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EXECUTIVE SUMMARY

The Government of Malawi (GOM) is eager to attract foreign direct investment and opportunities are plentiful for investors comfortable operating in frontier markets. Political risk in Malawi is manageable as the country has been largely free of political violence since gaining independence in 1964. Malawi has no significant tribal, religious, regional, ethnic, or racial tensions that could lead to violent confrontation. Malawi demonstrated its stability after the presidential election was rerun in 2020 when all political actors accepted the opposition win and power was transferred peacefully.

The GOM has several initiatives to help investors do business in the country. The Malawi Investment and Trade Center’s One Stop Center helps navigate relevant regulations and procedures, a process that can be challenging without local knowledge. The government also hosts Investment Forums to attract investors into the country, though with the COVID19 pandemic the forums have failed to take place. The Government of Malawi emphasizes private sector led development in the newly launched Malawi Vision 2063 development plan.

The agriculture and energy sectors are two areas of the Malawi economy that offer opportunity for investment. Agriculture accounts for 25% of GDP and 80% of Malawi’s exports, but the sector is prone to shocks such as Cyclone Idai and floods which hit the country in 2019, damaging infrastructure. Efforts to recover from the flooding damage have been slowed by the pandemic. Nonetheless, many opportunities exist for investment in agriculture, particularly in agribusiness and agro processing. The energy sector also provides opportunity for investment. In 2020, the U.S. International Development Finance Corporation (DFC) financed a multi-million dollar Solar Power Generation deal in Malawi, which has been approved by GOM and will roll out as planned. The solar power agreement followed the completion of MCC’s $350 million energy compact in 2018. Other opportunities in the energy sector, include mining, transport, and ICT.

Challenges for investment in Malawi are typical of developing countries. GOM has made efforts to combat corruption but it remains a major problem. Scarcity of skilled and semi-skilled labor is another serious impediment to businesses. Shortages are most acute in occupations such as economics, engineering, law, IT, and medicine/health. Infrastructure investment also lags and, as a land-locked country, port access depends on neighboring countries. Formal and informal trade boundaries may restrict both imports and exports, yet the economy is heavily reliant on imports. While power infrastructure has improved, power outages remain a significant impediment to investment.

In general, there are adequate legal instruments to protect investors, and foreign investors generally receive national treatment. All investors have access to Malawi’s legal system, which functions well and in an unbiased manner but is notoriously slow. There is an established mediation process to work with parties to overcome disputes and preempt court proceedings. All investors have the right to establish, acquire, and dispose of interests in business enterprises. Foreigners require a business residency permit to carry out any business activity in Malawi. All new land acquisitions are under leases, but foreigners may be limited to a 50-year renewable lease, compared to 99 years for Malawians.

The Government seeks to ensure the availability of foreign exchange for business transactions and remittances to attract investors and spur economic growth. There are 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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 129 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2020 109 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2020 111 of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2019 USD 70 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2019 USD 380 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Malawi is open to foreign and domestic investment and grants national treatment to all investors. Foreign investors may invest in almost any sector 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. Furthermore, an investor can disinvest 100%, make international payments, and cannot be forced into local partnerships. However, the Malawi Stock Exchange limits an individual foreign investor to 10% of any company’s initial public offering (IPO) and the stake of all foreign investors in an IPO is limited to 49% of total shares of the company.

The GOM prioritizes investment retention and maintains an ongoing dialogue with investors through the Malawi Investment and Trade Center (MITC), Ministry of Trade, Ministry of Industry, Public Private Partnership Commission, and other government agencies. The Malawi Confederation of Chambers of Commerce and Industry ( MCCCI ) represents all sectors of the economy and has been successful in lobbying the GOM on issues affecting the private sector. In recent years, the government has hosted Malawi Investment Forums to present a platform for marketing the country, fostering partnerships, and bringing in foreign direct investment.

Limits on Foreign Control and Right to Private Ownership and Establishment

The GOM does not impose restrictions on the ownership or location of investments. It permits FDI in all sectors of the economy except for those sectors or activities that may pose a danger to health, the environment or national security. Restrictions are not imposed on fund source, destination, or final product. There is, however, a requirement for companies registered in Malawi to appoint at least two Malawian residents as directors.

There are some limitations on foreign ownership of land. Under the Land Act of 2016, neither Malawians nor foreigners can acquire freehold land. Foreigners can secure lease-hold land for terms up to 50 years, after which the lease may be renewed. In addition, foreigners can only secure private land when no citizen has made an equal offer for the same land.

During the privatization of government assets, Malawian nationals are offered preferential treatment including discounted share prices and subsidized credit. A 2017 amendment to the Public Procurement and Disposal of Assets (PPDA) Bill includes an indigenization clause that calls for “the prioritization of all bids submitted to give preference to sixty percent indigenous black Malawians.” In 2020, GOM gazetted the Micro Small and Medium Enterprises (MSMEs) Participation Order, which empowers government ministries, departments and agencies (MDAs) to allocate procurements below certain thresholds to MSMEs. GOM is also in the process of gazetting Indigenous Black Malawian (IBM) Preference regulations, which orders MDAs to offer 60% of national competitive bidding procurements to IBM ( PPDA Legal Instruments ).

There is no government policy to screen foreign direct investment but minimum investment capital for foreign investors is $50,000. Such investors must register with MITC  and RBM . Registration of borrowed invested funds allows investors to externalize profits to pay back loans contracted abroad and repatriate funds when disinvesting. MITC has revised the threshold for capital requirements but is waiting for gazetting to make the threshold official. The new thresholds will depend on the sector and will be revised upwards ( MITC Malawi ).

Other Investment Policy Reviews

WTO last performed a periodic Trade Policy Review of Malawi in April 2016. The full report can be accessed at WTO TPR  . OECD and UNCTAD have not conducted reviews for Malawi.

Business Facilitation

MITC  assists foreign and domestic investors of all sizes to navigate relevant regulations and procedures of starting a business. It operates a One Stop Center where representatives from the Registrar General , the Malawi Revenue Authority , the Department of Immigration , and Ministry of Lands, Housing and Urban Development  are available to help potential investors. MITC’s main website, the iGuides  and its online trade portal ( www.trade.mitc.mw ) ( http://www.malawitradeportal.gov.mw/ ) provide further information.

In addition to MITC’s One Stop Center, businesses can register online at Registrar General , although the process may take longer and the website is sometimes inaccessible. To operate in Malawi, a business must register with the Registrar General, the Malawi Revenue Authority and often the Ministry or regulatory body overseeing their sector of activity. For example, construction companies need to register with the National Construction Industry Council . Businesses are also supposed to obtain business licenses from the city assembly, register the workplace with Ministry of Labor, and allow health officials to carry out an inspection of the company premises ( HYPERLINK “https://mitc.mw/invest/index.php” https://mitc.mw/invest/index.php ).

Outward Investment

Domestic investors are not restricted to invest abroad except in the case of the Pension Act of 2010 and accompanying regulations which do not allow for the investment of pension funds or umbrella funds abroad.

2. Bilateral Investment and Taxation Treaties

Bilateral Investment and Trade Agreements

Malawi has signed bilateral investment treaties with Egypt, Italy, and the Netherlands (all three in force), Zimbabwe, Malaysia, Taiwan, and Brazil (all four not in force). Malawi is also a member of the Common Market for Eastern and Southern Africa (COMESA) Customs Union and the Southern African Development Community (SADC) Free Trade Area, governed by the SADC Protocol on Trade and has signed the African Continental Free Trade Area. Malawi has tax agreements with South Africa, Norway, Zambia, UK among others. It does not have a trade agreement or a bilateral tax treaty with the U.S.

The new government has moved fast to reignite and strengthen relationships with neighboring countries and other strategic partners. On November 1, 2020 the Malawi president signed the instruments for ratifying the African Continental Free Trade Agreement (AfCFTA) with the African Union (AU), effectively consenting to the trade deal and the GOM has deposited the instruments. The AfCFTA rolled out on January 1, 2021. In 2020, GOM also signed an economic memorandum of understanding with South Africa and has resuscitated discussions with Mozambique through the Joint Permanent Commission of Cooperation (JPCC) to evaluate the bilateral cooperation.

Tax Law

In the past year, the GOM made the following amendments to the taxation law under the Taxation (Amendment) Act of 2020:

  1. Introduced the “Polluter Pays Principle” so the carbon tax is now charged on petrol and diesel at K5.00 per liter. Foreign registered motor vehicles under Temporary Import Permit or Transit are still required to pay carbon tax at the point of entry based on engine capacity.
  2. Introduced a standard rate of 16.5% VAT on animal or vegetable fats and oils and their products.
  3. Increased zero rate PAYE thresholds from K45,000 ($56.96) to K100, 000 ($126.58) per month and remove the 15% tax rate bracket. Income above K100,000 but below K3,000,000 is now subject to 30% tax rate and income above K3,000,000 a 35% tax rate.
  4. Introduced a 20% withholding tax on winnings from betting and gambling transactions including lotteries. GOM also clarified that the current 10% excise tax on betting and gambling services including lotteries shall be based on the amount wagered for betting or staked in the case of gambling.
  5. Increased the tax-free threshold for casual labor under the withholding tax regime from K15,000 to K35,000.

3. Legal Regime

Transparency of the Regulatory System

The GOM continues to undertake various reforms to ensure that tax, labor, environment, health, and safety laws do not distort or impede 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, the Parliament, or the Ministry of Justice. However, sometimes the public notice of such consultations comes late, with the effect that only insiders engage. Parliamentary procedures call for debate on drafts in relevant committees before presenting the bill to the floor for a vote. Rules allow fast-tracking bills as well.

Relevant government Ministries, Departments, and Agencies (MDAs) develop 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. If they feel procedures were not followed, private individuals and entities can raise the issue with the appropriate MDA, parliament, or bring a case against the government in court or seek redress through the Office of the Ombudsman. There are no specific regulatory guidelines for reviewing regulations or conducting impact assessments, including scientific or data-driven assessments. What’s more, there are no specific criteria for determining which proposed regulations are subject to an impact assessment nor is there a specialized government body tasked with reviewing and monitoring regulatory impact assessments conducted by other individual agencies or government bodies

The GOM uses a mix of fiscal, financial, and regulatory instruments to administer policy, and thus management and responsibility spreads across multiple ministries and agencies. Taxation policy is the jurisdiction of the Treasury Department in the Ministry of Finance. The Malawi Revenue Authority is the main implementing agency for tax policy. The Reserve Bank of Malawi administers the exchange rate of the Malawi Kwacha, as well as liberal exchange controls to allow free flow of capital and earnings — repatriation of dividends, profits, and royalties. 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.

Certain professional associations have sectoral rule-making power that amounts to regulatory power. These professional bodies include the National Construction Industry Council, Malawi Law Society, Malawi Accountants Board, Medical Council of Malawi, and the Employers Consultative Association of Malawi. Some of these associations require the use of local labor, local contractors, or other means to achieve localization or skills transfer to Malawians. The rule-making process is not always transparent to firms that are new to the Malawi market.

Interested parties can purchase copies of recent laws from the government printing office or access them at the National Library and in the High Court libraries. An increasing number of laws are also available online at https://malawilii.org/  . The GOM has no central repository for technical regulations. Relevant MDAs manage regulations and publish the regulations in the Malawi Government Gazette after which they form part of the schedules to relevant acts. MDAs websites do not usually post these laws and regulations but do provide them upon request.

The GOM also implemented reforms aimed at improvements in workplace registration and the implementation of the warehouse receipt systems act of 2018, the commodity exchange guidelines, and the cannabis bill of 2020. In 2020, GOM gazetted Export Processing Zone (EPZ) regulations which, among others, make provision for 20% allowance for local sales by an export enterprise under EPZ. GOM also gazetted Control of Goods Act (COGA) regulations which outline steps to take when issuing export and import restrictions ensuring that the process is fair, transparent, and predictable. Immigration rolled out an electronic permit system in 2019/20 and plans to roll out e-passport system in 2021. There are several reforms  which the government seeks to implement through the MDAs. These reforms and regulations may improve the business environment. MDAs develop technical regulations and forward them to the Ministry of Justice for final review. The MDAs then present the regulations to Cabinet for final approval and gazetting. Thereafter, relevant government MDAs enforce regulations under their purview.

Transparency of public finances and debt obligations is mixed. Publicly available budget documents provide a full picture of Malawi’s proposed/estimated revenue, including natural resources revenues and off-budget donor support, and expenditures. However, the approved budget provides expenditure data at the level of ministry/budget vote, and not below, where the details necessary to gauge investment potential in given sectors should be visible. End of year financial statements detailing actual revenues and expenditures are presented alongside the budget proposal for the following financial year. The government also makes public general information about debt obligations in its financial statement and annual debt report. The documents are available at Ministry of Finance . The RBM also publishes public debt information in its quarterly economic reviews, published at RBM . In contrast to the visibility into government finances, contingent liabilities are generally unknown to the public, as the books of State-Owned Enterprises are usually not presented to the public in a transparent manner. The government shares additional debt information with the World Bank for debt sustainability analysis and with the IMF for evaluation of compliance with its Extended Credit Facility (ECF) and these analyses are made public through the IMF’s release of its ECF reviews.

International Regulatory Considerations

Malawi is a member of the COMESA Customs Union and the SADC Free Trade Area, governed by the SADC Protocol on Trade. The government develops all new regulations roughly in line with the regulatory policy provisions set out by COMESA and SADC, but national regulations rule if there is a conflict. As a member of both SADC and COMESA, Malawi is bound by their respective norms and standards. Malawi is also a member of Africa Continental Free Trade Area (AfCFTA). One can find details on the organizations’ respective websites:

  • SADC:
  • COMESA:
  • AfCFTA:

Since 1995, there is no record of Malawi providing notification on draft technical regulations to the WTO Committee on Technical Barriers to Trade. The last time Malawi submitted a statement on implementation and administration of the WTO Agreement on Technical Barriers to Trade was in 2007. Malawi signed the 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 which one can access at https://www.malawitradeportal.gov.mw/ .

Legal System and Judicial Independence

Malawi’s legal system is based on English Common Law. The judiciary consists of local courts and a local appeals court in every district. The higher tiers consist of the Supreme Court of Appeal, the High Court, and the magistrates’ courts. Judges of the High Court are appointed by the President and posted to the five divisions of the high court: civil; commercial; criminal; family and probate; and revenue. The High Court has judicial authority over all civil and criminal cases. Magistrates’ courts are located throughout the country. The High Court hears appeals from the magistrates’ courts and the Supreme Court of Appeal in Blantyre hears appeals arising from the High Court. As of end 2020, there were 35 High Court judges and 11 Supreme Court judges. The Commercial Division of the High Court, presided over by a single judge, deals exclusively with disputes of a commercial or business nature while the Revenue Division deals with any revenue and tax related matter under written laws set out under the Malawi Revenue Authority Act. The Industrial Relations Court handles labor disputes and issues relating to employment. The Child Justice Court handles matters of justice affecting children but falls under the High Court. More information on the judicial system in Malawi can be found at Judiciary .

Laws and Regulations on Foreign Direct Investment

The legal system supports both local and foreign investment without bias. Key regulations that came out recently include The Trademarks Act of 2018, Control of Goods Act of 2018, The Corrupt Practice (Amendment) Act of 2019, The Reserve Bank Act of 2018, The Tobacco Industry Act of 2018, The Mines and Minerals Act of 2018 and the Cannabis Regulation Bill of 2020. The Malawi Investment and Trade Center (MITC) operates a One Stop Center and assists foreign investors to navigate relevant regulations and procedures. MITC  and the Malawi Confederation of Chambers of Commerce and Industry ( MCCCI ) have relevant information.

Competition and Antitrust Laws

The GOM established the Competition and Fair-Trading Commission ( CFTC ) in 2005. The CFTC safeguards competition by regulating and monitoring monopolies, protecting consumer welfare, and by ensuring fair market conditions. Since 2013, the institution has overseen over 26 applications for merger and acquisition and dismantled five cartels. CFTC decisions may be appealed, first to the Board and subsequently to the Commercial (High) Court. COMESA Competition Commission  is responsible for mergers and acquisitions across the COMESA block and the office is in Lilongwe. It promotes and encourages competition by preventing restrictive business practices and other restrictions that deter efficient operation of markets in COMESA.

Expropriation and Compensation

Section 44 of Malawi’s constitution permits expropriation of property only when done for public utility and with adequate notification and appropriate compensation. Even in such cases, there is always a right to appeal to a court of law. There are laws that protect both local and foreign investment. However, measures that carry expropriation effects are occasionally imposed, including export bans and implicit bans due to the government’s authority to require export licenses for any key commodities at any time for. These restrictions apply equally to foreign and domestic investors. There are no measures that deliberately deprive investors of substantial economic benefits from their investments.

Land acquisition is governed by the Land Acquisition Act of 2016. Accordingly, acquisition must be in the public interest and fair market value for the land must be paid. If the private landowner objects to the level of compensation, it may obtain an independent assessment of the land value. According to the Act, however, such cases may not be challenged in court; the Ministry of Lands, Housing, and Urban Development remains the final judge. In most cases, land is expropriated to give way to GOM development projects, such as construction of roads. Some landowners have refused to relocate due to disagreements; however, these cases are usually settled amicably and where necessary compensations are made. In such expropriations, claimants are well informed and fully engaged.

Dispute Settlement

ICSID Convention and New York Convention

Malawi has not ratified the New York Convention but has ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). As a member of the ICSID, Malawi accepts binding international arbitration of investment disputes between foreign investors and the GOM. The Investment Disputes (Enforcement of Awards) Act of 1966 makes provision for the enforcement in Malawi of awards of the Tribunal of the ICSID.

Investor-State Dispute Settlement

The government is not a signatory to a treaty or agreement recognizing binding international arbitration of investment disputes such as the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). Malawi does not have a Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with an investment chapter within the United States. Since 1996, there have been no known major investment disputes involving U.S. companies, although taxation disputes do occur. The court system in Malawi accepts and enforces foreign court judgments registered in accordance with established legal procedure. There are reciprocal agreements among Commonwealth countries to enforce judgments without this registration obligation. There is no such agreement between Malawi and the United States, but judgments involving the two countries can still be enforced if the judgment is registered appropriately in Malawi. There have been no known extrajudicial actions taken against foreign investors in the recent past.

International Commercial Arbitration and Foreign Courts

With respect to litigation, cases commenced in the High Court of Malawi or a subordinate court must, where the defendant indicates an intention to defend, first go to mediation. The Assistant Registrar of the High Court maintains a list of mediators and experts. A mediator chosen by agreement of the parties conducts the mandatory mediation. If the matter is not settled during mediation, the action will proceed in the court in which it was commenced. Malawi does not have an arbitration body. There is no statutory requirement for parties who have contractually agreed to arbitration to go through mediation. Parties will only be required to go through mediation before proceeding to arbitration if their agreement stipulates it. As in the case of Investor-State Dispute Settlements, the court system in Malawi accepts and enforces foreign court judgments that are registered locally. Statistics and information on investment disputes involving SOEs are not readily available. Court processes do not favor or discriminate SOE’s and there is adequate transparency in the domestic courts.

Bankruptcy Regulations

The commercial courts govern all bankruptcies under the provision of the consolidated Insolvency Act of 2016. The Act encourages alternatives to bankruptcy such as receivership and reorganization and gives secured creditors 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. Malawi moved from 141/190 in 2019 to 134/190 in 2020 on WB Doing Business’s ease of “resolving insolvency”.

4. Industrial Policies

Investment Incentives

The GOM offers a wide range of tax and non-tax incentives which apply equally to domestic and foreign investors. These incentives apply to several sectors including manufacturing, agriculture, mining, and business more generally. Specific incentives tend to vary from year to year. A detailed list of investment incentives can be found on the MITC  and Malawi Revenue Authority  websites. The incentives offered to investors are applied consistently, but many companies complain about long delays in accessing the accrued benefits. Additionally, firms must negotiate their eligibility for these incentives with the responsible government entities. The GOM occasionally issues guarantee and joint financing on foreign direct investment projects especially on projects that are of national importance.

Foreign Trade Zones/Free Ports/Trade Facilitation

Legislation for the establishment of export processing zones (EPZs) came into force in 1995. Companies engaged exclusively in manufacture for export may apply for EPZ status. As of March 2021, 13 companies (down from 30 in 2000) were operating under the EPZ scheme. Almost all of these are foreign owned companies, though the law does not discriminate on ownership. To resuscitate the EPZs, the GOM in 2020 revised and gazetted the EPZ regulations to allow export processing firms to sell 20 percent of their product on the local market. The government is also in the process of establishing Special Economic Zones, which will have broader coverage than EPZs, allowing a mix of commercial activities including services.

Performance and Data Localization Requirements

Malawi employment and immigration laws and regulations require that local or foreign investors prioritize the hiring of nationals except in cases where skills are not locally available. The appointment of at least two Malawian residents as directors is also required. These laws and regulations are to a large extent enforced by the Immigration Department  when issuing TEPs to foreign nationals. Expatriate employees who reside and work in Malawi must obtain a TEP. The government desires to make TEPs readily available, and mandates that processing times for TEP applications shall not exceed 40 working days. In practice, TEPs take significantly longer and face bureaucratic delays (anecdotal reports of several months to a year are common). The process to obtain employment permits can sometimes discourage investors

There are a few legal restrictions on foreign investment based on environmental, health, biosafety, and national security concerns. Affected sectors are firearms and ammunition; chemical and biological weapons; explosives; and manufacturing involving hazardous waste treatment/disposal or radioactive material. Since industrial licensing in Malawi applies to both domestic and foreign investment and is only restricted to a short list of products, it does not limit competition, protect domestic interests, or discriminate against foreign investors at any stage of investment. Additionally, retail operations in rural areas are limited to only Malawian citizens, although enforcement is weak.

Malawi does not place requirements on source of financing or geographic location nor does it set performance requirements for establishing, maintaining, or expanding an investment. While not discriminatory to foreign investors, investments in Malawi require multiple bureaucratic processes, which may include obtaining a business license, a tax registration number, and a land use permit. These procedures can be time consuming, particularly when it comes to land permits, and may constitute an impediment to investment. Investors may also face bureaucratic hurdles in obtaining TEP and business residency permits. Furthermore, there have not been reports of 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 to enforce local data storage within the country. Malawi Communications Regulatory Authority (MACRA) and the Ministry of Information are the government agencies responsible for IT issues. The Ministry of Information is in the process of developing a data protection bill ( www.malawi.gov.mw/index.php/proud/thuwala/acts# ) to be tabled in parliament.

5. Protection of Property Rights

Real Property

Malawi has laws that govern the acquisition, disposition, recording, and protection of all property rights (land, buildings, etc.) as well as intellectual property rights (copyrights, patents, trademarks, etc.). Currently record keeping for registering land ownership is centralized and inefficient. Efforts are underway to computerize and decentralize recordkeeping. Malawi has a limited housing finance sector. As mortgage availability does not yet meet demand, most households still finance housing through savings or non-mortgage credit. Interest rates on mortgage may vary from a low of 18.1 percent depending on banks’ interest structure and Central Bank’s reference rate, with 10 percent down, the balance payable over 10-20 years. The lowest size of mortgage in Malawi is estimated at $21, 813 ( Housing Finance Africa ).

In 2016, Parliament passed a revised Land Act, which converted customary land tenure to leasehold title so that those currently using that land enjoy legal rights to it. The new law prohibits freehold title and lease terms can be for up to 99 years, but the law generally restricts foreigners to 50 years but renewable. The new Land Act prohibits granting of freehold to a person but allows those that are already holding such land titles to continue. The Office of Commissioner of Lands administers and manages land issues such as making 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%. The Millennium Challenge Corporation second compact for Malawi (potentially scheduled to start in 2022/23) may emphasize land reforms.

The Land Act of 2016 gives provision to repossess private land under freehold title if the land sits idle for more than two years since registration. However, GOM has not repossessed land from a developer in recent memory. In 2019 GOM warned all investors that it will begin repossessing all land that is not being developed as required by law. Malawi ranks 90 on “registering property” under the 2020 World Bank’s ranking of ease of doing business down from 83 in the 2019 report. Land has become a hot topic in recent times as some locals feel some foreigners are getting all prime land through bribery and corrupt tendencies by GOM officials.

Intellectual Property Rights

Malawi recognizes the importance of intellectual property protection and 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. However, 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 GOM approved the Copyright (Levy on Storage Devices) Regulations in February 2018. Following the approval, COSOMA and the Malawi Revenue Authority began enforcement of a 5% levy on media storage devices to ultimately compensate rights holders. Malawi also has a new Trademarks act of 2018 which is a repeal of the trademarks act of 1957 and came into force on October 1, 2018. Malawi launched the National Intellectual Property Policy in May 2019 which acknowledges challenges with intellectual property in the country and provides a framework to foster the generation, protection, and exploitation of intellectual property.

While enforcement officials routinely seize counterfeit goods, Malawi does not have a systematic approach to track and report on such seizures, so statistics are not available. Malawi is not listed in USTR’s Special 301 Report or the 2018 Notorious Market Report. For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at https://www.wipo.int/directory/en/details.jsp?country_code=MW .

6. Financial Sector

Capital Markets and Portfolio Investment

The Malawi government recognizes the importance of foreign portfolio investment and has made efforts to provide a platform for such investment through the establishment of a Malawi Stock Exchange ( MSE ). The MSE hosts 16 listed companies (of which two listed in 2020) with a total market capitalization of $2,320.28 million as of end January 2021 up from $2,062.89 million in February 2020. The demand and supply of shares for existing 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 regulations include the Capital Market Development Act 1990, and Capital Market Development Regulations 1992 as amended in 2013.

Foreign investors can buy and sell shares at the stock market without any restrictions. Trading in shares can either be direct or through any one of four established brokers. There is a secondary market in government securities, and both local and foreign investors have equal access to purchase these securities. Malawi respects obligations under IMF article VIII and, therefore, refrains from imposing restrictions on making payments and transfers for current international transactions or from engaging in discriminatory currency arrangements or multiple currency practices without IMF approval. Liquidity for stock market participation is not a major problem with a variety of credit instruments on hand. Credit is generally allocated on market terms. The cost of credit is high but may fall in the medium term subject to continued moderate inflation, near stable exchange rate and policy rate downward adjustments. Foreign investors may utilize domestic credit but proceeds from investments made using local resources are not remittable.

Money and Banking System

According to the Institute of Bankers in Malawi, only 25 percent of the adult population in Malawi use banking services. Access to credit remains one of the biggest challenges for businesses and particularly SMEs, mostly due to the cost of credit. For instance, the base-lending rate in March 2021 was 11.9 percent, lowest in over a decade. The potential for using mobile banking technology to increase financial access in Malawi is emerging and official RBM Reports  have provided evidence of increasing usage of electronic transactions.

Malawi has a generally sound banking sector, overseen and regulated by the central bank. In 2021, there were eight full-service commercial banks with over 150 branches across the country. The banking sector remained profitable and stable with adequate liquidity and capital positions throughout 2020. Prudential regulations have limited net foreign exchange exposure and non-performing loan rates continue to fall, though spreads continue to be high. The sector, however, is highly concentrated and heavily invested in domestic government debt, which is a possible systemic risk. The banking sector continues to perform though in 2019 some banks underwent rationalization processes where voluntary retirement and other initiatives reduced operational expenses. Total bank assets (eight banks) as of December 2020 were at MK2,242.2 billion roughly 46% of which fell under two largest banks: National Bank and Standard Bank.

The Reserve Bank of Malawi (RBM) is Malawi’s central bank, and it plays a critical role in ensuring efficiency, reliability, and integrity of the payment system in Malawi. It is also a supervisory authority over commercial banks and other financial institutions including insurance companies. There are no restrictions on foreign banks in Malawi. The Banking Act provides the regulations applicable to commercial banks and other financial institutions and provides a supervisory mandate to the Reserve Bank. As of December 2020, four of eight banks were foreign owned. The RBM maintains correspondent banking relationships with almost all central banks across the world and 14 major banks in Asia, Europe, Africa, and the United States. Major commercial banks in Malawi also maintain correspondent banking relationships with banks from Africa, Europe, Asia, and US. For local business, banks require that a foreigner possess a Temporary Employment Permit or business residency permit before opening a bank account.

Foreign Exchange and Remittances

Foreign Exchange

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

The Malawi Kwacha (K) is convertible into major world currencies such as the U.S. Dollar, British Pound, Euro, Japanese Yen, Chinese Yuan, and South African Rand, as well as key regional and trading partners’ currencies. Since May 7, 2012, the value of the local currency has floated freely against major world currencies though the RBM intervenes to avoid sharp depreciation or appreciation. Float aside, the MWK/USD rate remained remarkably stable since 2016 but has faced sustained depreciation since June 2020 losing over 5% by end December 2020. Foreign exchange is available throughout the year but RBM sets rules on the requirements to obtain forex from commercial banks and authorized dealers. Malawi’s official foreign exchange reserves, as of February 2021, are sufficient to cover 2.31 months of imports. Antidotally, since 2019 periodic forex scarcity has delayed some USD remittances.

Remittance Policies

Investment remittance policies in Malawi have not changed in the past year. There are no restrictions on remittance of foreign investment funds (including capital, profits, loan repayments, and lease repayments) if the capital and loans were obtained from foreign sources and registered with the RBM. The terms and conditions of international loans, management contracts, licensing and royalty arrangements, and similar transfers require initial RBM approval. The RBM grants approval according to prevailing international standards; subsequent remittances do not require further approval. All commercial banks are authorized by the RBM to approve remittances, and approvals are automatic if the applicant’s accounts have been audited and sufficient forex is available. There are no time limitations on remittances.

Sovereign Wealth Funds

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

7. State-Owned Enterprises

Malawi has 67 state-owned enterprises (SOEs) scattered across many industries/sectors. A list of these SOEs is available on request from the Office of the President and Cabinet (OPC), but the GOM does not usually publish the list in the media or online except when releasing comprehensive list of board members of SOEs. The GOM has been known to bail out commercially-run SOEs when they have incurred heavy losses. Despite the significant role SOEs play in the Malawi economy, finances are opaque and overall statistics are not readily available.

Private and public enterprises generally compete on the same terms and conditions for access to markets, credit, and other business opportunities, although in practice personal relationships can influence decisions heavily. There are exceptions for some public works assignments where public enterprises tend to be given special preference by government. SOEs in the agriculture, education, and health sectors spend more on research and development than local private sector players and they are doing so for the public good rather than for profit. Because 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.

Malawi’s SOEs are not required to adhere to the OECD Guidelines on Corporate Governance of SOEs. Corporate governance for most SOEs follows the terms of the relevant Malawi law that established the entity. All SOEs report to a line ministry and to the Department of Statutory Corporations in the OPC but also have a Chairperson and Board of Directors. The president through the OPC appoints board of directors who usually range from politicians, religious & traditional leaders, and professionals. Boards also have senior GOM officials as ex-officio/non-voting members. The participation of members of the government as ex-officio/non-voting members, and of politicians as directors, creates a perceived and/or real conflict of interest.

Privatization Program

The government does not have any immediate plans for privatization, but in such cases all investors, irrespective of ethnic group or source of capital (foreign or local) may participate in privatization bids. However, the government may offer domestic investors a discount on shares. Privatization efforts currently focus on public-private partnerships and attracting strategic investors rather than outright privatization. These are handled by the Public Private Partnership Commission .

8. Responsible Business Conduct

There is a well-developed sense of Corporate Social Responsibility (CSR) or responsible business conduct (RBC) in Malawi and most corporate entities make a point to publicize such activities in the local media. There are no established laws or regulations governing RBC, nor does the Government (GOM) formally direct RBC to particular sectors. However, as part of its candidacy for the Extractives Industry Transparency Initiative, the GOM promotes RBC in the mining sector. There are laws governing protection of the environment and waste disposal for producers and consumers. GOM expects all enterprises to follow all laws of Malawi regarding employment and compensation. Malawi has several labor laws governing employment, work environment, industrial safety, age limits, hours of work, and minimum wages. However, the GOM through Environmental Affairs Department ( EAD ) and other MDAs lacks the resources to meaningfully enforce environmental, consumer, and labor laws and regulations. There is no history of provisions of environmental, social, or labor laws being waived to attract investment and there is no history of the government factoring responsible business conduct policies or practices into its procurement decisions. There have been no verified reports of high profile, controversial instances of private sector impact on human rights or resolutions in recent past. GOM lacks resources to meaningfully enforce human rights, labor rights, consumer protection, environment protections and other laws/regulations intended to protect individuals.

The GOM has enacted accounting standards applicable to the private sector that conform to international standards. Executive compensations are not defined. The law requires all MSE-listed companies to publish their annual audited accounts in local newspapers. Listed companies are also required to publicly declare their profits, dividends to be paid out, planned takeovers (or major portfolio investments), and all relevant information for shareholders to make informed decisions. They are also required to announce their annual shareholders meetings in newspapers.

Several civil society organizations monitor and advocate freely for corporate social responsibility and responsible business conduct in Malawi, including the Institute for Policy Interaction (IPI), the Catholic Commission for Justice and Peace (CCJP), the Centre for Environmental Policy and Advocacy, Institute for Sustainable Development, Malawi Economic Justice Network (MEJN), and Natural Resources Justice Network. On mining, Malawi does not adhere to OECD Guidelines for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas or any domestic measures requiring supply chain due diligence for companies that source minerals that may originate from conflict-affected areas. The Extractive Industries Transparency Initiative (EITI) Board approved Malawi as a candidate country in 2015. Following the conclusion of Malawi’s Validation in 2018, the EITI Board concluded that Malawi has made meaningful progress overall in implementing the EITI Standard. The Board also determined that Malawi has 18 months (until 27 August 2020) to carry out corrective actions regarding the findings of the initial assessment. Due to COVID19, Malawi requested extension of the assessment period to mid-2021 since the pandemic affected implementation of activities. Failure to achieve meaningful progress across several individual requirements in the second validation will result in suspension in accordance with the EITI Standard.

Additional Resources 

Department of State

Department of Labor

9. Corruption

Public sector corruption, including bribery of public officials and conflicts of interest, are a major challenge for firms operating in Malawi. Giving or receiving a bribe, whether to or from a Malawian or foreign official, is a crime under Malawi’s penal code. However, enforcement is insufficient, slow, and selective. The Corrupt Practices Act establishes 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, among other things, offences for abuse of office and possession of unexplained wealth. The Act also provides for the investigation of other offences uncovered during investigating corruption and provides protection for whistleblowers.

Malawian law requires 48 categories of public officers, including all levels of officials from the president and members of parliament, down to specific categories of civil servants, including traffic police and immigration officers, to declare their assets and business interests. The paper declarations are accessible to the public upon request. The law does not extend to family members or to political parties. However, where evidence implicates family members or members of a political party in corruption, the ACB has the power to build a case against the accomplices and bring them to court. In addition, 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 and these laws are not regularly enforced.

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. At times, the business sector joins forces to collectively engage in the fight against corruption, but no formal mechanism exists. Internal controls by companies exist but have failed to produce evidence in any high-profile cases.

Malawi is party to the United Nations Convention Against Corruption and the African Union Convention on Preventing and Combating Corruption. According to Malawian law, citizens have a right to form NGOs focused on anti-corruption or good governance and these NGOs are free to accept funding from any domestic or foreign sources. Malawi’s civil society and the media play an important and visible role in fighting corruption, investigating, and uncovering many 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 in Malawi. Although progress has been made, corruption continues to a major obstacle to doing business in Malawi.

Resources to Report Corruption

Director General
Anti-Corruption Bureau (ACB)
Mulanje House, P.O Box 2437, Lilongwe, Malawi
Tel: +(265) 1 772 107
E-mail: reportcentre-ll@acbmw.org
Website: https://acbmw.org/ 

National Coordinator
National Integrity Platform
C/O African Institute of Corporate Citizenship (AICC)
Bwanje Street, Area 47, Private Bag 382, Lilongwe, Malawi
Telephone: +(265) 1 775 787 / 691
Email: jeff@aiccafrica.org 
Website: http://mail.aiccafrica.org/ 

10. Political and Security Environment

Malawi continues to enjoy a stable and democratic government. Since the end of one-party rule in 1994, it has organized seven peaceful presidential and 6 parliamentary elections. International observers have characterized past elections, with the exception of 2019, as generally “peaceful, free, transparent, and credible.” In 2020, Malawians voted for a new government in a court sanctioned presidential re-run ousting the then ruling party. Although divisions exist, Malawi has no significant tribal, religious, regional, ethnic, or racial tensions that could lead widespread violence. Incidents of labor unrest occasionally occur, but these are usually non-violent and despite instances of political uncertainty there are no nascent insurrections or other 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

The majority of working-age individuals in Malawi live in rural areas and are involved in subsistence agricultural. Unskilled labor is plentiful. Skilled and semi-skilled labor is scarce. The informal economy covers about 89% of the labor force and the COVID19 pandemic has 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 issues. As of March 2021, two companies were given waivers enabling them to export tobacco to the U.S. after proving their supply chain is free of child and forced labor. Discrimination against women remains pervasive. Despite the enactment of the Gender Equality Act in 2013, women continue to 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. The University of Malawi, a government-run university with five constituent colleges nation-wide, provides bachelor’s and master’s degrees in economics, engineering, medicine, education, agriculture, and administration. Other public universities are Mzuzu University, Malawi University of Science and Technology, and Lilongwe University of Agriculture and Natural Resources. The Government (GOM) expanded its network of vocational schools as the higher education system cannot enroll and produce enough qualified graduates. Chancellor College, part of the University of Malawi system, operates the country’s law school. There are also a few PhD programs that usually enroll very few candidates.

Malawi employment, immigration laws, and regulations require that any local or foreign investor prioritize the hiring of nationals except in cases where skills are not locally available. 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 for economic reasons nor are employers required to have employment insurance for their employees. In 2021, GOM with support from development partners launched a three-month special cash transfer program targeting the poor urban households who were economically hit by the COVID19 pandemic. There is no provision 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 Zones for the purpose of promoting exports.

On collective bargaining, workers have the legal right to form and join trade unions. The law allows workers, except for military personnel and police, to form and join trade unions of their choice without previous authorization or excessive requirements. Unions must register with the Registrar of Trade Unions and Employers’ Organizations in the Ministry of Labor. There are about 24 unions affiliated with the Malawi Congress of Trade Unions with a membership of approximately 300,000 workers and the organizations are usually weak.

The Industrial Relations Court (IRC) has original jurisdiction over labor disputes and other issues relating to employment. An aggrieved party may appeal the decision of the IRC to the High Court of Malawi but only on matters of law or jurisdiction. Otherwise, on matters of fact, the decision of the IRC is final and binding. The Labor Relations Act (LRA) governs labor-relations management in Malawi’s formal sector. The Act allows strikes and lockouts for registered workers and employers after dispute settlement procedures in collective agreements and conciliation have failed. Employers, labor unions, and GOM lack sophistication regarding labor relations/disputes. Over the past few years there have not been any major strikes that posed any serious investment risk.

While GOM is a signatory to the ILO Convention protecting worker rights, enforcement is weak due to a serious labor inspector shortage and other resource constraints. The GOM is currently reviewing the Occupation Safety, Health and Welfare Act of 1997. The GOM also designated labor officers, police officers and immigration officers as trafficking in persons (TIP) enforcement officers following gazetting of the TIP Act of 2015. The government finalized the National Child Mainstreaming Guide, launched the National Action Plan on Child Labor (NAP II), and reviewed the National Child Policy. Four ILO instruments on forced labor, safety, and health in agriculture, which GOM ratified in November 2019, came into force on November 7, 2020, but the GOM has not updated domestic laws and regulations to fulfill the requirements of the ILO instruments. The ILO is finalizing a qualitative study on the tenancy system in Malawi, and an ILO financed quantitative study on tenancy prevalence is also underway with initial results expected mid-2021. In December 2020, GOM gazetted revised minimum wage regulations that increased wages by an average of 42.8 percent, with separate provisions for domestic workers and truck drivers.

12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs

DFC is bankrolling a $37.5 million solar power generation project in Nkhotakota. The project is key to expanding Malawi’s clean energy generation capacity. DFC has also partnered with a local bank on a $5 million facility to enhance lending to small and medium agribusinesses. Following these threshold projects and with intensive public and private sector engagement, there is potential to unlock more DFC assistance. Malawi has had an OPIC (DFC) investment guarantee agreement since 1967.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2020 $12.15 Billion 2019 $7.67 Billion www.worldbank.org/en/country 
U.S. FDI in partner country ($M USD, stock positions) 2019 Data not available 2019 $70 Billion BEA data available at
https://apps.bea.gov/international/factsheet/ 
Host country’s FDI in the United States ($M USD, stock positions) 2019 Data not available 2019 $(*) nonzero value that round to zero BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP 2019 Data not available 2019 1.2% UNCTAD data available at
https://stats.unctad.org/
handbook/EconomicTrends/Fdi.html 

* Source for Host Country Data: RBM Malawi . Note that Malawi Government rebased GDP in 2020 which resulted into upward adjustment of GDP figures ( GDP Rebasing Malawi ) .

Table 3: Sources and Destination of FDI
Data not available.
Table 4: Sources of Portfolio Investment
Data not available.

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

2021 Investment Climate Statements: Malawi
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