Malawi Investment Portfolio - USEmbassy.gov
Malawi InvestmentPortfolioMALAWI INVESTMENT ANDTRADE CENTRE (MITC)
ForewordHon. Sosten GwengweMinister of Industry & TradeIn 2012, the Government of Malawi initiated key policy reforms aimed atenhancing economic and social development through private sector and exportled growth.The primary objective of the policy reforms was to establish strategicdevelopment plans in line with Government’s vision to economically empowercitizens by creating jobs and wealth, and reducing poverty.To this effect, Government launched three key development strategies:1. Malawi Growth and Development Strategy II (MGDS II) was approved on17th April, 2012. MGDS II is the country’s five year medium termdevelopment framework designed to support Malawi out of poverty toprosperity. MGDSII has nine priority development goals that are alignedto Millennium Development Goals.2. Economic Recovery Plan (ERP) was officially launched on 28thSeptember 2012. The ERP outlines the short to medium termdevelopment plan with a focus on fewer pro-growth priorities. It identifiesareas for short term intervention to tackle the country’s economicchallenges inherited from the previous administration, such as shortage offoreign currency reserves, scarcity of fuel and essential drugs in hospitals.3. National Export Strategy (NES) was launched in December 2012 toprovide a framework for building Malawi’s production and exportcapacity. The NES is fully aligned to the priorities set out in the MGDS IIand ERP.The National development strategies launched by the Government aim to fostera conducive investment climate to support business growth in priority sectors(i.e. Agriculture, Energy, Mining, Infrastructure, Tourism). Additionally, the NESidentifies priority clusters for export (e.g. oil seed products, sugar cane products,agro processing products and manufacturing products).As such, the Government through its Investment Promotion Agency, the MalawiInvestment and Trade Centre (MITC) is working with Malawi based businesses2
to support economic growth led by exports and the private sector. MITC alsolooks to encourage international investors to look at Malawi as their investmentpartner of choice.In order to enhance business production and export capacity, Malawi is lookingto attract greater Foreign Direct Investment (FDI) to support private sectordevelopment. An increase in FDI flows can enable Malawi based businesses tobe more competitive and achieve success in international markets.Therefore, this document presents a selection of current investmentopportunities across the priority sectors.Finally, I want to assure the business community and investors that theGovernment of Malawi is committed to creating a very conducive and attractivebusiness environment in Malawi, and I take this opportunity to invite you toinvest in Malawi and make Malawi your preferred source of imports.Hon. Sosten GwengweMinister of Industry & Trade3
ContentsSection Title1PageMalawi profile51.1Country profile51.2Key facts & figures5Investing in Malawi62.1Overview62.2Specific investment incentives722.3Risk assessment3Key sectors114Investment prospects134.1Introduction134.2Summary table of all prospects13Next steps595.1Investment forum in Malawi595.2Establishing a Malawi-focused fund595.3Exiting investments59Further information616.1Contact details616.2Further references62Glossary of terms635694
1. Malawi Profile1.1 Country profileMalawi is a country in Southeast Africa with a population of 15.4 million people.Its predominant languages are Chichewa and English. The capital city isLilongwe and the main commercial city is Blantyre.Malawi is a low income country with a GDP ofUS 5.6 billion and Gross National Income (GNI) percapita of US 360. The country has experiencedpositive economic growth over the past 10 years.However, the country is currently in an economicrecovery phase after a series of economic shocksover the past 2 – 4 years.The Malawi Government’s recent policy reforms areaimed at enhancing economic and socialdevelopment by enabling a conducive businessclimate and an increase in private sector investmentas the means for driving growth.The country’s economy is largely agriculture basedand the Government’s policy reforms aim atsupporting diversification of the economy. To this effect, a number of key prioritysectors and export clusters have been identified for investment and these areoutlined in the country’s development strategic plans (i.e. MGDSII, ERP andNES).1.2 Key facts and figuresGDPUS 5.6bnGNI per capitaUS 360Population15.4mExchange rate 1 MWK 383(at 10.03.2013)2011 figures. Source: http://data.worldbank.org/country/malawi5
2. Investing in Malawi2.1 OverviewMalawi is a unique and rewarding place to invest and work, as it providestransparent and tangible options to contribute directly to the country’s economicgrowth. The country’s business is conducted in English, with a growingmanagement and middle class workforce, and its priority sectors offer highgrowth potential that can be achieved through increased investment.In addition to the potential high commercial returns that can be achievedthrough increased private sector investment; other benefits can include socialimpacts such as reduction of poverty levels, improvements to health andeducation standards as well as youth development and women empowerment.Pre-identifiedsupply gapsThe Malawi economy faces an imbalance due to higherimport levels than exports. As such, a number of priorityexport clusters have been identified in the NES in order tofulfill local and international supply demands. Current, lowexport levels are primarily constrained by a lack of affordableinvestor funding.New international market opportunities have already beenidentified and these can be served with an increase inproduction capacity. For example, an increase in the supplyof pigeon peas (toordhall lentils, in high demand in the Indiansub-continent and UK Asian markets) can be achievedthrough commercial up-scaling of agro-processing facilities.Identification of new markets provides mitigation againstpotential demand side risks.High cost ofborrowingThe interest rate on loans currently stands at around 40%:the cost of borrowing within the traditional financial sectorindicates the returns that are available, and yet also indicatethe need for lower cost, external investors to provideaffordable finance to businesses.6
Contribution to The Government’s recent introduction of the threedevelopment strategies (MGDSII, ERP, NES) provides adevelopmentstrong indicator on the level of commitment to transformMalawi’s economy into one of the fastest growing in SubSaharan Africa.Additionally, Malawi is taking positive steps to improve theoverall business and investment climate and therefore itsranking for ‘Ease of Doing Business’. This commitment isalso demonstrated by the recent restructure of theInvestment and Export Promotion Agencies, to create asingle effective entity in the form of the Malawi InvestmentTrade Centre (MITC).A coherentnationalframework forinvestmentThe country’s framework for investment planning is coveredin the key development strategies (MGDSII, ERP, NES). Thestrategies provide a coherent and alignment of prioritysectors and export clusters for investment.2.2 Specific investment incentivesMITC has the responsibility of formulating and further enhancing Malawi’sincentives for inward investment and ensuring these meet stakeholderrequirements.The table below illustrates consideration of business requirements andincentives offered:BusinessrequirementExportProcessing Zone(EPZ)Incentive Capital equipment and raw materials are duty-freeNo excise tax is imposed on the purchases of rawmaterials and packaging materials made in MalawiNo value added taxExpatriation ofprofitsPossible under EPZ rules and as foreign exchange (throughforeign currency account).Expatriation ofincomeUnder normal business operations, approx. 66% may beexternalized, with the remainder expected to remain in7
Malawi.Corporation tax30%: under reviewInvestmentProtection Tax breaks onlarge investments Constitution of Malawi guarantees protection of assetsof foreign investorsMember of the Multilateral Investment GuaranteeAgency (MIGA)Signatory to the international centre for settlement ofinvestment disputesMember of the Africa Trade Insurance Agency ofCOMESAAllowance for manufacturing companies to deduct alloperating expenses incurred up to 25 months prior tothe start of operationsLoss carry forward of up to seven years, enablingcompanies to take advantage of allowancesAdditional 15% allowance for investment in designatedareas of the country50% allowance for qualifying training costsBusiness PermitsCurrently offered when a minimum of US 50,000 isinvested, though this may be lowered to US 20,000.Land rights andpropertyProperty rights are based on Malawian Constitution.Forex accountsForeign exchange accounts may be held with the CentralBank.MITC GeneralIncentivesSummary 100% Investment allowance on New and UnusedIndustrial Buildings, Plant and MachineryAllowances of up to 40 percent for used buildings andmachineryZero duty on raw materials used in manufacturingExemption of Duty, Excise and VAT on IndustrialMachinery and EquipmentExemption of duty on direct importation of goods usedin the tourism industryThere are no restrictions on remittance of foreigninvestment funds (including capital, profits, loanrepayments and lease repayments) as long as thecapital and loans that were obtained from foreignsources were registered with the Reserve Bank ofMalawi (RBM).8
2.3 Risk assessmentPOLITICAL RISKMalawi is renowned for being a peace loving country, and was rated as thesecond most peaceful country in Africa by the Global Peace Index in 2009. Thecountry has no history of civil war or conflict.In 1994 the country went through a peaceful political transition following thirtyyears of single party rule and held its first ever multi party democratic elections.Since then, the country has held three further peaceful democratic electionswhich were all deemed free and fair by international observers. This illustratesMalawi's maturing democratic and governance structures.Furthermore, in April 2012 Her Excellency Mrs. Joyce Banda the former VicePresident and now incumbent President was elevated from office of VicePresident to office of President following the untimely death of her predecessor.This was in line with the constitutional requirement. Since then, the Governmentof Malawi has initiated pro-private sector and inward investment growth plansoutlined in the country’s key development strategies (MGDS II, ERP, NES).FINANCIAL RISKIn April 2012, Malawi ceased operating the fixed currency regime and adopted afloating currency regime in line with common international practice. As such, thecountry’s currency, the Malawi Kwacha, now reflects its true market value.As Malawi looks to increase its export base and improve the overall balance ofpayments position, the strength of its currency is also likely to improve.Therefore, this should protect against any significant currency fluctuations in thelonger term.Furthermore, investors can look to protect their investment against significantadverse currency movements by hedging their positions accordingly.SUPPLY CHAIN RISKThe investment prospects presented in this document cover various prioritysectors; this is in support of efforts to diversify Malawi’s economy from anAgricultural base.A diversified product export base will help reduce supply risks associated withthe significant dependency on the agriculture sector.It is acknowledged that the shift from an Agricultural base cannot beinstantaneous. Investment prospects being promoted cover priority export9
clusters such as agro-processing and manufacturing products where Malawianproducers may realise their local and export market opportunities. Thisapproach can enable a smooth transition whilst taking advantage of currentagriculture sector strengths.Additionally, Malawi also excels at organising small holder farmers throughvarious associations and cooperatives. This in turn enables effectivecoordination of support for the farmers through various market-focusedorganisations operating at the National or Regional level (e.g. NASFAM and SelfHelp Africa).MARKET RISKThe aim of the majority of the investment prospects presented here is to eitherfacilitate import substitution or increase exports. This is coherent with the recentcurrency flotation and subsequent devaluation which has made imports moreexpensive and exports much more competitive. Malawi is now well placed tosignificantly increase its exports by taking full advantage of its COMESA andSADC membership, AGOA signatory, and eligibility for preferential exports to theEU. This therefore mitigates any potential market risk.Furthermore, a growing middle class in Malawi means that the market demandfor goods and services is also growing rapidly.PORTFOLIO RISKAs Malawi may represent a new market for some investors, a diversified portfolioof investments can mitigate against any risks associated with single projectinvestments. In this regard, a Malawi based financial institution is currentlyconsidering establishing a Malawi focused investment fund that can enable acoordinated approach to managing investment funds on behalf of investors.Such an investment fund model would help to spread investors’ risk exposureacross several project investments, as well as the priority sectors of Malawi’seconomy.SUCCESSFUL INVESTMENTS IN MALAWIIn addition, Malawi has excellent examples of long-standing successful inwardinvestments in locally based SMEs and large international companies operatingin Malawi (e.g. Press Corporation, Standard Bank, Illovo Sugar, UniversalIndustries Ltd, Globe, and Candlex). Malawi Mangoes and Limphasa Sugar arerecent examples of significant inward investment into the country’s agroprocessing sector. New investments are now beginning to flow in, with MalawiMangoes recently securing a multimillion dollar investment from BXR (for furtherinformation please contact MITC and/or the Technical Team).10
3. Key SectorsAgricultureThe primary economic activity for around 85-90% ofMalawi’s population, contributing 30% of GDP, andcomprising the main input for much of the manufacturingsector’s foodstuffs and agro-processing production.Malawi is now exploring diversification away from tobacco(traditionally its main export) into other crops where there issignificant potential.Manufacturing The manufacturing sector provides scope for high growthand there are several well-documented opportunities,particularly in agro-processing, some of which arecontained in the profiles in this document.Other manufacturing sectors are textiles, plastics,packaging, soaps, steel production, pottery and ceramics.EnergyThe critical input for industry across Malawi, in particular theeffective growth of manufacturing. The development impactof energy projects is therefore significant, and the Scottishacademic and industry consortium, the Energy TechnologyPartnership (ETP), the EU and DfID are now investigatingwhat opportunities there are for value addition andinvestment.Large energy infrastructure projects are being planned,including increasing the supply of hydroelectric power.However, as many Malawians are off-grid, there arenumerous opportunities for micro-hydro, solar and biofuelenergy supply.MiningAn important sector for Malawi to generate foreignexchange-based income, which is critical for fundingimported inputs such as fuel and machinery, for example foragro-processing and other high-growth industries.In addition to the high-profile uranium mining operations byPaladin Energy in the north of Malawi (Karonga region),there are a number of mining opportunities currently beingexplored (e.g. precious and semi-precious stones – theseare often mined in the informal sector operated byassociations of small producers). There are furtheropportunities in the wider extractive industries which may beexplored through the Ministry of Mines and with MITC.11
TourismAn important cluster in Malawi and one that has significantpotential, because a) there is scope for further investment intourism to meet increasing demand, and b) a growingappreciation of Malawi as a ‘hidden gem’ tourist destination,particularly Lake Malawi, known as the ‘Lake of Stars’.Malawi has one main chain of hotels (Sunbird) whichprovides good quality hotel accommodation in key cities(Mzuzu, Lilongwe, Blantyre) and holiday destinations (LakeMalawi, Zomba Plateau). However, there is scope for otherhoteliers to enter the market. Niche and more informalaccommodation is also available at various tourist locationsacross the country. As such, there is further potential to offerunparalleled and unique holiday experiences.Secondary services to the tourism sector such as car hireand internal transport options also provide opportunities forfurther investment to enable integration of services in thesector.InfrastructureLarge infrastructure projects (including energy, above)along with water and sanitation, national and regional grainstorage silos, warehouse systems, roads and rail, are allunderway with scope for additional investment.Further innovative financing models to provide funding forsilos, schools, hospitals and other infrastructure would bewelcomed.12
4. InvestmentProspects4.1 IntroductionRanging in size from US 0.1m to US 70m, with a combined value of US 177m,and spanning the major growth sectors in Malawi’s economy, the investmentprospects presented in this portfolio demonstrate the extraordinary potential ofthe country and thus represent an extremely exciting opportunity for theinvestor.The portfolio has been developed through direct consultation and meetings withthe main sponsors of the investment prospects, many of whom have a trackrecord in doing business with Scotland and the wider UK. In many cases,detailed business plans exist and can be shared with investors upon request.However, in all cases, a process of due diligence has commenced, andinvestees will be happy to answer any questions about their investmentprospects.4.2 Summary table of all prospectsNoProspectSectorInvestmentApproxvalue(US ePigeon peas33.03Afriseed LtdAgricultureSeeds22.04Sunbird HotelsTourismEco-lodges8.05MpatsaHoldings ngSoy beanprocessing7.013
7RABProcessorsAgro-processingSoy beans6.08MpatsaHoldings LtdFinancial ngInput/outputmarketing5.010Pride MalawiFinancial servicesMicro-finance3.211SkybandInfrastructure / ICTFibre opticcables3.012Company XAgro-processingGroundnuts2.213BERLEnergyBio energy1.314ParagonCeramics LtdTourism/ManufacturingLodge &pottery1.015MpatsaHoldings LtdAgricultureFish cages1.016Beta TelevisionICTCommercialTV tricity0.418Tafika MillingAgro-processingMaize0.319Ink It Design &Print PressServicesPrinting press0.320NaturalsAgro-processingBaobab juice0.321Waste .322NamiashiLodgeTourismLodge0.123FESAgriculture &constructionPurchase ofBusinessTBCOther investments which are more suitable for a mix of public, donor and privatefunding, rather than direct private investment, have been identified and areavailable on request.14
Investment Prospect 1CompanynameOpen – Sugarcane opportunity (USAID)CompanydescriptionThe investment opportunity is a green field sugarcaneproduction and processing venture. It is founded upon theGovernment of Malawi’s Green Belt Initiative (GBI) and thedevelopment of 6,000 ha of irrigated land set aside for theproduction of sugarcane. In addition to developing the landfor sugarcane production, a processing facility will beestablished. Malawi’s potential to achieve high sugarcaneyields of excellent quality provide the investment withstr
1 Malawi profile 5 1.1 Country profile 5 1.2 Key facts & figures 5 2 Investing in Malawi 6 2.1 Overview 6 2.2 Specific investment incentives 7 2.3 Risk assessment 9 3 Key sectors 11 4 Investment prospects 13 4.1 Introduction 13 4.2 Summary table of all prospects 13 5 Next steps 59 5.1 Investment forum in Malawi 59
MEMO FOR ROBERT SCOTT, U.S. AMBASSADOR TO MALAWI SUBJECT: PEPFAR Malawi’s Country Operational Plan 2021 Approval This memo represents the successful completion of the PEPFAR Malawi Country Operational . Ne w Fu n d in g (All Acco u n t
Name: Dr Bernadette O’Hare Title: Senior Lecturer in Child Health, College of Medicine, University of Malawi, Malawi Present position and institution: Lecturer in Child Health, College of Medicine, University of Malawi, Malawi Previous position and institution: [As at the time of the child’s death]
Malawi. This ancient African Great Lake has the greatest number of fish species of any lake in the world, and the fishery is a major source of animal protein in Malawi. However, the decline of the capture fishery stocks has forced the Government of Malawi to promote cage aquaculture. The Maldeco Aquaculture Limited is the first cage aquaculture .
DR.C HISALE MHANGO — University of Malawi College of Medicine MS.P RIMROSE A. C HIMWAZA — Ministry of Justice and Constitutional Affairs FR.D ENNIS MKOMWA — Episcopal Conference of Malawi SENIOR CHIEF KAPENI — Ministry of Local Government and Rural Development MR.IMRAN W. S AIDI — Muslim Association of Malawi MR.R EX P. M APILA — Mal
Malawi CSA training manual for supervisors Page 8 of 64 Foreword Climate change is a serious challenge for developing countries around the world, including Malawi. It threatens to increase vulnerabilities, destroy economic gains, and hinder social and economic .
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1.4 Elements of Investment 1.5 Meaning of Portfolio 1.6 Portfolio Management 1.7 Portfolio Management Process 1.8 Objective of Portfolio Management 1.9 Exercises 2. Investment Alternatives 7 - 37 2.1 Introduction 2.2 Non-marketable Financial Assets 2.3 Money Market Instruments 2.4 Bonds or Fixed Securities 2.5 Investment in Equity Market 2.6 .
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