New Malawi Tax Measures Bound to Hurt Investment

6 June 2011

LILONGWE – Malawi’s new tax measures announced this week are likely to impact foreign direct investment in the southern African nation, the Malawi Confederation of Chambers and Commerce (MCCCI) said on Saturday.

Finance Minister Ken Kandodo said in his 2011-12 budget speech on Friday previous tax breaks for industrial buildings, plants and machinery granted to companies under a free trade zone would be reduced to 40 per cent from 100 per cent. Companies will also be subject to the standard corporate tax of 30 per cent, he said.

“The new tax measures will in the long run worsen the investment climate which is already on a decline because of unreliable power outages, water shortages and the high cost of service,” Chancellor Kaferapanjira, chief executive officer of the MCCCI, told Reuters.

MCCCI is an influential private sector grouping in Malawi.

Malawi’s FDI inflows have been on the decline since 2008, when they peaked at US$144 million. The Malawi Investment Promotion Agency said investment into the country in 2010 fell by 46 per cent from the previous year to US$58,2 million.

“There are lot [more] minuses than pluses in the budget, for instance there is a lot of goods that have been applied VAT (value added tax) and for sure businesses may raise prices and in the long run investment may suffer,” Kaferapanjira said.

The finance minister forecast that Malawi’s economy will grow 6,9 per cent this year and 6,6 per cent in 2012, allowing the country to absorb a hefty decline in foreign aid.

Tobacco accounts for more than 60 per cent of Malawi’s exports and 15 per cent of its gross domestic product. The tobacco industry employs an estimated two million people.

Malawi is also a uranium producer and touted to be home to one of the world’s largest reserves of rare earth metals. – Nampa-Reuters

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