Download Key Sectors - Malawi

Malawi
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Introduction
Investment Climate
Doing Business
Key Sectors
Key Takeaways
Introducing Malawi
• Key Facts, Geographic and Demographic
Highlights
• Political and Economic Highlights
• Resources and Infrastructure
Introduction
Investment
Climate
Doing
Business
Key
Takeaways
Key Sectors
Key Facts, Geographic and Demographic Highlights
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
Currency
Malawian kwacha (MWK)
Dialing
Code
265
Population Growth Rate Rank: 17
Urban
Population:
20%
Rural
Population:
80%
0-14 years
15-64 years
3,586,696
4,140,874
Literacy Rate: 76.1%
Sources: African Economic Outlook 2011 (Malawi); CIA World Factbook
3,571,298
4,155,015
Literacy Rate: 49.8%
3
65 years and above
Christian 82.7%,
Muslim 13%,
Other 4.4%
Population Growth Rate: 2.76%
243,065
Religion
World Population Rank: 63
182,304
Chewa 32.6%,
Lomwe 17.6%,
Yao 13.5%,
Ngoni 11.5%,
Tumbuka 8.8%,
Nyanja 5.8%,
Sena 3.6%,
Other 6.6%
Population: 15,897,252 (July 2011 est.)
MALE
Malawi
MALAWI’S DEMOGRAPHY
FEMALE
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.
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
magistrate’s court.
MALAWI’S ECONOMY
Maintaining its high growth Malawi’s GDP
was recorded at US$5.2 billion in 2010. The
main driving force of economic growth in
2010 was the strong performance in mining
and quarrying, construction, financial and
insurance services and information
technology sector. GDP growth rate was
recorded at 6.7% in 2010 and is forecasted
at 6.4% in 2011 and 6% in 2012, reflecting
the stability in uranium output and the
growth in the agriculture sector.
Agriculture being the most important sector
of the economy contributed 27.64% to the
GDP in 2010, with 60% of the total exports
coming from tobacco alone. The sector grew
by 6.4% in 2011, on the back of good
weather conditions and is expected to grow
by 7.3% in 2012 on account of Green Belt
Initiative(GBI).
Real GDP and GDP Growth Rate of Malawi
6
US$ billion
5
4.9
4
4.2
3
2
5.2
2.4
2.7
2002
2.4
2.6
2.8
2003
2004
2005
3.1
3.6
1
0
2001
Malawi-Real GDP (LHS)
2006
Malawi-GDP Growth Rate (RHS)
Sources: African Economic Outlook 2011 (Malawi); Unctad Stat
2007
2008
2009
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
2010
Southern Africa-GDP Growth Rate (RHS)
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Introduction
Investment
Climate
Doing
Business
Key
Takeaways
Key Sectors
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 India’s Bharti Airtel).
Sector wise % of GDP (2010)
3.2%
12.2%
31.7%
8.1%
8.5%
2.1%
18.4%
4.0% 1.3%
10.5%
Agriculture, forestry, fishing & hunting
Mining and quarrying
Manufacturing
Electricity, gas and water
Construction
Wholesale and retail trade, hotels and restaurants
Transport, storage and communication
Finance, real estate and business services
General government services
Other services
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
GDP Per Capita, Inflation, GDP Per Capita Growth Rate
400
337
350
301
300
US$
250
349
205
225
200
200
210
215
238
30%
25%
20%
263
15%
10%
150
5%
100
0%
50
-5%
0
-10%
2001
2002
2003
Malawi-GDP Per Capita (LHS)
2004
2005
2006
2007
2008
Malawi-GDP Per Capita Growth Rate (RHS)
Sources: African Economic Outlook 2011 (Malawi); Unctad Stat; IMF
2009
2010
Malawi-Inflation (RHS)
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Introduction
Investment
Climate
Doing
Business
Key Sectors
Key
Takeaways
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.
Total Airports (with paved runways)
6
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).
Railways
797 kms
Road
Malawi’s 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
Sources: AICD Report World Bank 2011
one of the highest in southern Africa.
Malawi’s 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 country’s
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.
Total Road
15.451 kms
Paved
6,956 kms
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)
Malawi’s 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.
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Investment Climate of Malawi
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Investment Scenario
Indian Investments in Malawi
Key Government Initiatives
Agreements and Associations
Introduction
Investment
Climate
Doing
Business
Key Sectors
Key
Takeaways
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.
million were announced.
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 US$140
million in FDI, which constituted 9.6% of the
national gross fixed capital formation(GFCF).
MODES 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 (M&A) Sales. In
2010, 3 greenfield projects worth US$298
.
Sources: UNCTAD World Investment Report 2011; Board of Investment
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Introduction
Investment
Climate
Doing
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Key Sectors
Key
Takeaways
Indian Investments in Malawi
MALAWI: INVESTMENT PORTFOLIO
The major Greenfield projects in Malawi
include:
• US$233.7 million metals extraction project
announced by the Australian Globe Metals
and Mining group in 2009
• US$220 million metals extraction project
announced by the Australian Paladin
Energy group in 2009
• US$200 million construction project
announced by the French Lafarge group in
2009
• US$150 million ICT project announced by
the Mongolian G-Mobile Holdings in 2010
• US$47.8 million healthcare project
announced by the UAEs Thumbay group, in
2010
• US$31.4 million food and tobacco project
announced by the British Lonrho group in
2009
• US$9.2 million financial services project
announced by Ecobank of Togo
• US$9.2 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
US$1.11 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 US$0.18 million.
Sectors attracting FDI from
India (July 2007-May2011)
Total amount
(US$ 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
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Introduction
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Doing
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Key Sectors
Key
Takeaways
Government Initiatives
FDI Policy
• Private investment in Malawi is regulated by the Investment and Export Promotion Bill 2012
• The Act states that investors, both domestic and foreign are allowed to invest in any sector of the
economy, with no restriction on ownership
• Further it puts no restrictions on the size of investment, the source of funds or whether products
are destined for export or for the domestic market
• The Act also established of Malawi Investment and Trade Centre (MITC) which acts as a One-Stop
Shop Investment and Trade Centre for all investors and exporters
Tax benefits
The Malawi Government through Taxation Act, VAT Act, and Customs and Excise Act offers the
following fiscal incentives:
• 100% Investment allowance on New and Unused Industrial Buildings ,Plant and Machinery
• No Minimum Tax Based on Turnover
• 25 % Export Allowance on revenue for non-traditional exports
• No Taxes on Gains from sell of Shares that are held for more than 1 year.
• 40% Investment Allowances for used Buildings, Plant and Machinery
• Transport tax allowance of 25% on international transport costs, excluding traditional exports
• Allowance for manufacturing companies to deduct all operating expenses incurred up to 25
months prior to the start of operations
• Exemption of Duty, Excise and VAT on raw materials used in manufacturing
• Exemption of Duty, Excise and VAT on Industrial Machinery and Equipments
• Carry forward of loss, up to seven years, enabling companies to take advantage of allowances
• Additional allowance of 15% for investment in designated areas of the country
• Exemption of duty on importation of buses with a seating capacity of 45 persons and above
• Exemption of duty on direct importation of goods used in the tourism industry
Repatriation of Capital
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 that were obtained from foreign sources and registered with the Reserve Bank
of Malawi (RBM).
Source: Malawi Investment Promotion Agency
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Introduction
Investment
Climate
Doing
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Key Sectors
Key
Takeaways
Government Initiatives
Manufacturing under bond Incentives
Manufacturing Under Bond (MUB) scheme offers incentives to those companies that
export some, but not all, of their products. These incentives include:
• Export allowance of 25% on revenue for non-traditional exports
• Transport tax allowance of 25% on international transport costs, excluding
traditional exports
• Exemption of duties on imports of capital equipment used in the manufacture of
exports
• Exemption of surtaxes
• Exemption of excise tax on the purchase of raw materials and packaging materials
• Timely refund of all duties (duty drawback) on imports of raw materials and
packaging materials used in the production of exports
Expropriation and Compensation
• Malawi's constitution prohibits deprivation of an individual's property without due
compensation. There are effective laws that protect both local and foreign
investment
• The likelihood of direct expropriations has been further reduced since the repeal of
the forfeiture act in 1992
Export Processing Zones (EPZ)
Legislation for the establishment of EPZs came into force in 1995. All companies
engaged exclusively in manufacture for export can apply for EPZ status. As of
December 2010, 16 were operating under the EPZ scheme. The incentives under this
scheme include:
• Exemption of corporate tax
• Exemption of withholding tax on dividends
• Exemption of duty on capital equipment and raw materials
• Exemption of excise tax on the purchases of raw materials and packaging materials
made in Malawi
• Exemption of value added tax
Source: Malawi Investment Promotion Agency
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Introduction
Investment
Climate
Doing
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Key Sectors
Key
Takeaways
Agreements and Associations
Regional Trade
Associations and
Blocs
India Malawi
Relations
Malawi is a member of/ signatory to the following:
• South African Development Community (SADC)
• Common Market for Eastern and Southern Africa (COMESA)
• African Growth Opportunity Act (AGOA)
Important bilateral treaties and agreements are:
• Memorandum of Understanding (MoU) on cooperation in the
field of Agriculture and Allied sector (2010)
• Agreement on Protocol for Consultations (2010)
• Agreement on Cooperation in the development of small scale
enterprises in Malawi (2010)
• MoU on Human Resources and Development (2010)
• Agreement for Mineral Resources Development (2010)
India extended a US$50-million Line of Credit (LoC) to Malawi in
2009–10 for its developmental projects. In February 2008, India
extended an LoC of US$30 million for irrigation, grain storage,
tobacco threshing and one-village, one-product projects.
International
Investment
Guarantees and
Agreements
Malawi is a member of/ signatory to the following:
• Multilateral Investment Guarantee Agency (MIGA), which
provides guarantee against non commercial risks
• International Center for the Settlement of Investment Disputes
(ICSID)
Double Taxation
Treaties (DTT)
The Government has concluded 9 DTTs as of December 2010.
• These include DTTs with Sweden, UK, Denmark, France,
Norway, Switzerland, Netherlands, South Africa and Norway
Bilateral Investment
Treaties (BIT)
Malawi has signed 6 BITs as of December 2010.
• These include treaties with Taiwan, Malaysia, Egypt, Italy,
Netherlands and Zimbabwe
Sources: UNCTAD WIR 2011; Ministry of External Affairs, India
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Doing Business In Malawi
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Investment Options
Investment Laws and Regulations
Investment Funding Options
Taxation
Introduction
Investment
Climate
Doing
Business
Key Sectors
Key
Takeaways
Overview
Comparison of Malawi with regional
Malawi ranks 145th on the 2012 World
Bank’s index of 'Ease of Doing Business‘. Key economies on ease of doing business ranking
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.
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
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
Attractiveness
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Introduction
Investment
Climate
Doing
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Key Sectors
Key
Takeaways
Overview
DOING BUSINESS IN MALAWI
1
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.
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
3
Investment funding
options
4
Taxation
Sources: EY Analysis
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
Malawi’s 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.
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Introduction
Investment
Climate
Doing
Business
Key
Takeaways
Key Sectors
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 country’s Central Bank)
1
through a commercial
bank in Malawi.
Investment options
2
Investment laws and
regulations
3
An investor must invest
at least US$50,000
to obtain Business
Residence Permit in the country.
Investment funding
options
4
Taxation
A foreign investor in Ghana may form a trading company or
may team up with a Ghanaian entrepreneur for a joint
venture, usually in the form of a partnership or a limited
company. The investor is required to register his/her
business at GIPC and Registrar General’s Department.
The Ghana Investment Promotion Center (GIPC) Act is the
main law that governs investment in Ghana. Mining and oil
and gas sectors are governed by a separate set of laws.
Further, sector specific regulations exist for industries such
as financial services, fishing and telecommunications.
An investor has several funding options in Ghana, including
shares issuance on Ghana Stock Exchange, commercial
loans, micro-financing, and low interest loans available
through Ghana Venture Capital Fund.
Ghana has a competitive taxation system with corporate tax
rate of 25% and maximum rate for personal tax rate at 25%.
Other taxes in the system include rent tax, capital gains tax,
mineral royalties and value added tax. A division of a foreign
company is taxed like any corporate entity in Ghana.
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 US$200
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 US$800 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
Introduction
Investment
Climate
Doing
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Key
Takeaways
Key Sectors
Investment Laws and Regulations
1
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
stage of investment.
Investment options
2
Investment laws and
regulations
3
The Government of
Malawi encourages
foreign direct investments
by offering several
investment incentives.
Investment funding
options
4
Taxation
A foreign investor in Ghana may form a trading company or
may team up with a Ghanaian entrepreneur for a joint
venture, usually in the form of a partnership or a limited
company. The investor is required to register his/her
business at GIPC and Registrar General’s Department.
The Ghana Investment Promotion Center (GIPC) Act is the
main law that governs investment in Ghana. Mining and oil
and gas sectors are governed by a separate set of laws.
Further, sector specific regulations exist for industries such
as financial services, fishing and telecommunications.
An investor has several funding options in Ghana, including
shares issuance on Ghana Stock Exchange, commercial
loans, micro-financing, and low interest loans available
through Ghana Venture Capital Fund.
Ghana has a competitive taxation system with corporate tax
rate of 25% and maximum rate for personal tax rate at 25%.
Other taxes in the system include rent tax, capital gains tax,
mineral royalties and value added tax. A division of a foreign
company is taxed like any corporate entity in Ghana.
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
Introduction
Investment
Climate
Doing
Business
Key
Takeaways
Key Sectors
Investment Funding Options
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
the economy due to low
penetration of financial
services, especially in
the rural regions.
1
Investment options
2
Investment laws and
regulations
3
Investment funding
options
4
Taxation
A foreign investor in Ghana may form a trading company or
may team up with a Ghanaian entrepreneur for a joint
venture, usually in the form of a partnership or a limited
company. The investor is required to register his/her
business at GIPC and Registrar General’s Department.
The Ghana Investment Promotion Center (GIPC) Act is the
main law that governs investment in Ghana. Mining and oil
and gas sectors are governed by a separate set of laws.
Further, sector specific regulations exist for industries such
as financial services, fishing and telecommunications.
An investor has several funding options in Ghana, including
shares issuance on Ghana Stock Exchange, commercial
loans, micro-financing, and low interest loans available
through Ghana Venture Capital Fund.
Ghana has a competitive taxation system with corporate tax
rate of 25% and maximum rate for personal tax rate at 25%.
Other taxes in the system include rent tax, capital gains tax,
mineral royalties and value added tax. A division of a foreign
company is taxed like any corporate entity in Ghana.
Key sources of finance
Drivers`
Banks
Around 11 commercial banks operate in Malawi, with the three
largest banks accounting for over 60% of the sector’s deposits and
assets. Some of the important banks in the country include:
• National Bank of Malawi Limited
• Standard Bank of Malawi Limited
• First Merchant Bank of Malawi Limited
• Nedbank
Stock Market
Established in 1994, the Malawi Stock Exchange (MSE) started
equity trading in late 1996. As of March 2011, the MSE listed
shares for one foreign and 14 national companies
Microfinance
Institutions
Micro-finance in Malawi is still in its early stage of development.
The country has several microfinance institutions (MFIs)
including:
• Malawi Rural Finance Company
• Small Enterprise Development Organization of Malawi (SEDOM)
• Credit Cooperatives (MUSCCO)
Others
Other financial institutions offering financing facilities include
leasing companies (such as Leasing and Financing Company
Limited) and discount houses (such as First Discount House
Limited, Continental Discount House Limited)
Sources: IHS Global Insight; EY Analysis
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Introduction
Investment
Climate
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Takeaways
Key Sectors
Taxation
1
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 forms of business enterprises in Kenya are partnerships,
Investment options and sole proprietorships, co-operatives and branch offices.
business registration
Private LLC is the most favored vehicle for foreign investors,
process
as the tax payable is less than that for a foreign branch.
Investment funding
options
A foreign investor has several financing options in the
country. Key sources of finance include commercial banks,
microfinance institutions, stock issue, and development
banks.
Investment laws and
regulations
The Foreign Investments Protection Act (Chapter 518, Laws
of Kenya)seeks to protect foreign investment made in Kenya.
Clearance is required from parent ministries for investments
in restricted areas before KIA approval is granted.
Taxation and business
environment
Kenya has a developed taxation system, and offers several
fiscal incentives to foreign investors. Capital deductions are
available on industrial buildings, hotels, plant and machinery
and mining investment.
2
3
4
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
Royalties withholding tax
Personal income tax
Payroll tax
Sources: EY Analysis; IHS Global Insight
Exchange rate: MWK1 = US$0.00596
20% applies to residents; 15% applies to interest payments
made to non-residents, unless reduced under an
applicable tax treaty
20% applies to residents; 15% applies to interest payments
made to non-residents, unless reduced under an
applicable tax treaty
First MWK180,000 income is tax free; thereafter, next
MWK is taxed at 15% and excess at 30%
1% tax-deductible levy of payroll costs is payable to
Technical, Entrepreneurial and Vocational Education and
Training Authority
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Key Sectors
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Agriculture
Mining and Quarrying
Manufacturing
Tourism
Introduction
Investment
Climate
Doing
Business
Key Sectors
Key
Takeaways
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
Malawi’s 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 Malawi’s
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
Malawi’s 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)
21
Introduction
Investment
Climate
Doing
Business
Key Sectors
Key
Takeaways
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 agroprocessing, 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
Direct
Indirect
Induced
Total
(46.7%)
(33.3%)
(20.0%)
(100%)
Domestic: 83%
Foreign: 17%
Supply chain:
26.8%
Investment: 4.2%
Government
collective: 2.3%
The total contribution of travel and
tourism to GDP in 2011 was 3.7% in
2011
Sources: EY Analysis; African Statistical Yearbook 2011; African Economic Outlook; Malawi Investment Promotion
Agency (MIPA); Malawi Tourism Association; WTTC
22
Key Takeaways
• Investment opportunities for Indian
Investors
• Key Contacts
Introduction
Investment
Climate
Doing
Business
Key Sectors
Key
Takeaways
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.
Sector
Agriculture
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.
Sub Sectors
• Cash crops,
particularly
tobacco
• Farm crops
Mining and
Quarrying
The country has a liberalized economy with
preferential access to world markets under
COMESA, SADC, LOME, AGOA.
• PGM’s
• Uranium
• Other minerals like
coal, bauxite etc
Manufacturing
• Agro-processing
• Textile and
garment
manufacturing
• Light
manufacturing
Travel and
Tourism
• Eco-Tourism
POTENTIAL SECTORS FOR
INVESTMENTS
In essence, Investors will get attracted to
Malawi’s cost effective work force and
competitive investment incentives for export
manufacturers and the tourism sector.
UK
UAE
US
TOP
INVESTORS
SPAIN
FRANCE
INDIA
24
Introduction
Investment
Climate
Doing
Business
Key Sectors
Key
Takeaways
Key Contacts
.
Organization
Malawi
Investment and
Trade Centre
(MITC)
Address
Web address
Contact details
Lilongwe Office
Aquarius House – First
floor
Private Bag 302
Capital City
E-mail : [email protected]
Tel:+265-1-770-800/
Lilongwe 3
Web:
265-1-771-315
www.malawiFax:+265-1-771-781
Blantyre Office
invest.net
Unit House – Fourth
Floor
Private Bag 131
Blantyre
High Commission
C-6/11, Vasant Vihar, Email:
Tel: +91-11-26706000
of the Republic of
New Delhi – 110057 [email protected] Fax:+91-11-26706010
Malawi in India
25