Attitude toward Foreign Direct Investment
Malawi is eager to receive foreign investment and foreign investors are generally granted national treatment. The Malawi constitution protects investment irrespective of nationality. The government encourages both domestic and foreign investment in most sectors of the economy without major restrictions on ownership, size of investment, source of funds, or the destination of the final product.
Other Investment Policy Reviews
The World Trade Organization (WTO) conducts periodic Trade Policy Reviews of Malawi. The last one was conducted in April 2016. These trade policy reviews have informed development co-operation and assistance to Malawi.
Laws/Regulations on Foreign Direct Investment
There are a few legal restrictions on foreign investment based on environmental, health, biosafety, and national security concerns. Affected sectors are firearms and ammunition; chemical and biological weapons; explosives; and manufacturing involving hazardous waste treatment/disposal or radioactive material. Since industrial licensing in Malawi applies to both domestic and foreign investment, and is only restricted to a short list of products, it does not limit competition, protect domestic interests, or discriminate against foreign investors at any stage of investment. Additionally, retail operations in rural areas are limited to only Malawian citizens, although enforcement is weak.
While not discriminatory to foreign investors, investments in Malawi require multiple bureaucratic processes, which may include obtaining a business license, a tax registration number, and a land use permit. These procedures can be time consuming, particularly when it comes to land permits, and may constitute an impediment to investment. Investors may also face bureaucratic hurdles in obtaining temporary employment permits (TEPs) and business residency permits (BRPs).
To facilitate the process of starting a business, the Malawi Investment and Trade Center (MITC) operates a One Stop Center. It offers assistance to foreign and domestic investors of all sizes on how to navigate relevant regulations and procedures. It hosts representatives of the Registrar General, the Malawi Revenue Authority, the Department of Immigration, and the Ministry of Lands, Housing, and Urban Development. MITC’s main website (www.mitc.mw) and trade portal (trade.mitc.mw) provide information about sectors and projects targeted for investment.
In addition to MITC’s One Stop Center, business registration can theoretically be done online at http://www.registrargeneral.gov.mw/. However, there are known problems with accessing the website and delays in acquiring a user name. To operate in Malawi, in addition to registering the company with the Registrar General, companies also need to register with the Malawi Revenue Authority and often with the Ministry or regulatory body overseeing their sector of activity (for example, construction companies, both foreign and domestic, need to register with the National Construction Industry Council of Malawi).
The government affiliated Small and Medium Enterprise Development Institute (SMEDI) offers training, assistance in access to finance, market linkages, and mentorship opportunities to domestic SMEs.
The government’s overall economic and industrial policy does not have discriminatory effects on foreign investors. The Malawi Growth and Development Strategy for 2011-2016 (known as MGDS II) identifies a number of sectors as priority growth areas. In 2014, the government compiled an investment projects compendium which identified investment opportunities in agriculture, mining, tourism, energy, and transport infrastructure. MITC’s website also lists investment opportunities by sector.
Sugar cane production and processing, legumes, livestock production, dairy farming, oil seed processing, irrigation farming, and large scale commercial agriculture have the highest priority for investment in the agricultural sector. Independent power producers, particularly for hydropower and other renewable power sources, are encouraged. Government is also calling for the private sector (both local and foreign) to develop the tourism sector. Private sector-led mineral exploration is also promoted and the Geological Survey Department is making efforts to produce geophysical and geological maps of Malawi.
Limits on Foreign Control and Right to Private Ownership and Establishment
There are some limitations on foreign control. One restriction in the mining industry is that small-scale prospecting and mining operations are reserved for Malawians and foreigners who have resided in Malawi for a minimum of four years. Under the government’s privatization program, participation of an individual foreign portfolio investor is limited to a maximum of 10% of any class or category of security and the maximum total foreign investment in any portfolio is 49%. During the privatization of government assets, Malawian nationals are offered preferential treatment, including discounted share prices and subsidized credit. Subsidized credit carries a precondition that the shares or assets be retained for at least two years. While this is not a legal requirement, for at least one large mining project, the Government of Malawi asked for and obtained a 15% equity share during licensing negotiations. Under a revised Land Bill currently being considered by parliament, foreign citizens will no longer be able to own land freehold; all foreign held land would be lease-hold for terms up to 50 years, and potentially longer.
Malawi has about 60 remaining state-owned enterprises that are involved in commercial operations, particularly in the public utilities sector, agriculture, housing, finance, education, and aviation. All investors, irrespective of ethnic group or source of capital (foreign or local) may participate in privatization bids.
Privatization efforts currently focus on public-private partnerships and attracting strategic investors rather than outright privatization. These are handled by the Public Private Partnership Commission (www.pppc.mw), formed in 2013 to succeed the former Privatization Commission, which the 2010 Public Private Partnership Act and 2011 Public Private Partnership Policy rendered obsolete.
In 2013, the government sold a 49% share of the bankrupt national air carrier Air Malawi to Ethiopian Airlines, which resumed operations under the Malawian Airlines name. The Government of Malawi has officially announced plans to sell its remaining 51% equity share in the airline in the future but no date has been set. In 2015, the Government of Malawi sold a controlling interest in the Malawi Savings Bank and the government’s residual equity in IndeBank. Both foreign and domestic investors were invited to submit bids for these banks. The bidding was considered transparent and one of the banks drew offers from foreign investors, but equity in both banks was ultimately sold to domestic investors.
Screening of FDI
There is no government policy to screen foreign direct investment. However, foreign direct investment (FDI) needs to be registered with the Malawi Investment and Trade Center (MITC, www.mitc.mw) and investment capital over $50,000 must be registered with the Reserve Bank of Malawi (RBM, www.rbm.mw) through any commercial bank in Malawi.
The Malawi Competition and Fair Trading Act of 1998 (CFTA) only became fully operational when the Competition and Fair Trading Commission (CFTC, www.cftc.mw) was established in 2005. Since 2013, the institution has overseen 26 applications for merger and acquisition and dismantled five cartels. The CFTC’s role is to encourage competition in the economy, to regulate and monitor monopolies and concentrations of economic power, to protect consumer welfare and to ensure the best possible fair market conditions. So far no mergers or acquisitions have been disapproved. CFTC decisions may be appealed, first to the Board and subsequently to the Commercial (High) Court.