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LEGAL REQUIREMENTS AND THE INCENTIVES OF DOING BUSINESS IN AFRICAN COUNTRIES (PART VII)

By Dr. Paul Otubusin,

M.B.A.,J.D.,PhD
Principal Partner, Otubusin & Assoc. P.C. (www.otubusin.com)
Professor Emeritus & former chair Philosophy, Calumet College.

MALAWI

Malawi is situated in the southern part of the East African Rift Valley cradled by Mozambique in the south and with Zambia and Tanzania to the west and east.

Legal System

The judiciary is independent of the legislative and the executive arms of government and the country’s mercantile law. Most of the civil law applicable to expatriates is based upon the English law of the late nineteenth century. Administration of customary law and of certain statutes, however, is dealt with by Traditional Courts. The government can be sued in the Courts.

Visiting businessmen are generally exempt from visa requirements if from former British possessions, Europe or North America.

The law governing commercial entities are closely based on English statute and case law. The British Companies Act of 1908, with certain amendments, at present regulates corporate affairs, together with Malawi courts. New companies legislation has been in draft for several years, however, and is likely to be presented to Parliament in the near future. This is expected to introduce a number of radical changes and tighter regulatory mechanisms.

Investment Incentives

It is the government’s policy to encourage the country’s economic development through the initiative and contributions of private enterprise. Foreign capital investment is generally welcome.

Financial participation is available from a variety of sources:

1. The Malawi Development Corporation (hereinafter, “MDC”) wholly owned by the government .

2. Investment and Development Bank of Malawi Limited.

3. Indefund, an offshoot of Indebank, and SEDOM, an EEC- sponsored organization, assist small enterprises.

4. Agricultural Development (hereinafter, “ADMARC”).

5. Commercial Banks.

6. Government guarantees for the purpose of initiating or advancing enterprises conducive to national economic development and growth and is in the public interest.

In addition to the above, the investor’s considerations include the following:

1. Granting of duty exemptions in respect of capital goods imported in connection with projects approved by the Ministry of Finance as being of national importance..

2. Granting of exclusive industrial licenses for development in new fields by the Ministry of Trade and Industry for renewable five-year periods.

3. Granting of tariff protection against imports for extended periods to protect developing infant industries.

4. Provision of necessary infrastructural services by the government or its agencies, except in remotest areas. However, capital or annualized contributions are required for such items as electricity or site servicing.

5. Provision of financial assistance through a government board for worker training.

6. Participation of international financing institutions in viable projects in Malawi in view of the country’s track record of non interference in the private sector and sound financial management.

7. Granting of exclusive licensing arrangements, tariff protection and intermediated financing assistance to economically an financially sound import-substitution or export-oriented projects in order to assist in the diversification process to reduce the national dependence on tobacco, tea and sugar.

8. Special assistance for projects utilizing the vast pinewood resources in the northern region of the country, for fertilizer and alternative energy projects, and for prospecting and developing mineral, oil and gas resources.

9. Granting of import duty drawbacks (rebates) where goods are exported, with or without value added, within two years (claims must be made within six months of export); such sales are exempt from surtax.

*** Please note that there is no export credit insurance scheme or subsidized export credit scheme.

Forms of Business Entities

Commercial entities take a number of forms:

1. Statutory bodies - Government-controlled enterprises established by specific Act of Parliament.

2. Public companies.

3. Private companies.

4, General partnerships.

5. Limited partnerships.

6. Joint ventures.

7. Branches of foreign corporations or companies.

8. Sole proprietorships.

9. Trusts

10. Cooperative societies.

11. Guarantee companies.

12. Unincorporated associations or societies.

***By far the most common form of business entity used by foreign investors is the company, although groups of contractors regularly operate through joint ventures or unregistered branches for nonrecurrent work. Corporations (that is, public companies) are incorporated under the Companies Act and require a minimum of seven shareholders,

To be continued...

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