MALAWI
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Vision 2020 &
Growth and
Development
Strategy II
POLICY, PLANS and PRIORITIES
The long-term development perspective for Malawi is set out in the Vision 2020
and has a series of medium-term operational strategies to attain it. The current
implementation strategy is the Malawi “Growth and Development Strategy II– from
Poverty to Prosperity (MGDSII 2011-2016)”. The main objective of the MGDS is to
reduce poverty through sustained economic growth and infrastructural
development. It aims to transform the country from a predominantly importing and
consuming economy into a predominantly producing and exporting economy.
The MGDS II highlights six thematic areas that shall be the basis for national
development: Sustainable Economic Growth; Social Development; Social Support
and Disaster Risk Management; Infrastructure Development; Governance; and
Gender and Capacity Development. The nine key priority areas of the MGDS II are:
Agriculture and Food Security; Energy, Industrial Development, Mining and
Tourism; Transport Infrastructure and Nsanje World Inland Port; Education Science
and Technology; Public Health, Sanitation, Malaria and HIV and AIDS
Management; Integrated Rural Development; Green Belt Irrigation and Water
Development; Child Development, Youth Development and Empowerment; and
Climate Change, Natural Resources and Environmental Management.
Trade
Based on the fact that economic growth is export-led in Malawi, trade and export
development have been identified as very relevant key priority areas and thematic
fields.
Priority Sectors
Priority Sectors identified by the Government for investment and trade are stated
in section 5 of the Investment and Export Promotion Act (2012) and include :
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agriculture;
agro-processing;
fisheries;
forestry;
manufacturing;
mining;
tourism; and
such other productive sectors as the Malawi Investment and Trade Centre
(MITC) may, from time to time, determine with the approval of the Minister
Legal Framework
The Malawian legislation is based on English common law and the independence
of the judiciary.
Investment
Framework
The Investment and Export Promotion Act (2012) covers the government’s
commitment to assist and strengthen the private sector which is acknowledged to
assume the leading role in developing the national economy. The Act provides
guidelines on the granting and processing of the Investment Certificate as well as
the revocation of the same. Accordingly, the Act mandates the Centre to operate a
one stop shop for business and investment registration. The Act further states that
applications for relevant permits made through MITC shall be processed
expeditiously and be granted within twenty-one (21) working days from the date of
application is made.
Specific measures are partially described in the Act, but most details on the
different topics are regulated in the supplement of the Act, the Investors Guide, and
which is revised from time to time.
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NATIONAL EXPORT
STRATEGY
The NES launched in December 2012, is a prioritized roadmap (2013 - 2018) for
developing a productive base for export competitiveness and economic
empowerment. The strategy is based on four priority areas:
 Develop three prioritised clusters to complement tobacco and drive exports
through value addition - oil seed products, sugar cane products and
manufacturers,
 In addition, support existing clusters including tobacco and tea
 Develop an environment conducive to economic competitiveness and
economic empowerment of youth, women, farmers and SME’s
 Invest in supportive economic institutions and organisations to build the
economy’s productive base
 Invest significantly in competencies, skills and knowledge
The Export Strategy prioritises the clusters of products to be groomed and
promoted for exports and these are manufacturing, sugarcane and oil seeds.
MITC
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INVESTMENT AND TRADE
PROMOTION
2.1
Institutions
The Malawi Investment and Trade Centre (MITC) is the body corporate in charge
of investment and trade promotion, investor assistance and advice to the Malawi
Government on investment and trade matters. It was established by the Act of
Parliament in 2012. It has a Board of Directors which consists of representatives of
the private sector and Government departments.
MITC operates as one-stop investment centre to investors by providing the
following services free of charge
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Ministry of Industry
and Trade
Provide courtesy services to visiting investors;
Guide investors through the investment process in Malawi, i.e. assistance
with permits, licences, land acquisition and various regulatory and
legislative requirements;
Provide information on investment opportunities in Malawi;
Identify joint venture partners, market linkages, and business development;
Linking investors to the financial institutions and providers of professional
and business services.
Obtaining permits and other business related registration certificates on
behalf of the investors
The Ministry of Industry and Trade is responsible for creating a conducive policy
and regulatory environment for industry, Trade Development, ensuring expansion
of products and services on the domestic and international markets; empowering
Small and Medium enterprises and cooperatives to participate in economic
activities.
The Ministry’s mission is therefore to promote, support and facilitate the
development of industry, trade and private sector in both existing and potential
growth sectors thereby increasing supply of value-added goods and services for
domestic and international markets while sustaining comparative advantage.
Reserve Bank of
Malawi
The Bank entails all functions of a central bank being responsible for the national
monetary policy. It regulates all foreign capital transactions which have to be
registered with the Bank. The Bank also regulates the banking sector under the
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Banking Act of 2010 and the insurance sector under the Insurance Act of 2010
Even though the Bank has authority, the Ministry of Finance has the ultimate
authority in the financial sector.
2.2
Investment and Export Incentives
Malawian legislation allows for a number of incentives for investment in specific
industries as well as in export industries. The incentives include customs duty, tax
concession and exemptions, VAT exemptions and tax allowances.
Manufacturing
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Industrial Rebates
Pre business expenses up to 18 months are allowable expenses (sec 41 of
the Taxation Act)
Losses are carried forward to six (6) years
Capital allowances & investment allowances are claimed as follows:
 100% on new and unused plant and machinery and industrial buildings,
 40 % on used plant and machinery and industrial building
 Investors can enjoy duty and excise exemption on raw materials if they choose
to operate in designated industries in Malawi under industrial rebate scheme.
Registered industrial rebate manufacturers are allowed to import raw materials
duty and excise free under the CPC401 while VAT is 16.5%.
 Use of this procedure implies a legal declaration that the goods are for the sole
use in the industry declared and the importer will comply with all legal
requirements and conditions relating to industrial rebate. Industries allowed to
enjoy industrial rebate in Malawi are listed in the Eight Schedule of the Customs
and Excise (Tariffs) Order.
Export Incentives
Current incentives applicable to exporting industries include:
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25% export allowance for non-traditional exports, these include: processed tea,
processed tobacco etc.
15% international transport allowance for non-traditional exports
Exports are zero-rated for purposes of Value Added Tax. It implies that
exporters can claim input tax on course of production
Duty Drawbacks
The Export Incentives Act of 1989 gives a provision for tariff and excise drawbacks
on goods exported within two years of manufacture on certain imported inputs used
in the manufacturing process. Depending on the specific product, the drawback
can be used in partial or total on products used in the manufacturing process. In
order to qualify for such incentive, registered manufacturers have to apply to the
Malawi Revenue Authority (MRA) for drawbacks and submit documentary evidence
showing the use of materials and the export of the product. The MRA then
determines the amount of duty drawback through a process of consultation with the
manufacturer. Authorities state that the refunds process takes approximately 30
days. Exporters have to file their claims within six months of the date of export.
Registered
Exporters
The Export Incentives Act also provides assistance to exporters of non-traditional
exports. They have to be registered with the Malawi Investment and Trade Centre
(MITC). Incentives for them are a 15% income tax allowance, duty drawback on
imported raw materials including packaging materials for export production,
technical assistance in promoting and marketing of export products and other
activities, duty-free import of capital equipment used in the manufacture of exports,
and a transport allowance that equals 25% of the international transport costs
incurred to the exporter.
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Addition incentives for attracting export-oriented zones have been developed with
the time which led to the establishment of Export Processing Zones (EPZ) and
other incentives for all exporters not operating in EPZs and including manufacturing
in bond. These additional incentives are covered in the Investors Guide, the
supplement of the Act. For the EPZ incentives please see section 2.3 below.
Tourism Sector
Investors intending to invest in the tourism sector in Malawi can enjoy the following
incentives: free import duty, free import excise and VAT is zero-rated
CPC 4000.451 and 4071.451
Zero tax on off-road game/scenery viewing motor vehicles.
CPC 442 (a) Goods for hotels, Lodges and Inns – with 50 rooms and above.
i. Glass, china porcelain earthenware and stone articles of table ware, enamel
and hollowware for table use Electo plated Nickel – silver and pated ware,
knives, forks, spoons and similar articles for cutlery and marked linen etched
stamped or in any manner marked with the name of the hotel.
ii. Industrial catering equipment, motor boats scuba diving, jet skis, kayaks,
wind surfers, pedallos, air conditioners, generators, gym equipment, message
equipment, industrial washing machines, bar fridges, sauna, hot steam baths
for furniture and furnishings.
CPC 442 (b) Materials and equipment for the establishment of a conference
centre of seating capacity of 200 people
Public address system, video conferencing equipment, television screens,
amplifiers, LCD equipment and industrial catering and bar equipment and
indelibly engraved, itched, stamped or in any other manner marked with the
name of the hotel/Lodge or inn
CPC 450 two passenger motor vehicle
Two passenger carrying motor vehicles of tariff heading 87.02, except used motor
vehicle in every five years for hotels, lodges and inns licensed under Tourism and
Hotels Act, duty and VAT free
2.3
EPZs, Freeports and other Special
Economic Zones
Export Processing Zones (EPZs) are regulated under the Export Processing Zones
(Amended) Act of 2013. Individual companies can apply for EPZ status at the
Ministry of Industry and Trade which is the responsible authority for the Act. An
Export Processing Zones Appraisal Committee is established through the Act,
responsible for appraising and reviewing of applications and for making appropriate
recommendations to the Minister. Important criteria influencing the approval of
business entities as EPZs are job creation, technology transfer, export
diversification, use of local raw materials, warehousing capability, and the proof of
export markets. The EPZ status is granted for 5 years and can be renewed for twoyear periods thereafter. The establishment of EPZs is based on the idea to
encourage the production of non-traditional products in these zones.
Incentives
Investors operating in Export Processing Zones enjoy the following incentives:
 No withholding tax on dividends
 No duty on capital equipment and raw materials
 No excise taxes on purchases of raw materials and packaging materials made
in Malawi
 No value added tax
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However, certain goods are not eligible for exemptions and they are specified
under section 18 of the Export Processing Zones Act of 2013.
2.4
General Incentives
Tax Incentives
Please see the different tax incentives as described under section 2.2 and 2.3.
These tax incentives are claimable by all taxpayers
 Losses are carried forward up to 6 years for traders
 Initial and annual allowances at various rates are granted besides the
depreciation (annual) allowances
 Initial and annual allowances are claimed at various rates as stipulated by the
Taxation Act.
 Commercial building with a construction cost of MK 100 million or above, are
subject to annual allowance at 2.5 %
A taxpayer can claim 50% allowance on social contributions paid directly into the
building of a public hospital or school, or the sponsoring of youth sporting
development activities.
Priority Industries
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Agro-processing and Electricity Generation, Transmission & Distribution
industrials are eligible and must be formally certified as “priority Industries” by
the Commissioner General of Malawi Revenue Authority following due
process.
Zero rated corporate tax for any number of years not exceeding the 10 years
as determined by Priority Industries Approval Committee
Thresholds to qualify are as under:
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Agriculture Sector
Agro-processing:
 Minimum US$500,000 for industries with 100%
shareholding by Malawian citizens subject to verification of
at least 35% value addition to the final product
 Minimum US$5 million in any other case subject to
verification of at least 35% value addition to the final
product
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Electricity Generation, Transmission and Distribution
 Minimum of US$30 million
 Transmission means conveyance of at least 66,000 volts
from generator or an import point to distributors or large
customers or an export point through a transmission
power system.
Irrigation (CPC 446)
Investors in the irrigation sector enjoy import duty, import excise and VAT free
(zero-rated) the following goods for direct use in irrigation: - PVC pipes, asbestos
pipes/rubber seals, galvanized pipes, elbow, sprinkles rainers, control valves,
solvent cement, diesel engine ranging from 12 kw- 17kw with tubes, pressure
gauges and nozzles imported by a farming entity recognized by the Secretary of
Agriculture.
Horticulture (CPC 448)
By investing in the horticulture industry, companies can enjoy exemption of duty,
import excise and VAT free (zero-rated) on seeds, cuttings, seed netting green
house structure, climate control equipment, 1 generator set, water pump or
borehole, flower power lights, pump, electrical engines, diesel engine for irrigation
with tubing, PVC piping, valves, sprinkler system, irrigation filters/nozzles, pressure
regulators, new refrigerated trucks per five years, cold rooms, strapping materials
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and clips, metal wires, strings elastic bands, processing equipment, bag strikers,
laboratory equipment, chemical and reagents, soil testing kits, moisture testers,
graders, chemicals rose cutter, spray equipment, sealing equipment and fumigation
equipment. These goods must be intended for export.
Fishing Industry (CPC 477)
By investing in the fishing industry companies can enjoy import duty, import excise
and import VAT free (zero-rated) on importation of Machinery, plant, laboratory
equipment and materials, aerators, pumps, blowers, diamond mesh, nets,
measuring equipment, separators, specialized tanks and diffusers, boat engines
and trawlers for deep sea fishing.
In addition, fishing vessels, factory ships and other vessels for processing or
preserving fishery products are import duty free in their own right in the Customs
and Excise (Tariffs) Order.
Poultry Farming
By investing in poultry farming companies can enjoy import duty free clearance of
machines for cleaning, sorting or grading eggs, fruit or other agricultural produce,
machinery for preparing animal feeding stuffs, poultry incubators.
Other Agricultural Goods
In addition to the incentives for the subsectors above, the following are some of the
goods which are essential for farming and investors can enjoy duty free clearance
in their own right according to the Customs and Excise (Tariffs) Order: Fertilizers,
Pesticides, Herbicides, Ploughs, agricultural horticultural or forestry machinery for
soil preparation or cultivation i.e. ploughs harrows, scarifers, cultivators, weeders,
manure spreaders and fertilizer distributors and Milking machinery.
Zero tax on importation of livestock meant for breeding. Animals include bovine,
swine, sheep and goats
Transport Sector
VAT free on other lifting, handling, loading or unloading equipment such as
conveyers, teleferics
Road Transport (CPC 440)
Investors in the road transport industry can enjoy import duty, import excise and
import VAT free (zero-rated) clearance of new buses and buses used for a period
not exceeding five (5) years of a seating capacity of forty five (45) persons or more
persons including the driver.
In addition, goods carrying motor vehicles exceeding 20 tonnes are import duty
free but excise duty is payable.
 Zero import duty on bicycles
 15% import duty on motorbikes with engine capacity not exceeding 250cc
 15% import duty on motor vehicles of seating capacity of 11 to 31 persons
including the driver and motor vehicles of 32 to 44 persons including the driver
regardless of engine capacity and year of make
For vehicles of seating capacity of 32 to 44 persons including the driver
 Zero excise duty for new and used vehicles not exceeding 8 persons
 10% excise duty for used motor vehicles exceeding 8 years but not
exceeding 12 years
 25% excise duty for used motor vehicles exceeding 12 years
Rail Transport
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In order to promote the railway industry, railway materials are import duty free and
exempted from VAT.
Air Transport
In order to promote the air transport sector, aeroplanes and other aircraft of
unladed weight exceeding 2,000kg are import duty free in their own right in the
Customs and Excise (Tariffs) Order.
Energy Sector
In order to promote the energy sector, the following goods for use in electricity
generation and distribution are import duty and import excise free:- fuses,
transformers, sling, ring main unit, insulators, galle chain equipment, conductors,
surge arrestors, column duplex, AAC/PVC and electricity supply meters.
Extension of the CPC for ESCOM under Customs & Excise Tariffs Order to all
importers of electricity generation and distributing equipment to be duty free
In addition, energy saver bulbs are import duty free in their own right in the
Customs and Excise (Tariffs) Order. VAT is payable at 16.5%.
Solar products are import duty free in their right in the Customs and Excise (Tariffs)
Order for example solar batteries and solar energy lamps. VAT is payable at 16.5%
Mining Sector
In order to promote the mining sector, grading, leveling, scraping, excavating or
boring machinery, for earth, minerals or ores; pile drivers and pile extractors are
import duty free and VAT exempt in their own right in the Customs and Excise
(Tariffs) Order.
Banking Sector
ATM machines, point of sale machines and mobile banking vans imported by
commercial banks locally registered by the Reserve bank of Malawi are allowed
import duty and excise duty free under CPC 487. VAT is payable a 16.5%.
Education Sector
Investors in the education sector can enjoy import duty and import excise free
clearance and VAT exemption of various educational materials when they are
imported by educational institutions.
The materials are as follows:- School stationery, instruments, apparatus,
appliances and other tuitional requisites including specialized furniture for use in
the Classroom, workshop or laboratory, athletic and sports goods, for tuitional
purposes. In the case of pre-school play groups; Photocopying machines, building
materials, pianos, organs, keyboards and computers are import duty free. In
addition books are duty free in their right in the Customs and Excise (Tariffs) Order.
Health Sector
By investing in the health sector, investors can enjoy import duty and import excise
free clearance and the exemption of VAT on the following goods:- Hospital, nursing
home, clinic, surgery and dispensary instruments, apparatus, appliances and
requisites including parts thereof and including specialized furniture diagnostic
and laboratory reagents for use in the diagnosis or treatment of diseases or
affections of humans or animals. In addition medical, surgical, dental and sight
testing instruments are also import duty free and exempted from VAT payment.
Communication
Zero tax on specialised broadcasting equipment for Television and radio stations
Construction
Zero tax crane lorries, concrete mixer lorries, mobile drilling derricks and track
laying tractors for the construction industry
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2.5
International Trade & Export
Promotion
Trade was liberalised in Malawi since the early 1990s and has ever since opened
up the economy to more private sector involvement in production.Malawi’s export
basket is largely dominated by tobacco which attracts more than 50 percent of
export earnings followed by tea, cotton, sugar and uranium. The country’s export
diversification focus is aimed at pulling away the economy from reliance on tobacco
to flourishing on other similarly competitive products and sectors. Nonetheless the
trade sector in Malawi faces supply side constraints which have drawn the
Government to identify areas that require improving and these include:
 Support for customs modernization,
 Support for development/rehabilitation of internal and regional transport links,
 Standards development and enforcement,
 Institutional capacity building,
 Issues of productivity,
 Low levels of investment,
 Limited trade and industry financing,
 Inadequate skilled manpower,
 Lack of an adequate network of trade representation abroad, and
 Quality and skills development.
Importing &
Exporting
The Customs and Excise Act and the Control of Goods Act of 1987 allow for any
person or entity to import goods for commercial purposes. Foreign firms in the
trading sector are required to obtain a Trading License from the Ministry of Industry
and Trade at a maximum fee of MK60,000 (US$133). In order to qualify they must
possess either a Business Resident Permit, or a permanent resident permit which
is issued by the Ministry of Home Affairs and Internal Security. Malawian nationals
can acquire trading licenses from the city assembly upon application at a
maximum fee of MK20,000 (US$44)Import licensing is required for certain products
and based on the Control of Goods Act of 1987. The Ministry of Industry and Trade
is the responsible authority for issuing import licenses. Malawi has a generally
liberalised export licensing regime except for a few products which include rice,
maize and maize products, poultry and poultry products, timber, hides and skins,
certain metals and minerals, arms, petroleum products, wild animals, scrap metal..
Import and Export licenses are free of charge.
Customs
In terms of customs procedures, Malawi has adopted UNCTAD’s Automated
System for Customs Data (ASYCUDA) and post clearance audits. However, import
shipment is still dominantly subject to physical inspection. Malawi also has infantindustry protection mechanisms such as applying non-automatic licensing
procedures for certain products like sugar and wheat-flour. Custom Clearance has
to follow a four step procedure and the employment of custom broker/clearing
agents is mandatory for all importers.
Customs duties are calculated on the c.i.f. price of the imported products and
according to the Customs and Excise Act. The tariff structure has 6 bands, rules of
origin regulations, diverse tax exemptions and concessions (please refer to the
Customs and Excise Act for details).
Trade-related Taxes
The latest WTO Trade Policy Review (2010) states: “Malawi relies heavily on traderelated taxes (customs duties, VAT, and excise taxes), which were responsible for
approximately 42% of tax revenue in 2009. Additionally, the overall tariff structure
is complicated to administer, with six bands and myriad concessions and
exemptions (Chapter III(1)(iii)), which tend to be discretionary and ad-hoc in nature,
leaving scope for corruption.”
COMESA
As member of the COMESA Customs Union launched in June 2009, member
states are given 3 years to align their national tariffs with the COMESA External
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Tariff (CET). The COMESA three-band structure is 0% for capital goods and raw
materials, 10% for intermediate goods, and 25% for finished goods. A provisional
list of national sensitive products has already been submitted to COMESA
Secretariat. No customs duties are generally applied to imports from other
COMESA members. COMESA tariff rates as stated in Malawi’s tariff schedule can
reach up to 20% on some products but do only apply to those members that have
not yet signed the FTA Protocol.
Besides the customs union, Malawi is also implementing other COMESA trade
facilitation initiatives, such as the COMESA Simplified Trade Regime, the
COMESA Yellow Card Scheme (a motor vehicle insurance valid in all participating
countries), and the Regional Customs Bond Guarantee Scheme. Furthermore,
Malawi is also a party to the COMESA Protocol on Trade in Services.
SADC Trade Area
As member of SADC, Malawi has signed the SADC Free Trade Area and the
SADC Protocol on Trade. In the process of phasing down of tariffs, authorities
stated that they are behind schedule but derogation had already been sought from
SADC for extension of the implementation period. The list of sensitive products
under SADC is similar to COMESA's and includes sugar, and textiles and clothing.
The simple average preferential tariff in 2009 was 10.2% on imports from South
Africa, and 7.8% on imports from other SADC countries, with a maximum tariff of
25%.
African Free Trade
Zone
Since October 2008, SADC, COMESA and EAC have agreed to form an African
Free Trade Zone uniting the existing free trade zones of COMESA and SADC.
GSP
The Generalised System of Preference (GSP) is a trade arrangement between the
EU, some other developed countries such as Russia, Japan, USA and Canada and
LDC countries. It allows LDC countries exemption from import duties when
exporting finished goods or agricultural commodities. A proof of origin of the
products has to be shown by completing the GSP form which can be obtained from
the Malawi Confederation of Chambers of Commerce and Industry (MCCCI). The
certificate has to be approved by both MCCCI and the MRA. From 1 January 2014,
the European Union will adopt a revised GSP which focuses on easing trade for 89
LDC’s or lower income countries that are greatly in need. The revised system has
more products compared to the previous system that will enjoy larger preference
and therefore improve their penetration on the international market. In the mean
time, countries and businesses are transitioning into the new scheme which will be
operational by 2014.
Bilateral Trade
Agreements
To encourage and stimulate the trade between Malawi and important trading
partners, Malawi has concluded bilateral trade agreements with South Africa,
Zimbabwe, Mozambique, Botswana, China, India and Malaysia. The agreements
enable Malawian importers to buy goods in the respective partner countries and
import them without having to pay import duty, or only a small agreed duty rate on
the qualified goods. A list of the respective goods is registered with the relevant
authorities.
2.6
Encouragement of
SMEs
Other Issues
Based on the fact that the government considers the private sector as the striving
actor for national development, it also acknowledges the potential of Small and
Medium Enterprises (SMEs) for rapid economic growth and employment creation.
It has established various assistance programmes, such as entrepreneurship
training and technical and financial assistance. Currently, the commercial banks
are taking responsibility of enhancing small and medium enterprises through well
organised facilities mainly to address financial incapacity and illiteracy. The
Government of Malawi merged SME support institutions –Malawi Entrepreneurs
Development Institute (MEDI), Small Enterprise Development Organisation(
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External Transport
Routes
North-South
Corridor
SEDOM) & Development of Malawian Enterprises Trust (DEMAT) - into Small and
Medium Entreprise Development Institute (SMEDI) to improve on efficiency and
effectiveness of service delivery to SMEs.
Malawi is a land-locked country and hence depends on its neighbours for access to
the world market. Efficient and secure transport routes are essential both within
and outside the national borders for economic development. The Government
commits to undertake initiatives to expand domestic transportation networks as
well as “transport corridors” to harbours of its neighbour countries, such as the
development of the Northern Corridor to Dar-es-Salaam in Tanzania or the
rehabilitation of the Nacala Railway Line to the port of Nacala in Mozambique.
Besides these two ports, the Mozambican port of Beira handles the dominant share
of Malawi’s trade (about 47%), followed by the port of Durban (about 15%) in South
Africa.
A joint initiative of COMESA, EAC and SADC is the implementation of the NorthSouth Corridor Aid for Trade Programme which aims to reduce transport costs
along two priority corridors. The two corridors cover the Dar-es-Salaam Corridor
linking Dar-es-Salaam to the Copperbelt, and the North-South Corridor linking the
Copperbelt to the southern ports of South Africa. The later passes through 8
countries: Tanzania, DR Congo, Zambia, Botswana, Malawi, Mozambique,
Zimbabwe and South Africa. This pilot programme does not only involve
improvement of the physical infrastructure for transport, but also covers the
regulatory environment for trade and transport along the Corridor.
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ACCESS AND ADMISSION OF
FOREIGN INVESTORS
3.1
Foreign Investment & Capital
Mobility
Forms of investment
Malawi has no restrictions on maximum ownership by foreign investors. Private
investors can either conduct Greenfield investment or partner up with a local
company in a joint venture. A database of potential investors in Malawi has been
established by MIGA. Investment opportunities arising through privatisation exist
especially in the energy sector where government supports the creation of publicprivate partnership programmes.
Investment
Requirement &
Restrictions
The minimum investment level for foreign investments is US$50,000. Foreign
investors cannot enter small-scale prospecting and mining operations which are
reserved for Malawians as well as foreigners that already lived in Malawi for at
least 4 years. Other restrictions apply to industries that pose health, security and
environmental concerns such as manufacture of firearms, ammunition, biological
and chemical weapons, explosives, and industries involving hazardous waste and
radioactive materials.
Access to Local
Financing
Modernisation and liberalisation of the financial sector with the enactment of the
Capital Market Development Act, 1990, was not only done to facilitate access to
local financing for domestic investors, but also to create more possibilities of
financing for foreign investors. National and foreign investors have unrestricted
access to local financing facilities. Government committed to establish a diversified
banking sector with competition and new banking institutions. It furthermore
guarantees no direct Government controls on credit and market based interest
rates.
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3.2
Foreign Investment Establishment,
Registering and Licensing
Processes
The investment process in Malawi is very simple. According to Business
Registration Act (2013), all new companies have to register with the Registrar of
Companies as a Limited Liability Company. The process is expected to take about
3 days. Investment in certain designated sectors or industries requires licenses
based on the legislation governing those sectors. Such sectors include mining,
energy, pharmaceutical among others.
Investment License
Foreign investors that invest a minimum amount of US$50,000 have to apply for an
Investment Certificate from MITC. With the completed application form, the
investors must submit a business proposal with all details of the project including
staffing and expatriate staffing, land requirements, certificate of incorporation, etc.
The application processing fee is US$200, or its equivalent in Malawi Kwacha
(MWK). After reception, MITC conducts a background check on the company,
evaluates and approves or rejects the application. Once the license is approved,
the investor has to pay US$800 or an equivalent in MWK for issuance of the
investment certificate.
Industrial License
For manufacturing, no license is required except for some small industries that
raise safety and health concerns and are:
1.
2.
3.
4.
Foreign capital
registration
Firearms, ammunition and chemical and biological weapons;
Explosives;
Manufacturing involving hazardous waste treatment or disposal; and
Manufacturing involving radioactive material.
After incorporating/registering the company, the foreign company is required to
register any foreign capital inflow with the Reserve Bank of Malawi through a
commercial bank. This requirement has a purely for data collection and funds
repatriation purposes. Furthermore, the Reserve Bank has to approve terms and
conditions of international loans, management contracts, licensing and royalty
arrangements and technology transfer. However, granting the approvals is not an
issue as they are automatically granted within internationally prevailing standards.
Once the investor has registered the company and attained a Business Residence
Permit (BRP) (please see details on section 3.3.), he has to open a business
account with any Commercial Bank operating in Malawi.
Tax Registration
For payment of the compulsory taxes such as corporate and withholding tax, the
investor has now to register with the Commissioner of Domestic Taxes Division of
the Malawi Revenue Authority (MRA).
Mining
The Mines and Minerals Act of 1981 is regulating any mining operation in Malawi
and is administered by the Department of Mines being part of the Ministry of
Natural Resources and Environmental Affairs. For large-scale prospecting and
mining operations, three different licenses can be issued.
Reconnaissance License: issued for 1 year for an agreed programme and an area
which is not exceeding 100,000 square km; subsurface operations are not allowed
unless they are specifically authorised.
Exclusive Prospecting License (EPL): It provides exclusive rights to carry out
prospecting operations for a specified mineral and in an area of 2,500 square km
which is reduced by 50% each time the license is renewed. This license can be
issued for a maximum of 3 years and can be renewed twice for a period of two
11
years. Requirement for this license is to provide a proposal for the training and
employment of Malawian citizens.
Mining license conferring exclusive rights: Holders and non-holders of an EPL can
receive exclusive rights to prospect, mine, produce and sell specified minerals from
a designated area not bigger than the area under the EPL. The validity of such
mining license is 25 years or the estimated life time of the mine and is renewable
for a period of 15 years. The mining licenses entails terms specifying the
requirements for employment and training of Malawians.
Financial Services
The financial services sector is under the authority of the Reserve Bank of Malawi
for banking and insurance, and the Ministry of Industry and Trade or the Registrar
General for savings and credit cooperatives, pension funds and development
finance institutions. The regulation of non-bank financial services are not duly
regulated nor duly supervised. The regulation is in the process of reform and a new
Banking Act and a new Insurance Act were already enacted in November 2009,
but have not yet entered into force. A Financial Services Bill and Bills on pension,
Credit Cooperative and Microfinance have been drafted. Once they enter into
force, the supervisory power will be consolidated under the Reserve Bank of
Malawi.
Banking
The Banking sector is regulated under the Banking Act of 2010 under which the
Reserve Bank of Malawi is responsible for for licensing and supervising
commercial banks and other financial institutions. According to the Reserve Bank’s
financial stability report of June 2013, the sector is dominated by two banks against
a sum of 12 and grew by 19.3% by March 2013 compared to 12.3% achieved in
September 2012. The Government’s pursuit to restore economic and financial
soundness led it to implement tight monetary policies that would control the rising
inflation and foreign exchange availability which are key in influencing the foreign
investment course in Malawi. Such policies included inflating the bank rate and
floating the exchange rate. Indeed the policies have conspicuously yielded the
country a great improvement in the foreign exchange reserves and a downward
trend in the inflation rate. Despite some adverse effects, the financial system has
been stable.
12
Insurance
The Insurance Act of 2010 regulates the insurance industry. The Reserve Bank of
Malawi is the responsible supervisory authority by delegation from the Ministry of
Finance.
Security Trading
The capital market is small and there are 15 companies listed on the Malawi Stock
Exchange (MSE). This market is regulated under the Capital Market Development
Act of 1990. The MSE is operating under the Reserve Bank of Malawi as a selfregulatory institution and started its trading operations in 1996.
Other Trading Systems Malawi now has two commodity exchanges: The Agricultural Commodity Exchange
(ACE) and the Auction Holdings Commodity Exchange (AHCX) established in
2013.Malawi is in the process of developing a legal framework for Commodity
Exchanges and Warehouse Receipt System.
3.3
Foreign Employment & Residence
The processing of employment and business permits has been rather restrictive
and taken a long time in the past. However, an order was issued in 2013
delegating powers of approval of such permits from the Minister of Home Affairs to
the Chief Immigration Officer. The order, which awaits a ministerial signing, will
improve the processing time of permits from as long as 12 months to 5 days.
Malawi recognises that the employment of expatriates is inevitable in any
developing country where specialised skills for industries strived for investment is
missing.
In general, there are four different types of permits for expatriate workers:
Temporary Residence Permit (TRP), Business Residence Permit (BRP),
Temporary Employment Permit (TEP), and the Permanent Residence Permit
(PRP). The BRP and TEP are especially of importance to foreign investors and
described in more detail.
Temporary
Residence Permit
A TRP is issued for visitors and temporary workers who will stay longer than 90
days but not more than 6 months in the country.
Business Residence
Permit
An investor investing at least US$50,000 in Malawi is eligible for a Business
Residence Permit (BRP). It covers foreigners who are shareholders and establish a
company in Malawi. The permit is valid for 5 years and is renewable. The
application shall be submitted to MITC which acts as Secretariat. The application
has to contain:





Application forms in duplicate (available at MITC);
Two passport size photographs;
Project proposal with full details of the investment project;
Police clearance from the last country of residence;
Processing fee of MK 10,000.
MITC will process the application and present it to the Chief Immigration Officer for
further action. At approval, the investor has to pay the issuance fee of MK 500,000.
Temporary
Employment Permit
(TEP)
The Temporary Employment Permit (TEP) is for expatriate workers employed by a
Malawian firm or firms working on Government contracts and who expect to stay
for more than 6 months in the country. The permit is valid for up to 2 years and has
to be renewed in case an extension beyond that period is required. Any new
application shall contain:




The immigration application forms;
2 copies of the curriculum vitae of the applicant;
2 passport size photos;
Copies of certificates;
13
 Organisation chart of the company indicating the position in question;
 Processing fee of MK 10,000.
The application is filed with MITC for processing and presentation to the
Immigration Department and the TEP Committee for approval or rejection. An
issuance fee of MK 120,000 has to be paid and the TEP will be received from the
Chief Immigration Officer.
Permanent
Residence Permit
This permit applies to foreigners who have legally stayed in Malawi for not less
than 7 years who may wish to take up residence in Malawi.
Department of
Immigration
Foreign investors face their biggest challenges with the Department of Immigration
when applying for TEPs. The areas of difficulty are on the one side that permits
have an upper limit which does not match the duration of the worker’s contract, and
the requirement to conduct a labour market test proofing that no Malawian worker
with similar skills can fill the position.
3.4
Foreign Investor Access to Land
and Property Rights
Land Availability
The Government of Malawi, realising the urgent need for serviced land for
investment purposes, is working with the Malawi Investment and Trade Centre in
developing and servicing land for investor use inorder to reduce and eventually
eliminate the cost and period that would delay the establishment of investments in
Malawi.
Types of Land
Customary Land
This is land under the jurisdiction of traditional authority and accounts for not less
than 60% of the total land mass. Ideally, this land is preserved for agricultural
activities by locals. Nevertheless, customary land can be accessed by foreign
investors upon approval of required applications.
Public Land
This is land that is occupied, used or acquired by the Government of Malawi,
Private Land
This is land held either in freehold or leasehold ownership both in rural and urban
areas.
Land development
Costs
Ministry of Lands
and Valuation
Commercial or industrial development is possible on all three types of land,
although the location must conform to the zoning regulations set by the
Department of Housing and Physical Planning. Prior to development an applicant
must apply for and receive an Offer of a Lease from the Ministry of Lands, Physical
Planning and Surveys in the case of customary and public lands. Transfers of
freehold land are private transactions, although notice of intended sale must be
given to Government when freehold property is sold. An investor may approach a
freeholder for a direct transfer or lease of freehold land.
4
FOREIGN INVESTMENT
OPERATIONS
4.1
Employment
The labour legislation consists of the following main acts:
The Labour Relations Act of 1996 promotes sound labour relations by protecting
and promoting the freedom of association, encouraging the engagement in and
14
establishment of trade unions and employer’s organisations, pursuing collective
bargaining and organisational rights, and expeditious dispute settlement. The Act
also covers the establishment and functioning of the Tripartite Labour Advisory
Council, and the Industrial Relations Court.
The Employment Act No. 6 of 2000 sets out the fundamental principles of the
labour conditions in Malawi, functions, powers and administration of the Labour
Commission and labour officers, the regulation on the employment of young
people, requirements on establishment, reinforcement and regulations of standards
of employment, of wages and contracts, and dismissal and disciplinary processes.
The Workers Compensation Act covers the following matters:
 Eligibility for Compensation in Case of Injury other than the Contraction of a
Scheduled Disease.
 Compensation for Injury Caused otherwise than by the Contraction of a
Scheduled Disease.
 Calculation and Distribution of Compensation
 Medical Aid
 Compensation for Injury due to the Contraction of a Scheduled Disease.
 Procedure for Obtaining Compensation
 Administration
 Workers’ Compensation Fund
The Technical, Entrepreneurial and Vocational Education and Training Act of 1999
provides for the promotion and co-ordination of Technical, Entrepreneurial and
Vocational Education and Training and the establishment of the Technical,
Entrepreneurial and Vocational Education and Training Authority of Malawi. It sets
the basis for the Technical, Entrepreneurial and Vocational Education and Training
Fund, and regulates the payment into the fund through periodical contributions
levied on employers. the application of the fund towards the defraying various costs
and expenses relating to technical education and training and further to provide for
matters incidental to or connected with the foregoing.
4.2
Business Taxation
In general, Malawi is considered to have numerous taxes and levies.
Corporate Tax
Malawi has a corporate tax rate of 30% for domestic companies and 35% for
foreign branches. For dividends, a withholding tax of 3% applies.
Income Tax
The annual threshold level for exemption from personal income tax is MK240,000,
and all income in excess is taxed at varying rates with MK60,000 being taxed at
15%. All income in excess of the MK60,000 above is taxed at 30%. Non-residents
have to pay a 15% withholding tax on their gross income in Malawi. There is also a
payroll levy of 2%.
VAT
VAT applies to most goods and rates at 16,5%.
Estate Tax
Estate taxes vary from 0 to 9% and depend on the value of the estate.
Stamp Duty
Stamp duties apply to instruments such as mortgages, bonds, leases, and
insurance policies. They vary according to the nature of the instruments and the
value of the transaction.
Department of
Income Tax
Improvements have been identified by the Government. The two points that have
been suggested to improve the tax system consist of improving the transparency,
especially in sequencing, design and language of forms employed, and to change
the advance payment system of corporate taxes for manufacturers which face
difficulties in their first-year as no tax payment record is yet established.
15
4.3
Environment, Physical Planning,
Health & Safety, Consumer
Protection
Labour Standards
General working standards are regulated by the Employment Act of 2000. The
Workers’ Compensation Act covers for employee compensation for injuries
suffered or diseases contracted in the course of their employment. The Act also
initiates the establishment and management of a Workers’ Compensation Fund
that is providing for such matters. The Occupational Safety, Health and Welfare Act
of 1997 makes furthermore provisions for all conditions of employment in
workplaces relation to the safety, health and welfare of persons employed. It also
states regulations for plant and machinery inspections, the preventions and
regulation of accidents occurring at the workplace.
Environment
The Environment Management Act No. 23 of 1996 provides for environmental
conservation measures while the Environment (Specification of Projects Requiring
Environmental Impact Assessment) Notice of 1998 specifies all cases in which as
Environmental Impact Assessment (EIA) is required for a project approval.
Consumer
Protection
The topic of consumer protection is covered by the existing competition policy
under the Competition and Fair Trading Act of 1998.
4.4
Competition Policy & Law
Competition Policy
Malawi has a competition policy, the Competition and Fair Trading Act (CFTA)
which was enacted in 1998 and entered into force in 2000. However, the
application of the act only started in 2005 when the Competition Commission was
created. The Commission is independent in its procedures and decisions and
investigates anti-competitive and unfair trading cases. The policy prohibits anticompetitive trade practices, regulates and monitors monopolies and other
concentration of economic power, ensures the best possible market conditions and
protects consumer welfare.
COMESA
Competition
Commission
Under the COMESA initiative, a COMESA Competition Commission (CCC) was
established and started operating in 2009. The CCC is based in Malawi with nine
commissioners from member countries. The objective of CCC is to eliminate the
abuse of over-pricing and dominance, price fixing and collusion.
Price Controls
There are price controls of certain agricultural products such as maize, raw tobacco
and cotton. Electricity tariffs are controlled through an “automatic tariff adjustment”
mechanism that comes into effect in case of a 5% fluctuation in inflation or the
exchange rate. Fuel prices are under control of the government and are approved
by the Malawi Energy Regulatory Authority (MERA). The water price is a result of
the proposal of its price to the Minister of Water Development by the five water
boards in place. However, a water sector reform has been initiated which aims to
provide MERA also the power to regulate the water sector.
4.5
RBM and its role
Monetary Policy, Foreign Exchange
and Foreign Investors
The Reserve Bank of Malawi (RBM) is in charge of the monetary policy and has a
key role authorizing all foreign capital transactions in the country. In the IMF (2009)
report it is noted that the RBM needs to reduce its role in the market in order to
improve the monetary and exchange policy transparency. The supply of foreign
exchange to commercial banks had largely stopped led to a serious imbalance of
available foreign exchange in the country as well as to a fundamental foreign
16
exchange rate imbalance. Such development has negative impact on the operating
businesses and, hence, the economic growth and development.
Restructuring of the
Financial Market
Government and IMF agreed that a restructuring of the foreign exchange markets
is required including respective policy adjustments. Measures include the reactivation of the interbank market for foreign exchange, reducing RBM’s marketmaking role, introduce more flexibility to the exchange rate to achieve a marketbased rate, and revise and update respective laws and regulations. Besides
reforms on the foreign exchange regime, further reforms on reserve money ceilings
and the general monetary policy approach have been initiated.
General Rights
Access to foreign exchange is free to foreign investors as well as paying for
imports and transferring financial payments. Full remittance is allowed for
dividends, investment capital on repatriation, interest and principal payments for
approved international loans, and approved fees for management, licenses,
royalties and similar obligations.
Exporter
Requirements
The current regulations oblige exporters to surrender 40 percent of proceeds to the
banking system, while tobacco exporters haven to retain even 60% of their export
proceeds in Foreign Currency Deposit Accounts (FCDAs) and 40% to commercial
banks. Tobacco exporters who do not possess an FCDA have to retain 100% of
their proceeds to commercial banks at the commercial bank rate.
4.6
Public Procurement
The Public Procurement Act No. 8 of 2003 and the Procurement Regulations of
2004 are covering the different procurement rules, procedures and methods to be
employed for Government procurement. According to the regulations and the Act,
the procurement responsibility is decentralised to the procuring entities through the
establishment of internal procurement committees in the entity. The act also
established the Office of the Director of Public Procurement (ODPP) which shall
regulate, monitor, and oversee public procurement.
One setback is that the regulations allow Government ministries to import products
duty free which disadvantaged local producers and caused serious problems to
national SMEs.
4.7
Intellectual Property
Legislation
Intellectual Property legislation is covered by the Patents Act of 1958, the Trade
Marks Act of 1958, the Registered Designs Act of 1985, the Trade Descriptions Act
of 1987, and the Copyright Act of 1989. The laws are outdated and relevant
authorities are aware of the need for reviewing them and adapting them to the new
international standards and agreements. Hence, a new IP policy has been drafted
and is awaiting the approval by the Cabinet. The IP policy aims to stimulate the
generation, commercialization, and protection of intellectual property rights as an
economic stimulant for wealth creation. It also aims to encourage institutions to
adopt their own IP policies; and to integrate the IP system in government
development strategies. The new policy is apparently already in the Office of the
President for its review and approval.
Authorities
Responsible authorities for intellectual property issues are the Registrar General
under the Ministry of Justice for patents, trademarks and designs; the Ministry of
Trade and Industry for trade-related aspects of IPR; the Copyright Society of
Malawi (COSOMA) under the Ministry of Culture for copyright matters. A proposal
of the new IP policy is to consolidate all IPR matters through the creation of the
Malawi Intellectual Property Office (MIPO).
17
4.8
Constitution of
Malawi
Investment Protection and Dispute
Settlement
Article 28 of the Constitution of Malawi states the right of property irrespective of
ownership and therefore applies to both national and foreign investors:
1. Every person shall be able to acquire property alone or in association with
others.
2. No person shall be arbitrarily deprived of property.
International
Agreements
Malawi is member of the International Centre for the Settlement of Investment
Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA). Being
member of the WTO, Malawi intends to comply with the TRIPS Agreement by the
end of 2013 and by 2016 with the implementation of patent protection for
pharmaceutical products. Furthermore, Malawi has concluded several Bilateral
Investment Promotion and Protection Agreements. A list of all BITs can be found
below.
4.9
International Agreements and
Obligations – Trade and other
Agreements, BITs, DTTs
COMESA
Malawi is actively involved in COMESA institution, trade facilitation schemes, the
COMESA Customs Union as well as the COMESA Common Investment Area as
signed in August 2010.
WTO, EC and EPA
Malawi is part of the WTO and is signatory to the ACP-EU Lomé Conventions and
subsequent agreements. Based on the requirement to establish WTO-compatible
trade agreements, Malawi entered negotiations for the European Partnership
Agreements (EPAs) under the ESA configuration. The ESA group consists of 11
members.
AGOA and others
Malawi qualifies under the US-Africa Growth Opportunity Act (AGOA) to receive
preferential market access to the US market for about 6,400 goods.
As stated above, Malawi is member of ICSID, MIGA and has signed Bilateral
Investment Treaties (BITs) with several countries.
A list of Bilateral Investment Treaties and Double Taxation Treaties is attached
below.
5
SADC RELATED ISSUES
The Dual membership of SADC and COMESA has been evaluated as following by
the WTO Policy Review (2010): “Malawi's dual membership in SADC and
COMESA has so far not created any conflict, according to the authorities. The
issue of overlapping membership may be also resolved once the plan to harmonize
the three regional economic groupings of COMESA, East African Community
(EAC), and SADC, materializes. However, the authorities are expecting a delay in
launching the SADC Customs Union as planned in 2010.”
18
Bilateral Investment
Treaties
Bilateral Investment Treaties Concluded with Malawi
Partner Country
Date of signature
1
2
3
4
5
6
7.
Egypt
Italy
Malaysia
Netherlands
Taiwan Province
China
Zimbabwe
of
Libya
21-Oct-97
28-Aug-03
05-Sep-96
11-Dec-03
22-Apr-95
Date of Entry
into force
07-Sep-99
01-Nov-07
-
04-Jul-03
-
1999
-
Double Taxation
Agreements
Double Taxation Agreements concluded with Malawi as of 1 June 2009
Partner Country
Type of Agreement
Date of Signature
1
Denmark
Income and Capital
17-Jan-59
2
France
Income and Capital
05-Nov-63
3
Netherlands
Income and Capital
07-Jun-69
4
Norway
Income and Capital
16-Dec-63
5
South Africa
Income and Capital
03-May-71
6
Sweden
Income and Capital
25-Nov-54
7
Switzerland
Income and Capital
03-May-65
8
United Kingdom
Income and Capital
25-Nov-55
Agreements under
Negotiations
Malawi is negotiating Bilateral Investment Treaties and some cases double
Taxation agreements with Mauritius, United Arab Emirates, India, Germany and
Brazil among others
Sources included
Government of Malawi (2012) Malawi Growth and Development Strategy 2011 –
2016
Government of Malawi: Relevant Legislation
Ibid: National Export Strategy (2012)
19