Malawi

Bureau of Economic and Business Affairs
Report
July 19, 2018

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Executive SummaryShare    

The Government of Malawi is eager to attract foreign direct investment. The Malawi Investment and Trade Center’s One Stop Center offers assistance on how to navigate relevant regulations and procedures. In general, there are adequate legal instruments to protect investors. Foreign investors are generally accorded national treatment.

Malawi has been largely free of political violence since gaining independence in 1964. Although divisions exist, Malawi has no significant tribal, religious, regional, ethnic, or racial tensions that could be expected to lead to violent confrontation.

Agriculture accounts for one third of GDP and 80 percent of Malawi’s exports. Opportunities exist for investment in the agricultural sector, particularly for processing and value addition. As the United States government concludes a USD 350 million effort to upgrade electrical transmission lines and assist in policy reform to attract additional power sector investment, the power sector provides increased opportunities for investors.

Although the Government of Malawi has made some efforts to combat corruption, it remains a major obstacle to carry out investment in Malawi. Scarcity of skilled and semi-skilled labor is another serious impediment to doing business in Malawi and is most acute in occupational categories that include accountants and financial management personnel, economists, engineers, lawyers, IT, and medical/health personnel.

There is an established mediation process to promote agreements between parties in disputes before court proceedings start. Both foreign and domestic investors have access to Malawi's legal system, which functions fairly well and is generally unbiased but slow.

All investors have the rights to establish, acquire, and dispose of interests in business enterprises. Foreigners require a business residence permit (BRP) to carry out any business activity in Malawi. All new land acquisitions are done under leases. Lease terms for foreigners may be limited to 50 years, compared to 99 years for Malawians.

Table 1

Measure

Year

Index/Rank

Website Address

TI Corruption Perceptions Index

2017

122 of 175

http://www.transparency.org/
research/cpi/overview

World Bank’s Doing Business Report “Ease of Doing Business”

2017

110 of 190

doingbusiness.org/rankings

Global Innovation Index

2017

115 of 128

https://www.globalinnovation
index.org/analysis-indicator

U.S. FDI in Partner Country (M USD, stock positions)

2015

USD 1

http://www.bea.gov/
international/factsheet/

World Bank GNI per capita

2015

USD 320

http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign InvestmentShare    

Policies Toward Foreign Direct Investment

The Government of Malawi encourages both domestic and foreign investment and foreign investors are generally granted national treatment. Investors, both domestic and foreign, may invest in any sector of the economy, with no restrictions on ownership. There are no restrictions on the size of investment, the source of funds, or whether products are destined for export or for the domestic market. However, the Malawi Stock Exchange limits an individual foreign investor to 10 percent of the shares of any one company during its initial public offering (IPO) and the aggregate of all foreign investors participating in the IPO is limited to 49 percent of shares. These restrictions only apply to the initial offering and do not apply to any future trading of shares.

The Malawi Investment and Trade Centre (MITC) is the Government of Malawi’s trade and investment promotion agency. Established to promote Malawi as a destination for trade and investment, it maintains three websites (www.mitc.mw; http://www.theiguides.org/public-docs/guides/malawi;

and trade.mitc.mw) that provide information on potential sectors for investment and relevant regulations. MITC also operates a One-Stop Service Centre in Lilongwe to help foreign and domestic businesses navigate relevant regulations and procedures. MITC hosts representatives of the Registrar General (for business registration), the Malawi Revenue Authority (for tax registration), the Department of Immigration (to help process visa and residency permit for foreign investors, staff, and their families), and the Ministry of Lands, Housing, and Urban Development (to help identify and secure land for investment projects).

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities are generally free to establish and own business enterprises and engage in all forms of remunerative activity regardless of size of the investment, source of funds, or destination of the final product. There is, however, a requirement that at least two Malawian residents be appointed directors of companies registered in Malawi.

There are some limitations on foreign ownership of land. Under the Land Act of 2016, neither Malawians nor foreigners are able to acquire freehold land; foreigners are able to secure lease-hold land for terms up to 50 years, and potentially longer. In addition, foreigners can only secure private land when no citizen has made an offer for the land and the law prohibits the passing of land by way of gift between persons who are not citizens of Malawi.

During the privatization of government assets, Malawian nationals are offered preferential treatment, including discounted share prices and subsidized credit. Small-scale prospecting and mining operations are reserved for Malawians and foreigners who have resided in Malawi for a minimum of four years. A 2017 amendment to the Public Procurement and Disposal of Assets Bill includes an indigenization clause that calls for “the prioritization of all bids submitted to give preference to sixty percent indigenous black Malawians and forty percent others for national competitive bidding.” The government has yet to draft implementing regulations to bring this into force.

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 USD 50,000 must be registered with the Reserve Bank of Malawi (RBM, https://www.rbm.mw through any commercial bank in Malawi. Registration of borrowed invested funds allows investors to externalize profits to pay back loans contracted abroad.

The Embassy is not aware of any ownership or control mechanism, sector restrictions, or investment screening mechanisms that target U.S. investors.

Other Investment Policy Reviews

The last World Trade Organization (WTO) periodic Trade Policy Reviews of Malawi was conducted in April 2016. The full report and recommendations can be accessed at https://www.wto.org/english/tratop_e/tpr_e/tp435_e.htm.

Business Facilitation

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), the iGuides (http://www.theiguides.org/public-docs/guides/malawi), and trade portal (www.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. 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).

Outward Investment

MITC is mandated to promote outward as well as inward investment. However, MITC rarely facilitates outward bound investment, as it is more focused on inward investment. There are some limitations on outward investment. The Pension Act of 2010 and accompanying regulations do not allow for the investment of pension funds or umbrella funds abroad, thus imposing constraints on asset diversification.

2. Bilateral Investment Agreements and Taxation TreatiesShare    

Malawi has signed bilateral investment treaties with Egypt (in force), Italy (in force), the Netherlands (in force), Zimbabwe (not in force), Malaysia (not in force), and Brazil (not in force). Malawi is also a member of the Common Market for Eastern and Southern Africa (COMESA) Customs Union and the Southern African Development Community (SADC) Free Trade Area, which is governed by the SADC Protocol on Trade.

Malawi does not have a bilateral tax treaty with the United States. Investments, and income derived from them, are subject to applicable taxes in both jurisdictions. Americans working in Malawi are subject to applicable taxes in both jurisdictions.

In the past year, the Government of Malawi passed the Taxation (Amendment) Act 2017 (which increases the tax free bracket for salaried employees (up to USD 41/month) and introduces an additional income tax bracket for high income earners (over USD 4,100/month), the Value‑Added Tax (Amendment) Act 2017 (which makes certain essential commodities including milk, eggs, and honey tax exempt), and the Customs and Excise (Amendment) Act 2017 (which imposes an excise duty on airtime, television subscriptions, gaming and betting (including lotteries)). The Government of Malawi is in the process of reviewing the taxation law to modernize tax law in the country and to introduce structures for effective tax dispute resolution.

3. Legal RegimeShare    

Transparency of the Regulatory System

The Government of Malawi continues to undertake various reforms to ensure that no tax, labor, environment, health, safety, or other laws distort or impede foreign or domestic investment. The legal, regulatory, and accounting systems are somewhat transparent and consistent with international norms. However, procedural delays continue to impede the business and investment environment.

The Government of Malawi uses a mix of fiscal, financial, and regulatory instruments to administer its investment policy, and thus management and responsibility is spread across multiple ministries and agencies. Taxation policy is the jurisdiction of the Treasury Department in the Ministry of Finance. The Malawi Revenue Authority (MRA) is the main implementing agency for tax policy; it administers the Taxation Act and other relevant legislation. Some regulatory incentives are within the jurisdiction of their respective ministries. The Reserve Bank of Malawi (RBM) administers the market-based exchange rate of the Malawi kwacha, as well as liberal exchange controls to allow free flow of capital and earnings -- repatriation of dividends, profits, and royalties. The Ministry of Home Affairs’ immigration department administers the Employment of Expatriates Policy, Temporary Employment Permits (TEPs), and Business Residence Permits (BRPs). The Ministry of Lands, Housing and Urban Development is responsible for land policy administration. Technical regulations are developed by relevant government Ministries, Departments, and Agencies (MDAs) and forwarded to the Ministry of Justice for final review and gazetting.

There are no specific regulatory guidelines for periodically reviewing regulations or conducting impact assessments. Furthermore, there are no specific criteria for determining which proposed regulations are subject to an impact assessment nor is there a specialized government body tasked with reviewing and monitoring regulatory impact assessments conducted by other individual agencies or government bodies. All technical regulations are enforced by relevant government Ministries, Departments, and Agencies.

Certain professional associations have sectorial rule-making power that amounts to regulatory power. These professional bodies include the National Construction Industry Council, Malawi Law Society, Malawi Accountants Board, and the Employers Consultative Association of Malawi. Some of these associations have set regulations that require the use of local labor, local contractors, or other means to achieve localization or skills transfer to Malawians. Such rules are printed in the Government Gazette, available from the official government printing office. As they are set by associations with closed membership, the rule-making process is not always transparent to firms that have not yet entered the Malawi market, but are considering doing so.

In 2001, the Institute of Chartered Accountants in Malawi adopted the International Financial Reporting Standards (IFRS), which are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. The IFRS are the applicable framework for all companies incorporated under the Companies Act in Malawi. Subsequently, the Institute of Chartered Accountants in Malawi has also adopted the IFRS for Small and Medium Entities Standard as the applicable framework for all non-publicly accountable entities.

Almost all proposed laws, regulations, and policies are subject to public consultation before they are submitted to Cabinet, Parliament, or the Ministry of Justice. However, sometimes the public notice of such consultations is not issued in a timely manner, with the effect that only insiders are aware of and able to plan to attend the meetings. Parliamentary procedure calls for draft bills to be debated in relevant committees before being presented on the floor for a vote. Parliamentary rules do, however, permit fast-tracking bills to avoid this step.

Copies of recent laws can generally be purchased from the government printing office or accessed at the National library and in the High Court libraries in major cities. An increasing number of laws are also available online at www.malawilii.org. The Government of Malawi has no central repository for technical regulations. Regulations are managed by relevant government Ministries, Departments, and Agencies (MDAs). These are published in the Malawi Government Gazette and form part of schedules to relevant acts. Although some of the MDAs do not have operational websites, those that do often have these laws and regulations available online. Some older regulations can be difficult to locate.

Regulations and enforcement actions are legally reviewable in the national court system. However, there is no existing requirement that regulations be periodically reviewed. The Ministry of Justice and Constitutional Affairs is mandated to provide oversight or enforcement mechanisms to ensure MDAs follow administrative processes for developing and implementing regulations. If they feel procedures were not followed, private individuals and entities can bring a case against the government in court or seek redress through the Office of the Ombudsman.

The Government of Malawi has made positive steps toward increasing regulatory transparency and improving the foreign investment environment, including the review of several rules and regulations that are relevant to foreign investors. These include: regulations on minimum wage that increase the minimum wage for apprentices; insurance regulations that increase the minimum capital and solvency requirements for life insurers to USD 1.4 million; and a customs and excise tariffs order which gives duty exemptions on capital goods and building materials for agro-processing and electricity generation, transmission and distribution.

Over the past 24 months, the Government of Malawi has implemented a number of reforms to improve the ease of doing business, such as streamlining procedures for dealing with construction permits, resolving insolvency, registering property, and consolidating procedures at the borders to facilitate smooth flow of goods. These reforms, among others, have helped Malawi improve its Doing Business ranking from 141 in 2016 to 110 in 2018.

International Regulatory Considerations

Malawi is a member of the Common Market for Eastern and Southern Africa (COMESA) Customs Union and the Southern African Development Community (SADC) Free Trade Area, which is governed by the SADC Protocol on Trade. All regulations are developed in line with the regulatory policy provisions that are set out by COMESA and SADC, but national regulations rule if there is a conflict.

As a member of both SADC and COMESA, Malawi is bound by their respective norms and standards. Details can be found on the organizations respective websites:

Since 1995, there is no record of Malawi providing notification on draft technical regulations to the WTO Committee on Technical Barriers to Trade. The last time Malawi submitted a statement on implementation and administration of the WTO Agreement on Technical Barriers to Trade was in 2007.

Malawi signed the Trade Facilitation Agreement on July 12, 2017. Malawi has made progress on implementing the FTA provisions through the launch a trade information portal with the aim of increasing transparency and predictability and ultimately boosting trade, investment, and growth. The portal provides all regulatory information on cross-border trade including laws, regulations, prohibitions, restrictions, technical standards, applicable tariffs, fees, procedures for license and permit application and clearance, copies of all forms and plain language instructions. The portal can be accessed at https://www.malawitradeportal.gov.mw/.

Legal System and Judicial Independence

Malawi’s legal system is based on English Common Law. The judiciary consists of local courts and a local appeals court in every district. The higher tiers consist of the Supreme Court of Appeal, the High Court, and the magistrates’ courts. A chief justice and four judges, appointed by the president, preside over the High Court. It has judicial authority over all civil and criminal cases, and sits in Blantyre, Lilongwe, Mzuzu, and Zomba. Magistrates’ courts are located in cities and towns in 24 districts throughout the country. Appeals from the magistrates’ courts are heard by the High Court and those arising from the High Court by the Supreme Court of Appeal in Blantyre. The Commercial Division of the High Court deals exclusively with disputes of a commercial or business nature and is presided over by a single judge. The Industrial Relations Court handles labor disputes and issues relating to employment.

Malawi does not have written commercial law or contractual law but has legislation that governs commercial transactions which include the Sale of Goods Act, Companies Act, Employment Act, Hire Purchase Act, Insolvency Act, and Control of Goods Act. By local standards, the Commercial Courts work reasonably efficiently, with dedicated judges and their own registries. There is an established mediation process to promote agreements between parties in disputes before court proceedings start. Enforcement of judgments can be slow.

Both foreign and domestic investors have access to Malawi's legal system, which functions fairly well and is generally unbiased. Heavy caseloads, staffing limitations, and inadequate funding, however, mean that legal remedies can take a long time to achieve. The judicial system has also been criticized for the ease with which court injunctions are granted, further contributing to the backlog and delays.

Regulations and enforcement actions are appealable and are adjudicated in the national court system. In the financial sector, regulations and enforcement actions are appealable through the Financial Services Appeals Committee. If the decision by the Appeals Committee is not accepted, local and foreign investors are free to seek judicial review through the High Court of Malawi.

Laws and Regulations on Foreign Direct Investment

Malawi recently passed a number of laws aimed at improving the investment environment, these include:

  • Taxation (Amendment) Act 2017 which, among other things, increases the tax free bracket for salaried employees (up to USD 41/month) and introduces an additional income tax bracket for high income earners (over USD 4,100/month).
  • Value Added Tax (Amendment) Act 2017 which revises penalties and interest for various offenses under the Act and gives tax exemption for certain essential commodities including milk, eggs, and honey.
  • Customs and Excise (Amendment) Act 2017 which imposes an excise duty on airtime, television subscriptions, gaming and betting (including lotteries), in accordance with the rate prescribed by the Minister.

Competition and Anti-Trust Laws

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 the CFTC has not disapproved any mergers or acquisitions. CFTC decisions may be appealed, first to the Board and subsequently to the Commercial (High) Court.

Expropriation and Compensation

Malawi’s constitution prohibits deprivation of an individual’s property without due compensation. There are laws that protect both local and foreign investment. However, measures that carry expropriation effects are occasionally imposed, including export bans (and implicit bans due to the government’s authority to require export licenses for any good at any time) for key commodities. These restrictions applied equally to foreign and domestic investors.

The government can employ land acquisition procedures set forth in the Land Acquisition Act of 2016. According to this Act, the government must justify its acquisition as being in the public interest and must pay fair market value for the land. If the private landowner objects to the level of compensation, it may obtain an independent assessment of the land value. According to the Act, however, such cases may not be challenged in court; the Ministry of Lands, Housing, and Urban Development remains the final judge. In most cases, land is expropriated to give way to development projects, most commonly, the construction of roads. Some have refused to relocate due to disagreements; however, these cases are usually settled amicably.

Dispute Settlement

Malawi has ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). Malawi is a member of the International Center for Settlement of Investment Disputes (ICSID), accepting binding international arbitration of investment disputes between foreign investors and the Government of Malawi. Malawi’s current president is a former arbitrator for ICSID.

The Investment Disputes (Enforcement of Awards) Act of 1966 makes provision for the enforcement in Malawi of awards of the Tribunal of the International Centre for Settlement of Investment Disputes.

Malawi is not a signatory to the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). Malawi does not have a Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with an investment chapter with the United States. Since 1996, there have been no major investment disputes involving U.S. companies.

The court system in Malawi accepts and enforces foreign court judgments that are registered in accordance with established legal procedure. There are reciprocal agreements among Commonwealth countries to enforce judgments without this registration obligation. There is no such agreement between Malawi and the United States, but judgments involving the two countries can still be enforced if the judgment is registered appropriately in Malawi. The Embassy is not aware of any extrajudicial actions that have been taken against foreign investors in the recent past.

With respect to litigation, most cases commenced in the High Court of Malawi or any subordinate court must, where the defendant indicates an intention to defend, first go to mediation. The Assistant Registrar of the High Court maintains a list of mediators and a list of experts. The mandatory mediation is conducted by a person chosen by the agreement of the parties from the list of mediators maintained by the Assistant Registrar or, if the parties consent, a person who is not named on the list. If the matter is not settled during mediation, the action will proceed in the court in which it was commenced.

Malawi does not have an arbitration body. There is no statutory requirement for parties who have contractually agreed to arbitration to go through mediation. Parties will only be required to go through mediation before proceeding to arbitration if an agreement entered into between them requires them to do so.

The Embassy does not have available statistics on investment disputes involving State Owned Enterprises (SOEs).

Bankruptcy Regulations

The courts govern all bankruptcies under the provision of the consolidated Insolvency Act of 2016. The Act encourages alternatives to bankruptcy such as receivership and reorganization and gives secured creditors – rank-ordered based upon investment registration dates – priority over other creditors. Monetary judgments are usually made in the investor’s currency. Cross border provisions of the Insolvency Act are modeled after United Nations Commission on International Trade Law model laws. In 2017, Malawi made resolving insolvency easier by introducing a reorganization procedure, facilitating continuation of the debtor’s business during insolvency proceedings, and introducing regulations for insolvency practitioners.

Malawi has two licensed credit reference bureaus (CRBs): CRB Africa Limited and Credit Data Credit Reference Bureau Ltd. Though more banks are now willing to share data with credit reference bureaus since the passing of the Credit Reference Bureau Act came into force in August 2016, some players within the financial sector are still reluctant to share client information with the CRBs.

4. Industrial PoliciesShare    

Investment Incentives

The Government of Malawi offers a wide range of tax and non-tax incentives which apply equally to domestic and foreign investors. These incentives apply to several sectors including manufacturing, agriculture, mining, and others relating to businesses in general. Customs and excise tax incentives are provided on raw materials, machinery, and equipment in a number of sectors. Specific incentives tend to vary from year to year. A detailed list of investment incentives can be found at the Malawi Investment and Trade Center (MITC) website: www.mitc.mw.

Generally speaking, the incentives offered to investors are applied consistently, but many companies complain about long delays in accessing the accrued benefits, especially those that require investors to spend first and claim later. Additionally, firms must negotiate their eligibility for these incentives with the responsible government entities.

Foreign Trade Zones/Free Ports/Trade Facilitation

Legislation for the establishment of export processing zones (EPZs) came into force in 1995. Companies engaged exclusively in manufacture for export may apply for EPZ status. As of January 2018, 11 companies (down from 30 in 2000) were operating under the EPZ scheme. Almost all of these are foreign owned companies, though the law does not discriminate on ownership. To resuscitate the EPZs, the Government of Malawi has revised EPZ regulations to allow export processing firms to sell 20 percent of their product on the local market. The government is also in the process of establishing Special Economic Zones which will have broader coverage that EPZs, allowing a mix of commercial activities including services.

Performance and Data Localization Requirements

Employment and Investor Requirements

Malawi employment and immigration laws and regulations require that any local or foreign investor prioritize the hiring of nationals except in cases where the skills required to undertake certain tasks are not locally available. There is a requirement that at least two Malawian residents be appointed directors of companies registered in Malawi. These laws and regulations are to a large extent enforced by the Department of Immigration when issuing Temporary Employment Permits to foreign nationals.

The process to obtain employment permits can sometimes discourage investors. Expatriate employees (of both domestic and foreign businesses) who reside and work in Malawi must obtain temporary employment permits (TEPs). The government desires to make TEPs readily available to expatriates, and mandates that processing times for TEP applications shall not exceed 40 working days. In practice TEPs take significantly longer and face significant bureaucratic delays (anecdotal reports of several months to a year are not uncommon) as files are not digitized and TEPs are approved by a high-level committee that does not meet regularly.

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

Goods, Technology, and Data Treatment

Embassy Lilongwe is not aware of any forced localization policies or any requirements for foreign IT providers to turn over source code or provide access to encryption. There are no measures that prevent or unduly impede companies from freely transmitting customer or other business-related data outside the country’s territory. Embassy Lilongwe is not aware of any mechanisms that are in place to enforce any rules on local data storage within the country.

Investment Performance Requirements

Malawi does not set performance requirements for establishing, maintaining, or expanding an investment, nor does it place requirements on source of financing or geographic location. 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).

5. Protection of Property RightsShare    

Real Property

Malawi has laws that govern the acquisition, disposition, recording, and protection of all property rights (land, buildings, etc.) as well as intellectual property rights (copyrights, patents, trademarks, etc.). Currently record keeping for registering land ownership is centralized and inefficient. Efforts are underway to computerize the recordkeeping and to decentralize it to the district councils.

Malawi has a limited housing finance sector. As the mortgage market does not yet meet the breadth of the population who might afford a mortgage, most households still finance their housing independently, with savings or non-mortgage credit. The lowest recorded interest rate on a mortgage in Malawi as of January 2018 is 23 percent and requires at least a 10 percent down payment and is repaid over 15-20 years. The average mortgage size in Malawi is USD 17,632.

In 2016, Parliament passed a revised Land Act which converted customary land tenure to leasehold title so that those currently using that land can have legal rights to the land. This has enabled land holders to use such land as collateral for acquiring financing to develop the land and/or to finance other business ventures. The new land law prohibits freehold title going forward and all newly acquired land will be on a leasehold basis. Lease terms can be for up to 99 years, but the law restricts foreign leaseholders to leases of up to 50 years, although exceptions exist.

The Land Act of 2016 gives provision for private land under freehold hold title to be repossessed by government within two years of registration if not being used. However, no land belonging to developers has been repossessed by government in the last year.

The Registrar General, governed by the Personal Property Security Act of 2013, is the Registrar of the Personal Property Security Registry. The office registers and administers interest over personal property used as security in commercial transactions. The Register General’s Office also has an online Personal Property Security Registration System where lenders interested in taking collateral as security can both check if the proposed collateral has an existing security interest registered against it and to register its security interest against that collateral to protect their priority status. The system, though not always reliable, can be accessed at https://www.registrargeneral.gov.mw/index.html.

Intellectual Property Rights

Malawi recognizes the importance of intellectual property protection and enforcement but lacks the capacity to do so. The Registrar General administers the Patent and Trademarks Act of 1948, which protects industrial intellectual property rights in Malawi. The Registrar General maintains a public registry of patents and patent licenses. Patents must be registered. Trademarks are registered publicly following advertisement and a period of no objection.

Enforcement of intellectual property rights is inadequate. However, general awareness of the importance of protecting intellectual property in all forms (copyrights, trademarks, patents, trade secrets, and others) has improved. The Copyright Society of Malawi (COSOMA) administers the Copyright Act of 2016 which protects copyrights and “neighboring” rights in Malawi.

The Trademarks Act of 2017 allows for protection for services, registration of collective marks, certification marks, and geographical indications, and a 10-year registration and renewal term.

It encompasses the terms of the Banjul Protocol (which governs ARIPO trade marks) into the national law and there is also a schedule which concerns procedures for International Registrations, which indicates that the Malawi authorities are considering signing Madrid Protocol in the future. Until that happens, it is not possible to obtain trademark protection in Malawi through international registrations.

While enforcement officials routinely seize counterfeit goods and goods suspected to be counterfeit, Malawi does not have a systematic approach to tracking and reporting on such seizures. There are no reliable estimates of the number of seizures, type or value of goods seized, or related information.

Malawi is not listed in USTR’s Special 301 Report or the 2017 Notorious Market Report which highlights prominent online and physical marketplaces that reportedly engage in and facilitate substantial copyright piracy and trademark counterfeiting.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

6. Financial SectorShare    

Capital Markets and Portfolio Investment

The Malawi Stock Exchange (MSE www.mse.co.mw) hosts about a dozen listed companies with a total market capitalization of USD 1.3 billion as of December 29, 2017. Most of these companies are local. The demand and supply of shares for existing listed companies is limited. However, demand for newly listed companies has always exceeded the shares on offer. The Reserve Bank of Malawi regulates the MSE, which is governed by the Companies Act, Capital Market Development Act (1990), Capital Market Development Regulations (1992) as amended in 2013, and the Securities Act (2010).

Foreign investors can buy and sell shares at the stock market without any restrictions. Trading in shares can either be direct or through any one of three established brokers. There are no specific measures taken by private firms or government to restrict foreign investment or participation. Foreign investors tend to be the dominant shareholders in large MSE-listed companies requiring significant technical and financial resources. There is a secondary market in government securities, and both local and foreign investors have equal access to purchase these securities.

Malawi respects obligations under IMF article VIII and, therefore, refrains from imposing restrictions on making payments and transfers for current international transactions or from engaging in discriminatory currency arrangements or multiple currency practices without IMF approval.

Liquidity for stock market participation is not a major problem as the private sector in Malawi has a variety of credit instruments. Credit is generally allocated on market terms. The main problem is the cost of credit given high rates of inflation in recent years. Foreign investors may utilize domestic credit, but proceeds from investments made using local resources are not remittable.

Money and Banking System

Only 19 percent of the adult population in Malawi uses banking services. Access to credit remains one of the biggest challenges for businesses and particularly SMEs, mostly due to the cost of credit (lending rates in December 2017 ranged from 27 percent-33 percent). There is a huge potential for using mobile banking technology to increase financial access in Malawi.

The Reserve Bank of Malawi (RBM) – the central bank – oversees and regulates Malawi’s generally sound banking sector. RBM plays a critical role in ensuring efficiency, reliability, and integrity of the payment system in Malawi. It is also a supervisory authority over commercial banks and other financial institutions including insurance companies. In 2018, following First Merchant Bank’s acquisition of Opportunity Bank of Malawi, there were nine full-service commercial banks with over 150 branches across the country. The banking sector remained profitable and stable with adequate liquidity and capital position throughout 2017. Prudential regulations have limited net foreign exchange exposure and non-performing loans remain low, though spreads continue to be high. The sector, however, is highly concentrated. Two banks, National Bank and Standard Bank, dominate the market with USD 1.1 billion in assets, 50.9 percent of the banking sector’s total assets.

There are no restrictions on a foreign bank establishing operations in Malawi. The Banking Act provides for the regulations of the business of banking in Malawi conducted by commercial banks and other financial institutions and also provides a mandate to the Reserve Bank for the supervision of banking business.

The Reserve Bank of Malawi maintains correspondent banking relationships with almost all central banks across the world and 14 major banks in Asia, Europe, Africa, and the United States. Major commercial banks in Malawi also maintain correspondent banking relationships with banks from Europe, Asia, the United States, and within Africa.

Malawian banks require that a foreigner possess a temporary employment permit (TEP) or business residency permit (BRP) before opening a bank account.

Aside from blockchain technology being piloted in the tea industry, the Embassy is not aware of any intentions to implement or allow the implementation of blockchain technologies in the country’s banking transactions.

Mobile phone-based money transfers are an increasingly popular payment method. The two major mobile phone companies offer this service, and many retailers and most of the major banks participate in one or both networks. As of December 2017, the total number of subscribers for mobile payment schemes was 4.6 million. However, despite the increase in subscription since its introduction, usage still remains very low and the majority of transactions on the mobile money services were for airtime purchases and cash-in/out despite the platform having the capacity to handle payment for goods and services.

Foreign Exchange and Remittances

Foreign Exchange Policies

Government policy seeks to ensure the availability of foreign exchange for business transactions and remittances in order to attract investors and spur economic growth. Commercial banks may operate as forex dealers. Investors have access to forex with no legal limitation, both to pay for imports and to transfer financial payments abroad. Specifically, there are no licensing requirements to import forex and full repatriation of profits, dividends, investment capital, and interest and principal payments for international loans is permitted, once the loan and/or investment is registered with the Reserve Bank of Malawi. Malawian investors seeking foreign financing must seek permission from the Reserve Bank of Malawi before acquiring an international loan.

The Malawi Kwacha (MWK) is convertible into major world currencies such as the U.S. Dollar, British Pound, Euro, Japanese Yen, Chinese Yuan, and South African Rand, as well as key regional and trading partners’ currencies.

Since May 7, 2012, the value of the local currency, the MWK, has floated freely against major world currencies. Foreign exchange is available throughout the year and Malawi’s official foreign exchange reserves currently are sufficient to cover approximately three months of imports.

Remittance Policies

There are no restrictions on remittance of foreign investment funds (including capital, profits, loan repayments, and lease repayments) as long as the capital and loans were obtained from foreign sources and registered with the Reserve Bank of Malawi (RBM, www.rbm.mw). The terms and conditions of international loans, management contracts, licensing and royalty arrangements, and similar transfers require initial RBM approval. The RBM grants approval according to prevailing international standards; subsequent remittances do not require further approval. All commercial banks are authorized by the RBM to approve remittances, and approvals are fairly automatic as long as the applicant's accounts have been audited and sufficient foreign exchange is available.

Sovereign Wealth Funds

Malawi does not have a Sovereign Wealth Fund or similar entity.

7. State-Owned EnterprisesShare    

Malawi has 68 State-Owned Enterprises (SOEs) scattered across many industries/sectors including agriculture and agribusiness, education, construction, energy, finance, health, information and communication, media, public utilities, aviation, and services. The Government of Malawi is sometimes required to bail out commercially-run SOEs when they have incurred losses. A list of these enterprises is available from the Office of the President and Cabinet, but the Government of Malawi does not publish the list in the media or online, nor can it be purchased from the Government Printer.

Private and public enterprises generally compete on the same terms and conditions for access to markets, credit, and other business opportunities, although in practice personal relationships can influence decisions heavily. There are exceptions for some public works assignments where public enterprises tend to be given special preference by government.

SOEs in the agriculture, education, and health sectors spend more on research and development than local private sector players and they are seen as doing so for the public good rather than for profit. Because local firms tend to be capital-constrained and because highly-skilled labor (such as research scientists and engineers) is scarce, there is not a strong tradition of private sector-led research and development in Malawi.

Malawi’s SOEs are not required to adhere to the OECD Guidelines on Corporate Governance of SOEs. Corporate governance for most SOEs follows the terms of the relevant Malawi law that established the entity. All SOEs report to a line ministry and to the Department of Statutory Corporations in the Office of President and Cabinet, but also have a Chairperson and Board of Directors. The boards are composed of politicians and professionals typically appointed by the president to be directors. Boards usually also have senior government officials as ex-officio/non-voting members. The participation of members of the government as ex-officio/non-voting members on these boards, and of politicians as directors, creates a perceived and/or real conflict of interest.

Privatization Program

Malawi has about 68 remaining state-owned enterprises that are involved in commercial operations, particularly in the public utilities sector, agriculture, housing, finance, education, construction, energy, media, services, and aviation. The government does not have any plans for immediate privatization of any SOEs at this time.

All investors, irrespective of ethnic group or source of capital (foreign or local) may participate in privatization bids, however, the government may offer domestic investors a discount on shares.

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).

8. Responsible Business ConductShare    

There is a well-developed sense of corporate social responsibility in Malawi and most corporate entities make a point to publicize such activities in the local media.

There are no established laws or regulations governing Corporate Social Responsibility (CSR), nor does the government formally direct CSR to particular sectors. However, as part of its candidacy for the Extractives Industry Transparency Initiative, the Government of Malawi is working to address uses of responsible business conduct in the mining sector.

The Embassy is not aware of any high profile cases of private sector impact on human rights in the recent past.

There are laws governing protection of the environment and waste disposal for producers and consumers. Government expects all enterprises to follow all laws of Malawi regarding employment and compensation. Malawi has a number of labor laws governing employment, work environment, industrial safety, age limits, hours of work, and minimum wages. The Government of Malawi lacks the resources to meaningfully enforce environmental, consumer, and labor related laws and regulations. There is no history of provisions of environmental, social, or labor laws being waived to attract investment. There is no history of the government factoring responsible business conduct policies or practices into its procurement decisions.

The Government of Malawi has enacted accounting standards that conform to international standards that the corporate sector is expected to adhere to. Executive compensations are not defined. All MSE-listed companies are required by law to publish their annual audited accounts in the local newspapers. Listed companies are also required to publicly declare their profits, dividends to be paid out, planned takeovers (or major portfolio investments in or out of the company), and all relevant information that shareholders need to make informed decisions. They are also required to announce their annual shareholders meetings in the newspapers.

There are several civil society organizations that monitor and advocate freely for corporate social responsibility and responsible business conduct, including the Institute for Policy Interaction (IPI), the Catholic Commission for Justice and Peace (CCJP), the Centre for Environmental Policy and Advocacy, Institute for Sustainable Development, and Natural Resources Justice Network.

The Embassy is not aware of any efforts by the government to encourage adherence to OECD Guidelines for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas or any domestic measures requiring supply chain due diligence for companies that source minerals that may originate from conflict-affected areas.

The Extractive Industries Transparency Initiative (EITI) Board approved Malawi as a candidate country in 2015. Malawi has until 2018 to implement local laws to ensure compliance with the EITI global transparency standard requiring extensive disclosure and measures to improve accountability in how oil, gas, and minerals are governed.

9. CorruptionShare    

Malawi law prohibits bribery. Giving or receiving a bribe -- whether to or from a Malawian or foreign official -- is a crime under Malawi’s penal code. Public sector corruption, including bribery of public officials and conflicts of interest, however, remains rampant and a major challenge for firms operating in Malawi. The law provides for criminal penalties for corruption by officials. There are regular reports of government corruption at all levels of government.

The Corrupt Practices Act established the Anti-Corruption Bureau (ACB) with a mandate of preventing corruption in Malawi. The President appoints both the ACB Director and Deputy Director, subject to confirmation by the Public Appointments Committee of Parliament. The Corrupt Practices Act widened the definition of corruption to include, among other things, offences for abuse of office and possession of unexplained wealth. The Act provides for the investigation of cases not only for corruption but for other offences that come to light during the course of investigating corruption. The Act also provides protection for “whistleblowers.” Malawi's ACB cooperates with other anti-corruption bureaus in the region and beyond. The Act does not extend to family members or to political parties. However, where evidence exists that the family members or members of a political party were complicit in corruption, the ACB has the power to build a case against the accomplices and bring them to court.

The Public Officers (Declaration of Assets, Liabilities and Business Interests) Act of 2013 requires 48 categories of public officers – including all levels of officials from the president and members of parliament, down to specific categories of civil servants, including traffic police and immigration officers – to declare their assets and business interests. The paper declarations are accessible to the public upon request.

The Public Procurement and Disposal of Public Assets Act of 2016 requires all public officials to disclose any conflict of interest and not take part in any deliberation or decision making process in relation to the matter. Upon conviction, failure to disclose interest attracts a fine of USD 1,370 or five years imprisonment. However, there is no clear definition of what constitutes conflict of interest and the law is not regularly enforced.

Companies are encouraged to participate in the fight against corruption. The ACB encourages institutions to develop and implement Corruption Prevention Policy frameworks as a way of mainstreaming anti-corruption initiatives into their operations. The business sector has at times joined forces to collectively engage in the fight against corruption, but no formal mechanism exists.

Malawi is party to the United Nations Convention against Corruption, which it ratified in December, 2004.

According to Malawian law, citizens have a right to form NGOs focused on anti-corruption or good governance and these NGOs are free to accept funding from any domestic or foreign sources. Malawi’s civil society plays an important and visible role drawing public attention to governance concerns, corruption, development priorities, and government inaction on issues of national importance. The media also plays a central role in investigating and uncovering many cases of corruption.

Although progress has been made in addressing the issue, corruption continues to be viewed as a major obstacle to doing business in Malawi. There have been serious allegations of corruption, which is perceived to be particularly endemic in the following sectors: police, immigration, road traffic, tax administration, traditional leaders, and government procurement.

The following local industry or non-profit groups offer services for vetting potential local investment partners:

Victor Chayamba
Lead Consultant
Deloitte Consulting Malawi
P.O. Box 30364, Lilongwe 3, Malawi
Tel:+265-1-773-699
Fax: +265-1-772-276
E-mail: vchayamba@deloitete.co.mw
Website: deloitte.com

Mavunganya Chirwa
Manager
KPMG Advisory Services Limited
Anamwino House, P.O. Box 30453, Lilongwe 3, Malawi
Tel:+265-1-773-855
Fax: +265-1-771-070
E-mail: mchirwa@kpmg.com

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:

Mr. Reyneck Matemba
Director General
Anti-Corruption Bureau
Mulanje House, P.O. Box 2437, Lilongwe, Malawi
Tel: +265-1-772-107
Fax: +265-1-770-108
E-mail: lkondowe@acbmw.com
Website: http://www.acbmw.com

Contact at "watchdog" organization:

Mr. Timothy Mtambo
Executive Director
Centre for Human Rights and Rehabilitation
Area 47/03/90, Private Bag 2340, Lilongwe, Malawi
Tel: +265-1-761-122
Fact: +265-1-761-700
E-mail: chrr@chrrmw.org
Website: http://www.chrrmw.org/

10. Political and Security EnvironmentShare    

Malawi continues to enjoy a stable and democratic government. Since the end of the one party regime in 1993, it has organized five peaceful presidential and parliamentary elections, one of which also included local government elections. International observers have characterized the presidential, parliamentary, and local government elections in Malawi as generally “peaceful, free, transparent, and credible.” The current President, Prof. Arthur Peter Mutharika, is in his first five-year term which started in 2014. The next elections are set for May 21, 2019.

Although divisions exist, Malawi has no significant tribal, religious, regional, ethnic, or racial tensions that could be expected to lead to violent confrontation. Incidents of labor unrest occasionally occur, but these are usually non-violent. There are no nascent insurrections or other politically motivated activities of major concern to investors.

Malawi’s economy has performed poorly in the past two years largely owing to vulnerability to climate induced shocks and fiscal management challenges. Flooding in 2014/15 and drought in 2015/16 hurt agriculture, the economy’s dominant sector. Erratic rains affected the country’s hydro-dependent electricity generation, leading to widespread blackouts and water shortages. The power shortages severely affected the cost of doing business. In 2016/17, adequate rainfall improved agricultural production. The economy is expected to double its 2016 GDP growth rate of 2.3 percent to 4.5 percent in 2017. The government continues to balance its efforts to restore fiscal discipline with its efforts to address Malawi’s food security needs.

11. Labor Policies and PracticesShare    

A large majority of working age individuals in Malawi live in rural areas and are involved in subsistence agricultural. Unskilled labor is plentiful. Skilled and semi-skilled labor on the other hand is scarce. The informal economy has experienced a rapid expansion, and is characterized by poor working conditions, specifically less social protection, work safety, and lack of representation. It is estimated that the informal economy covers 89 percent of the labor force. Child labor remains a serious and widespread problem in Malawi. The 2015 Child Labor Survey found 38 percent of children aged 5-17 active in child labor.

Occupational categories with skills shortages include accountants and related personnel, economists, engineers, lawyers, IT, and medical/health personnel. The University of Malawi (a government-run university with five constituent colleges nation-wide) provides bachelors and master’s degrees in economics, engineering, medicine, education, agriculture, and administration. The Malawi College of Accountancy teaches accounting. Chancellor College, part of the University of Malawi system, operates the country’s law school. The government also recently expanded its network of vocational schools to address technical skills shortages in the trades and the construction industry.

Malawi employment and immigration laws and regulations require that any local or foreign investor prioritize the hiring of nationals except in cases where the skills required to undertake certain task are not locally available. These laws and regulations are to a large extent enforced by the Department of Immigration when issuing Temporary Employment Permits to foreign nationals.

There are no restrictions on employers adjusting employment to respond to fluctuating market conditions so long as such adjustments are done in compliance with employment laws and regulations. Furthermore, labor laws in Malawi clearly differentiate between layoff and firing and have clear provisions as to how layoffs and dismissals are to be handled. However, there are no social safety net programs for workers laid off for economic reasons nor are employers required to have employment insurance for their employees.

There is no provision for labor laws to be waived to attract or retain investment in the country nor are there additional or different labor law provisions in the Export Processing Zones for the purpose of promoting manufacturing of export products.

Workers have the legal right to form and join trade unions. There are 22 unions affiliated with the Malawi Congress of Trade Unions with a membership of approximately 200,000 workers. Union membership is low, however, given the small percentage of the work force in the formal sector, the lack of awareness of worker rights and benefits, and a resistance on the part of many employees to join unions. In 2016, only 13 percent of people in wage employment belonged to a union.

The Industrial Relations Court (IRC) has original jurisdiction over labor disputes and other issues relating to employment. An aggrieved party may appeal the decision of the IRC to the High Court of Malawi but only on matters of law or jurisdiction. Otherwise, on matters of fact, the decision of the IRC is final and binding.

The Labor Relations Act (LRA) governs labor-relations management in the small Malawi formal sector. The Act allows strikes and lockouts for registered workers and employers after dispute settlement procedures in collective agreements and conciliation have failed. Employers, labor unions, and the government lack sufficient knowledge of their legitimate roles in labor relations/disputes.

Despite the enactment of the Gender Equality Act in 2013, discrimination against women remains pervasive and they continue to have lower literacy and education levels and less access to employment opportunities than men. Children in Malawi continue to engage in the worst forms of child labor, most notably in agriculture, including on tobacco farms. While the government is a signatory to the ILO Convention protecting worker rights, mechanisms for enforcing the provisions of the convention are weak. Serious manpower shortages at the Ministry of Labor result in very few labor inspections.

The Government of Malawi approved the National Employment and Labor Policy in January 2016. The government is also in the process of developing a National Child Labor Policy as well as the reviewing the Occupation Safety, Health and Welfare Act of 1997.

Malawi is a beneficiary of the Africa Growth and Opportunity Act, which requires labor standards be upheld.

12. OPIC and Other Investment Insurance ProgramsShare    

Malawi has had an OPIC investment guarantee agreement since 1967. OPIC has partnered with a U.S Department of Agriculture program in Malawi and signed a loan guarantee facility agreement with a commercial bank in Malawi through the Agribusiness Investment for Market Stimulation (AIMS) Project. The loan guarantee facility aims to increase agricultural trade through improving access to markets and financing. OPIC-supported equity funds also invest directly in Malawi’s agricultural sector. OPIC continues to explore potential opportunities in Malawi, including in the energy sector.

China's presence in Malawi has been growing steadily since the two countries established diplomatic ties in 2007 and signed a trade agreement. Malawi has been a beneficiary of a number of infrastructure projects (constructed by Chinese contractors) through concessional loans, with more projects promised in the future.

13. Foreign Direct Investment and Foreign Portfolio Investment StatisticsShare    

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

 

Host Country Statistical Source

USG or International Statistical Source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

Economic Data

Year

Amount

Year

Amount

 

Host Country Gross Domestic Product (GDP) (M USD)

2016

USD 5,310

2016

USD 5,440

www.worldbank.org/en/country

Foreign Direct Investment

Host Country Statistical Source

USG or International Statistical Source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

U.S. FDI in Partner Country (M USD, stock positions)

N/A

N/A

2016

USD 1

N/A

Host Country’s FDI in the United States (M USD, stock positions)

N/A

N/A

N/A

N/A

N/A

Total Inbound Stock of FDI as % host GDP

N/A

N/A

N/A

N/A

N/A


Table 3: Sources and Destination of FDI

Data not available.


Table 4: Sources of Portfolio Investment

Data not available.

14. Contact for More InformationShare    

U.S. Embassy
Economic and Commercial Section
40/24 Kenyatta Dr.
Lilongwe, Malawi
+265-1-773-166
LilongweECON@state.gov