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Malawi Investment Guides

Introduction

Malawi is a landlocked independent republic with a democratic government. It lies south of Tanzania and to the west of Mozambique and forms part of the Southern African Region. The capital city is Lilongwe. Other major cities are Blantyre and Zomba. Malawi is one of the world's least-developed countries, with an economy based on subsistence agriculture and over 90 percent of its population rural.


Malawi has undergone a social and political transformation over the past few years. These changes have created a new Malawi – a Malawi that is poised on the threshold of the 21st century to transcend its past and develop into a stable, valuable business partner.

The inauguration of the new government in May 1994 has further assured the world that Malawi will not only stay the course of free and open markets, but will continue to reduce government control over the private sector, simplifying administrative procedures and improving the foreign investment climate.

Malawi offers an excellent package of incentives and tax concessions to encourage investment. Malawi’s low wage rates and central location offer the investor a great place to set up operations from which to provide goods and services to the growing economics of Botswana, South Africa, and the rest of Central and Southern Africa. We cordially invite you to explore the wonder and stability that makes Investing in Malawi a smart choice

The economy

Economic conditions

Malawi has always stood as stable free market beacon in a continent enveloped in command economy favor. Even through some of the most difficult times of drought, famine and war in nearby countries, Malawi has stayed firm to its commitment toward capitalism. The drought of 1992, which was the worst drought to afflict Southern Africa in memory, slowed the tremendous growth Malawi had achieved the two years previous. But true to form, the resolute and determined people of Malawi have overcome this set back and are looking to the future with more hope and promise than ever before.

Trade

Malawi is central and easily accessible to Central and Southern Africa. This makes Malawi a choice location from which to trade with these nations, some of which are among the fastest growing economies in the world. Malawi imposes virtually no restrictions on exporting, and being a signatory to many major trade agreements makes Malawi an ideal location from which to export to nations throughout the world. Countries and trading blocks to which Malawi has preferential access include:

The European Union – through the Lome Convention, agricultural products and virtually all manufactured goods have preferential access to all member states of the EU.

Eastern and Southern Africa – Malawi has a bilateral agreement with South Africa whereby Malawi’s exports receive reduced tariffs upon entry to that country. Malawi is also a participant in the preferential Trade Area for Eastern and Southern Africa (PTA), and the Southern Africa Development Community (SADC).

Malawi is also a member of the General Agreement on Tariffs and Trade (GATT) and the General System of preferences.

Industry

Several industrial estates have been established to attract foreign investment to Malawi. These estates have nearly eliminated any obstacles investors experience in acquiring land for factory sites. Furthermore, the creation of export processing zones is actively encouraged by the government’s establishment of special incentives strictly for this purpose.

Setting up a manufacturing operation does not require a license except for a small number of industries, which raise the specter of health and safety concerns. Although the Reserve Bank is required to approve international loans, licensing and royalty arrangements, and certain technology transfer schemes, investments, approvals are automatically granted within internationally prevailing standards.

The majority of Malawi's industrial activity (85 percent) comes from manufacturing, a sector that in 2000 generated around 14 percent of GDP. Malawian manufacturing is carried out by about 100 companies involved in agricultural processing, textiles, clothing, and footwear production.

The manufacturing sector in Malawi is agro-based and mainly involves agro-processing. In 1999 it accounted for nearly 13 percent of GDP. The agro-processing industries include tea factories, spinning and weaving, tobacco processing, sawmills and plywood, oil and grain mills, meat processing. Other industries include soaps and detergents, cement, textiles and clothing, footwear, leather processing, fertiliser compounding, brewing, distillery and structural works. There is significant investment potential in the following areas:

  • Light engineering industries such as steel rolling, wire drawing, metal plating, metal fabrication, machine shops, tool shops, electric cables and foundries. Mineral based industries include lime, ash cement, mini-cement plants, roofing tiles, refractors, pottery, ceramic ware and graphite.
  • Light chemical industries such as paper recycling, oil refining, plastics, rubber products, auto rubber parts, pharmaceuticals and pesticide formulation, shampoos and detergents. Textiles including handloom and powerloom weaving, yarn, garment and fishing net manufacture.
  • Forestry and wood-based industries.
  • Food preservation and agro-processing of fish, coffee, avocado oil, fruit juices, canning, bakeries and confectionery and
  • Fertiliser production

Malawi is host to several major multinational corporations, including Lever brothers (since 1948), Lonrho (since 1962), Carlsberg (since 1968), and Cargill (since 1990). Their experience in Malawi is a case study in stability and success.

Travellers cheques and foreign currency notes of all major currencies are accepted by authorised hotels and other institutions. Malawi does not put any restriction on the amount of foreign currency notes visitors may bring into the country, nor are there any restrictions on the repatriation of profits.

In the bid to increase the availability of and access to financial resources and services, the Government has embarked on an ambitious reform programme to liberalise and modernise the financial system. Some of the features are market-based interest rates, no direct government control on credit, and unrestricted access to financing facilities for both local and foreign investors.

The land – Malawi’s greatest resource

Investment opportunities in Malawi have historically revolved around the land –tourism, agriculture, and mining. As Malawi tries to diversify its agriculture-based economy, many investment opportunities remain in the land.

Tourism

Malawi is known as the Warm Heart of Africa for good reason. The people are friendly and hospitable, the climate temperature, and the views breath-taking. Being steeped in the free market all of their lives, the young and the enterprising are willing and able to offer investors an invaluable resource in which to develop tourist destinations. Tourism spending in Malawi has increased four-fold since 1985, with average expenditures per tourist during this time period increasing by over 40 percent.

Mining

Mining remains small-scale, and Malawi has no precious metals or oil, but ruby mining began in the mid-1990s, with Malawi the only source of rubies in Africa. Malawi also has deposits of bauxite, asbestos, graphite, and uranium. After the establishment in 1985 of a government mines department and a national mining agency to explore the feasibility of exploiting various minerals, bauxite and titanium reserves in the south were singled out for development. Although the supporting infrastructure is weak, some foreign investment has been attracted.

Malawi is endowed with mineral resources, which are currently not being exploited. Unfortunately, the minerals sector has suffered from a chronic lack of investment in basic infrastructure. The government encourages private investors to delineate, evaluate, and where viable, capitalise on the resources using appropriate technologies.

Agriculture

Agriculture represents 36% of the GDP, accounts for over 80% of the labor force, and represents about 80% of all exports. Its most important export crop is tobacco, which accounts for about 70% of export revenues. In 2000 the country was the tenth largest producer in the world. The United Nations Foreign Agricultural Office estimates the following production of unprocessed tobacco by country in 2000 (figures are in thousands of tonnes.) The main crops grown in Malawi are maize, tobacco, tea, sugarcane, groundnuts, cotton, wheat, coffee, rice and pulses.

The country's heavy reliance on tobacco places a heavy burden on the economy as world prices decline and the international community increases pressure to limit tobacco production. Malawi's dependence on tobacco is growing, with the product jumping from 53% to 70% of export revenues between 2007 and 2008. The country also relies heavily on tea, sugarcane and coffee, with these three plus tobacco making up more than 90% of Malawi's export revenue.

Traditionally Malawi has been self-sufficient in its staple food, maize (corn), and during the 1980s it exported substantial quantities to its drought-stricken neighbors. Nearly 90% of the population engages in subsistence farming. Smallholder farmers produce a variety of crops, including maize, beans, rice, cassava, tobacco, and groundnuts (peanuts).

Foreign investment ….. why Malawi?

The Investment Promotion Act of 1991

A wide range of policy measures have been taken to reduce foreign investment, to protect foreign invested enterprises, and to facilitate their smooth operation. Towards this end, the Government of Malawi passed the Investment Promotion Act of 1991, which established the Malawi Investment Promotion Agency (MIPA). The Act clearly defines a range of incentives designed to attract productive investments to Malawi.

Some of Malawi's investment incentives include:

  • Free access to foreign exchange
  • No license requirements for imports;
  • Full remittance of dividends;
  • Corporate tax rate of 35 percent;

Generous tax allowances, including:

  • 40 percent allowance on new buildings and machinery
  • additional 15 percent allowance for investments in designated areas;
  • up to 20 percent allowance for used buildings and machinery;
  • 50 percent allowance for qualifying training costs;
  • 100 percent deduction for manufacturing company operating expenses during the first 18months;
  • indefinite loss carry forward to allow companies to take full advantage of tax allowances.

For those intending to export:

  • Export processing zones

An important aspect of the Investment Promotion Act was the establishment of procedures for setting up export processing zones (EPZ). Incentives for those establishing operations in an EPZ include:

  • corporate tax rate of 15 percent;
  • no withholding tax on dividends;
  • no excise taxes on purchases of raw materials and packaging materials made in Malawi;
  • no value added taxes;
  • transport tax allowance equal to 25 percent of international transport costs.

Foreign exchange and capital

Investors have free access to foreign exchange in Malawi, both for paying for imports and transferring financial payments abroad. This free access includes; no licensing requirements for importing foreign exchange; and full repatriation of profits, dividends, investment capital, and interest and principal payments for international loans.

Local and foreign investors have unrestricted access to local financing facilities. Interest rates are market-based and there are no direct government controls on credit.

If you manufacture in bond, incentives include:

  • export tax allowance equal to 12 percent of export revenue for non-traditional exports;
  • transport tax allowance of 25 percent for international transport costs, excluding traditional exports;
  • no duties on import of capital equipment, raw materials, and packaging material;
  • no value added taxes
  • no excise taxes on the purchases of raw or packaging materials made in Malawi
  • timely refund of all duties (duty drawback) on imports of raw materials and packaging materials.

While exports of horticultural products receive:

  • 100 percent duty free importation of equipment and raw materials for those engaged exclusively in horticultural products for export.

Malawi Investment Promotion Agency (MIPA)

MIPA’S foremost responsibilities are to promote, attract, encourage,and facilitate local and foreign investment in Malawi. To accomplish this mandate, MIPA is responsible for:

  • Developing a favourable investment image of Malawi regionally and throughout the world;
  • Undertaking investment promotion missions;
  • Recommending to the government changes in the statutory and administrative framework relevant to the investment climate.

Investor services that MIPA is charged with providing with providing include:

  • Facilitating all aspects of the investment process in Malawi
  • Providing courtesy services to investors
  • Furnishing information related to investment in Malawi
  • Identifying partners in or outsice Malawi for joint venture business opportunities
  • Working with local and international financial institutions for the benefit of investors
  • Encouraging existing investors to expand or start new investments
  • Consulting with private sector organizations so that better informed recommendations concerning the investment climate can be made.

Although MIPA will provide those services listed above, the agency will also have the power to:

  • Receive queries and complaints from investors regarding any public officer or any authority in dealing with any matter submitted for review or approval;
  • Summon or call upon any public officer or any authority to promptly decide, in accordance with the relevant written law, any matter submitted by an investor or to show case why a decision on the matter cannot be promptly made. MIPA can also request that an indication be given as to when a decision will be made;
  • Inquire into the reasons for any negative decision by any public officer or any authority on any matter submitted by an investor- in situations where the Agency is not satisfied with the reasons given, MIPA has the authority to make representations to the public officer or authority, or to the appropriate Minister, on behalf of the affected investor.
  • Report to the Minister cases of inefficiency, laxity and ineptitude by any public officer or any authority in situations that directly involve investors;
  • Do anything that the Agency considers to be necessary to fulfill its objectives as outlined in the Investment Promotion Act.

Services for foreign investors

There are several public and semi-public organizations that can assist foreign investors in efficiently establishing operations in Malawi. As a one-stop facilitator, MIPA can effectively co-ordinate the services offered by these organizations on behalf of the investor.

Besides MIPA, they include the Malawi Chamber of Commerce and Industry, the Malawi Development Corporation (MDC), the Investment and Development Bank (INDEBANK), and the Reserve Bank of Malawi.

Transportation and communications

Malawi transportation and communication systems are showing signs of steady improvement. Being a landlocked country, Malawi depends more on its road, rail, and air than most other countries. For this reason, the government has embarked on an aggressive program to improve the overall transportation sector of the economy. There are several major projects currently under construction or being planned, and with transportation corridors to the Mozambican coast reopened, the cost of shipping products and raw materials into and out of Malawi has been reduced substantially.

Driving in Malawi is on the left-hand side of the road, as it is elsewhere in southern Africa.

The road network
A majority of Malawi’s international freight traffic has been largely moved through the country’s 14000km-road network. Eight major road projects have recently been carried out, with many more under construction or being planned. Some of these projects have been aimed at improving conditions and boosting traffic on the roadway to Tanzania, in an effort to increase the ease with which freight is transported to the port in Dar es Salaam. Further enhancements to the roadway between the Lake and Lilongwe are also being given high priority to provide easier for tourists.

Air transport
One of the healthiest transport sectors in Malawi, air has registered growth rates even when other sectors haven’t. Air Malawi, with one of the newest fleets in all of Africa, offers service to regional and domestic destinations, including Nairobi, Harare, Lusaka, Blantyre, and Johnnesburg, among others. The International Airport in Lilongwe, considered to be one of the cleanest and most efficient in all of Africa, is serviced daily by several major European and African airlines. The flow of passengers through the airport has increased over tenfold in the last decade alone. The airports in Lilongwe and Blantyre both have large capacity bonded and refrigerated warehouse space available.

Rail
Heavily used dedicated rail freight links are being bolstered by the development of the Northern Corridor, which leads into Tanzania. The Nacala freight line through Mozambique has been improved greatly, thus reopening the route to the ports on the Indian Ocean. The Tete corridor, which closed in 1991, has been rehabilitated and reopened to traffic, as well. Passenger rail traffic, on the other hand, has been continually dropping in favour of other forms for transport.

Telecommunications
The telecommunications network in Malawi is rapidly improving, becoming one of the most reliable-and inexpensive-in the region. International direct dialling is now available on 98 percent of the country’s phones. In an effort to bring Malaw’s communications system more in line with the rest of the world, thousands of digital lines are being installed in the major cities each year.

Fax, electronic mail, and data can now be transmitted from Malawi to practically any place in the world.

Post
The postal service in Malawi is unlike those in most other developing countries. The Malawi postal service not only offers all of the services one comes to expect from the post, but express mail with same day option is part of the service package. Major international express services are also available to and from Malawi.

A Little about Malawi

Climate
Malawi has a sub-tropical climate, which is relatively dry and strongly seasonal. The warm-wet season stretches from November to April, during which 95% of the annual precipitation takes place. Annual average rainfall varies from 725mm to 2,500mm with Lilongwe having an average of 900mm, Blantyre 1,127mm, Mzuzu 1,289mm and Zomba 1,433mm. Extreme conditions include the drought that occurred in 1991/92 season and floods of 1988/89 season. The low-lying areas such as Lower Shire Valley and some localities in Salima and Karonga are more vulnerable to floods than higher grounds.

A cool, dry winter season is evident from May to August with mean temperatures varying between 17 and 27 degrees Celsius, with temperatures falling between 4 and 10 degrees Celsius. In addition, frost may occur in isolated areas in June and July. A hot, dry season lasts from September to October with average temperatures varying between 25 and 37 degrees Celsius. Humidity ranges from 50% to 87% for the drier months of September/October and wetter months of January/February respectively.

From Nyasaland to Malawi
Although the area that now makes up Malawi has been inhabited for thousands of years, the first mention of this land was made when Scottish explorer, David Livingstone "discovered" Malawi in the early 1860’s. Following years of sporadic settlement by British missionaries and settlers, Britain installed a consul to look after the interests of their citizens in 1884. As part of an overall British plan to establish a continuous land bridge of territories from Cairo to Cape Town, the present borders were drawn up as The British Protectorate of Nyasaland in 1891. Following years of colonial rule, and occasional revolts by citizens who wanted complete independence, the British began to disengage themselves in the late 1950’s. The firs free elections were held in 1961. On July 6, 1964, Nyasaland became the independent state of Malawi. Two years later, also on July 6, Malawi declared itself an independent republic. Nearly 30 years after independence and one party rule, Malawians peacefully cast ballots in May 1994. This peaceful transition to a pluralistic, democratic political system displays the stability and calm that is Malawi.

Leisure and life-style
Malawi has some of the beautiful and diverse scenery in all of Africa. From the shores of lake Malawi to the peaks of Krik Range to the depths for the Shire River Valley, the Warm Heart of Africa has everything for today’s healthier life-styles. The lake, Malawi’s major recreational attraction, offers a wide range of sporting activities ranging from snorkeling, scuba diving, camping, fishing, boating and swimming, just to name a few. Several hotels and lodges offer a wide range of accommodations and activities along the shore. The major cities of Malawi have sports clubs which offer year –round recreation facilities including cricket pitches, golf courses, and tennis courts and are social gathering points for locals and foreigners alike.

Malawi is known for social peace, political stability, and harmony among the races. The lifestyle in Malawi is as friendly and relaxed as you want it to be. Although Malawians are very welcoming of newcomers to their country, they are very respectful of ones privacy. While in Malawi, one has a choice of some of the finest ethnic restaurants including Korean, Indian, German, Italian, and Chinese. And one needn’t worry about crime and pollution, both of which are virtually unknown in Malawi, even in the major cities.

Malawi has good potential for continued growth with a promise of a good business climate. The opportunities for investment in Malawi are only beginning to grow. We hope this brochure will help you gain a better understanding of the investment in Malawi and serve as a useful tool for your investment planning.

Malawi Investment Promotion Agency (MIPA)
The Malawi Investment Promotion Agency is Your One - Stop Investment Centre mandated by an Act of Parliament (1991) to promote, attract, encourage, facilitate and support foreign and domestic investment in Malawi.

  • The responsibility of the Malawi Investment Promotion Agency include:
  • Developing a favourable investment image of Malawi regionally and throughout the world;
  • Recommending to government changes in the statutory and administrative framework relevant to the investment climate;
  • Facilitating all aspects of the investment process in Malawi ;
  • Furnishing information related to investment in Malawi;
  • Identifying partners in or outside Malawi for joint venture business opportunities;
  • Working with local and international financial institutions for the benefit of investors;
  • Encouraging existing investors to start or expand or start new investment;
  • Consulting with private sector organizations so that better informed recommendations concerning the investment climate can be made.

We are a "One Stop Investment Centre" since April, 2001. Under the One Stop Investment Centre , investment applications are processed and approved by an inter - agency committee known as the Investment Approval Committee (IAC) and we offer :

  • Approval process assistance for various permits such as Business Residence and Employment Permits within 10 calender days;
  • Information on Business Operating Costs , Economic Indicators, Utilities, Investment Opoortunities e.t.c.
  • Courtesy services such as appointments for meetings , site visists and aftercare services.

Contact your One - Stop Investment Centre at

Address: Aquarius House, Private Bag 302, LILONGWE 3.
Tel: (265) - 1 - 770 800
Fax: (265) - 1- 771 781
Email: mip...@malawi.net

Statement of investment policies in Malawi

1. This policy statement sets forth the Malawi Government's principal policies of encouraging and assisting private investment.The Government is fully committed to enacting these policies and will take whatever measures may be necessary to ensure their prompt implementation. This statement is supplemented by the Investors Guide containing detailed information of importance to investors.

2. The Government seeks to encourage the private sector to assume the leading role in developing the national economy. The thrust of the Government's efforts will be to facilitate, rather than to regulate private investment. This is consistent with the Statement of Development Policies issued by the Government in 1987.

3. To create a more conducive investment climate, the Government will continue to pursue stable macro-economic policies by exercising fiscal and monetary, discipline and maintaining a realistic exchange rate of Malawi Kwacha (MK), the country's currency. Specific measures to deregulate the private sector and create new investment opportunities have already been enacted, including elimination of price controls, termination of import restrictions and of the accompanying need import licenses, divestiture of state-owned companies and steps to rectify the external transport situation.

4. To further encourage and assist private investment, theGovernment announces the following new initiatives:

Freedom to invest

5. Investors, both domestic and foreign, may invest in any sector of the economy, with no restriction on ownership. Further there are no restrictions on the size of investment, the source of funds or whether products are destine for export or for the domestic market. Domestic investors are encouraged to join with foreign investors to pursue investment opportunities in Malawi.

Industrial licensing and company formation

6. The industrial license is to be eliminated, except for investments in such industries as the Government may place on a short negative list. Procedures for company formation and business registration will be simplified to permit prompt establishment. Investors will only be required to provide the Registrar of Companies with basic information on proposed business activities.

Transfer of land

7. The Government is committed to ensure that land for industrial and commercial uses is readily available to investors. Accordingly, the Government will accelerate land transfer procedures to expedite granting approvals and consents. To better provide serviced land to investors, the Government will develop new industrial sites. In addition, the Government will provide the necessary framework to enable private investors to develop industrial sites, including sub-leasing to other investors.

Taxes and duties

8. To further enhance Malawi's investment climate and international competitiveness, the Government is committed to continue the process of reducing rates of taxes and duties. This is to be achieved through the ongoing tax and trade reform programmes.

External transport routes

9. The government is aware that access to efficient and secure transport routes, both within the country and to foreign markets, is of vital importance. To ensure such access, the Government is undertaking a number of initiatives, including the expansion of the domestic transportation network, the development of the Northern Corridor route to the port of Dar-Es-Salaam in Tanzania and the rehabilitation of the Nacala Railway Line to the port of Nacala in Mozambique.

Availability of foreign exchange

10. The Government recognizes that the availability of foreign exchange is critical to investors. The Government will, therefore, ensure that foreign exchange is available for business transactions and remittances. The Reserve Bank of Malawi has granted, and will continue to grant, commercial banks the authority, as foreign exchange dealers, to approve such transactions and remittances according to set procedures.

Access to local financing

11. The Government has embarked on a reform programme to modernize and liberalize the financial sector. With the enactment of the Capital Market Development Act, 1990, both foreign and domestic investors will have greater access to sources of local financing. The Government is committed to foster competition in the banking sector, including the establishment of new banking institutions.

Labour practices

12. The Government will not interfere in employers' choice of workforce. Further, the Government recognizes that investments may require expertise not available in Malawi. Accordingly, it will continue to make Temporary Employment Residence Permits for expatriate personnel readily available for key positions in investments.

Encouragement of small scale and medium scale enterprises

13. Malawi's small-scale and medium-scale enterprises hold great potential for rapid economic growth and. employment creation. The Government is, therefore, dedicated to continuing with various programmes to assist these enterprises, including entrepreneurship training and technical and financial assistance.

Encouragement of export oriented investments

14. To encourage export-oriented investments, the Government will offer incentives competitive to those found in other countries. At present, these incentives include-

  • an income tax allowance based on export sales of non-traditional products (i.e. products other than tobacco, tea, sugar and coffee);
  • rebates of import duties, surtaxes, and local taxes on most inputs used in production of export.

15. In addition. the Government is considering establishing other incentives, including export financing and guarantee schemes, further developing a manufacturing-in-bond programme, creating export processing zones, and introducing measures to eliminate the payment of duties at the time of importation.

Investment assistance of promotion

16. In order to increase awareness of the investment opportunities in Malawi, as well as to provide greater assistance to existing and potential investors, the Government has established an investment promotion agency. This agency has been given sufficient authority and operational autonomy to fulfill its mandate of promoting investment and assisting investors.

Investment promotion

17. The Government recognizes that the security of assets is of primary importance to investors. The Malawi Constitution and existing laws and regulations provide further assurance that investors' assets are protected. In addition, the Government will actively pursue the process of concluding bilateral investment treaties with other Governments. Malawi is also a member of the Multilateral Investment Guarantee Agency (MIGA), and is an eligible country under a number of other investment insurance programmes.

Access to international arbitration

18. The Government acknowledges that investors must have an acceptable forum to resolve disputes that cannot be settled amicably. Parties to disputes may agree to pursue arbitration and to choose an appropriate forum, including international arbitration. The Government,is a member of the International Centre for the Settlement of Investment Disputes (ICSID).

Last Updated on Tuesday 18th January 2011

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