Country Profile MALAWI
About Malawi
The Republic of Malawi is a landlocked country with an estimated population of 18 million people. Malawi has a sub-tropical climate, which is characterised by a warm-wet season and a cool-dry season. The country has a total land area of 9.4 million hectares, of which 5.8 million hectares are cultivated and 3.2 million hectares are under forest cover. The remaining 2.9 million hectares of Malawi are covered by Lake Malawi, a fresh water lake that makes up part of Malawi’s eastern border with Tanzania and Mozambique. Lake Malawi provides the source water for Malawi’s largest river, the Shire River, which is the main source of Malawi’s electricity.
Economy
Overview
The country’s GDP grew by 2.5 percent in 2016, although growth is expected to slow in the short-term as the impacts of two years of severe drought ripple through the economy.
Market Access
Malawi’s economy benefits from access to markets with populations of more than 90 million people through its shared borders with Tanzania, Mozambique, and Zambia. The larger markets of the DRC (70 million people) and Zimbabwe (16 million people) are also relatively close to Malawi. All of these countries are members of regional trading blocs such as SADC and COMESA.
Previous Investments
Malawi’s access to international sea- and airports to several African trading partners has made it a destination for Foreign Direct Investment (FDI). In 2012, Malawi received FDI worth USD $1.2 billion, representing 22% of FDI flows to Southern Africa. The MITC records indicate that FDI increased by 18 percent from 2011 to 2012, which is indicative of the improved business climate in Malawi. Most FDI came from China and the UK, whereas FDI from South Africa, India, Pakistan, and locals accounted for less than 4% of total in 2012.
Investment Case
General
Countries in the southeastern African region are competing for scarce FDI from funds that are seeking to maximize their financial, social, and environmental returns. Malawi has a number of advantages that make it a relatively attractive proposition for investors. These include:
- political stability
- investor-friendly climate
- regional trade agreements through WTO, EU, COMESA, and SADC
Legal Framework For Investment
Malawi’s legal framework allows foreign investors to invest in any part of the Malawian economy unless explicitly denied by the sector’s responsible minister.
A foreign investor can:
- Own land under leasehold agreements
- Make international payments on their loans and interests without any restrictions
- Wholly remit profits and dividends as long as their investment is registered with the Central Bank of Malawi
- Disinvest 100% from the country whenever they choose
- Control 100% of their business interests in Malawi
Source: Malawi Export Promotion Act of 2012
Key Sectors in Malawi
Sector I: Forestry
Malawi’s forestry sector is a significant source of economic activity, as both hard and softwood function as the major construction materials. Additionally, around 98% of households use fuelwood or charcoal for cooking because there are few viable alternatives. At the same time, forest plantations have seen their tree cover fall over the last decades to 10% of their 1950s levels. Estimates suggest the sector constitutes approximately 4.4% of Malawi’s GDP. However, true contribution is likely to be greater because that figure does not account for many values that forests provide to other activities, such as growing and processing of tobacco, protection of water supply, protection of watersheds and general improvement of the environment.
Sector II: Agriculture
Malawi grows a wide variety of tree-based crops including bananas, mangos, macadamia and avocados. The country’s agri sector accounts for 32% of the economic activity and more than 85% of its exports. Additionally, agriculture is also a significant employer, accounting for approximately 90% of employment in the country with smallholder farmers growing nearly 75% of Malawi’s annual food supply.
Simultaneously, Malawi’s continuously increasing population, leads to reduced average smallholder farm sizes. As a result, low-skilled labor is abundant and relatively inexpensive, creating opportunities for low-margin activities and value-adding steps such as processing.
Uhusiano Capital
Established in May 2016, Uhusiano Capital addresses the capital requirement needs for African-based projects and opportunities. The founding principle of Uhusiano Capital is the fundamental belief that commercial capital and impact capital can come together. This interaction can generate sustainable long-term projects in Africa for which both impact capital and commercial capital can be catalysts.
Disclaimer
The contents of this document are communicated by, and the property of, Uhusiano Capital Limited. Uhusiano Capital Limited is an appointed representative of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority (“FCA”). The information and opinions contained in this document are subject to updating and verification and may be subject to amendment. No representation, warranty, or undertaking, express or limited, is given as to the accuracy or completeness of the information or opinions contained in this document by Uhusiano Capital Limited or its directors. No liability is accepted by such persons for the accuracy or completeness of any information or opinions. As such, no reliance may be placed for any purpose on the information and opinions contained in this document. The information contained in this document is strictly confidential. The value of investments and any income generated may go down as well as up and is not guaranteed. Past performance is not necessarily a guide to future performance.
