Malawi's economy is based on agriculture which accounts for about 38 percent of Gross National Product and more than 90 percent of the country's export earnings. At least 80 percent of agricultural produce comes from smallholder farmers on customary land. The rest is produced by commercial farmers on estates. The main crops grown in Malawi are maize, tobacco, tea, sugarcane, groundnuts, cotton, wheat, coffee, rice and pulses.

Malawi is an exporter of primary produce and net importer of industrial goods. It's major exports include tobacco, tea, sugar and groundnuts while its major imports are intermediate (chemical and allied) goods for industry.

Malawi adopted an export oriented growth strategy following independence based on large scale agriculture and agro-based manufacturing using foreign capital and managerial skills. The economy was directed at supporting private and parastatal projects in the productive agricultural sector through the provision of essential infrastructure, utilities and supporting services. Until the mid 1980s when structural adjustment reforms were introduced, parastatals and conglomerate Press Holdings Limited operated in all key sectors of the economy, often enjoying monopoly positions. Government control and regulation of the private sector was also significant. The country enjoyed a high economic growth rate up until 1979, driven by tobacco and tea exports. GDP growth for the first 15 years of independence averaged six percent every year. Between 1979 and 1982, Malawi's economy went into recession. To get the economy back on track, the government believed the smallholder agriculture sector needed to grow, management of public resources needed improvement and private and public sector wage controls to be relaxed. Further liberalisation of the foreign exchange, an overhaul of the monetary and tax systems and improved incentives for foreign and local investors were also introduced. Since the early 1990s, economic reforms aimed at, among other things, attracting foreign investment, have been stepped up. Price controls on all commodities have been eliminated and privatisation of the parastatal sector is well underway. Malawi's main economic activity continues to be in the agricultural sector. The major export crops include tobacco, sugar, groundnuts, rice, tea, coffee and cotton. Other crops include maize (the staple food), sorghum, millet, pulses, root crops and rubber. These crops are grown by both smallholder farmers and estates. About 38 percent of GDP comes from agriculture. The other major sectors are manufacturing, utilities, construction, transport, distribution and communications as well as government services.

BUSINESS AND INVESTMENT ENVIRONMENT

Malawi has undergone a social and political transformation in recent years which has created a new optimism within the country. It is now poised to capitalise on its comparative advantage through greater cooperation with private sector investors. Foreign investment is welcome and inward transfers of capital are not restricted. The Government plans to liberalise capital flows further and the few remaining restrictions on payment for current account international transactions were lifted in February 1995. There are no restrictions on the transfer of dividends, licence fees and profits by foreign owned companies. To promote domestic and foreign investment in export-oriented manufacturing, the Malawi Government has liberalised regulations over the past 10 years. The Investment Promotion Act of 1981 cut out the need for general investment licenses for investment and the Malawi Investment Promotion Agency facilitates the entire process. MIPA is an investment promotion body whose board of directors is made up of representatives from the private sector, parastatal sector and government. It is responsible for promoting, attracting and encouraging local and foreign investment in Malawi. The services MIPA provides to investors include:

• Facilitating all aspects of the investment process in Malawi
• Providing courtesy services to investors
• Furnishing information related to investment in Malawi
• Identifying partners in or outside Malawi for joint venture business opportunities
• Working with local and international financial institutions for the benefit of investors, and
• Consulting with private sector organisations so that better informed recommendations concerning the investment climate can be made.

FOREIGN TRADE

The country's central location makes it an important trade centre in the region of central and southern Africa and it has strong existing links with regional and overseas trading partners. Countries and trading blocks to which Malawi has preferential access include:

1.  The European Union through the Lome Convention (agricultural products and virtually all manufactured goods have preferential access to all EU member states)
2. Eastern and Southern Africa

Malawi has bilateral trade agreements with South Africa and Zimbabwe. Malawi is also a participant in the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA)

3. Malawi is also a member of the General Agreement on Tariffs and Trade (GATT) and the Generalised Systems of Preferences.

Almost all non-tariff barriers to trade have been removed. Restrictions on imports have been relaxed except for a very small range of goods which have implications on health, safety, national security and the environment. Export licenses have been abolished for everything except maize, groundnuts and beans. An extended and improved duty drawback was introduced for manufactured exports in 1991.

Malawi’s foreign trade balance is determined by production levels and world market prices for tobacco, tea and sugar. The country's exports are dominated by these three commodities which account for about 85 percent of domestic exports. Imports are dominated by capital goods and industrial equipment. During years of drought, Malawi's food imports rise significantly. In recent years, the direction of Malawi's foreign trade has diversified with South Africa emerging as a major trading partner. Malawi has a diverse range of export products mainly in the agricultural sector. These include beans and pulses, dhals, chillies, tobacco, tea, coffee, macadamia nuts, rice, confectionery, ceramics, textiles, crafts, farm implements, fishing flies, furniture, gemstones, enamelware, rubber, live tropical fish, cut flowers, buses and trailers.

FINANCIAL INSTITUTIONS

In a bid to increase the availability of and access to financial resources and services, the Malawi Government has embarked on an ambitious reform programme to liberalise and modernise the financial system. Some of the features of the programme include market-based interest rates, no direct government control on credit and unrestricted access to financing facilities for both local and foreign investors. Exporters are allowed to operate foreign accounts in authorised banks and anyone can apply to operate a bureau de change throughout the country. Traveller Cheques and foreign currency notes of all major currencies are accepted by authorised hotels and other institutions. There is no exception on the amount of foreign currency that can be brought into Malawi.

Existing commercial banks and finance houses all adhere to international banking standards and in a sound financial position. The Malawi Government has followed a flexible exchange rate regime since the 1980s. In February 1994, a market-determined exchange rate was put in place and the Malawi Kwacha was floated. The exchange rate is now freely established on the basis of supply and demand for foreign currencies.

CENTRAL BANK

The Reserve Bank of Malawi (RBM) took over the central banking functions of the Bank of Rhodesia and Nyasaland and took over exchange control; after independence. Foreign exchange transactions used to be administered by RBM with the authority of the Ministry of Finance. Prior to liberalisation, the Reserve Bank conducted foreign exchange fixing sessions every Friday but the RBM has since granted commercial banks the authority as foreign exchange dealers, to approve transactions and remittances liberally. The RBM has registration authority over new foreign capital investment and oversight and approval authority over international transfers of foreign exchange.

In 1994, the RBM introduced Treasury Bills of various maturities ranging from 30 to 183 days and it operates the fledgling market in government stocks. The main feature of government's comprehensive financial reforms programme is the use of more indirect and market oriented monetary control mechanisms rather than Reserve Bank control mechanisms.

COMMERCIAL BANKS

There are six registered commercial banks in Malawi. The National Bank of Malawi and the Commercial Bank of Malawi operate a countrywide branch network and other conventional range of services to depositors including checking accounts, registration of foreign capital with RBM, short and medium term credit facilities, trade financing, export credit guarantees, foreign remittances and repatriation of capital. Commercial banks also offer working capital to investors. Between 1991 and 1995, INDEFINANCE, First Merchant Bank, Finance Bank of Malawi and Finance Corporation of Malawi commenced their services in the country.

OTHER FINANCIAL INSTITUTIONS

The Investment and Development Bank of Malawi (INDEBANK) was formed in 1972 with foreign and local participation to provide medium and long-term credit. It is a development finance institution which provides loan and equity financing for projects in agro-business, manufacturing, tourism and services. The state-owned Malawi Development Corporation is a commercial parastatal organisation set up to invest in agricultural, industrial and commercial projects with local or foreign partners. Other financial institutions are National Mercantile Credit, National Insurance Company and Leasing and Finance Company of Malawi.

MONEY AND CAPITAL MARKETS

Following the 1990 Capital Market Development Act, the Malawi Government has continued to introduce measures to broaden the capital market and improve the mobilisation of domestic financial resources. In 1992, readily discountable Reserve Bank of Malawi bills were introduced and the Malawi Stock Exchange was established in 1994. Stockbrokers Malawi Limited deals in listed company shares and acts as a broker in government and other securities approved by RBM. The liberalisation of Malawi's financial sector has helped the monetary authorities to run a tight, independent monetary policy which has removed government-controlled credit ceilings in favour of open-market operations to regulate money supply.

INDUSTRY

The Malawi Government has taken a pro-active stance to attract foreign investment into the country. Several industrial estates have been established. These have all but eliminated the obstacles investors have faced in acquiring land for factory sites. Export Processing Zones offering special incentives to investors have been established and manufacturing licensing requirements have disappeared in all but a small number of industries.

The manufacturing sector in Malawi is agro-based and mainly involves agro-processing. In 1999 it accounted for nearly 13 percent of GDP. The agro-processing industries include tea factories, spinning and weaving, tobacco processing, sawmills and plywood, oil and grain mills, meat processing. Other industries include soaps and detergents, cement, textiles and clothing, footwear, leather processing, fertiliser compounding, brewing, distillery and structural works. There is significant investment potential in the following areas:

• Light engineering industries such as steel rolling, wire drawing, metal plating, metal fabrication, machine shops, tool shops, electric cables and foundries. Mineral based industries include lime, ash cement, mini-cement plants, roofing tiles, refractors, pottery, ceramic ware and graphite.
• Light chemical industries such as paper recycling, oil refining, plastics, rubber products, auto rubber parts, pharmaceuticals and pesticide formulation, shampoos and detergents. Textiles including handloom and powerloom weaving, yarn, garment and fishing net manufacture.
• Forestry and wood-based industries.
• Food preservation and agro-processing of fish, coffee, avocado oil, fruit juices, canning, bakeries and confectionery and
• Fertiliser production

1. Mission Statement
2.  Goal
3. Situation Analysis
4. Activities in the budget year 2000/2001
5.  Future Plans
6.  List of Parastatals
7.  Organisation Structure of the Ministry of Commerce & Industry

Address                     :        P.O. Box 30061, Lilongwe 3
Telephone                  :       774 266
Fax                             :       774 110
E-mail                         :       dcs@malawi.net

Responsible Minister  :     Hon. Bob Khamisa, M.P.
                                         Minister of State in the President's
                                         Office responsible for Statutory
                                         Corporations

Chief Officers             :     A.M. Juma,
                                         Comptroller of Statutory Corporations

                                         S.H. Ng'oma,
                                         Deputy Comptroller of Statutory Corporations
 

1. MISSION STATEMENT

The Department of Statutory Corporations is responsible for ensuring optimal utilisation of resources available to the parastatal sector for the purpose of achieving predetermined objectives of the individual parastatals.

2.    GOAL
The ultimate goal of the Department is to make parastatals more profitable, less dependent on government subvention and offer quality products and services. Whilst the above remains the main goal of the Department, establishing good management (including transparency and accountability) and financial management systems are intermediate goals to achieve the stated main goal.

3.     SITUATION ANALYSIS
There are 54 parastatals in the country and about 24 of these are commercial, that is, they are self-financing. The rest depend on government subvention.

Data on performance of parastatals still show that many of the commercial parastatals are unable to make adequate profits and pay dividends and corporate taxes. Some of them make big losses and are unable to service their debts and pay dividends to government. Many subvented parastatals are always looking for increased subvention (funding) from government. However, there is improvement in some parastatals in the way they are monitoring their performance through good management and financial systems put in place.

There are still many persistent problems being faced by parastatals that are forcing them to come to government for financial help. This has resulted in government embarking on privatisation, dissolution and restructuring programmes to resolve some of the outstanding problems. These activities are going on even more intensively now as more and more parastatals are giving problems and finding it hard to adapt to the changing environment of economic liberalisation and technological advancement.

During the period 2000/2001, the Department of Statutory Corporations was unable to perform to its full potential because of low funding which declined by K8 million between 1998 and the year 2000. Many activities suffered to the extent that the Department, in some circles, was said to be doing nothing useful. The problem was made difficult by the movement of some of the qualified and experienced staff to other Ministries and institutions. This problem has now been to a large extent resolved.
 

4. ACTIVITIES IN THE BUDGET YEAR 2000/2001

(i) Coordinated and participated in the activities of rationalising parastatals through dissolution of redundant parastatals or merging those with similar functions in order to reduce costs and hence government subvention to the sector.

(ii) Presented to Parliament annual performance reports of nearly 10 parastatals.

(iii) Established a special unit within the Department, called Parastatal Performance Monitoring Unit, to be solely responsible for financial analysis, monitoring and supervision of parastatals.

(iv) Administered and facilitated the restructuring process of Smallholder Tea Authority and Malawi Tea Factory, which is now ready for privatisation.

(v) Trained staff in the Department to enhance efficiency.

(vi) Participated in the on-going restructuring of ESCOM, MDC and ADMARC.

(vii) Participated in the on-going privatisation of Air Malawi being managed by the Privatisation Commission.

(viii) Implemented necessary steps for the final privatization of Kasungu Flue Cured Tobacco Authority (KFCTA), like payment of retrenchment benefits to staff. The final part of privatization will be handles by the Privatisation Commission.

5. FUTURE PLANS
 In the next three years or more, the Department would like to carry out the following activities on a yearly basis:

(i) Intensify implementation of January 2000 Chairmen and Chief Executives Symposium resolutions.

(ii) Enhance management and financial discipline through:
- Orientation and training of Boards and management teams.
- Intensify audit systems in at least 25 parastatals.

(iii) Carry out technical reviews in the parastatal sector to assess their financial viability and areas that need improvement/rationalisation as well as how such improvement can be achieved.

(iv) Participate in and facilitate the activities of privatising parastatals by the Privatisation Commission.

(v) Facilitate and manage the process of restructuring parastatals.

(vi) Continue monitoring and supervising parastatals in administrative and financial matters.

(vii) Continue processing and assisting in the appointment of suitable persons to the boards of directors.

(viii) Carry out a study of the parastatal sector with a view to have a strategic plan for the sector.
 
 

1.      Agricultural Development and Marketing Corporation (ADMARC)
2.      Electricity Supply Corporation of Malawi (ESCOM)
3.      Air Malawi
4.      Malawi Housing Corporation (MHC)
5.      Blantyre Water Board
6.      Lilongwe Water Board
7.      Northern Region Water Board
8.      Central Region Water Board
9.      Southern Region Water Board
10.    Petroleum Control Commission (PCC)
11.   Tobacco Control Commission
12.   Privatisation Commission
13.   University of Malawi
14.   Mzuzu University
15.   Malawi Development Corporation (MDC)
16.   National Electricity Council
17.   Small Enterprise Development Organisation of Malawi (SEDOM)
18.   Malawi Entrepreneurs Development Institute
19.   National Roads Authority (NRA)
20.   Malawi Revenue Authority (MRA)
21.  Technical, Entrepreneurship and Vocational Education Training Authority (TEVETA)
22.  Censorship Board
23.  Copyright Society of Malawi
24.  Development of Malawian Traders Trust (DEMATT)
25.  Malawi National Examination Board (MANEB)
26.  Malawi College of Accountancy
27.  Smallholder Tea Authority
28.  National Youth Council
29.  Tree Nut Authority
30.  Television Malawi (TVM)
31.  Malawi Telecommunications Ltd (MTL)
32.  Malawi Posts Corporation (MPC)
33.  Malawi Communications Regulatory Authority (MACRA)
34.  Malawi Bureau of Standards (MBS)
35.  Malawi Accountants Board
36.  Malawi Council for the Handicapped (MACOHA)
37.  Malawi Industrial Research and Technology Development Centre (MIRTDC)
38.  Malawi Institute of Education (MIE)
39.  Malawi Institute of Management (MIM)
40.  Malawi Investment Promotion Agency (MIPA)
41.  Malawi National Commission for UNESCO
42. Malawi Polytechnic Board of Governors
43. Medical Council of Malawi
44. National Herbarium and Botanic Gardens
45. National Library Services
46. National Road Safety Council of Malawi
47. National Sports Council of Malawi
48. Nurses and Midwives Council of Malawi
49. Pharmacy, Medicines and Poisons Board
50. Public Accountants Examination Council
51. Chitakale Tea Estates
52. Malawi Broadcasting Corporation (MBC)
53. Airports Development Limited
54. Malawi College of Health Sciences