flag Malawi Malawi: Investing

In this page: FDI in Figures | What to consider if you invest in Malawi | Procedures Relative to Foreign Investment | Investment Opportunities

 

FDI in Figures

FDI flows to Malawi have been fluctuating in the recent past. According to UNCTAD's 2021 World Investment Report, FDI inflows decreased from USD 822 million in 2019 to USD 98 million in 2020, as a result of the global economic crisis triggered by the Covid-19 pandemic. The FDI stock reached USD 1.6 billion in 2020. UNCTAD’ Investment Trends Monitor reported that although global FDI flows rebounded strongly in 2021, FDI flows to African countries (excluding South Africa) rose only moderately. The agricultural sector attracts the most FDI - primarily from South Africa, Germany and the United States - while the temporary collapse of raw material prices impacted the production of uranium. However, the exploration of rare earth elements near Lake Malawi could attract new investments in the mining sector. For example, the Kaniyka niobium project will be the first niobium-mining project in Africa (Coface). There is also hope that an oil field would be discovered in the region. Apart from agriculture and minerals, Malawi also offers investment opportunities in agro-processing, manufacturing and tourism. The main investing countries are Australia, China, India, the Republic of Korea, South Africa, the UAE and the UK.

Malawi is eager to receive foreign investments and foreign investors are generally granted the same treatment as nationals, as the Malawian constitution protects investment irrespective of nationality. However, while not discriminatory to foreign investors, investments in the country involve multiple, and sometimes time-consuming, administrative procedures, which may include obtaining a business license, a tax registration number, and a land permit. There is no government policy to screen foreign direct investment; however, FDIs need to be registered with the Malawi Investment Trade Centre. The government is also trying to attract investments through bilateral cooperation, as shown by events like the Malawi-China Investment Forum and the Malawi-Japan Investment Forum. On the other hand, Malawi's landlocked geographical location and the inadequate condition of its infrastructure are barriers to foreign direct investment. The business climate also suffers due to a lack of skilled workforce, high transportation costs, unreliable supply of water and electricity, inefficient public institutions and difficulties in accessing credit. In the World Bank's 2020 Doing Business Report Malawi has been ranked 109th worldwide, for the ease of doing business. This represents a slight improvement from 2019 edition when the country was ranked 111th.

 
 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 554550
FDI Stock (million USD) 1,4671,5451,595
Number of Greenfield Investments* 422
Value of Greenfield Investments (million USD) 3724341

Source: UNCTAD - Latest available data.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

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What to consider if you invest in Malawi

Strong Points
The strong points of the Malawian economy include:
• natural resources (uranium, tea, coffee, tobacco)
no restrictions on remittance of foreign investment funds (including capital, profits, loan repayments and lease repayments)
• rapidly expanding services sector
• resumption of support by financial donors
• preferencial access to several markets: the country is member of the SADC (Southern African Development Community) and the COMESA (Common Market for Eastern and Southern Africa)
Weak Points
The main challenges for foreign investors include:
• an economy dominated by agriculture, vulnerable to weather conditions
• high inflation rates
• Infrastructure shortcomings (water, energy, IT)
• Scarcity of skilled and semi-skilled labor
• Low foreign exchange reserves
• corruption remains a major obstacle to carry out investment in Malawi.
• Increase in extreme poverty
• Diplomatic tensions with Tanzania and Mozambique
Government Measures to Motivate or Restrict FDI
The Government of Malawi offers a wide array of fiscal and non-fiscal incentives which apply equally to domestic and foreign investors and to several sectors including manufacturing, agriculture and mining.
Malawi recently passed a number of laws aimed at improving the investment environment, including:
• Amendment to the Taxation Act 2017, which increases the tax-free bracket for salaried employees (up to USD 41/month) and introduces an additional income tax bracket for high income earners (over USD 4,100/month).
• Amendment to the Value Added Tax Act 2017 which revises penalties and interest for various offenses under the Act and gives tax exemption for certain essential commodities including milk, eggs, and honey.
• Amendment to the Customs and Excise Act 2017 which imposes an excise duty on airtime, television subscriptions, gaming and betting (including lotteries).

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Procedures Relative to Foreign Investment

Freedom of Establishment
The Constitution of 1995 guarantees basic freedom to invest, to own property, and to fair compensation in the event of expropriation.
Malawi is eager to attract foreign investment and foreign investors are generally granted national treatment as the Malawian constitution protects investment irrespective of nationality.
Acquisition of Holdings
Investors, both domestic and foreign, may invest in any sector of the economy, with no restrictions on ownership. There are no restrictions on the size of investment, sources of funding, or whether products are destined for export or for the domestic market. However, the Malawi Stock Exchange limits an individual foreign investor to 10% of the shares of any one company during its IPO, with the aggregate of all foreign investors participating in the IPO being limited to 49% of shares. These restrictions only apply to the initial offering and do not apply to any future trading of shares.
Obligation to Declare
Government does not screen foreign direct investments but need to be registered with the Malawi Investment and Trade Center (MITC) and investment capital over USD 50,000 must be registered with the Reserve Bank of Malawi (RBM).
Competent Organisation For the Declaration
Malawi Investment and Trade Center (MITC)
Reserve Bank of Malawi (RBM)
Requests For Specific Authorisations
While not discriminatory to foreign investors, investments in Malawi involves some processes, which may include obtaining a business license, a tax registration number, and a land use permit. Foreigners need a business residence permit (BRP) to carry out any business activity in Malawi. All new land acquisitions are done under leases, with lease terms for foreigners limited to maximum 50 years, compared to 99 years for Malawian citizens. Moreover, foreigners can only secure private land when no citizen has made an offer for the land and the law prohibits land transfer, as a gift, between persons who are not Malawi citizens. During the privatization of government assets, Malawian nationals are offered preferential treatment, including discounted share prices and subsidized credit.

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Latest Update: November 2022