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Malawi

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Title: Malawi


1
  • Malawi
  • Introduction
  • Investment Climate
  • Doing Business
  • Key Sectors
  • Key Takeaways

2
  • Introducing Malawi
  • Key Facts, Geographic and Demographic Highlights
  • Political and Economic Highlights
  • Resources and Infrastructure

3
Introduction
Investment Climate
Doing Business
Key Sectors
Key Takeaways
Key Facts, Geographic and Demographic Highlights
The Republic of Malawi, also know as "The Warm
Heart of Africa is strategically located in the
south-eastern Africa. It is largely an
agricultural country, and is endowed with natural
resources such as uranium, coal and
limestone. MALAWIS
DEMOGRAPHY
Population 15,897,252 (July 2011 est.)
World Population Rank 63
Population Growth Rate 2.76
Malawi Key Facts
Area sq km 118,484
Capital Lilongwe
Languages Chichewa (official) 57.2, Chinyanja 12.8, Chiyao 10.1, Chitumbuka 9.5, Other 10.4
Ethnic Diversity Chewa 32.6, Lomwe 17.6, Yao 13.5, Ngoni 11.5, Tumbuka 8.8, Nyanja 5.8, Sena 3.6, Other 6.6
Religion Christian 82.7, Muslim 13, Other 4.4
Currency Malawian kwacha (MWK)
Dialing Code 265
Population Growth Rate Rank 17
Urban Population 20
Rural Population 80
0-14 years
15-64 years
4,140,874
3,586,696
MALE

182,304
Literacy Rate 76.1
65 years and above
4,155,015
3,571,298
FEMALE
243,065
Literacy Rate 49.8
Sources African Economic Outlook 2011 (Malawi)
CIA World Factbook
4
Introduction
Investment Climate
Doing Business
Key Sectors
Key Takeaways
Political and Economic Highlights
POLITICAL SCENARIO Malawi is a presidential
representative democratic republic, whereby the
President of Malawi is the Head of the State,
Head of the Government and of a multi-party
system. Executive power is exercised by the
government although legislative power is vested
in both the government and the National Assembly.
The unicameral, National Assembly of Malawi is
the country's legislative body consisting of 193
members. The Judiciary is independent of the
executive and the legislature. The Supreme Court
is the highest court and the court of appeal
below it are the high court, and magistrates
court. MALAWIS ECONOMY Maintaining
its high growth Malawis GDP was recorded at
US5.2 billion in 2010. The main driving force of
economic growth in 2010 was the strong
performance in mining and quarrying,
construction, financial and insurance services
and information technology sector. GDP growth
rate was recorded at 6.7 in 2010 and is
forecasted at 6.4 in 2011 and 6 in 2012,
reflecting the stability in uranium output and
the growth in the agriculture sector.
Agriculture being the most important sector of
the economy contributed 27.64 to the GDP in
2010, with 60 of the total exports coming from
tobacco alone. The sector grew by 6.4 in 2011,
on the back of good weather conditions and is
expected to grow by 7.3 in 2012 on account of
Green Belt Initiative(GBI).
Sources African Economic Outlook 2011 (Malawi)
Unctad Stat
5
Introduction
Investment Climate
Doing Business
Key Sectors
Key Takeaways
Political and Economic Highlights
Mining and quarrying sector witnessed a growth of
83 in 2010 up from 9 in 2009, due to the
increase in production of uranium and coal. The
telecommunication sector also grew by 15.3 in
2010, due to the expansion in mobile phone
industry (specially due to the entry of Indias
Bharti Airtel). For past three years, the
Malawian kwacha has been relatively stable at
MWK168 against the US. Inflation has been
declining and has been contained within a single
digit over the past four years as a result of the
increase in domestic food production and
agricultural input subsidies since 2006.
Inflation declined from 8.4 in 2009, to 7.4 in
2010 and is expected to ease to 7.6 in 2011 on
the back of decline in global oil prices and
increase in crop production.
Exchange Rates ( June 2012)
100 MWK US 0.370
100 MWK INR 20.59
Sources African Economic Outlook 2011 (Malawi)
Unctad Stat IMF
6
Resources and Infrastructure
INFRASTRUCTURE IN MALAWI Malawi is one of the few
African nations to have successfully achieved its
millennium development goal for water- almost a
decade ahead of the target. Air
Transport Though Malawi has a relatively small
air transport market as compared to its peers, it
is well connected to Zambia and the regional hub
in South Africa. Railways Malawi has a total
rail network of 797kms. The rail links present a
huge opportunity for investors with several big
ticket infrastructure projects available to
investors such as improving performance in the
Nacala corridor, extending rail network
northwards to join the TAZARA network (Tanzania
and Zambia railway authority). Road Malawis
substantial road investment program has ensured
that its road network is significantly better
than its peers in both middle income and lower
income countries. Its road sector spending as a
of its GDP is one of the highest in southern
Africa. Malawis road fund is also distinguished
by its institutional design features. Not only
is its paved road density extremely high when
compared to other lower income countries, but
also the road quality (both paved and unpaved) is
substantially better as well. For instance 90 of
the countrys unpaved road network is in good or
fair condition as compared to an average of less
than 60 in both low income and middle income
countries. Power Malawi has implemented about
60 of the best-practice institutional reforms in
its power sector, putting it ahead of the average
score for Sub-Saharan Africa. Information and
Communication Technology (ICT) Malawis GSM
signal coverage, which reaches 93 percent of the
population, is one of the highest in Africa and
even exceeds the average of 85 percent across
middle-income countries in the region. As a
result, Malawi has one of the lowest
market-efficiency gaps in the region.
Total Airports (with paved runways) 6
Total Road 15.451 kms
Paved 6,956 kms
Railways 797 kms
Sources AICD Report World Bank 2011
7
  • Investment Climate of Malawi
  • Investment Scenario
  • Indian Investments in Malawi
  • Key Government Initiatives
  • Agreements and Associations

8
Investment Scenario
OVERVIEW The liberalized economy of Malawi, with
ample incentives for exports and a good
international connectivity has attracted a
consistent flow of foreign investment over the
last few years. The trend in FDI showed
improvement after the sharp decline witnessed in
2008 as a result of the global economic crisis.
In 2010, the country received a total of US140
million in FDI, which constituted 9.6 of the
national gross fixed capital formation(GFCF). MOD
ES OF ENTRY Foreign investments in Malawi have
primarily been received through the Greenfield
projects route. The country has witnessed almost
negligible cross border Mergers and Acquisitions
(MA) Sales. In 2010, 3 greenfield projects
worth US298 million were announced.
.
Sources UNCTAD World Investment Report 2011
Board of Investment
9
Indian Investments in Malawi
  • MALAWI INVESTMENT PORTFOLIO
  • The major Greenfield projects in Malawi include
  • US233.7 million metals extraction project
    announced by the Australian Globe Metals and
    Mining group in 2009
  • US220 million metals extraction project
    announced by the Australian Paladin Energy group
    in 2009
  • US200 million construction project announced by
    the French Lafarge group in 2009
  • US150 million ICT project announced by the
    Mongolian G-Mobile Holdings in 2010
  • US47.8 million healthcare project announced by
    the UAEs Thumbay group, in 2010
  • US31.4 million food and tobacco project
    announced by the British Lonrho group in 2009
  • US9.2 million financial services project
    announced by Ecobank of Togo
  • US9.2 million financial services project
    announced by the Malaysian ICB Financial Holdings
    in 2008
  • INDIAN INVESTMENTS
  • There are about 7000 people of Indian origin and
    1500 Indian nationals currently residing in
    Malawi. The Indian community, 75 of which is
    Muslims, is primarily engaged in trade.
  • On the investment side, private investment of
    Indian origin is primarily concentrated in the
    community, social and personal services sector.
    Hi Tos Linear Agency Pvt Ltd is the biggest
    Indian player, with an investment of US1.11
    million. It has entered into a joint venture(JV)
    called Chrimba Container Terminal Ltd.
  • Weismann Ltd, another Indian company in the
    electricity sector , has also entered into a JV
    and invested US0.18 million.


Sectors attracting FDI from India (July 2007-May2011) Total amount (US million)
Community Social and Personal Services 1.11
Electricity, Gas and Water 0.18
Sources Reserve Bank of India Ministry of
External Affairs, India UNCTAD LDC Profile
10
Government Initiatives
Source Malawi Investment Promotion Agency
11
Government Initiatives
Source Malawi Investment Promotion Agency
12
Agreements and Associations

Sources UNCTAD WIR 2011 Ministry of External
Affairs, India
13
  • Doing Business In Malawi
  • Investment Options
  • Investment Laws and Regulations
  • Investment Funding Options
  • Taxation

14
Key Sectors
Key Takeaways
Introduction
Investment Climate
Doing Business
Overview
Malawi ranks 145th on the 2012 World Banks index
of 'Ease of Doing Business. Key reforms
undertaken by the country during last one year
include implementation of new rules providing
clear procedural requirements and time frames for
winding up a company, and adoption of a new law
under which it would create a private credit
bureau in the country.
Comparison of Malawi with regional economies on
ease of doing business ranking

Average doing business rank
1-46
93-138
47-92
139-183
Ease of doing business rank of Malawi
Parameter Doing Business 2012 Rank Doing Business 2011 Rank Attractiveness
Starting a Business 139 132
Dealing with construction permits 167 167
Getting electricity 177 178
Registering property 95 80
Getting Credit 126 116
Protecting Investors 79 74
Paying Taxes 23 22
Trading Across Borders 164 163
Enforcing Contracts 121 122
Closing Business 132 131
Sources Doing Business, World Bank
15
Key Sectors
Key Takeaways
Introduction
Investment Climate
Doing Business
Overview

DOING BUSINESS IN MALAWI
Investment options
An investor can conduct business in Malawi using
any of the following forms public/private limited
company, partnership, sole trader and branch of
foreign company. Foreign investors are required
to register their amount of capital inflow with
the Reserve Bank of Malawi through a commercial
bank.
1
Investment laws and regulations
The Investment and Export Promotion Act 2012
regulates both investments and trade in Malawi.
The country offers several investment and trade
incentives under various legislations including
the Export Processing Zone (EPZ) Act, the Customs
and Excise Act, and the Income Act.
2
Investment funding options
Important sources of finance in Malawi include
commercial banks, stock exchange, microfinance
institutions, leasing companies and discount
houses. Informal financial arrangements also play
a important role in the economy
3
Taxation
Malawis tax regime is quite favorable towards
foreign investors. Key taxes applicable in the
country include personal income tax, corporate
tax, withholding tax, value added tax and payroll
tax.
4

Sources EY Analysis
16
Key Sectors
Key Takeaways
Introduction
Investment Climate
Doing Business
Investment Options
Public/private limited company, partnership, sole
trader and branch of foreign company are
principal business entities used by investors to
conduct commercial activities in Malawi. Foreign
investors, after completing the registration
process, are required to register their capital
inflow with the Reserve Bank of Malawi (the
countrys Central Bank) to obtain Business
Residence Permit in the country.
through a commercial bank in Malawi. An investor
must invest at least US50,000
Business incorporation procedures
Submit an application at the Malawi Investment
and Trade Centre (MITC), accompanied by a
complete business proposal. A non-refundable fees
of US200 or Malawi Kwacha equivalent shall apply
for applying new investment license
MITC processes the application and sends it to
Investment Approval Committee for appraisal and
approval
Committee, if satisfied, issues an investment
license. Upon approval, the investor shall be
required to pay US800 or Malawi Kwacha
equivalent for obtaining an Investment
Certificate
Open a bank account with a Malawi commercial
bank. The account can be transacted after the
completion of registration process
Companies are required to register with the
Registrar of Companies
Companies are also required to register with the
Malawi Revenue Authority (MRA) for the payment of
taxes
Sources Malawi Investment Promotion Agency EY
Analysis
17
Key Sectors
Key Takeaways
Introduction
Investment Climate
Doing Business
Investment Laws and Regulations
stage of investment. The Government of Malawi
encourages foreign direct investments by offering
several

The Investment and Export Promotion Act of 2012
governs investments in Malawi. The government
promotes foreign investments in most sectors of
the economy without limitations on ownership,
investment size and source of funds. Further,
the law does not restrict competition and
discriminate against foreign investors at any
investment incentives.
General incentives for investors
100 investment allowance on qualifying
expenditure for new building and machinery
Allowance up to 40 for used buildings and
machinery
Allowance for manufacturing companies to deduct
all operating expenses incurred up to 25 months
prior to the start of operations
Free repatriation of dividends, profits and
royalties
Malawi has promulgated the Export Processing
Zones Regime through Export Processing Zones Act
of 1995. The regime attracts export-orientated
industries, by offering them favorable investment
and other incentives.
Key incentives under the Export Processing Zones
Act
100 exemption of corporate income tax
No duty on capital equipment, machinery and raw
materials
No withholding tax on dividends
0 value added tax
Sources Malawi Investment Promotion Agency EY
Analysis
18
Key Sectors
Key Takeaways
Introduction
Investment Climate
Doing Business
Investment Funding Options
the economy due to low penetration of financial
services, especially in the rural regions.
The financial sector of Malawi comprises the
central bank, commercial banks, microfinance
institutions, discount houses and other financial
institutions. Informal financial arrangements
play an important in
Key sources of finance
Drivers
Sources IHS Global Insight EY Analysis
19
Key Sectors
Key Takeaways
Introduction
Investment Climate
Doing Business
Taxation

Since 2006, Malawi has implemented several
reforms to improve the fiscal management of the
country. Malawi has been notable for its strong
commitment to business incentives, particularly
for foreign investors.
Key Taxes
Type Rate
Corporate Income Tax Standard rate of 30 investment income of pension funds is subject to tax rate of 15
Foreign branch tax 35
Value-added tax 16.5, however, banking and life insurance services are exempted
Dividends withholding tax 10 unless reduced under an applicable tax treaty
Interest withholding tax 20 applies to residents 15 applies to interest payments made to non-residents, unless reduced under an applicable tax treaty
Royalties withholding tax 20 applies to residents 15 applies to interest payments made to non-residents, unless reduced under an applicable tax treaty
Personal income tax First MWK180,000 income is tax free thereafter, next MWK is taxed at 15 and excess at 30
Payroll tax 1 tax-deductible levy of payroll costs is payable to Technical, Entrepreneurial and Vocational Education and Training Authority
Sources EY Analysis IHS Global InsightExchange
rate MWK1 US0.00596
20
  • Key Sectors
  • Agriculture
  • Mining and Quarrying
  • Manufacturing
  • Tourism

21
Key Sectors
The Malawian economy is characterized by a high
dependence on agriculture and related activities.
Agricultural products account for a majority of
the export earnings. However, the recent trend of
growth in mining and manufacturing activities has
come on the back of government efforts to
diversify the economy. Agriculture Malawis
agricultural sector accounted for more than
27.64 of the GDP in 2010 while registering a
growth rate of 1.5. This was on account of poor
rainfall that affected most parts of the country.
Growth is expected to return to the long term
objective of 6.4 in 2011. A source of major
concern is Malawis dependence on rain. This is
reflected in the fact that out of the 400,000 ha
of land suitable for irrigation, only 62,000ha is
under irrigation. With substantial investment in
irrigation facilities, the land and climate is
suited for horticulture. The Farm Inputs
Subsidy Program (FISP) is currently in its sixth
year of implementation. The program was initiated
to help achieve food security while
simultaneously augmenting the income of
smallholders. Agricultural production primarily
revolves around maize, rice, tobacco, tea and
sugar cane cultivation. Exports of tobacco alone
account for 60 of export earnings. Livestock
farming and the dairy industry are additional
areas where investment potential exists.
Mining and Quarrying Malawis mineral resource
endowment is yet to be fully exploited. With a
wide variety of minerals including coal,
limestone and gemstone, the mining and quarrying
sector is expected to play a larger role in the
Sources EY Analysis African Statistical
Yearbook 2011 African Economic Outlook Malawi
Investment Promotion Agency (MIPA)
22
Key Sectors
economy. The government expects mining to
contribute 5 to the GDP by 2012. With sustained
growth, this is set to come true. Other
potential areas of growth include uranium,
platinum group of minerals (PGMs), base metals
nickel and copper, dimension stone, phosphates,
heavy mineral sands, graphite, and
coal. Manufacturing The manufacturing sector in
Malawi can broadly be sub-categorized into
agro-processing, textile and garment
manufacturing and light manufacturing.
Agro-processing has tremendous potential for
investment, given than most of the countries cash
crops like tobacco and tea are exported in raw
form. Expansion in processing capacity of these
products would help in value addition and greatly
enhance export earnings. Moreover, Textile and
garment manufacturing has the advantage of easy
availability of raw materials that can be sourced
domestically. Chinese and Indian firms dominate
in terms of total production figures.
Additionally, Malawi has in place favorable
bilateral investment agreements that provide
opportunities for entry into other markets
including South Africa. Tourism Malawi runs
along the western side of part of the Great Rift
Valley of Africa is home to the third largest
fresh water lake in Africa. Although relatively
small in size, Malawi is a beautiful country with
favorable climate and warm people. Malawi
wishes to reposition itself as a leading
eco-tourism destination in the medium term.
Economic contribution of Travel Tourism in 2011
Sources EY Analysis African Statistical
Yearbook 2011 African Economic Outlook Malawi
Investment Promotion Agency (MIPA) Malawi
Tourism Association WTTC
23
  • Key Takeaways
  • Investment opportunities for Indian Investors
  • Key Contacts

24
Investment opportunities for Indian Investors
Compared to other low income countries, Malawi
has a relatively well developed Infrastructure
with significant improvements in all spheres such
as ICT, power and road transport networks.
Malawi has emerged as one of the regional
leaders in ICT with its institutional best
practices for the ICT sector well above the
average level for Sub-Saharan Africa. The
country has a liberalized economy with
preferential access to world markets under
COMESA, SADC, LOME, AGOA. In essence, Investors
will get attracted to Malawis cost effective
work force and competitive investment incentives
for export manufacturers and the tourism
sector.
POTENTIAL SECTORS FOR INVESTMENTS POTENTIAL SECTORS FOR INVESTMENTS
Sector Sub Sectors
Agriculture Cash crops, particularly tobacco Farm crops
Mining and Quarrying PGMs Uranium Other minerals like coal, bauxite etc
Manufacturing Agro-processing Textile and garment manufacturing Light manufacturing
Travel and Tourism Eco-Tourism
25
Key Contacts
.
Organization Address Web address Contact details
Malawi Investment and Trade Centre (MITC) Lilongwe Office Aquarius House First floor Private Bag 302 Capital City Lilongwe 3 Blantyre Office Unit House Fourth Floor Private Bag 131 Blantyre E-mail mitc_at_mitc.mw Web www.malawi-invest.net Tel265-1-770-800/ 265-1-771-315 Fax265-1-771-781
High Commission of the Republic of Malawi in India C-6/11, Vasant Vihar, New Delhi 110057 Email malawindia_at_airtelmail.in Tel 91-11-26706000 Fax91-11-26706010
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