Malawi still struggling with commodity dependence—UN

 The United Nations (UN) says commodity dependence has remained a significant challenge in global merchandise trade, particularly for developing countries such as Malawi.

United Nations Conference on Trade and Development (Unctad) data shows that while the share of merchandise exports for Malawi has shrunk from $1.3 billion (about K2.2 trillion) in 2014 to $958 million (K1.6 trillion) between 2021 and 2023, the country’s dependence on commodities for exports has remained elevated at 91 percent, raising questions about diversification drive and risks to external shocks.

Out of this, commodity exports constituted $868.5 million with agricultural products having 89.5 percent between 2021 and 2023 as tobacco at 45.3 percent remained the lead export.

Reads the report in part: “Alarmingly, commodity dependence is prevalent across structurally weak and vulnerable economies, affecting more than 80 percent of least developed countries and landlocked developing countries and roughly 60 percent of small island developing States.

“But entrenched reliance on these primary products long been of global concern hinders industrial development and threatens countries’ fiscal stability when global prices go volatile.”

This is an indication that Malawi is yet to transition from overdependence on unprocessed goods for the export market despite the Malawi Government formulating a number of strategies to encourage export diversification and promote manufacturing of ‘Made in Malawi’ products for the export market.

The strategies, among others, include the Malawi National Export Strategy (NES 2021/26), which seeks to consolidate, expand and diversify exports from Malawi in terms of product and market outreach as well as the Buy Malawi Strategy which seeks to encourage production of locally manufactured goods.

Meanwhile, the World Bank projects that global commodity prices will decline by 12 percent in 2025 and a further five percent in 2026, marking a significant reversal from the post-Covid-19 boom that boosted export earnings for many developing countries.

The bank warned that two-thirds of developing economies, many of which rely on commodity exports, could see their economic prospects weakened by the downturn.

Scotland-based Malawian economist Velli Nyirongo said “lower revenues from agricultural and mineral exports will reduce foreign exchange earnings and widen the current account deficit”.

He said government’s ambition to diversify exports through mineral development could be delayed.

Ministry of Trade and Industry spokesperson Patrick Botha is on record as having said Malawi also intends to leverage regional integration through its participation in regional blocs such as African Continental Free Trade Area, Tripartite, Southern African Development Community and the Common Market for Eastern and Southern Africa as opportunities to explore new markets for value-added products.

Malawi launched NES II in 2021 to achieve export competitiveness focusing on increasing Made in Malawi products in regional markets.

The NES II aspires to increase exports of ‘Made in Malawi’ goods to regional and global markets and improve export readiness.

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