Background of the Assignment
Like many countries, Malawi, a low-income nation, has faced significant existential challenges. These include climate change and severe weather events such as Tropical Cyclone Freddy in 2023, which caused losses estimated at USD 36.4 million, equating to a real GDP loss of 0.5 percent. This followed cyclones Ana and Gombe in 2022. Additionally, a recent drought devastated 750,000 hectares of maize, representing 44% of the total 1.7 million hectares, across 23 of the 28 districts, impacting 9 million people. Compounding these issues are macroeconomic imbalances characterized by an unstable and depreciating kwacha, high debt levels, trade imbalances, foreign exchange shortages, power shortages, and high inflation (World Bank 2023).
In an attempt to resolve the macroeconomic challenges, the Government of Malawi has embarked on several reforms including amendment of the Foreign Exchange Control Act and the promotion of the Buy Malawi. Recently the government, through the Ministry of Trade and Industry, instituted import restrictions on various commodities. These are fruits (except those that do not grow in Malawi), matches, vegetables (except those that do not grow in Malawi), maize flour, fresh milk, rice, peanut butter, meat products such as sausages, bacon and cold meat, honey, table eggs, popcorn, toothpicks, bottled water, plastic utensils, wooden furniture, mops, Irish potatoes, garlic, ginger, onions, and security boots. According to a press statement from the Ministry of Trade and Industry, this measure is meant to protect local industries, stimulate local production, create jobs, and foster the economic empowerment of Malawians while preserving the scarce foreign exchange. Export restrictions on some commodities are also in force.
While the intentions to protect and stimulate local industries may be good, trade restrictions have welfare effects, and it is not clear what other consequences there could be. Literature suggests that import and export restrictions can lead to higher costs and reduced choices for consumers. Reduced competition and limited supply may result in higher prices for goods. Additionally, such measures could provoke retaliation from other countries and distort domestic markets, leading to inefficient industries and resource re-allocation. It is against this background that AGRA, in collaboration with UNDP, World Bank, IFC, etc. is proposing an in-depth analysis of the consequences of the Government of Malawi’s policy direction to restrict imports and exports of some of the targeted products and commodities.
Objectives of the Assignment
The main objective of this study is to determine the impact and the implications of Malawi’s import and export restrictions and share outcomes with relevant stakeholders for informed decision-making both within public and private sector domains. The study should provide actionable insights into managing trade restrictions while balancing domestic needs and regional trade considerations in the face of increasing climate-related and macroeconomic challenges. The specific objectives are to:
1) Generally, assess the current socio-economic environment of the Malawian economy which may have formed the legitimate basis for instituting the trade restriction. This should include estimated size and capacity of the industries that utilize the commodities affected by the measure.
2) Determine the effectiveness of the current measure in achieving its stated objectives. Reflect on critical success factors for such restriction orders and policy alternatives that could have been more effective in meeting the objectives. This should include providing an analysis of First-Best and SecondBest policy options.
3) Employ macro-econometric modelling to determine the impact of this measure (import ban) generally on food security with a specific focus on availability, quality, access, prices and trade (value and volume) on the domestic economy. This should include an estimate of the impact (including costs and benefits) of the measure on key value chain actors (producers, traders, industry, logistics service providers, financial institutions, consumers, etc.).
4) Use appropriate measures of Malawi’s competitiveness in the affected commodities to infer the nature of accompanying actions in the short-tomedium-term.
5) Evaluate the implications of the restrictions on Malawi’s trading partners in the specific commodities. The analysis should also include a political economy analysis (PEA) angle of this measure to shed light on likely winners and losers, and how this measure affects them.
6) Assess the Dead Weight Loss (DWL) in economic efficiency if market equilibrium in those banned commodity markets is distorted. This should include the tradeoffs between the gains from local production and the losses from the reduced consumer surplus and market efficiency as a result of the ban.
7) Determine/reflect on what options are available for the government and other actors to mitigate against the measures’ adverse effects, clearly synthesizing recommendations for consideration by AGRA and other stakeholders. The recommendations should include those managing the balance between domestic industry promotion, food security and the spirit of regional integration.
8) Determine whether the restrictive measures are consistent with regional/continental/global trade agreements.
Qualifications and Experience
The consultant should demonstrate a strong knowledge and experience of domestic and regional food trade issues including the working of regional food trade and markets. The individual should have a good understanding of the political sensitivities of this or similar work and capabilities to safeguard the methods, engagements/consultations, outcomes or findings in a confidential fashion.
Specifically, the consultant should have the following requirements:
a. Possess a minimum of a Master’s degree in Economics, Agricultural Economics, Finance and Business Management or related field.
b. At least 15 years of international experience in policy analysis, programme management, Agricultural and Rural Development Sector in Africa
c. Experience in delivering market intelligence, political economy analysis and policy strategy.
d. Experience in macro-econometric modelling, specifically in Partial Equilibrium Models to estimate sector specific deadweight losses and gravity models of trade in quantifying regional trade impacts.
e. Previous experience of conducting a similar assessments.
f. Expertise in designing and conducting qualitative and quantitative assessments.
g. Experience working with multi-donor projects and similar warehouse inventory work.
h. Deep and wide knowledge of the Malawi industry and commodity marketing systems in the different regions of the country and at the international level.
i. Ability to professionally interact and engage at high levels of government and development partners.
j. Excellent process management and facilitation skills
k. Strong written, verbal communication, and presentation skills.
