Malawi

Executive Summary

Malawi’s economy was significantly impacted by the COVID-19 pandemic. Gross domestic product growth slowed to 0.9 percent in 2020, but rebounded slightly in 2021, expanding by 2.2 percent. The government forecasts this trend will continue and forecasts growth of 4.5 percent by 2023. Macroeconomic and fiscal challenges remain, however. The government’s heavy debt burden and persistent fiscal deficits are likely to restrain economic expansion that outpaces population growth. Inflation was 9 percent in 2021, driven largely by currency devaluation and price increases for imported goods, primarily fuel, fertilizers, and food. The economy is heavily dependent on agriculture and is particularly vulnerable to climate related shocks.

The Government of Malawi is eager to attract foreign direct investment. Investment opportunities exist in agricultural, mining, health, transportation, information technology, and energy sectors. Transportation is a potential growth sector as the government works to improve the road network and rehabilitate railway lines connecting Malawi to Mozambique, Zambia, and Tanzania. Public-private partnership opportunities are likely to open in aviation and road networks. Corruption remains a major problem at all levels of the public and private sectors. There is a scarcity of skilled and semi-skilled labor. Political risk in Malawi is manageable and tribal, religious, regional, ethnic, or racial tensions are minimal.

The Malawi Investment and Trade Center assists investors and businesses by providing insight and local knowledge to help navigate the myriad regulations, processes, and procedures required to operate a business. Malawi’s legal system is generally unbiased but is notoriously slow. Investors have the right to establish, acquire, and dispose of interests in business enterprises. Parliament is scheduled to review existing land laws in early 2022. If passed, the reforms may negatively affect foreign ownership and investment in land-based enterprises.

Scarcity of foreign exchange (forex) remains a challenge and negatively affects investors. The government aims to maintain a three-month supply of forex, but often falls short of that goal. Forex rationing has led to several months wait for business to remit foreign investment funds. Despite the long wait times, there are currently no restrictions on remittance of foreign investment funds if the capital and loans initially came from foreign sources and were registered with the Reserve Bank of Malawi.

Malawi is a land-locked country and the road network connecting to ports in neighboring countries is limited. Investment in infrastructure overall has been limited. Formal and informal trade boundaries may restrict imports and exports, and import tariffs tend to be high. Malawi is one of the least electrified countries in the world; approximately eleven percent of the country has access to regular electricity and internet is unreliable, and expensive.

The government is committed to addressing climate change through climate smart policies and programs. The Environmental Management Act provides details on environmental requirements for investors and ministries, departments, and agencies (MDAs). Climate change issues are integrated across the public service and national development plans. However, limited resources and issues related to poverty impede the government’s ability to implement climate adaptation and resilience programs and initiatives.

Malawi’s borders are open to local and international travelers, but all travelers are required to present negative COVID-19 test results and certificate of COVID-19 vaccination.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 110 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 107 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 188 million https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD 580 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Malawi is open to foreign and domestic investment. Foreign investors may invest in most sectors of the economy and may access government investment incentives. There are no restrictions on ownership, size of investment, source of funds, investment sector, or whether the products are destined for export or for domestic markets. An investor can disinvest 100%, make international payments, and cannot be forced into local partnerships. The Malawi Stock Exchange limits an individual foreign investor to 10% of any company’s initial public offering (IPO) and limits foreign investment to 49% of total shares in the company.

The Cabinet Committee on Public Private Partnership was established in 2020 to boost private sector growth. The government utilizes the Malawi Investment and Trade Center ( MITC ), Ministry of Trade and Industry, Malawi Revenue Authority, Reserve Bank of Malawi, and the Public Private Partnership Commission to interface with foreign investors. The Malawi Confederation of Chambers of Commerce and Industry ( MCCCI ) represents all sectors of the economy and has successfully lobbied the government on various private sector issues in the past. The Malawi Investment Forum serves as a platform for marketing the country, fostering partnerships, and bringing in foreign direct investment.

The government does not impose restrictions on the ownership or location of investments. Foreign investment is permitted in all sectors of the economy except those that are deemed to pose a danger to health, the environment, or national security. There are no restrictions on funding sources, destinations, or final product. All companies are required to have at least two Malawian residents as directors, and there are limitations on foreign ownership of land. The 2022 session of Parliament is expected to review the current Land Act of 2016. The act states that neither Malawians nor foreigners can acquire freehold land. Foreigners can secure lease-hold land for up to 50 years and may renew the leasehold in most instances. Foreigners can only secure private land when no Malawian citizen has made an equal offer for the same land. The 2022 land act reform is expected to place additional restrictions on ownership and land acquisition by foreigners.

Malawian nationals receive preferential treatment during the privatization of government assets; this can include discounted share prices and subsidized credit. The 2017 amendment to the Public Procurement and Disposal of Assets (PPDA) Act calls for “the prioritization of all bids submitted to give 60% preference to indigenous black Malawians.” In 2020, the government drafted Indigenous Black Malawian (IBM) Preference regulations. These were approved by Parliament but failed to be gazetted due to pressure from non-indigenous populations. There is a high likelihood that the regulations will be gazetted in 2022. The Micro Small and Medium Enterprises (MSMEs) Participation Order restricts government ministries, departments, and agencies (MDAs) to allocate procurements below certain thresholds to MSMEs ( PPDA Legal Instruments ).

Prior to establishing or conducting business in Malawi, all foreign investors are required to obtain an investment certificate from MITC . As part of the certification process, investors must register with the Registrar General’s office  and RBM  and have a minimum of $50,000 to invest ( MITC Investment Procedures ). MITC announced plans to revise the threshold for capital requirements in 2019 but provided no concrete timeline for completion. The proposed thresholds will differ by sectors and may go as high as $500,000, if implemented. Registration of borrowed invested funds allows investors to externalize profits to pay back loans contracted abroad and repatriate funds when disinvesting. ( MITC Malawi ).

The last Trade Policy Review of Malawi was conducted by the WTO in April 2016. The full report is available at WTO TPR . The OECD and UNCTAD have not conducted investment policy reviews for Malawi.

There are no recent policy recommendations by civil society organizations based on reviews of investment policy related concerns.

The MITC offers business facilitation services to any foreign or domestic investor through their One Stop Center. The center houses representatives from Registrar General , Malawi Revenue Authority , Department of Immigration , and Ministry of Lands, Housing and Urban Development.   Information can also be found on MITC’s main website, the iGuides , and its online trade portal www.trade.mitc.mw ; and http://www.malawitradeportal.gov.mw/ .

To operate in Malawi, a business must register with the Registrar General, the Malawi Revenue Authority and the Ministry or regulatory body overseeing their particular sector. Businesses can register online through the Registrar General; however, the online process can be cumbersome and inefficient due to technical constraints. Registering in person is preferred and generally less time consuming. Businesses must also obtain business licenses from the city assembly, register the worksite with the Ministry of Labor, and allow health officials to carry out periodic inspections of the company premises ( https://mitc.mw/invest/index.php  ).

Malawi does not incentivize or promote outward investment. The Pension Act of 2010 and accompanying regulations prohibit domestic investors from investing pension funds or umbrella funds in foreign schemes. There are no other prohibitions on domestic investors investing abroad.

MITC is responsible for the promotion and facilitation of trade and investment. MITC offers services to both local and foreign investors, for both inward and outward facing investments. In practice, most MITC services are for domestic investing and business development.

3. Legal Regime

The government continues to work on policy reforms to support business development and investment. The legal, regulatory, and accounting systems are partially transparent and consistent with international norms. Almost all proposed laws, regulations, and policies (including investment laws) are subject to public consultation before submission to the Cabinet, Parliament, or Ministry of Justice. However, public consultation notices are often posted late, resulting in a situation in which only insiders are aware of and able to participate in the consultation process. Enforcement of laws and regulations varies by location and sector and is limited by government resources and capacity.

All regulations follow the same approximate process. The relevant government MDA develops technical regulations and forward them to Ministry of Justice for review and gazetting. All regulations are set at the national level with input from relevant stakeholders. Regulations and enforcement actions are legally reviewable in the national court system. The Ministry of Justice provides oversight or enforcement mechanisms to ensure MDAs follow administrative processes for developing and implementing regulations. Private individuals may raise issue with the appropriate MDA, Parliament, or Ombudsman if they feel the aforementioned procedures were not followed. There are no specific regulatory guidelines for reviewing regulations or conducting impact assessments, including scientific or data-driven assessments. 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 MDAs.

The government uses a mix of fiscal, financial, and regulatory instruments to administer business and economic policies across multiple MDAs. Taxation policy is overseen by the Ministry of Finance and Economic Affairs and the Treasury Department. The Malawi Revenue Authority is responsible for implementation of all tax policies. The Reserve Bank of Malawi administers monetary policy, exchange rate policy, as well as exchange controls to allow free flow of capital and earnings, and repatriation of dividends, profits, and royalties. The Immigration department administers the Employment of Expatriates Policy, Temporary Employment Permits (TEPs), and business residence permit. The Ministry of Lands, Housing and Urban Development is responsible for land policy administration. The Malawi Bureau of Standards is responsible for metrology, standardization, and quality assurance. The Malawi Communications Regulatory Authority administers the communications act. The MITC is responsible for approving business plans and providing investment certificates.

The National Construction Industry Council, Malawi Law Society, Malawi Accountants Board, Medical Council of Malawi, and the Employers Consultative Association of Malawi have sectoral rule-making authority, similar to regulatory power. Among the rules established by these associations is the required use of local labor, local contractors, or other means to achieve localization or skills transfer to Malawians. The sector-specific rule-making process is not transparent and can be confusing for firms that are new to the Malawi market. More information on the rule making process can be found at: https://rulemaking.worldbank.org/en/data/comparedata/consultation .

The Institute of Chartered Accountants in Malawi (ICAM) adopted the International Financial Reporting Standards (IFRS) as a common global language in 2001. The Companies Act stipulates that all companies must use IFRS or IFRS accounting standards for Small and Medium Enterprises (SMEs). All public interest entities are required to use full IFRS standards. The government encourages, but does not require environmental, social, and governance (ESG) disclosure. The Environmental Management Act provides the authority to the relevant ministry to require environmental and social impact assessment of projects prior to implementation which may significantly impact timelines and limit the use of an environment or natural resources.

The government does not maintain a public, central repository for technical regulations. Copies of Acts and Laws are available at the National Library and High Court libraries. Copies of recent laws can be purchased from the government printing office. A limited number of laws are also available online at https://malawilii.org/ . The relevant MDAs manage and publish their respective regulations in the Malawi Government Gazette. MDAs do not generally post their regulations or laws on their websites but have been known to provide them upon request.

Recently implemented policy reforms:

(2020) Commodity exchange guidelines, the Cannabis Act of 2020, Export Processing Zone (EPZ) regulations: 20% allowance for local sales by an export enterprise under EPZ. Electronic Permit System launched by the Immigration Department.

(2021) Control of Goods Act (COGA) Export Mandates: all grains, legume, and oil seed export transactions must take place through licensed commodity exchange. E-Passport System launched by the Immigration Department.

Transparency of public finances and debt is inconsistent. Publicly available draft budget documents detail Malawi’s proposed or estimated revenue, and includes natural resources revenues, off-budget donor support, and detailed expenditure lines. The final, approved government budget only provides ministry level expenditure data, line items are generally not disclosed. Actual revenue and expenditures are included in the end of year financial statements. Information about government debt obligations is available in the financial statement and annual debt report. These documents are available at Ministry of Finance . Financial information and contingent liabilities on State Owned Enterprises (SOEs) are generally unknown to the public. SOE data is not transparent nor made public. The IMF currently considers Malawi’s debt to be unsustainable. Additional information on Malawi’s debt can be found in the IMF’s publicly available reports.

Malawi is a member of the Africa Continental Free Trade Area (AfCFTA), COMESA Customs Union, and the SADC Free Trade Area. The government develops all new regulations roughly in line with the regulatory policy provisions set out by AfCFTA, COMESA, and SADC but national regulations take precedence if there is a conflict. As a member of AfCFTA, SADC, and COMESA, Malawi is bound by their respective norms and standards. Details on the respective standards can be found at each organization’s website: SADC- SADC Standards-quality-infrastructure ; COMESA- http://www.comesacompetition.org/ ; and AfCFTA- https://au.int/en/cfta .

There are no records of Malawi providing notification on draft technical regulations to the WTO Committee on Technical Barriers to Trade. Malawi submitted a statement on implementation and administration of the WTO Agreement on Technical Barriers to Trade in 2007 and signed the WTO Trade Facilitation Agreement (TFA) on July 12, 2017. Malawi has made progress on implementing the TFA provisions through the launch of a trade information portal at https://www.malawitradeportal.gov.mw/ . As of February 2022, Malawi has implemented 63% of the TFA Commitments .

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. Judges of the High Court are appointed by the President and posted to one of five divisions on the high court: civil, commercial, criminal, family and probate, or revenue. The High Court has judicial authority over all civil and criminal cases. The High Court hears appeals from the Magistrates’ Courts and the Supreme Court of Appeal in Blantyre hears appeals arising from the High Court. Magistrates’ Courts are located throughout the country. At the end of 2021, there were 36 seated High Court judges and 11 vacancies, and seven Supreme Court judges and six vacancies. The Commercial Division of the High Court deals exclusively with commercial or business disputes; the Revenue Division deals with any revenue or tax related matter. The Industrial Relations Court handles labor disputes and issues relating to employment. The Child Justice Court handles matters affecting children but falls under the High Court. More information on the judicial system can be found at the Judiciary  website.

The government does not have written commercial or contractual laws but instead relies on legislation that governs commercial transactions. The Sale of Goods Act, Companies Act, Employment Act, Hire Purchase Act, Insolvency Act, Control of Goods Act, Labor Relations Act, Business Licensing Act, Taxation Act, Consumer Protection Act, Copyright Act, and Patents Act, serve as the commercial and contractual framework. Mediation is often used to facilitate agreements prior to court proceedings. Enforcement of judgments can be extremely slow.

Foreign and domestic investors have access to Malawi’s legal system, which is generally unbiased but notoriously slow. The legal process is slowed by heavy caseloads, staffing limitations, and inadequate funding. Court injunctions contribute significantly to backlogs and delays. The judicial system is independent of the executive branch. Regulations and enforcement actions are appealable and adjudicated in the national court system. In the financial sector, regulations and enforcement actions are appealable through the Financial Services Appeals Committee and investors are free to seek judicial review through the High Court’s Commercial Division.

The legal system supports local and foreign investments. The MITC operates a One Stop Center to assist any investor to navigate relevant government regulations and procedures. MITC  and MCCCI  both offer websites with relevant information on doing business in Malawi.

The government established the Competition and Fair-Trading Commission ( CFTC ) in 2005 to promote fair and transparent business procedures. The CFTC is responsible for regulation, monitoring, and prevention of activities likely to negatively impact competition or fair trade in Malawi. CFTC decisions may be appealed at the Commercial Court level. COMESA Competition Commission  is responsible for mergers and acquisitions across the COMESA block. It promotes and encourages competition by identifying and preventing restrictive business practices that may impede efficient market operations in COMESA.

According to Malawi’s constitution, Section 44, expropriation of property is only permitted when done for public utility and with adequate notification and compensation. Land is generally only expropriated for government development projects, such as road construction. Affected individuals may obtain an independent assessment of the land value and have the right to appeal in court. The Land Acquisition Act of 2016 is currently under review and changes are expected. The reforms will likely impact land expropriation costs.

Commercial courts govern all bankruptcies under the provision of the consolidated Insolvency Act of 2016 . The Act encourages the use of receivership or reorganization as an alternative to bankruptcy. Secured creditors are given priority over other creditors. Monetary judgments are usually made in the investor’s currency. Cross-border provisions of the Insolvency Act are modeled after UN Commission on International Trade Law models.

4. Industrial Policies

The government offers tax and non-tax incentives in various sectors. Incentives vary by year and are available to both domestic and foreign investors. In recent years, the government has offered incentives in manufacturing, agriculture, and mining. The current list of investment incentives can be found on the MITC and Malawi Revenue Authority websites. Firms must negotiate to establish their eligibility with the relevant government entity. Long delays in accessing incentives and accrued benefits are not uncommon. The government occasionally issues guarantees and joint financing on foreign direct investment projects of national importance. To support clean energy investment, government recently removed import duty, import excise and value added tax (VAT) on most imported renewable energy products.

Regulations to enable export processing zones (EPZs) were established in 1995. The original program was limited to companies strictly engaged in manufacturing for export. In 2020, the EPZ program was amended to allow export processing firms to sell up to 20 percent of their product on the local market. As of 2022, there are 13 companies operating under the auspices of the EPZ, 11 of the companies in the program are foreign owned, though the law does not discriminate on ownership. The government began the process to establish Special Economic Zones (SEZ), in 2021. The SEZs will have broader coverage than EPZs and include a mix of commercial activities and services.

Malawi does not follow “forced localization” or use geographic requirements for goods or financing, nor set performance requirements for establishing, maintaining, or expanding an investment. There is an ongoing local campaign to “Buy Malawi” to encourage the purchase of locally produced goods. Legal restrictions on foreign investment are based on environmental, health, biosafety, and national security concerns. The primary sectors subject to restrictions are firearms and ammunition, chemical and biological weapons, explosives, and manufacturing involving hazardous waste treatment/disposal or radioactive material. All business ventures in Malawi must navigate complex and often confusing bureaucratic processes. Minimum requirements include, business license, tax registration number, temporary employment permit, business residency permits, and land use permits. Depending on the sector additional licensing or permits may also be required. These procedures are time consuming and may constitute an impediment to investment.

Currently there are no requirements for foreign IT providers to turn over source code or provide access to encryption to prevent free transmission of customer or other business-related data outside the country’s territory, or a mandate for local data storage within the country. The Malawi Communications Regulatory Authority ( MACRA ) and the Ministry of Information and Digitization are responsible for IT issues. The Ministry of Information and Digitization is drafting a data protection bill, it is expected to be tabled in parliament sometime in 2022.

5. Protection of Property Rights

The government utilizes various laws and regulations to govern the acquisition, disposition, recording, and protection of all physical property rights. The land ownership registry is centralized, and record keeping is inefficient and often inaccurate. Efforts are underway to computerize and decentralize recordkeeping. Financing options in the housing sector are extremely limited. Most households finance their homes through savings or non-mortgage credit. Mortgage availability is inefficient to meet demand and interest rates generally start at 18 percent and go up.

The Land Act of 2016 converted customary land tenure to leasehold title to enable those currently using that land to have legal rights to it. The 2016 law prohibits freehold title; renewable lease terms for Malawians is up to 99 years and up to 50 years for foreigners. The Act prohibits the issuance of new freehold titles but grandfathered in existing land titles. The Office of Commissioner of Lands administers and manages land issues, grants, leases, and other dispositions. There is no reliable data on the proportion of land without clear titles, but it is likely much higher than 10%. Under the 2016 Act, land may be repossessed by the government if it lays idle for more than two years after it is registered to an individual or entity. No land has been repossessed from a developer the recent past. The 2022 session of Parliament is expected to review proposed changes to the 2016 Act. If passed, the reforms may negatively affect foreign ownership of land and investments in land-based enterprises while increasing ministerial powers to determine land uses.

Malawi recognizes the importance of intellectual property protection but lacks enforcement capacity. The Registrar General administers the Patent and Trademarks Act, which protects industrial intellectual property rights (IPR) 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 IPR is inadequate. General awareness of importance of protecting intellectual property in all forms has improved. The Copyright Society of Malawi (COSOMA) administers the Copyright Act of 2016, which protects copyrights and “neighboring” rights in Malawi.

The government approved copyright regulations and levies on storage devices in 2018. COSOMA and the Malawi Revenue Authority introduced a five percent levy on all media storage devices to be used to compensate rights holders. The Trademarks Act of 2018 and National Intellectual Property Policy of 2019 acknowledge the challenges to intellectual property rights in Malawi and provide a framework to foster the generation and protection of intellectual property rights. Enforcement officials routinely seize counterfeit goods, but there is no systematic approach to track and report on seizures, so statistics are not available. Malawi is not listed on USTR’s Special 301 Report or Notorious Markets List. For additional information about national laws and points of contact for local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/. 

6. Financial Sector

The Malawi Stock Exchange ( MSE ) is open to foreign portfolio investment. As of February 2022, the MSE hosts 16 listed companies with a total market capitalization of $3.01 million. The demand and supply of shares for listed companies is limited. The stock exchange is licensed under the Financial Services Act 2010 and operates under the Securities Act 2010 and the Companies Act 2013. Other governing regulations are the Capital Market Development Act 1990, and Capital Market Development Regulations 1992 as amended in 2013.

There are no restrictions on foreign investors buying or selling shares listed on the MSE. Trading can be done by the stockholder or through one of four registered brokers. A secondary market offers government securities and is also open to local and foreign investors. Malawi respects the obligations under IMF article VIII. There are no restrictions on making payments or transfers for international transactions and no discriminatory currency arrangements or multiple currency practices undertaken without IMF approval. Credit is generally allocated on market terms though the cost of credit is generally high. Foreign investors may utilize domestic credit, but any proceeds from investments made using local resources are not remittable.

According to a World Bank Report , only 40 percent of the adult population in Malawi use financial services. Access to and the cost of credit remains one of the biggest challenges for businesses and particularly SMEs. The minimum lending rate in February 2022 was 12 percent with a maximum rate of 24 percent. Mobile banking technology has the potential to increase access to local banking but is very nascent and its implementation is limited by access to reliable electricity and IT infrastructure. Official central bank reports  do indicate an increase in electronic transactions over the last 24 months, but mobile banking is still not widely used.

The banking sector is generally sound. The sector is overseen and regulated by the Reserve Bank of Malawi (RBM). As of February 2022, there are eight full-service commercial banks with 106 branches across the country. The banking sector remained profitable and stable with adequate liquidity and capital positions throughout 2021. Prudential regulations have limited net forex exposure and non-performing loan rates hovers around 6-7 percent and spreads remain high. The sector is highly concentrated and heavily invested in domestic government debt, which is a systemic risk. Total assets as of December 2021 were $3.5 billion. The National Bank of Malawi and Standard Bank Malawi account for 46 percent of total assets. Equity capital of the two banks is approximately 61 percent and total loans 53 percent of total banking sector.

The Banking Act provides a supervisory mandate to the RBM. The RBM has supervisory authority over all financial institutions and is responsible for ensuring the efficiency, reliability, and integrity of the financial system. There are no additional restrictions placed on foreign banks in Malawi. As of February 2022, four of the eight banks are foreign owned. The RBM and the major commercial banks maintain correspondent banking relationships with other central banks and major banks in foreign countries. To open a bank account locally, a foreigner must first present a temporary employment permit or business residency permit.

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

7. State-Owned Enterprises

Malawi has 71 public enterprises, 20 of which are SOEs. A full list of the SOEs is available by request from the Office of the President and Cabinet (OPC), but the government does not publish the list in the media or online except in conjunction with the announcement of board members of public enterprises. The government has bailed out several SOEs when they incurred heavy losses. SOE finance and operations data is opaque and not available to the public. Malawi’s SOEs are not required to adhere to the OECD Guidelines on Corporate Governance of SOEs. Corporate governance for the various SOEs is mandated by the law that established the entity. All public enterprises report to their sector-related line ministry, to the Department of Statutory Corporations in the OPC, and have a Chairperson and Board of Directors. The President appoints the board of directors, usually politicians, religious & traditional leaders, and professionals. Boards also include senior government officials as ex-officio/non-voting members. The participation of members as ex-officio/non-voting members, and of politicians as directors, creates a perceived and/or real conflict of interest.

Public and private enterprises are subject to the same terms and conditions, and must compete for access to markets, credit, and business opportunities. Public enterprises are given special preference by the government in the case of public projects. Personal relationships play a significant role in influencing business decision-making. Public enterprises in agriculture, education, and health sectors spend more on research and development than the private sector. Local firms tend to be capital-constrained and highly skilled labor is scarce. There is not a strong tradition of private sector-led research and development in Malawi.

There are no immediate plans for privatization of government resources or services. It is unclear how impacts from the proposed Lands Amendment will impact the ability of foreign investors to participate in the privatization sales. Under the current Land Law, if privatization were to take place, any foreign or domestic investor would be allowed to participate, and the government is permitted to offer domestic investors a discount on shares. Business and investment efforts are focused on public-private partnerships and attracting strategic investors rather than outright privatization. These are handled by the Public Private Partnership Commission .

8. Responsible Business Conduct

Corporate entities in Malawi have a well-developed sense of responsible business conduct (RBC) and incorporate corporate social responsibility (CSR) into their business practices. Corporate entities make a point to publicize their CSR activities in the local media. There are no established laws or regulations governing RBC or CSR. As a candidate to the Extractives Industry Transparency Initiative (EITI), the government is promoting RBC in the mining sector.

There are a variety of laws and regulations to protect the environment and on waste disposal for producers and consumers. All foreign and domestic enterprises are expected to adhere to the national and local laws and regulations regarding employment and compensation, the work environment, industrial safety, age limits, and minimum wages. However, there is a lack of resources for meaningful enforcement of laws and regulations and no comprehensive reporting mechanism to track violations.

There is no history of any laws or regulations being waived to attract investment, nor of the government factoring in RBC practices into its procurement decisions. There are no verified reports of high profile or controversial instances of any private sector entity impacting human rights or related resolutions. In the recent past, the media reported on complaints by indigenous communities against government MDAs related to land or natural resource allocations. Most land allocation complaints are related to development projects and are decided by the courts or in mediation. There is a general lack of government enforcement and reporting on human rights, labor rights, environment protections because of budget and capacity constraints.

The private sector is required to adhere to international accounting standards. Executive compensation requirements are not defined. The law requires all Malawi Stock Exchange (MSE) listed companies to publish their annual audited accounts in local newspapers. Listed companies are also required to publicly declare profits, dividends, planned takeovers, major portfolio investments, and all relevant information for shareholders to make informed decisions.

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, Consumers Association of Malawi, Malawi Economic Justice Network (MEJN), and Natural Resources Justice Network are civil society organizations that monitor and advocate freely for CSR and RBC in Malawi. Malawi does not adhere to OECD Guidelines for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas. There are no domestic requirements for due diligence by companies engaged in the supply chain of minerals that may originate from conflict-affected areas.

The EITI Board approved Malawi as a candidate country in 2015. Malawi’s Validation was completed in 2018, and the EITI Board concluded that Malawi has made meaningful progress overall in implementing the EITI Standards. The Board determined Malawi must carry out corrective actions regarding the findings of the initial assessment. Due to the COVID-19 pandemic, the final assessment has been delayed until sometime in 2022. Failure to achieve meaningful progress on the second validation will result in suspension in accordance with the EITI Standard.

Department of State

Department of the Treasury

Department of Labor

Comply Chain.

Malawi is vulnerable to climate change impacts due to deep-rooted poverty, over-dependence on rainfed agriculture, overexploitation of natural resources, and rapid population growth. The government offers incentives in several sectors as part of an overall effort to address climate resilience and adaptation. The Environmental Management Act provides details on adherence to environmental requirements for MDAs and general business investors, including foreigners. Climate related issues are integrated throughout public service and national development plans, adherence and enforcement suffer from a lack of funding and capacity. The government submitted its first nationally determined contribution (NDC) to the UN Framework Convention on Climate Change (UNFCCC) in 2015, which provides strategic goals and objectives for Malawi through 2040 and updated the document in 2021. The update includes an unconditional target of six percent carbon emission reductions and a combined conditional and unconditional reduction of 51 percent carbon emission reductions by 2040—contingent upon additional external support and full NDC implementation.

The Department of Environmental Affairs  in the Ministry of Natural Resources and Climate Change is the secretariat of all climate change related issues in the country. Several documents and strategies govern the country’s climate adaption and mitigation activities. The Nationally Appropriate Mitigation Actions (NAMAs), National Climate Change Response Framework (NCCRF), and National Adaptation Plan (NAP) provide details on the government’s commitment to addressing climate change. The 2016 National Climate Change Management Policy (NCCMP) provides an overview of the country’s climate change intervention priorities. The National REDD+ Strategy, National Charcoal Strategy, and National Forest Landscape Restoration Strategy provide guidelines and strategies to manage emissions from forestry and land-use sectors. National strategies, Malawi 2063, Malawi Growth and Development Strategy, the National Meteorological policy, the National Climate Change Investment Plan, the National Climate Change Resilience Strategy, and the Malawi Strategy on Climate Change Learning provide long term development and growth strategies. Despite these well-articulated documents, implementation is stymied by budget and resource constraints.

9. Corruption

Corruption remains a major challenge for firms operating in Malawi. Corruption, fraud, bribery of public officials, illicit payments, misuse of funds, and conflicts of interest are not uncommon. A number of high-profile government scandals have occurred during all recent presidential administrations. President Lazarus Chakwera dissolved his cabinet in January 2022 over a corruption scandal. Corruption in all forms is illegal in Malawi. However, enforcement is insufficient and slow. The Corrupt Practices Act established the independent Anti-Corruption Bureau (ACB) which works with other anti-corruption bureaus in the region but is consistently under-staffed and under-resourced. The Act widened the definition of corruption to include offences for abuse of office and possession of unexplained wealth. The Act also provides protection for whistleblowers. The ACB encourages private sector companies and institutions to develop and implement corruption prevention policies as a way of mainstreaming anti-corruption initiatives into their operations. The business sector may join forces to collectively engage in the fight against corruption, but no formal mechanism currently exists. Some companies employ their own fraud controls, but to date fraud identified through internal controls has failed to result in any high-level prosecutions.

Malawian law requires all public officials from all levels of government to declare their assets and business interests. However, access to view or obtaining copies of the declarations is difficult at best. However, the law does not extend to family members. The Political Parties Act requires all political parties to disclose source of funds. If corruption evidence implicates family members or members of a political party the ACB has the power to build a case against accomplices and bring them to court. All public officials are required to disclose any conflict of interest and to recuse themselves from any deliberation or decision-making process in relation to the conflict. However, there is no clear definition of what constitutes conflict of interest. Despite have the legal framework in place, in practice the requirements for public asset declarations, political party financial reporting, and conflict of interest disclosures are rarely enforced, and noncompliance is high.

Malawi is party to the UN Convention Against Corruption and the African Union Convention on Preventing and Combating Corruption. According to Malawi 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 and the media play an important and visible role in fighting corruption, investigating, and uncovering cases of corruption. Specific firms with U.S. affiliations have noted irregularities in tender processes and mining licensing but have nonetheless continued to pursue business opportunities. Although some progress has been made, corruption remains a major obstacle to businesses in Malawi.

Director General, Anti-Corruption Bureau (ACB)
Mulanje House, P.O Box 2437, Lilongwe, Malawi
Tel: +(265) 1 770 166 / +265 (0) 888 208 963
E-mail: reportcentre-ll@acbmw.org
Website: https://acbmw.org/ 

National Coordinator
The Integrity Platform
Area 47, Sector 5, Private Bag 382, Lilongwe, Malawi
Telephone: +265 1 775 786/691
Email: info@integrityplatformmw.org
Website: www.integrityplatformmw.org 

The Chairperson
National Anti-Corruption Alliance (NACA)
Phone Numbers: 0881 02 22 12 and 099 86 57 18
Email Address: mosesmkandawire@yahoo.co.uk 

10. Political and Security Environment

Malawi continues to enjoy a stable and democratic government. Since the end of one-party rule in 1994, the country has had 7 peaceful presidential and 6 parliamentary elections. In 2020, Malawians voted for a new government in a court sanctioned presidential re-run ousting the then ruling party. Although political divisions exist, Malawi has no significant tribal, religious, regional, ethnic, or racial tensions that might lead to widespread violence. Incidents of labor unrest occasionally occur but are usually non-violent. Despite instances of political uncertainty there are no nascent insurrections or politically motivated activities of major concern to investors. Democratic processes in Malawi are well established, and destabilizing unrest is unlikely.

11. Labor Policies and Practices

Most working-age individuals in Malawi live in rural areas and are involved in the informal sector and subsistence agriculture. The informal economy covers 89 percent of the labor force. Informal employment is primarily small-scale, minimally capitalized, and relies on household members for labor. Across all age groups, more males are employed than females. Informal employment is usually easier to get, is less stable, and usually pays far less than minimum wage. The COVID-19 pandemic significantly and adversely affected the informal sector.

Child labor remains a problem. A 2015 Child Labor Survey found 38% of children aged 5-17 are active in child labor. In November 2019, the U.S. Customs and Border Protection Agency issued a Withhold Release Order against tobacco from Malawi due to child and forced labor concerns. As of February 2022, three companies were granted waivers enabling them to export tobacco to the U.S.

Due to capital requirements, all foreign investors are categorized in the formal sector. Labor laws cut across all sectors and the courts may get involved in any labor dispute.

Skilled and semi-skilled labor is scarce and skilled employment opportunities are extremely limited. Despite the Gender Equality Act in 2013, discrimination against women is pervasive, and women still have lower literacy and education levels and less access to employment opportunities. Occupational categories with skills shortages include accountants, economists, engineers, lawyers, IT, and medical/health personnel. Malawi has six public universities that provide bachelor’s, and master’s degrees in several fields including accountancy, economics, engineering, medicine, education, agriculture, and administration. In response to a need for skilled tradesmen, the government is expanding its network of vocational schools. The University of Malawi and the privately owned Catholic University are accredited to offer law degrees. There are few PhD programs that usually enroll few candidates.

Employment, immigration laws, and regulations require that any local or foreign investor prioritize hiring of nationals except in cases where the needed skills are not available locally. There are no restrictions on employers adjusting employment to respond to fluctuating market conditions so long as such adjustments comply with employment laws and regulations. There are also no social safety net programs for workers laid off due to economic reasons nor are employers required to have employment insurance for their employees. There are no provisions for labor laws to be waived to attract or retain investment in Malawi nor are there additional or different labor law provisions in Export Processing and Special Economic zones for purpose of promoting exports.

Aside from military or police personnel, all workers are legally permitted to form and join trade unions without previous authorization or excessive requirements. Unions must register with Registrar of Trade Unions and Employers’ Organizations in the Ministry of Labor. Most unions are affiliated with the Malawi Congress of Trade Unions (MCTU) with a membership of approximately 300,000 workers. Despite the membership size, the MCTU Unions power is limited and weak. The government is a signatory to the ILO Convention protecting worker rights, ratified all eight of the fundamental International Labor Conventions, and the Forced Labor Protocol to fast-track implementation of Target 8.7, but enforcement is weak due to a serious labor inspector shortage and resource constraints. The Occupation Safety, Health and Welfare Act of 1997 is scheduled for review in 2022. Government designated labor officers, police officers and immigration officers also serve as trafficking in persons (TIP) enforcement officers.

The Industrial Relations Court (IRC) has 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, the IRC decision is final and binding on all other matters. The Labor Relations Act (LRA) governs labor-relations management in Malawi’s formal sector. Employers, labor unions, and the government lack sophistication regarding labor relations/disputes. There have not been any major strikes that posed any serious investment risk since 2012. In October 2021, government amended LRA and the Employment Act. The LRA amendment allows an employer to deduct wages from an employee who strikes for more than three days per annum and authorizes the Minister of Labor to designate categories of workers as essential, thereby prohibiting them from striking or lockdowns. The LRA removed the requirement of employer and employee panelists in the IRC, thereby loosening the bottleneck at the IRC. Amendments to the Employment Act prohibits forced and tenancy labor, provides special working conditions for pregnant and breastfeeding female employees, provides for paternity leave, and makes provisions for deduction of wages for the period an employee is absent from work due to participation in a strike.

14. Contact for More Information

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

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