malawi investment opportunities

INVESTORS GUIDE TO

MALAWI

THE MALAWI FLAG

FOREWORD1

he purpose of this Guide is to highlight the investment policies, opportunities and incentives that Malawioffers to investor. These opportunities have been well researched and redesigned to the Governmentsagenda of achieving high economic growth through rapid and broad private sector led development as

stipulated in the Malawi Growth and Development Strategy.

In support of the Private Sector Development, my Government will continue to maintain stable macroeconomicconditions and I would put all the efforts to make it easy for businesses to operate in our beloved country, Malawi.

In this regard, Government is committed to creating an enabling environment for private sector development. Toattract more investors, my Government has also undertaken a fundamental review of the taxation system as partof implementing the Malawi Growth and Development Strategy (MGDS). This review seeks to address the taxationissues that affect the growth of our private sector business, taking into account the views of private sector. Thistax review will also seek to make Malawi competitive in attracting foreign investment.

My Government is currently reviewing the National Investment Policy. The Policy is expected to address theinherent weaknesses in the current investment environment including the heavy geographic and sectoralconcentration of private investment in the main urban areas. The Policy will also eliminate inconsistencies byharmonizing the provisions and strategies in various government policies pertaining to investment as well asfacilitate improvements in the implementation structure.

Malawi takes pride in its political stability since independence in 1964. The peaceful transition to multiparty politicsin 1994 and the peaceful presidential and parliamentary elections held in 2004 has shown the highest level ofmaturity and political tolerance existing in the country and guaranteeing the foreign investors years of economicprosperity once they invest in Malawi.

Malawi has preferential entry into regional and international markets through agreements under the World TradeOrganisation (WTO), Southern African Development Community (SADC), COMESA, The European Union throughthe EU-African Caribbean and PAcific (ACP) agreement, the United States of America under the African Growthand Opportunity Act (AGOA).

Malawi is now ready for investment and this is why I am confidently inviting investors to come and invest in ourland full of opportunities. The economy is stable and recovering well. Malawians are very hospitable, hardworkingand easy to train, and coupled with our abundant natural resources, you can easily make this country your secondhome.

The Warm Heart of Africa, Malawi, awaits your arrival.

H.E. Dr. Bingu Wa MutharikaPresident of the Republic of Malawi

T

2MIPA INVESTOR'S GUIDE TO MALAWI

MALAWI IN BRIEF3

MALAWI IN BRIEF

GeographySurface area: 118,484 sq. km (about 20% water)Time zone: GMT + 2

Demographics (2007)Total population: 13.2 millionMain cities

Lilongwe: 744,000Blantyre: 778,000Mzuzu: 150,000Zomba: 113,000

Population density: 111 per sq. kmPopulation growth: 1.9% per annumUrban population: 13%Life expectancy: 39.1 yearsLiteracy rate: 58%

Economy (2006)Currency: Malawi Kwacha (MK)Exchange rate: US$1 = MK140 (April 2007)GDP: US$2.172 billion GDP per capita: US$170Real GDP growth: 7.9% Annual inflation rate: 13.9% Principal exports: Tobacco, tea, sugar,

cotton and apparel

Government Political system: Multi-party democracyHead of state: H.E. Dr. Bingu Wa MutharikaCapital: LilongweOfficial languages: English, ChichewaReligions: Christianity (79.9%),

Islam (12.8%), others (7.3%)

Climatic conditionsMay to August Cool and dry. July is the coldest month, with temperatures ranging from 15.5 to 18 C in plateauareas and 20 to 24.5 C in the rift valley areas. There is little rain during this season; most rains fallin the high southeast-facing slopes.

September to mid-NovemberHot and dry. Temperatures range from 22 to 25 and 27 to 30 C in the plateau areas and the riftvalley respectively.

Mid-November to AprilHot and rainy. Ninety percent of the annual rainfall is received during this period. December andJanuary are the wettest months. Total annual rainfall overages 760 to 1,015mm with some plateauareas recording over 1,525 mm.

Fig 1. GDP Composition (2006)

Distribution

Indus

try

Tran

spor

t & C

omm

unic

atio

n

Electricity andWater

Construction

Other

Financ

ial & P

rofess

ional

Servic

es

Agriculture

The Malawi Investment Promotion Agency (MIPA) would like to thank the

United Nations Development Programme (UNDP) for providing financial and

technical assistance in the production of this Guide under the Growing

Sustainable Business programme. In addition, MIPA would like to thank the

various ministries, donors, and private sector individuals who made valuable

contributions to the creation of the Guide, and to BERL, ESCOM, Ministry of

Agriculture, the Natural Resource College and Wilderness Safaris for

providing pictures.

4

ACKNOWLEDGEMENTS

MIPA INVESTOR'S GUIDE TO MALAWI

CONTENTS5

CONTENTS

1.0 Introducing Malawi 1.1 Country and people1.2 History and Government1.3 Market size and access1.4 Government priorities

2.0 The operating environment 2.1 Economic environment 2.2 Trade2.3 Investment2.4 Infrastructure2.5 Communication2.6 Labour2.7 Health services2.8 Financial sector 2.9 Taxation2.10 Investment incentives

3.0 Investment opportunities3.1 Agriculture3.2 Mining3.3 Tourism3.4 Manufacturing3.5 Infrastructure3.6 Forestry3.7 Energy3.8 Finance3.9 Privatisation

4.0 The regulatory framework4.1 Legal and judicial system4.2 Institutional framework4.3 Investment policy 4.4 Repatriation of foreign exchange4.5 Investment protection and access to international arbitration4.6 Land

5.0 Overview of the investment process 5.1 Malawi Investment Promotion Agency (MIPA)5.2 Investment procedures5.3 Environmental Impact Assessment (EIA) requirements

Appendix1. Public holidays, business hours and visa requirements 2. Important business contacts

Inserts 1. Business operating costs2. Investment projects

INTRODUCINGMALAWI

1.1 Country and people Malawi is located in south-eastern Africa.It is a long, narrow and landlocked countrybordered by Tanzania to the north, Zambiato the west, and Mozambique to the eastand south. Lake Malawi, the third largestlake in Africa and one of the deepest in theworld, accounts for almost one-fifth of thecountry's area. The terrain of Malawi isbreath-taking, comprised of plateaus,plains, hills and mountains. These includethe Nyika and Viphya Plateaus and MisukuHills to the north, and the Dedza and KirkRange Mountains in the central region. Inthe south, the terrain is equally varied withescarpments, highlands and mountainsand low marshy lands along the ShireRiver, Lake Malawi's outlet in the south.The Mulanje Mountain, home to the rareMulanje Cedar, is the highest mountain inCentral Africa, with the highest point,Sapitwa Peak, rising to 3,050 metresabove sea level.

Malawi is predominantly a rural country,with approximately 87 percent of its 13.2million inhabitants residing in thecountryside. Its three major populationcentres are Mzuzu in the north; Lilongwe,the administrative capital, in the centre;and Blantyre, the commercial "capital," inthe south. There are eight major tribes inMalawi: the Chewa, Yao, Tumbuka,Lomwe, Sena, Tonga, Ngoni and Ngonde.Although these tribes speak theirrespective ethnic languages and dialects,Chichewa and English are the country'sofficial languages. Asians and Europeansalso constitute a sizeable number ofMalawi's population. Christianity (79.9

percent) and Islam (12.8 percent) are thepredominant religions.

1.2 History and GovernmentThe early occupants of today's Malawiwere the Tumbuka in the north, theMaravi (also known as Chewa or Nyanja)in the centre and south, and the Yao in thesouth. The Maravi people established apowerful kingdom which extended intoareas of present-day Mozambique andZambia. In the late nineteenth century, theBritish colonised this part of Africa,forming the British Central AfricanProtectorate, which later became theNyasaland Protectorate. The colonialeconomy was based on the productionand export of a narrow-range ofcommodities- first coffee, and latercotton, tea and tobacco. In 1953, in aneffort to boost economic development inthe region, Nyasaland joined withNorthern and Southern Rhodesia (today'sZambia and Zimbabwe) to form theFederation of Rhodesia and Nyasaland.

Opposition to colonial rule strengthenedthroughout the 1950s and early 1960s,eventually giving way to an independentMalawi in 1964. Two years later Malawiadopted a republican constitution andbecame a one-party state with Dr.Hastings Kamuzu Banda, leader of the pro-independence Nyasaland AfricanCongress (later renamed the MalawiCongress Party), as President. Dr. Bandaquickly consolidated power and in 1970was declared "President for Life" of theMalawi Congress Party (MCP); one yearlater he became "President for Life" ofMalawi.

INTRODUCING MALAWI7

The country's economy under Dr. Banda wascharacterised by high levels of Governmentownership, influence and control of manyindustries and businesses in cooperation with aselect and privileged group of private sectorpartners. The Government's developmentstrategy placed heavy emphasis on exportproduction and estate agriculture, whichresulted in a significant increase in tobaccoproduction and export and a six percentaverage annual growth rate in GDP in the 1960sand early 1970s. This growth however wasnarrowly based and was associated with ahighly skewed distribution of income andwealth. A series of external shocks in the 1980sand early 1990s destabilised Malawi'seconomy, resulting in a slowing of growth andan annual decline in per capita income by some10 percent.

As the Malawian economy deteriorated,changes came to the political structure of thecountry. In 1993 a referendum was held inwhich Malawians were asked to vote for eithera continuation of the one party state or achange to a multi-party democracy. Malawiansoverwhelmingly voted for a multi-partydemocracy and the first multi-party electionswere held in 1994. Bakili Muluzi was electedState President, and his administration pushedforward accelerated economic liberalization andstructural reform; Muluzi was re-elected in1999.

In 2004, Malawi saw its first transition betweendemocratically-elected presidents when Dr.Bingu Wa Mutharika was elected into office.Dr. Mutharika's administration has made greatstrides in fighting corruption and stabilizing thecountry's economy.

1. 3 Market size and accessWhile Malawi's domestic market is small, thecountry is a party to a number of multilateral,regional and bilateral trade agreements,offering wider access and preferentialtreatment for Malawian products. Theseagreements are already being utilized, as

indicated in Table 1, however exports underpreferential treatment can still be expanded.Multilateral and regional trade agreementsinclude:

Common Market for Eastern andSouthern Africa (COMESA): COMESA hasa potential market of 340 million people anda combined GDP of US$170 billion. Memberstates within the COMESA have continuedto take steps to consolidate the Free TradeArea in preparation for the forthcomingtransition of the COMESA Free Trade Areainto a Customs Union due to comeinto force in December 2008.

Southern African DevelopmentCommunity (SADC): The SADC region hasa potential market of 199 million people anda combined GDP of US$176 billion. UnderSADC, Malawi is committed to reducingtariffs on intra-SADC trade progressively.The implementation of the SADC TradeProtocol aims at creating a SADC Free TradeArea by 2008.

African Growth Opportunities Act(AGOA): AGOA offers duty and quota-freeaccess to the United States market of 298million people for 1,800 products, in additionto the standard GSP programme.

Cotonou Agreement/Everything ButArms (EBA): This initiative extends duty-and quota-free access to the EuropeanUnion market for all imports from LeastDeveloped Countries, except arms. Minorvariations apply to bananas, sugar and rice.Full liberalization will take place for thesecommodities 2009.

In addition, bilateral trade agreements existwith South Africa, Zimbabwe, andMozambique, and a customs agreement is inplace with Botswana. Further trade agreementsare currently under consideration with Zambiaand Tanzania. These, alongside other initiativessuch as the Growth Triangle and the SpatialDevelopment Initiative, offer considerableopportunities for increased trade andinvestment. The Growth Triangle and theSpatial Development Initiative are mechanismsfor attracting export-driven investment intoareas with under-utilised potential withinSouthern Africa.


1.4 Government prioritiesThe Government of Malawi realises theimportant role that private investment, andmore specifically Foreign Direct Investment(FDI), plays in the economic growth anddevelopment of the country. Over the pastthree years, President Dr. Mutharika'sadministration has taken a number of actions toimprove private sector growth prospects. The2006 Malawi Growth and DevelopmentStrategy (MGDS) emphasises the creation of asound business-enabling environment forattracting both local and foreign investment.

In addition, the MGDS specifies targetedpriority areas for investment, which includeagriculture, mining, tourism, manufacturing andinfrastructure. The Government is currently inthe process of reviewing the country'sinvestment policy, investment incentives andthe legal, institutional, and regulatoryframework for investment in the country.Following these reforms, Malawi will be a morecompetitive, attractive and preferableinvestment destination for both the local andinternational investor.

9

Table 1. Malawi's Trade with Major Trading Blocks 2001-2006

Trade BlockAverage annual exports Average annual imports

US$ million Percent of total exports US$ million Percent of total imports

SADC 131.2 25.9 524.2 58.7

COMESA 86.0 17.0 130.4 14.7

EU* 207 43.7 76.8 16.2

USA 82.7 16.3 26.1 3.0

Source: COMTRADE 2007 and Annual Economic Report 2005, 2006, 2007*Averages for 2001-2005

INTRODUCING MALAWI

THE OPERATINGENVIRONMENT

2.1 Economic environment Malawi's economy has made importantstrides over the past three years largelydue to the current administration'spolitical commitment to exercise prudenteconomic management and resuscitatehigh rates of economic growth as a moresustainable means of reducing poverty.The administration's determination toeradicate corruption at all levels of theeconomy has brought a renewedconfidence in the Government and itsability to create a sound business-enablingenvironment.

Strong economic management andimproved governance has yielded anumber of notable outcomes. InSeptember 2006 the IMF and World Bankcancelled 90 percent of Malawi's externaldebt of about US$2.97 billion after thecountry reached the Heavily IndebtedPoor Countries (HIPC) completion point.This was followed by a further debtcancellation by the Paris Club in October2006 and other bilateral debtcancellations, thus reducing Malawi's totalforeign debt to less than US$480 million.

Sound fiscal management has alsolowered national inflation. The averageannual inflation rate dropped to 13.9percent in 2006 from 15.4 percent in2005, and as of May 2007 inflation standsat 8.6 percent. It is expected that theeconomy will register single digit annual

inflation for 2007.Between 2000 and 2006, Malawi's Gross

Domestic Product (GDP) grew at anaverage annual rate of about 3 percent.The macroeconomic performance during2004/05 fiscal year was negativelyimpacted by drought, which hit thecountry in the first quarter of 2005. Theeconomy rebounded in 2006, registeringan 8.5 percent increase in real GDP, upfrom 2.1 percent growth in 2005. Thegrowth rate for 2007 is estimated at 6-percent.

Malawi's economy is based largely onagriculture. The agriculture sector, whichis composed of agriculture, forestry andaquaculture, accounts for more than 85percent of its export revenues, 32 percentof its GDP, and employs over 80 percentof the population. Most of the agriculturalproduce comes from smallholder farmers.Maize still occupies as much as 75percent of all crop and in the country, andin most areas is still synonymous withfood security.

Recent years however, have been markedby efforts to diversify agriculture awayfrom maize production to other crops. Anumber of products- cassava, sweetpotato, potato, groundnut, paprika,macadamia and others-have enjoyed rapidgrowth, albeit from a low base.

THE OPERATING ENVIRONMENT11

The single most important factor determiningvolatility in GDP growth is the impact of erraticweather patterns on agriculture as 99 percent israin-fed. The performance of the agriculturalsector during the past decade has generallybeen weak, with an average growth rate of 3percent. In 2005, the agricultural sectorsuffered from prolonged drought, registering an8.5 percent drop in growth. Governmentresponded to the crisis by initiating a FarmInput Subsidy Programme, which increasedboth the utilization of fertilizer and improvedseed. As a result of this programme as well asimproved climatic conditions, maize production

increased by 25 percent from 2.6 million metrictonnes in 2005/06 to approximately 3.2 millionmetric tonnes in the 2006/07 growing season.The agriculture sector therefore recovered in2006, growing by 11.9 percent. Based on thesepositive results, Government intends tocontinue implementing the Farm Input SubsidyProgramme in the 2007/2008 growing seasonand the agriculture sector is expected to growby 7.3 percent in 2007. As a long-term strategywith respect to erratic rainfall patternsexperienced for much of the past decade,Government is promoting a steady shift fromrain-fed agriculture to on-farm irrigation at boththe smallholder and commercial levels.

Percentgrowing

Percentmarketing

Maize 97 18

Other cereals 24 26

Root crops 36 32

Pulses 68 37

Vegetables 15 38

Tobacco 15 100

Sugar 5 100

Cotton 3 100

Table 3. Proportion of Malawian Farmers Growingand Marketing Major Crops

Source: World Bank


2004 2005 2006 2007*

Nominal GDP (MK billion) 221.1 260.0 304.0 345.0

Real GDP growth rate (%) 5.1 2.3 7.9 6.0

Inflation (%) 11.9 15.5 13.9 9.0

Exchange rate (MK/US$) 109.0 118.0 134.0 145.0

Government revenue (MK billion) 44.6 57.3 121.6 134.7

Government expenditure (MK billion) 91.8 118.8 128.4 138.7

Exports (US$ million) 483.1 503.6 668.2 -

Imports ( US$ million) 932.2 1,183.7 1,210.2 -

Trade balance -449.1 -680.1 -542.0 -

Population (million) 11.9 12.3 12.7 13.2

Table 2. Selected Key Economic Indicators

*ProjectionsSource: Malawi Economic Reports (various)

Manufacturing on the other hand, is relativelysmall and in 2006 accounted for only 11.8percent of GDP. It mainly involves the agro-processing of tobacco, tea, and sugar, and islargely inward-oriented as only a small portionof manufactured products are exported. Thissector grew by 5.8 percent in 2006 comparedto 7.2 percent in 2005. The sector is expectedto grow by 9.1 percent in 2007 on account thatinterest rates will reduce to growth stimulatinglevels.

The service sector is the fastest growing sectorin Malawi, with financial and professionalservices registering a 17.8 percent growth in2006 up from 7.6 percent in 2005.


2.2 Trade Malawi's major exports include tobacco, tea,and sugar. In 2006 tobacco accounted for 68percent of export earnings, tea 8 percent, andsugar 7.8 percent. In 2006, 50 percent ofMalawi's total exports went to the United

States, South Africa, Egypt, Germany andNetherlands. The country is expecting mining tocontribute substantially to the export bundle asa result of recent investment in uranium miningand in heavy mineral sands.

2000 2001 2002 2003 2004 2005 2006

Tobacco 14,200.3 18,363.3 17,893.1 24,191.2 22,303.5 31,241.5 55,840

Tea 2,235.4 2,461.0 2,827.8 3,481.5 5,132.5 5,937.4 6,737

Sugar 2,339.2 3,975.7 2,684.2 10,571.4 7,881.4 5,408.5 6,391

Apparel 797.8 2,018.0 2,464.6 3,858.1 4,795.5 4,995.7 5,525

Cotton 438.5 316.6 260.8 483.9 2,224.3 1,847.1 2,054

Groundnuts 239.7 368.2 378.1 1,132.0 1,581.0 1,473.0 1,003

Pulses 134.3 211.3 218.8 494.1 608.3 - 785

Wood 34.3 57.0 62.7 178.6 219.3 380.5 973

Rubber 73.7 171.0 152.9 265.8 399.0 248.1 679

Coffee 316.4 451.5 175.6 245.1 217.5 - 381

Spices 85.6 78.3 224.0 141.2 170.7 169.0 610

Hides & Skins 21.1 33.9 32.1 31.5 44.0 67.5 113

Wooden furniture - - - - - 270.8 440

Table 4. Principal Exports, 2000-2005 (Millions of Kwacha)

Source: National Statistical Office

Malawi is heavily dependent on imports. In2006, total exports were valued at US$668.2million, while total imports were US$1,210.2million, resulting in a trade deficit of US$542.0million.

Malawi's principal imports include fertilizers,petroleum products, semi-manufacturedgoods, consumer goods, and transportationequipment. In 2006, almost 50 percent of totalimports were derived from South Africa.

Table 5. Malawi's Major Import and Export Partners 2006 (as a percentage of total imports and exports)

Import partners Export partners

South Africa 48.5 South Africa 18.0

Mozambique 16.9 UK 12.2

UK 7.9 Germany 7.6

Zambia 4.8 USA 7.0

Tanzania 4.6 Egypt 6.9

Source: Annual Economic Report Malawi


As part of a broader effort to enhance exportcapacity, the country is developing a NationalExport Strategy that highlights exports as a keydevelopment avenue and targets improvedexport volumes and value addition in six keysub-sectors: integrated cotton/textiles andgarments, food and agro-processing,handicrafts, tourism, and mining.

2.3 InvestmentIn order to create a sound business-enablingenvironment, the Government is currentlyfinalizing the review of Malawis InvestmentPolicy. This initiative aims to update the policyin order to make it more relevant to the currenteconomic development agenda.

Between 1999 and 2007, the MalawiInvestment Promotion Agency (MIPA)facilitated a total of US$439.34 million in FDIpledges, or approximately US$55 million inpledges per annum. In 2006, FDI pledges roseto US$185.28 million. The bulk of FDI pledges,approximately 73 percent, went to the miningsector, while manufacturing received 23percent.

As of 2006, Malawi has Investment Promotionand Protection Agreements (IPPAs) with thefollowing countries: Zimbabwe, theNetherlands, Italy, the OPEC Fund forInternational Development, and Libya. Malawihas entered into Double Taxation Agreements(DTAs) with the following countries: Denmark,France, Kenya, the Netherlands, Norway, SouthAfrica, Sweden, Switzerland, and the UnitedKingdom.

Source: MIPA Statistics

Figure 2. MIPA-Facilitated FDI Pledges

Mill

ion

US

D

Time (yrs)* Data for 2007 is for the period January-March

200

150

100

50

01999 2000 2001 2002 2003 2004 2005 2006 2007*


2.4 InfrastructureThe Government of Malawi places high priorityon infrastructure development as the basis foreconomic transformation. Good infrastructureis key to facilitating investment and hassignificant implications on both the efficiencyand operating cost of business. To this effect,recent years have been characterised byserious efforts to improve infrastructure andutilities.

2.4.1 UtilitiesElectricity Malawi generates electricity by hydro, thermal,(largely diesel and gas based) and photo-voltaic(PV) systems. Hydropower is the largestsource, accounting for 99 percent of allelectricity generated. The Electricity SupplyCorporation of Malawi (ESCOM) is the onlypublicly-owned and vertically-integrated powerutility, which generates, transmits, distributes,and retails electricity throughout the country.ESCOM's total installed capacity is estimated at304.8 megawatts, of which 19 megawatts isthermal. With the projected peak demand of324.8 megawatts, 478 megawatts and 757megawatts for years 2010, 2015 and 2020respectively, ESCOM's system capacity needsto be increased accordingly in order to meet theprojected demand. The estimated overall potential for power

generation in Malawi however, is over 900megawatts of hydropower, with more than 2million tonnes of confirmed coal reserves aswell as uranium deposits. Reforms areunderway to liberalize the energy sector inMalawi.

Access to electricity in Malawi is very low atseven percent of the total population. Electricaldemand is highly skewed in favour of industrialand large commercial customers who consumeapproximately 60 percent of the total. Domesticusers account for around 25 percent, while theremaining 15 percent goes to small commercialconsumers.

ESCOM is in the process of connecting thecountry's electricity grid to that ofMozambique's in order to include Malawi in theSouthern African Power Pool. With thisconnection, Malawi will be able to importpower from other countries in the region duringperiods of excess demand and also exportpower during periods of excess supply. Inaddition, a 15 megawatts turbine in Blantyrehas been rehabilitated for standby and peakingpurposes.

WaterWater facilities in the cities, towns and peri-urban areas of Malawi are provided by fiveparastatal water boards: Blantyre Water Board,Central Region Water Board, Lilongwe WaterBoard, Northern Region Water Board, andSouthern Region Water Board. The existingurban and rural water supply schemes andsystems provide access to potable waterfacilities for up to 54 percent of the country'spopulation. To improve water supply services inthe country, Government is reforming thesector and encouraging private sectorparticipation.


2.4.2 TransportTransport infrastructure plays a key role infacilitating economic activity in landlockedMalawi. Currently, transport costs constitute avery high component of the final cost of goodsand services in Malawi.

There is therefore a great need forimprovement in the cost and efficiency of thetransportation, logistics and distributionsystems in order to ensure that the Malawianeconomy is competitive at the internationallevel. Most products are both imported andexported via the following ports: Nacala andBeira in Mozambique, Durban in South Africa,and Dar es Salaam in Tanzania.

RoadThe bulk of Malawi's freight and passengertraffic is moved along the country's 16,450kilometres of road, of which about 15 percent ispaved. Table 6 below depicts the level ofimport and export traffic through various borderposts.

The National Roads Authority (NRA) has beenimplementing an ongoing road infrastructuredevelopment, rehabilitation and maintenanceprogram targeting not only international routesbut also the domestic network. Further reformsin the roads sector include the separation of theRoad Fund from NRA in order for each of theseinstitutions to concentrate on their corefunctions.

Table: 6. Imports & Exports Moved by Border Post (Thousand tonnes)

2003 2004 2005

Export Import Total Export Import Total Export Import Total

Mchinji 58.2 68.0 126.2 70.6 60.5 131.0 65.1 67.1 132.2

Mwanza 358.7 268.1 626.8 341.0 326.5 667.5 325.8 335.4 661.2

Kaporo 64.0 34.4 98.4 55.3 50.7 106.0 56.2 56.2 105.5

Total 480.9 370.5 851.4 466.9 437.7 904.5 458.7 458.7 898.9


WaterLake transport is provided by the privately-operated Malawi Lake Services. The companyoperates both freight and passenger servicescovering all the main ports on Lake Malawi,including Chilumba, Likoma Island, Nkhata Bay,Chipoka, and Monkey Bay. Malawi LakeServices also covers Matengula and Cobue inMozambique. Lake transport in Malawi has thepotential to move up to 80,000 tonnes of drycargo and about 15,000 tonnes of fuel cargo perannum.

An important water transport project that iscurrently under preparation is the Shire-Zambezi Waterway Project. The project wasendorsed by the New Partnership for AfricanDevelopment (NEPAD) in October 2005 andaims at reopening the Shire and Zambezi Riversto navigation from the Malawi World Inland Portof Nsanje in southern Malawi to the port ofChinde on the Indian Ocean in Mozambique.When fully developed, this waterway willprovide Malawi with direct access to the sea,facilitating not only Malawi's imports andexports but also those of neighbouringcountries, at considerably reduced cost.

Air Two international airports service Malawi:Kamuzu International Airport (KIA) in Lilongweand Chileka International Airport in Blantyre.Overall freight traffic is about 7,000 tonnesannually and KIA, the larger of the two airports,handles up to three times as much freight cargoas Chileka.

Facilities at both airports are currently beingupgraded to meet modern aviation demands.Air Malawi, the national carrier, is wholly ownedby Government. The airline services bothdomestic and regional destinations in easternand southern Africa, with connecting flights toAsia, Europe and the USA. Air Malawi fliesdomestically between all the major cities andtourist destinations. In addition, the airlinefrequents numerous regional destinations,including the major regional hubs ofJohannesburg in South Africa and Nairobi inKenya. Recently the airline has introduced newflights to London and Dubai in the United ArabEmirates. Other airlines servicing Malawiinclude Ethiopian Airlines, Air Zimbabwe, KenyaAirways, and South African Airways.

Reforms are underway in the air transportsector's institutional, legal and regulatoryframework in order to facilitate privateparticipation.

Figure 3. Malawi Rail Map

Rail The Nacala Corridor is an important externaltransport route for Malawi's imports andexports. Since its reopening in 1992, after theend of the civil war in Mozambique, freighttraffic on this route has resumed. There ishowever, still much potential capacity forincreased traffic. A single private company,the Central East African Railways (CEAR),has operated the Nacala railway line in bothMalawi and Mozambique since 1999. TheNacala railway line will soon be extended onthe Zambian side to cater to internationalfreight traffic from that country, therebyincreasing traffic levels on this rail route. Thetransit time from Nacala in Mozambique toBlantyre in Malawi is 48 hours.


2.5 Communications

Information and CommunicationTechnologyMalawi's telecommunications sector consistsof a single fixed line private operator, MalawiTelecommunications Limited that wasprivatised in 2006; two mobile operators Celteland Telekom Networks Malawi; and a numberof Internet Service Providers (ISPs). Currently,the fixed telephone penetration rate is low witha national average of 3 lines per 1,000 people.A second fixed line licence was issued in 2007to Access Communications. The introductionof mobile telephone services however has ledto an increase in telephone coverage such thatcurrently 6 percent of the population hasaccess to a fixed/mobile telephone connection.International direct dialling is available on 98percent of the country's phones.

Postal servicesAlong with all the standard postal services,express mail is offered with a same daydelivery option by the Malawi PostalCorporation. International courier services havetheir branches in Malawi including DHLExpress, FedEx, TNT, Skynet WorldwideExpress and locally the Pony Express.

2.6 LabourLabour costs for both skilled and unskilledlabour in Malawi are among the lowest in theregion. In fact, Malawi's monthly wage ofUS$32 for an unskilled worker matches theprice of a similar skill-level worker in India andChina.

Malawi's labour force is disciplined, hard-working, reliable, readily trainable and English-speaking. Out of the population of about 13.2million, 40 percent is economically active.Labour issues are handled through a tripartitearrangement comprised of the Employer'sConsultative Association of Malawi, the MalawiCongress of Trade Unions and the Ministry ofLabour.

Table: 7. Median Monthly Compensation 2006 (US dollars)

Source: World Bank Malawi Investment Climate Assessment

Zambia Tanzania S. Africa Malawi Kenya Uganda Madagascar

Managers 357.71 217.26 2,086.90 348.95 376.26 139.08 Export

Professionals 360.02 186.22 1670.90 257.12 138.35 78.34 65.1

Skilled 83.08 82.77 554.70 78.06 87.22 43.12 325.8

Unskilled 42.48 56.90 292.50 32.14 114.92 44.51 56.2


Since 1994, the Government has guaranteedfree primary education, while secondaryeducation enrolment has increased in parallel.In addition, the capacity of tertiary educationhas expanded further with the recent openingof two private institutions- the University ofLivingstonia and the Catholic University- addingto the University of Malawi and the Universityof Mzuzu. Seven public technical collegesoperate in the country, offering skills andtechnical training to secondary schoolgraduates. Furthermore, the Technical andVocational Education Training Authority workswith industries to provide them with relevanttechnical skills. Malawi however, has sufferedfrom a "brain drain," particularly in the healthsector, as a large number of skilled workershave migrated to the industrialised world insearch of better work conditions andremuneration. Steps are being taken to redressthis through increase in salaries and investingfurther in the College of Medicine.

To this end, Government is committed tofacilitating employment of skilled personnel byinvestors. Temporary Employment andBusiness Residence Permits for expatriatepersonnel are readily available for key positions

as well as for positions where there are skillshortages in the local economy. Malawi'slabour laws conform to the conventions of theInternational Labour Organization and areadministered under the Ministry of Labour.

2.7 Health servicesThe Government's policy goal for the healthsector is to raise the health status of allMalawians through the development of adelivery system capable of promoting health,preventing, reducing and curing disease, andreducing the occurrence of premature death inthe population.

The country's public health system comprisesboth the Government and the Christian HealthAssociation of Malawi (CHAM) facilities,providing health services to most of the generalpublic. There are also international standardprivate hospitals and clinics with some offeringspecialised treatment and having links withother international health facilities in thesouthern Africa region. There are four centralhospitals- Queen Elizabeth, Kamuzu, Mzuzuand Zomba- in the main urban centres, anddistrict hospitals in all districts of the country.


2.8 Financial SectorMalawi's financial sector has undergone asignificant reform programme aimed at buildinga more inclusive financial sector, liberalising andmodernising the financial system and opening-up the sector to new entrants. This hasresulted in an increase in the number ofcommercial banks from two to nine, thenumber of microfinance institutions/lenders tofifteen, market-based interest rates,unrestricted access to financing facilities forboth local and foreign investors and a managedfloating exchange rate. Exporters are alsoallowed to operate foreign currencydenominated accounts in authorised banks,though there is a 40 percent conversionrequirement on receipt of proceeds.Liberalisation of the capital account is plannedwithin the next three years.

These financial reforms have also led to thedevelopment of the capital market; and theestablishment of two discount houses, anumber of investment banks, and the MalawiStock Exchange; and the introduction of theReserve Bank of Malawi Bills. Thedevelopment of a more conducive financialservices market has been encouraged with therecent drafting of new legislation andaccompanying regulations to encompasscommercial banks, microfinance institutions,financial cooperatives, and insurance andpension companies.

Table 8. Financial Institutions in Malawi

Central Bank Reserve Bank of Malawi

Commercial Banks National Bank of Malawi Limited, Standard Bank of Malawi Limited, First Merchant Bank of Malawi Limited, Nedbank, Indebank Limited, Loita Investment Bank Limited, New Building Society Bank, Malawi Savings Bank, Opportunity International Bank of Malawi

Discount Houses First Discount House Limited, Continental Discount House Limited

Stock Exchange Malawi Stock Exchange

Leasing Companies Leasing and Financing Company Limited

Investment Banks Indefund Limited

Savings Banks Malawi Savings Bank

MicrofinanceInstitutions

Malawi Rural Finance Company, FINCA Malawi, Pride Malawi, Small EnterpriseDevelopment Organisation of Malawi (SEDOM), Malawi Union of Savings &Credit Cooperatives (MUSCCO), Fund for the Self Employed (FITSE), Development of Malawi Entrepreneurs Trust (DEMAT), ECLOF Malawi, CUMO Limited, Micro Loan Foundation, Touching Lives FundLimited, National Association of Business Women (NABW), The Hunger Project,B Blue,The Malawi Rural Development Fund (MARDEF)


2.9 Taxation

General TaxationGenerally, all types of businesses and personalincome in Malawi are taxable. The legal basisfor taxation in Malawi is the Taxation Act of1993. Government has been undertaking acomprehensive tax review in order to makeMalawi's tax system more conducive toinvestment without compromising theGovernment's ability to generate revenue.

Malawi has two tax legislations: Income Tax - comprised of tax on profits,

i.e. gains and rents; Pay As You Earn (PAYE)or payroll tax; fringe benefit taxes;and non-resident tax.

Customs and Excise Tax - comprised ofimport duty, value added tax, and excise tax.

The following sources of income are taxable: Gains and profits from trade and business Gains and profit from employment Dividends and interest Rents and royalties Pensions, annuities, or other periodic

payments Fringe benefits

Loss carry forwards of up to seven years areallowed on unabsorbed losses.

2.9.1 Direct taxes

Corporate/Company TaxThis tax is imposed on income or gains derivedfrom Malawi for both resident and non-residentcompanies. A resident company is a companyregistered and incorporated in Malawi. Thecorporate tax in Malawi is 30 percent and 35percent for companies with headquartersoutside of Malawi.

Personal Income TaxThe income of individuals derived from wagesand salaries is taxed through PAYE, accordingto a graduated scale with rates from 0 to 30percent. PAYE is deducted and remitted on amonthly basis by employees along with a taxreturn. Institutions in Malawi with employeesearning emoluments of more than MK7,000(US$50) per month register for a Pay Roll TaxScheme with the Commissioner General.Income earned abroad by Malawian residents isnot taxed in Malawi.

Capital Gains TaxAll capital gains are considered as eitherpersonal or business income that is taxed at theapplicable personal or corporate rates.

Withholding TaxAll distributed dividends are subject to a 10percent withholding tax. This tax is levied onpayments to non-residents, including royalties,interest rents, and services. This is a final taxand the recipient of the dividend is not requiredto include the dividend received in his taxableincome.

2.9.2 Indirect taxesIndirect taxes in Malawi include value-addedtax, import duty, and excise tax. Indirect taxesare levied on the consumption of certain goodsand services.

Value-Added TaxConsumers pay value-added tax. The tax islevied on goods and services at the rate of 17.5percent in most cases, with some exempt andzero-rated items.


Import and Excise DutiesAn import duty is levied on imported goodswhether a final product, intermediate product orraw material. In Malawi the maximum importduty rate is 25 percent on final products, 0-10percent on intermediate goods, and 0-5 percenton some raw materials. Excise taxes are thosetaxes imposed on the consumption of selectedimported and manufactured goods classified tobe either luxurious or of social cost to the nationsuch as beer, spirits, cigarettes and motorvehicles. The excise tax is neutral, levied onboth imported and locally-produced goods.

2.10 Investment incentivesTax incentives in Malawi are enshrined in themain tax legislations that include the Customsand Excise Act, the Income Tax Act and theExport Processing Zones (EPZ) Act. Toencourage investment, the Government offersthe following incentives:

General incentives 100 percent investment allowance on

qualifying expenditure for new building andmachinery

allowances of up to 40 percent for usedbuildings and machinery

50 percent allowance for qualifying trainingcosts

allowance for manufacturing companies todeduct all operating expenses incurred up to25 months prior to the start of operations

zero duty on raw materials used inmanufacturing

Loss carry forward of up to seven years,enabling companies to take advantage ofallowances

additional 15 percent allowance forinvestment in designated areas of the

country Duty-free importation of buses with a

seating capacity of 45 persons (including thedriver) and above

Duty-free direct importation of buildingmaterials for factories and warehouses

Duty-free direct importation of goods usedin the tourism industry, which includesbuilding materials, catering and relatedequipment, and water sport equipment

free repatriation of dividends, profits, androyalties

Incentives for establishing operations in anExport Processing Zone (EPZ) zero corporate tax rate no withholding tax on dividends no duty on capital equipment and raw

materials no excise tax on the purchases of raw

materials and packaging materials made inMalawi

no value added tax

Incentives for manufacturing in bond export allowance of 12 percent revenue for

non-traditional exports transport tax allowance equal to 25 percent

of international transport costs, excludingtraditional exports

no duties on imports of capital equipmentused in the manufacture of exports

no surtaxes no excise tax or duty on the purchase of raw

materials and packaging materials a timely refund of all duties (duty drawback)

on imports of raw materials and packagingmaterials used in the production of exports.

There are also additional incentives for thehorticulture, mining and tourism.


INVESTMENTOPPORTUNITIES

IntroductionFor the past three years, investmentopportunities in Malawi have increasedconsiderably following the Government'scommitment to sound fiscalmanagement, a curbing of corruption, andgreater involvement of the private sectorin the building of the national economy.

The favourable environment has createdseveral inroads for private investors. Whileinvestment opportunities exist in allsectors of the economy, Government hastargeted certain sectors due to theirpotential to increase Malawi's exportearnings and reduce poverty. Thesepriority sectors offer the optimum returnsto investors and include agriculture,mining, tourism, manufacturing andinfrastructure.

3.1 Agriculture Agriculture still remains the mainstay ofMalawi's economy, accounting for about32 percent of GDP. There are variousopportunities for investment inagriculture, such as livestock production(for dairy, beef, poultry and pork),aquaculture, horticulture, agro-processing,cold chain development, wholesaling andbrokerage services and packaging.Substantial hectares of affordable estateland are vacant and the development ofcommercial estate farming offers widescope for long term investments byprofessional farmers. The Government is

currently developing an improved policyand legislative framework to facilitatecontract farming, which in turn offersscope for increased turnover forprocessing operations. Increasingly,Government encourages public-privatepartnerships in extension, input supplyand finance in support of sucharrangements. As most of the traditionalagricultural crops such as tobacco, tea,coffee and cotton are exported in a semi-processed state, there are greatopportunities for investors to convertthese agricultural products into highervalue finished products. Opportunitiesalso exist for investment in other higher-value agricultural products such as chillies,macadamia nuts, cut flowers, and specifictypes of beans.

In addition, Malawi has not fully exploitedthe production of agricultural crops underirrigation. Horticultural products such asvegetables, flowers, and fruits, as well asrice, can be grown using surface, gravity,pump, river diversion or sprinkler irrigationsystems. Out of the 400,000 hectares ofland suitable for irrigation, only 14,000hectares of land is under smallholderfarmer irrigation and 48,000 hectares areunder estate irrigation. This gap inirrigation infrastructure can be addressedthrough investment.

INVESTMENT OPPORTUNITIES25

3.1.1 CoffeeProfileCoffee is one of Malawi's traditional exports.The cash crop is grown mainly in the uplandareas of the north (Mzuzu) and south-east(Thyolo and Zomba) of the country, with verylittle production in the central region, where themean altitude is too low except for some partsof Ntchisi, Dowa and Dedza Districts. Around85 percent of Malawian coffee is produced onlarge estates in the south, while the remainderis produced in the north by smallholder farmers.

While Malawi has both the climate and altitudeto produce specialty Arabica coffee that attractspremium world market prices, most Malawiancoffee (98 percent) is exported as green beans.Since the early 1990s, falling world marketprices for coffee have led to an overallreduction in coffee production- from 7,720tonnes in 2001 to a low of 1,590 tonnes in2004.

In recent years however, Malawian coffeeproducers have become increasingly aware ofthe high quality of their coffee bean and itspotential to fetch higher prices in the "specialty"segment of the coffee industry. Since 2005,measures were taken by the CoffeeAssociation of Malawi towards transformingthe country into one of the world's premiumspecialty-coffee producing nations. Malawianspecialty coffee has been showcased ininternational competitions, attracting theinterest of international buyers. Production hassince recovered to 2,173 tonnes in 2006 and isexpected to increase steadily with improvedquality and focus on the specialty markets.

Opportunities Markets: Malawi coffee producers are

seeking international markets for theirspecialty coffees.

Coffee production and processing: Opportunities exist in expanded productionand processing (roasting) of coffee.

3.1.2 Tea ProfileMalawi is the second largest producer of tea inAfrica after Kenya, accounting for around fourpercent of annual world exports (about 40,000tonnes). Traditionally, tea has been the secondmost important export earner for Malawi aftertobacco and has been increasing as aproportion of export sales over the last threeyears. Malawi has suitable ecologies for teacultivation; areas under tea production includeThyolo, Mulanje and Nkhata Bay districts. Theestate sector accounts for approximately 80percent of land under tea cultivation and 90percent of tea production. In addition to theestates, there are about 7,000 smallholderfarmers engaged in tea production.

Tea is sold on the market through twomethods-the Limbe Auction, which is the onlytea auction in Malawi, and through direct andforward contract sales to buyers. Malawi tea isexported in semi-processed form to European,Asian and American markets.

Opportunities New clonal varieties: Investment is

encouraged in high-yielding 'new' clonalvarieties, which are of even higher qualityand more productive than the bulk of theclonal teas being grown presently. A shift toa greater proportion of clonal teas willincrease the average price received forMalawi tea.

Irrigation: Investment in irrigationinfrastructure will generate significantincreases in yields. The infrastructure canbe installed quickly and the resulting yieldimprovements are gained almostimmediately. There are secondary benefits,in that the irrigation can improve productionin the trough months (June to November)when rain is absent, therefore utilizingexisting factory capacity more fully.


Tea processing: Investment is needed inrefurbishing existing tea processingfacilities and the construction of newfacilities. Contract management ofsmallholder tea processing offers anadditional opportunity; the Smallholder Tea Authority has its own factory.

Green tea: Opportunities also exist in theproduction and processing of green tea forEast Asian markets and other specialty teas,such as Hibiscus.

3.1.3 TobaccoProfileTobacco is Malawi's largest industry,accounting for approximately 70 percent of itsexport earnings, 13 percent of GDP, and 23percent of its total tax base. StrongGovernment support for the industry, includingsubsidies and tax breaks, has led to tobacco'sdomination of Malawi's export market. Burley isthe most important tobacco, but there is alsoNorthern Dark Fired and flue-cured tobaccowhich are exported semi-processed. Theliberalisation of the industry in the early-mid1990s resulted in the entry of smallholderfarmers in tobacco production who currentlyaccount for approximately 70 percent oftobacco production. As around 375,000smallholder farmers depend on tobacco forcash income, the crops' success has a majorimpact on rural livelihoods. In 2006/2007115,765,000 kg. of tobacco was produced, a4.8 percent decrease from last season's crop of121,570,000 kg. This decrease is mainlyattributed to the lower prices offered on theauction floors in 2005/2006.

Tobacco leaf is sold in the auction marketslocated in Lilongwe, Limbe and Mzuzu. Eightmajor tobacco-exporting companies are activein Malawi, most of them being agents ordivisions of multi-national companies based inthe United States and Europe. These exportingcompanies buy tobacco leaf from the auction

markets and export it after processing. Some ofthem have established in-country processingfacilities which are made available to othercompanies, and most have technical andmarket expertise for tobacco exporting. UnderGovernment regulations, any company iseligible to purchase tobacco leaf on the auctionfloor.

Opportunities: Markets: As eight international companies

account for over 90 percent of leafpurchases at Malawi's auctions,Government is encouraging more buyers tobuy and semi-process.

Processing: As tobacco is exported semi-processed, there is an opportunity toconvert tobacco into cigarettes.

3.1.4 Macadamia nuts ProfileMacadamia is an expanding cash crop inMalawi. The nuts have a variety of uses, theycan be consumed raw, roasted, or furtherprocessed into additives for confectioneryproducts. In addition, macadamia nut oil can beextracted for use in cooking oil and cosmetics.In Malawi the total area under macadamia nutcultivation is 2,200 hectares. Macadamia nutsare produced by both smallholder farmers andlarge estates.

Three world class nut processing factories arecurrently operating as a result of recentinvestment. The cost of production per hectarein Malawi is very low. Macadamia products areexported in raw form to both Asian andEuropean markets. In addition, Malawi is thelargest exporter of macadamia nuts to theUnited States under AGOA.


Opportunities Development of commercial macadamia

estates: Due to increasing demand for theproduct, more investment is being soughtto boost the production of macadamia nuts.

Post-harvest and processing facilities:Investment is encouraged in post-harvestand processing facilities, in particular for thesmallholder farmers.

3.1.5 CottonProfileCotton has been identified as one of thecountry's strategic crops. Promotion of the cropis envisaged to create jobs in Malawi throughthe revamping of the cotton, textiles andgarment chain. The AGOA initiative, offeringduty and quota-free access to the U.S. market,provides an opportunity for Malawi to developits textile, clothing and garment accessoriesindustry.

Most cotton in Malawi is cultivated bysmallholder farmers in the Lower Shire Valleydistricts of Chikwawa and Nsanje, in thesouthern regions upland areas and around thelakeshore which is hot and experiencesrelatively low rainfall. It is estimated that cottonproduction supports 120,000 farminghouseholds and is currently grown on 60,688hectares of land. While cotton production saw adecline since the mid-1980s due to a relativelylow rate of returns, in 2002-2003 the industrywas revived through the activities of the Cotton

Development Association (CDA). As a result,cotton production increased fromapproximately 16,000 tonnes in 2003, to 46,000tonnes in 2006; the expected yield for 2007 is50-55,000 tonnes.

Cotton is separated into lint (38 percent) andcottonseed (60 percent), the latter is used forpressing into oil for consumers and seedcakefor animal feed. There are three ginningcompanies operating in Malawi with a totalprocessing capacity of 70,000 metric tonnes.Almost all the lint produced in Malawi is beingexported at present (98 percent) with only onespinning operation capable of processing it.Almost all cloth and accessories (zippers,buttons, etc.) are being imported into Malawi.The Government therefore encouragesupstream investment in the cotton industry andintends to establish a Cotton Council, which willbe charged with the responsibility ofoverseeing the development of the cottonchain industry in Malawi.

OpportunitiesProfit in cotton production is very muchdependent on the inter-linkages in the cottonand garment value chain. The Governmentencourages investment in: Textiles: Spinning, weaving, knitting, and

printing plants Garments: Export of garments under AGOA


Cottonseed oil and seedcake processingplants: Many by-products result from cottonprocessing, which can be furtherprocessed. Seed cotton converts into about40 percent lint and 60 percent cotton seedin weight. Cotton seed can be crushed tomake edible cotton oil and seedcake forlivestock feed. There is a strong localdemand for both these products.

Ginneries: In recent years cotton productionhas seen significant increase and thecurrent ginneries are operating at almost fullcapacity. There will therefore be scope theestablishment of additional ginneries.

Biodiesel: Currently in Malawi there isfacility for the production of biodiesel fromcotton seed oil.

Accessories: Malawi imports almost all ofaccessories (zippers, buttons, etc.). As thecotton and garment value-chainstrengthens, there will be scope for thedomestic production of garmentaccessories.

3.1.6 Pulses ProfileIn 2006/2007 Malawi produced about 411,752metric tonnes of pulses, representing a 19.7percent increase from the 343,898 metrictonnes recorded the previous season. There areseveral varieties produced in commercialvolumes, including several types of beans,pigeon peas, cowpeas, field peas, grams, whiteharicot beans, soya beans and chickpeas.Pulses are produced for both local andinternational consumption.

Currently, there are more than 14 companies in Malawi that purchase pulses and have thecapacity to process, package, locally distributeand export pulses. Beans are exported to SouthAfrica and Europe, while processed dhal isexported to Europe, India and the Far East.

OpportunitiesSoya beansSoya bean processing is a fast growingbusiness. This high-protein crop can beprocessed into a number of products: Breakfast cereal and therapeutic foods for

infants and HIV/AIDS patients. Soya-based products are also used by meat,

bakery and animal feed manufacturers toincrease the nutritional value as well as theshelf life of products.

Soya oil production by-product used inanimal feed manufacturing.

Soya as an input into commercial fishfarming.

Soya milk Cosmetics

Opportunities exist for the establishment ofsoya bean processing plants in Malawi.

The locations which currently produce thelargest quantities of soya beans per annum areKasungu (17,000 tonnes), Ntchisi (17,000tonnes) and Mzimba (18,000 tonnes) inMalawi's central and northern regions. Contractfarming arrangements with smallholder andestate farmers offer a quick route to expandingthese volumes.

Sugar beansOpportunities exist in the production of sugarbeans in Malawi. There is ongoing research onsugar bean production as part of the NationalBean Improvement programme to enable theproduction of specific varieties suitable for theexport market. This includes the developmentand release of suitable sugar bean varietiessuch as Sugar 131 (or "Kholophete"). Sugarbeans are a staple crop in the region,particularly South Africa. There is growingpotential in the market for beans in the regionowing to population growth and differences ingrowing seasons; South Africa consumes anaverage of 40,000 tonnes per year and importsa substantial proportion of this from the region,giving good export opportunities for Malawi.

Groundnuts (peanuts)Investment is encouraged in groundnutproduction and processing into such foods aspeanut butter and Ready to Use Foods forsupplemental nutritional feeding programmes.Groundnuts have long been an important partof smallholder production in Malawi. Recently,


several private companies have entered intothe groundnut market and have formed aLegume Association, backing efforts to reviveseed multiplication and delivery systems, andincrease awareness of farmers regardingquality specifications. This is supported byinternational research-extension support forfarm level quality assurance.

Groundnut production increased from 71,000tonnes in 1996 to 2,611,486 metric tonnes in2005/2006. It is expected that this season3,218,850 metric tonnes to groundnuts will beproduced, an increase of 25 percent over lastseason's crop. The central and southern areasof Malawi-Kasungu, Lilongwe, Machinga andBlantyre-account for over 75 percent of thetotal area planted. Integrated value chaindevelopment could re-establish Malawi'sformer prominent reputation as a supplier ofhigh quality confectionary nuts for theinternational market. Opportunities exist in: Wholesaling, grading, and quality testing for

export markets. Peanut butter production for local and

regional markets. Oil extraction for domestic and international

markets. Production of groundnuts as an ingredient in

cage bird and other pet diets for export Use in supplemental feeding products

targeting HIV/AIDS patients andmalnourished children.

3.1.7 CassavaProfileCassava, as an alternative to maize, hasreceived much attention from both theGovernment and Donors as the crop is droughtresistant, can thrive in low fertility or acidic soils

without added fertilizer or amendments, andrequires little labor effort. The production ofcassava in Malawi is expected to grow by 11.8percent to 3,202,398 metric tonnes in 2006,from last season's production of 2,863,212metric tonnes.

While currently 21 percent of smallholderfarmers grow cassava as food or a cash crop,the biggest problem facing these farmers isthat next to the local food market there is noother outlet available for them to sell their crop.With donor assistance, a cassava starchprocessing facility in Nkhotakota wasestablished in 2006 while a smaller processingfacility is operating in Lilongwe. Cassava, oncetransformed into starch, has many otherindustrial applications (e.g. glues, papermaking,snacks, sweeteners, pharmaceuticals fuels andbiodegradable plastics). Through its wide-rangeof applications the world wide market of starchis growing and even Malawi with its limitedproduction industry, is currently importingUS$3 million worth of starch annually for itspaper and packaging industry.

OpportunitiesCassava processing facility: There is greatscope in Malawi for the processing of cassavainto starch for industrial use. In addition,cassava starch can be further processing intoethanol.

3.1.8 Chillies ProfileMalawi is one of the leading suppliers of chilliesto the Western European market as well asother countries.

Opportunities Chillie processing: Chillies as the main

ingredient in chilli sauces for export Paprika: Malawi is expected to produce

approximately 5,000 tonnes of paprika in2007. This is still far below export potential.Most of Malawi's paprika is exported toSouth Africa for further processing intopowder and oleoresin, which is then re-exported to Europe and other markets.Apart from South Africa, Malawi paprika is inhigh demand in Zimbabwe and Zambia, aswell as Spain.

Opportunities therefore exist in paprikaprocessing within Malawi for later export.


Again, commercial paprika production andcontract farming with smallholder and estatesprovide profitable channels to increase thesupply for processing and export.

3.1.9 Cut flower production ProfileMalawi's climate, altitude, high light intensity,and regular day length is favourable for theproduction of cut flowers. As flowers do notgrow well during Europe's winter months,Malawi has an advantage over European cutflower producers during this period. Alreadysome cut flower companies are operating andsuccessfully exporting to Europe.

OpportunitiesAdditional investment in this sector will createeconomies of scale and hence make Malawi'scut flower industry more competitive on theinternational market. Labour is readily availablefor cut flower production within Lilongwe andthe surrounding districts where cut flowers canbe directly exported by air to Europe.

3.1.10 Fruit processing plant ProfileWhile Malawi's climate is favourable for theproduction of a wide-range of fruit, includingpineapples, tangerines, mangoes, bananas, andavocados, currently, as there is limited fruitconcentrate processing in the country, largevolumes of these crops are left to waste duringtheir harvest seasons due to lack of intake andprocessing capacity. Meanwhile, over the lastfew years, several small-scale Malawiancompanies have ventured into fruit juice/fruit

nectar processing. The bulk of fruit juicesretailed in Malawi however, are actually madefrom imported fruit juice concentrate primarilyfrom South Africa or are imported finishedproduct.

Opportunities Fruit juice concentrate processing plant: An

investment opportunity exists to set up afruit juice concentrate processing plant.

Fruit processing: Jams, dried fruit, cannedfruit

Partnerships with international fair tradebusinesses specialising in smallholdergrown tropical fruit products.

3.1.11 Livestock

Beef and dairyProfileThe livestock industry in Malawi is not fullydeveloped. The livestock population in 2005included over 750 thousand cattle, over 1.9million goats and 115 thousand sheep. Thecattle population has stagnated over the pastdecade while that of the small ruminants,particularly goats has grown considerably.

National dairy production supplies only abouthalf of national demand, and there is significantunused capacity in the processing industry(most processing plants run at 25 percentcapacity). In 2004, US$5.8 million dollars worthof dairy products were imported into Malawi,about 60 percent of which was milk powder.


Meat production is also very low, with currentproduction levels translating into per capitameat consumption of 1.3 kg per annum. Thishighlights the vast potential in developing thisindustry.

Opportunities Cattle breeding (both dairy and beef) for

supplying producers with breeding stock Commercial beef and milk production.

Malawi needs experienced commercialfarmers to underpin the expansion of thisindustry.

Contract farming arrangements betweenprocessors and smaller scale producers.

Feed growing and feed production. Manufacturing: Cooling tanks and collection

equipment (e.g. milk, churns). Service provisions: Artificial insemination,

operation of dipping tanks, veterinarysupplies and services.

Abattoirs and meat processing plants. Transportation of raw milk to processing

plants. Cold chain development. Milk and meat promotion, marketing and

retailing.

Poultry ProfilePoultry is the most widely kept class oflivestock in Malawi in both rural and peri-urbanareas. The majority of poultry kept are chickensfollowed by doves, ducks, and guinea fowls.The trends in small and medium scale poultryproduction have been unsteady due to anunreliable supply of feed, an inadequate supplyof day-old chicks, and the prevalence ofdiseases. Malawi currently has a poultrypopulation of about 8.6 million free-rangechickens, 1.6 million broiler chickens and about0.2 million layers kept under intensiveproduction. Realizing the importance of poultryproduction, the Government has embarked on anumber of poultry improvement programmesgeared at improving productivity of subsistenceand smallholder commercial poultry production.

Opportunities Commercial bird rearing: Day-old chick

production (broilers and layers); table egg. Commercial poultry feed production Abattoirs and bird processing Promotion, marketing and retailing of

poultry production.

Table 10. Meat and Milk Production in Malawi, (Tonnes)

Source: FAO database 2006

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Beef & Veal (,000) 22.6 12.1 14.3 14.6 16.0 16.0 16.0 16.0 15.7 16.0

Goat meat (,000) 4.5 5.6 5.8 5.1 6.1 6.0 6.0 6.0 6.6 6.6

Mutton & lamb 322 343 364 364 388 402 402 402 402 402

Cow milk (,000) 32.0 33.0 33.0 34.0 35.0 35.0 35.0 35.0 35.0 35.0

Table 9. Livestock Numbers in Malawi

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Cattle (,000) 700.1 598.2 715.4 711.7 763.7 749.0 750.0 750.0 765.0 750.0

Sheep (,000) 93.0 97.9 102.7 103.1 111.5 115.3 115.0 115.0 115.0 115.0

Goat (,000,000) 1.26 1.57 1.6 1.43 1.69 1.67 1.70 1.70 1.90 1.90

Source: FAO database 2006


3.1.12 FisheriesProfileThe abundant fresh waters of Africa's thirdlargest lake, Lake Malawi, is home to over 800endemic fish species including the MalawiChambo. Most fishing on Lake Malawi and theother smaller lakes, such as Lake Malombe andChiuta as well as the Shire River, is on a small-scale. Due to a steady decline in fish catchesand per capita fish supply in Malawi, theGovernment is promoting investment incommercial fish farming both for the domesticand international market through the 2006Presidential Initiative on AquacultureDevelopment (PIAD).

Currently there exist approximately 4,600 small-scale fish farmers in Malawi, owning over 9,500fish ponds scattered throughout the country,while Maldeco Aquaculture Limited, asubsidiary of Press Corporation, has recentlyventured into commercial cage fish farmingalong the southern shores of Lake Malawi. Thecombined production of both large and small-scale fish farmers is around 565 tonnes peryear, which is not enough to satisfy local- letalone regional- demand for Malawi Chambo.

Opportunities Commercial fish farming: Government

encourages further engagement incommercial fish farming, using the latestfishing technologies, for both the domesticand foreign market.

Fish feed production Fingerlings harvesting and distribution Fish processing facilities Transport Cold storage facilities

3.2 Mining ProfileMalawi is naturally endowed with vast mineralresources. As a result of large capital injections,the country's mining sector grew by anastonishing 51.1 percent in 2005. The sectorregistered negative growth in 2006 (-22percent) due to a lack of new capital which wasexpected to be injected into the sector.However, in 2007 the sector is expected togrow by 2.7 percent. While both local andinternational companies are actively engaged inthe exploration and mining of various minerals,there is still great scope for expansion. In 2006mining activities accounted for approximately 1percent of GDP, however with recentinvestment in uranium and heavy mineral sandsextraction, the Government expects mining tocontribute about 5 percent of GDP in 2008.


Mineral ProcessingPhosphate fertilizer manufacturing: As anoffshoot of mining, there is an opportunityto start the manufacturing of phosphatefertilizer using Tundulu phosphate rocksituated at Nambazo in Phalombe District inthe southern part of Malawi. Officialstatistics show that Malawi imports onaverage about 200,000 tonnes of fertilizerper annum. Phosphate fertilizers constitute20 percent (40,000 tons) of Malawis totalimports. Domestic fertilizer production inMalawi would reduce the price of fertilizer

and therefore encourage the distribution offertilizer to the more remote portions of therural population.Limestone: Processed limestone could beutilized in a number of applications includingthe production of lime, cement, and watertreatments.Glass production and recycling: Glass sandsare suitable for the manufacture of brown(amber) quality glass containers.Soaps and detergents: The glass sands canbe used for the production of sodiumsilicate for use in the soap and detergentindustry.

Source: Geological Surveys, Department Bulletins and Reports, and Private Company Mineral Exploration Reports

Deposit LocationReserve

(Million Tonnes)Grade

Bauxite Mulanje 28.8 43.9 % AL2O3

Uranium Karonga/Chitipa 12.5 0.15% Ur308

Monazite/Strontianite Balaka 11.0 8%Sr, and 2% REO

Corundum Ntcheu 8.0 75.6 gm per m3

Graphite Dowa 2.7 5.8% C

LimestoneNtcheu 15 48% CaO, 1.2% MgO

Balaka 10 46.1% CaO, 3.5% MgO

Titanium HeavyMineral Sands

Salima 700.0 5.6% HMS

Mangochi 680.0 6.0% HMS

Zomba 15.0 6.0% HMS

Vermiculite Mwanza 2.5 4.9% (Med+Fine)

CoalNsanje 4.7 30% ash

Karonga 15.0 21.2% ash

Phosphate Phalombe 2.0 17% P2O5

PyriteDowa 34.0 8% S

Lilongwe 10.0 12% S

Glass SandsMchinji 1.6 97% SiO2

Zomba, Mangochi 25.0 92.7% SiO2 and 0.62%

Dimension Stone Chitipa, Mzimba, Mangochi,Mchinji Large volumes Black, blue, pink, green granite

GemstonesMzimba, Nsanje, Chitipa, Chikwawa, Rumphi,Ntcheu

Large volumesNumerous pegmatites

and volcanics

GoldNeno, Ntcheu, Nkhotakota, Mangochi, Blantyre,Chikwawa

Occurences

Diamonds Mangochi, Mwanza, Rumphi,Chikwawa Occurences

Table 11. Mineral Deposits and Estimated Reserves 2006

Opportunities Mineral extraction


Industrial ceramics and paints: Other thanroofing materials, Malawi does not have anylocal production in ceramics and paints forthe building industry - such as cisterns,toilets, basins etc. The raw materialsrequired for production are available inMalawi - clay, feldspar, quartz, limestoneand heavy mineral sands.Production of jewels and jewellery: Malawihas an abundance of gemstones such asagate, amethyst, aquamarine, garret, rubiesand sapphires; occurrences of gold andkimberlitic rocks which are generally host todiamonds have also been located. There isan opportunity to convert these stones intopolished jewels and jewellery.


3.3 TourismProfileMalawi has great potential to improve anddevelop its tourist industry. Tourism in Malawihas experienced steady growth in recent years.The number of visitors increased from 173,000in 1995 to approximately 480,165 in 2006. TheGovernment is actively encouraging the growthand development of the tourism sector underthe Strategic Tourism Development Plan (2003-2008), which is currently under revision. Theplan places emphasis on the development ofecotourism, the construction of internationalconference facilities, as well as thedevelopment of tourism around the country'snumerous hot springs.Opportunities Development of tourism along Lake Malawi:

Construction of lodges, transport facilities(including cruise ships along the Lake), andrecreational activities.

Ecotourism: The potential for growth intourism is enormous, particularly in eco-tourism. Prospective investors may invest insome of Malawi's unique areas of naturalbeauty around Lake Malawi, MulanjeMountain, Nyika Plateau and protectedareas such as national parks, wildlifereserves, nature sanctuaries. Pre-feasibilitystudies have already been carried-out onvarious ecotourism developments inpotential tourism-designated areas.

Cultural tourism: Malawi has a rich culturalheritage. Opportunities exist in the

development of cultural tourism, including ashowcasing of Malawi's arts and crafts,traditional dances, local village culture, andhistorical sites such as missionary gravesand slave trade villages.

Hot springs: There are numerous virgin hotsprings in Malawi which offer tremendouspotential for tourism development. Hotsprings are found in the following areas:Nkhota Kota, Liwonde and along thenorthern Lakeshore.

Accommodations: Opportunities exist in theconstruction and management of hotels, lodges and camps.

International conference facilities: TheGovernment is actively promoting theconstruction of international conferencefacilities in Lilongwe, Blantyre and along thelakeshore.

Recreation facilities: Opportunities exist thedevelopment cinemas, casinos, watersports, horseback riding, nature walks,among other activities.

Table 12. International Visitors to Malawi, 2002-2005

*EstimateSource: Department of Tourism, NSO and Department of Immigration

2003 2004 2005 2006*

Total number of international visitors 382,600 424,000 427,360 480,165

Percentage growth - 11 1 12


3.4 Manufacturing ProfileManufacturing accounts for about 12 percent ofMalawi's GDP. The sector registered a 5.8percent growth in 2006 and is expected togrow by 9.1 percent in 2007. As most of thetraditional agricultural crops such as tobacco,tea and cotton are exported in a semi-processed state, there are great opportunitiesfor investors to convert these agriculturalproducts into high-value finished products.Opportunities in agro-processing are outlined inthe Agriculture section 3.1 of this Guide.Additional opportunities in light and mediummanufacturing are listed below:

Opportunities Spinning and weaving: An opportunity

exists to invest in a sisal sack manufacturingfacility with a capacity to produce 6 millionsacks per annum. Malawi has a tremendousdemand for sacks, all of which are currentlyimported. Malawi is capable of growing6,000 tonnes of sisal per year.

Leather processing and footwearproduction: Malawi boasts good qualityhides and skins which can be tanned intoleather and used for the production ofvarious leather products such as footwear.Malawi's footwear market is estimated at20 to 30 million pairs of shoes per year (twoper person).

Food and Beverages: Mineral waterbottling: Malawi is a country blessed withmany unpolluted water resources. Theunique geological formation in some areasof Malawi makes them ideal for mineralwater bottling. Favorable areas for bottlinginclude the following districts: Ntcheu,Thyolo and Mulanje.

Paper and paper products, printing andpublishing: Due to vast tree plantations (seeForestry 3.6), opportunities exist for bookprinting, paper and pulp manufacturing aswell as paper recycling.

Electrical machinery, apparatus, appliancesand supplies: Opportunities exist for theproduction of generators, transformers,meters, switch gears, test equipment,lighters, as well as for computer assembly.

Injection moulding/plastics: Most plastics inMalawi are imported, therefore anopportunity exist in the production of plasticproducts. Due to a growth in the beverageindustry, there is great opportunity toproduce plastic drink bottles. Otherpotential areas for investment include themanufacture of toothbrushes, house wares,furniture, shoes, as well as materials for theconstruction industry.

Fabricated metal products, machinery andequipment: Machinery manufacturing: Office and

industrial machinery, equipment andapparatus; pipes, tubes and structuremetal products; farm equipment andagricultural hand tools.

Vehicle manufacturing and assembly:Motor vehicles, motor cycles,automotive components, bicycles andtricycles.

Recycling of scrap metal: Malawiimposed a ban on the export of scrapmetal to enable domestic producers tosource the raw materials withoutdifficulties. There is therefore potentialfor the development of a foundryindustry in Malawi.


Chemicals manufacturing: Mosquito coils Pharmaceuticals: Malawi imports most

of its pharmaceutical products. There istherefore an opportunity to produce bothgeneric drugs and cosmetics.

3.5 Infrastructure The Government is seeking investmentpartners in a number of projects under variousprivate sector participation options such asBuild Operate and Transfer (BOT) and BuildOperate and Own (BOO) concessions. Theseprojects include:

3.5.1 Airports Kamuzu International Airport (Lilongwe)Planned activities for Kamuzu InternationalAirport in Lilongwe at an estimated cost ofUS$8 million include the rehabilitation ofrunways, taxiways and part of the apron. Therehabilitation and replacement of thetelecommunications equipment also needsinvestment.

Chileka Airport (Blantyre)The rehabilitation of Chileka Airport in Blantyreis estimated at US$1 billion. This will includethe construction of a new terminal building, andthe rehabilitation and widening of the runway.

New Mangochi (Namiyasi) AirportPlans have been finalized for the constructionof the new Namiyasi Airport at Mangochi tosupport the tourism industry at the southernend of Lake Malawi. An investor is invited totake up this opportunity.

3.5.2 Shire-Zambezi Waterway Project The project aims at reopening the Shire-Zambezi Waterway from the inland port ofNsanje in southern Malawi to the Indian Ocean

Port of Chinde in Mozambique, a distance ofapproximately 238 km. This will enable bargesand medium sea-going vessels to ply betweenChinde and Nsanje, thereby providing directwaterway access to the Indian Ocean. Inaddition, the project will provide Malawi with amulti-modal transport linkage through therehabilitation of the rail line from Nsanjethrough Blantyre to Chipata in Zambia andthrough Dona Ana to Sena in Mozambique.When this project is completed, Malawi willcease to be "landlocked" within theconventional definition and transportation costswill also decrease.

The project is estimated to cost US$3.925billion over a five-year period. There arenumerous investment opportunities under thisproject; a pre-feasibility study funded by theEuropean Union has been completed and it wasdetermined that the navigation of the waterwayis feasible. Additionally, a Memorandum ofUnderstanding (MOU) between Mozambique,Zambia and Malawi was signed in April 2007and plans are underway to undertake anEnvironmental Impact Assessment (EIA) andHydrographical Studies.

3.5.3 Urban housing There is heavy demand for urban housing in allthe major towns in Malawi. In spite of the rapidincrease in new house construction, theescalating house rental prices and long waitinglists for affordable public housing aremanifestations of this high demand. TheMalawi Housing Corporation has over 60,000potential tenants on its waiting list. There isgreat opportunity for investment in theconstruction of low, medium and high-densityhouses in Blantyre, Lilongwe, Mzuzu and Zomba.


3.6 ForestryProfileThere are 69 forest reserves in Malawicomprising 30 percent of the forest cover.Most of these reserves were created forwatershed protection, hence their location inthe mountains and escarpments. The NationalForestry Policy (1996) and the Forestry Act(1997)- guided by the Malawi National ForestryProgramme launched by Government in 2001-are key instruments driving the developmentand management of forests and forest-derivedproducts in the country. These provisions seekto improve rural livelihoods, which depend onforest products for their economicdevelopment, by allowing the participation ofthe private sector and civil society in the sector.

Malawi has large plantations of pinus patulawhich the Government offers as a concessionfor investment. The main plantation is locatedin northern Malawi, approximately 300 km fromLilongwe. Concessions and loggingagreements have been issued to some privatecompanies for about 20,000 out of around53,000 hectares of commercial forest inMalawi. The commercial potential of Malawi'slarge forest plantations such as Viphya Plateau(Lusangazi, Chikangawa), Nyika Plateau, Dedza,Mulanje mountains and Zomba Plateau hastherefore not been fully exploited.

Opportunities Tree seedling production: The production of

tree seedlings has become a vibranteconomic activity. Tree seedlings areraised by both small and large-scaleentrepreneurs. Government is currently thelargest buyer and is subsidizingcommunities engaged in tree plantingprogrammes during the National Forestryseason which is an annual event.

Wood processing: The Department ofForestry offers concessions for 25-30,000woodlots. Malawi timber is in high demand

in South Africa, Mozambique, Europe andAsia where it has established markets. InMalawi, timber is extensively used in theconstruction industry, which is currentlyexperiencing a boom. Between 2002 and2006, the Malawi construction industrygrew at an average annual rate of 13percent.

Furniture manufacturing: Furnituremanufacturing is a growing industry inMalawi, particularly in urban areas wherethere is population growth as peoplemigrate from rural areas. More investmentis required in furniture manufacturing orderin to make this manufacturing sub-sectorcompetitive in the international market.

Rubber processing: Malawi has rubber treesfor the production of latex rubber at the rateof 1,300 tonnes per annum. Ten percent ofthe total tonnage is used locally for tyre re-treading, paint and mattress manufacturing.The remainder is exported to Europe, NorthAmerica and regional markets. There istherefore an opportunity to invest in rubberdown stream industries for the productionof shoes, bags, mats and motor vehicleproducts for local consumption as well asfor the regional markets.

3.7 EnergyProfileThe energy sector is a crucial industry thatsupports other industries. A vast amount ofprivate investment is required to meetincreasing energy demand for both householdand industrial use. Current estimates indicatethat firewood and charcoal satisfies 93 percentof all household energy demand in Malawi,while one percent of the total population useselectricity for cooking and lighting.

The use of firewood and charcoal has led toserious deforestation at an unsustainable rate.As recent projections indicate, householdconsumption of 7.5 million tonnes per annum


of firewood and charcoal exceeds sustainablesupply by 3.7 million tonnes and has reducedthe areas of protected forest cover from 47percent to 21 percent within the last two and ahalf decades. For this reason, the Governmentis promoting the utilization of various market-ready viable alternative sources of energy.

OpportunitiesThe energy sector in Malawi consists of fourmain sub-sectors:

HydropowerMalawi is seeking investment in electric powergeneration. Listed below in Table 13 are someof the energy opportunities that could beexplored.

Pumped water storage power generation:The potential for a pump storage powergeneration scheme from Lake Malawi andsome of the rivers such as Bua and SouthRukuru has been investigated. From abusiness and engineering perspective, LakeMalawi can be viewed as the suitable sitefor pumped water storage electricitygeneration. This is because next to the Lakeis situated on one of the highest plateaus(Nyika Plateau) in the Southern Africa.

Interconnection of power systems betweenMalawi and neighbouring countries.

Table 13. Hydroelectric Power Generation Projects

Capacity (mega-watts) Project cost (million USD)

Lower Fufu 90-100 119

Khorombidzo high 479 330

Khorombidzo lower 479 312

Mpatamanga 300 335


CoalThere are about 22 million tonnes of coalreserves and about one billion tonnes ofprobable coal reserves. Coal is used forindustrial boilers in the Central and SouthernRegions and is imported from Tanzania tosupplement local production which isinadequate. Coal mining: Out of five major coal fields

available in the country, only two fields,

Livingstonia and Mwabvi are being mined,however not at full capacity. Therefore thereis great potential for increased coal miningin the country. The five major coal fields andtheir characteristics are listed in Table 14.

Coal processing for household use: Thiswould also necessitate investment in thedevelopment of appropriate stoves.

Thermal power generation.

Table 14. Coal deposits

PetroleumMalawi relies entirely on the importation ofrefined petroleum products such as petrol,paraffin and diesel via the neighboring countriesof Mozambique and Tanzania. These importsare bought into the country by road and rail,adding to the landed cost of petroleumproducts. Therefore, the Government isseeking investment in the construction of an oilpipeline from the Port of Beira to the MalawiWorld inland port of Nsanje, as well as theconstruction of a strategic fuel storage facility inthe country. The Government has recently

commissioned a feasibility study for theconstruction of the oil pipeline.

Alternative energy sourcesIn 2006 the Department of Energy Affairslaunched a flagship the Promotion ofAlternative Energy Sources Project (PAESP)aimed at increasing the country's reliance onnon-traditional fuels for cooking (wood andcharcoal) and heating, thereby improving thecountrys environment. There are 13 alternativeenergy sources selected for promotion underPAESP.

Table 15. Alternative Energy Sources

Source: Annual Economic Report 2007

Coal Field District Cal Value (Kcal/kg) Ash Content

Ngana Karonga 4,799 21%

N. Rukuru Rumphi 5,410 28%

Livingstonia Rumphi 7,226 14%

Lengwe Chikwawa 4,250 50%

Mwabvi Nsanje 5,030 40%

Energy Type Energy Source

Biomass-based fuels Biomass briquettes

Coal Coal (household) stoves

Gas-based fuels Liquefied petroleum gas biogas (methane)

Ethanol-based fuels Gel-fuelSuper BluEthanol for cooking and heating

Petroleum-based fuels Parrafin stoves

Electric energy distribution New connectionsReady boards

Generation Wind power generation

Solar Photo-voltaicsSolar thermal (water heating)


SolarUtilization of solar power is gainingprominence as a way of transformingMalawi's rural economy. However, theindustry is beset by lack of local capacity inmanufacturing and distribution of solarpower equipment. This has translated intohigh up-front costs for end-users.Investment opportunities exist, particularlyfor international suppliers, to partner withlocal supplier and/or installer companies inthe manufacturing and distribution of solarpower equipment.

EthanolMalawi has two ethan

malawi investment opportunities

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