The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world. They analyze a variety of economies that are or could be markets for U.S. businesses. The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption. The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption.
Executive Summary
Malawi’s economy was significantly impacted by the COVID-19 pandemic and supply chain issues related to the Russian invasion of Ukraine. Gross domestic product growth slowed to 0.9 percent in 2020, but rebounded slightly in 2021, expanding by 2.2 percent. The government forecasts this trend will continue and forecasts growth of 4.5 percent by 2023. Macroeconomic and fiscal challenges remain, however. The government’s heavy debt burden and persistent fiscal deficits are likely to restrain economic expansion that outpaces population growth. Inflation was 9 percent in 2021, driven largely by currency devaluation and price increases for imported goods, primarily fuel, fertilizers, and food. The economy is heavily dependent on agriculture and is particularly vulnerable to climate related shocks.
The Government of Malawi is eager to attract foreign direct investment. Investment opportunities exist in agricultural, mining, health, transportation, information technology, and energy sectors. Transportation is a potential growth sector as the government works to improve the road network and rehabilitate railway lines connecting Malawi to Mozambique, Zambia, and Tanzania. Public-private partnership opportunities are likely to open in aviation and road networks. Corruption remains a major problem at all levels of the public and private sectors. There is a scarcity of skilled and semi-skilled labor. Political risk in Malawi is manageable and tribal, religious, regional, ethnic, or racial tensions are minimal.
The Malawi Investment and Trade Center assists investors and businesses by providing insight and local knowledge to help navigate the myriad regulations, processes, and procedures required to operate a business. Malawi’s legal system is generally unbiased but is notoriously slow. Investors have the right to establish, acquire, and dispose of interests in business enterprises. In 2022 and early 2023, Parliament passed a number of reforms that negatively impact foreign ownership and investment in land-based enterprises. The regulatory framework of these reforms is under review; they are expected to come into force in late 2023 or early 2024.
Scarcity of foreign exchange (forex) remains a challenge and negatively affects investors. The government aims to maintain a three-month supply of forex, but often falls short of that goal. Forex rationing has led to several months wait for business to remit foreign investment funds. Despite the long wait times, there are currently no restrictions on remittance of foreign investment funds if the capital and loans initially came from foreign sources and were registered with the Reserve Bank of Malawi.
Malawi is a land-locked country and the road network connecting to ports in neighboring countries is limited. Investment in infrastructure overall has been limited. Formal and informal trade boundaries may restrict imports and exports, and import tariffs tend to be high. Malawi is one of the least electrified countries in the world; approximately eleven percent of the country has access to regular electricity and internet is unreliable, and expensive.
The government is committed to addressing climate change through climate smart policies and programs. The Environmental Management Act provides details on environmental requirements for investors and ministries, departments, and agencies (MDAs). Climate change issues are integrated across the public service and national development plans. However, limited resources and issues related to poverty impede the government’s ability to implement climate adaptation and resilience programs and initiatives.
Malawi’s borders are open to local and international travelers. To access the full text of the 2023 ICS, visit the U.S. Department of State Investment Climate Statements website.