WT/TPR/S/231 Trade Policy Review 
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IV. TRADE POLICIES BY SECTOR 
(1) AGRICULTURE  
(i) General features and policy framework 
1. Agriculture is the backbone of Malawi's economy.  The sector contributes over one third of 
GDP1 (Table I.2), almost 90% of employment, and ab out 90% of Malawi's foreign exchange earnings 
from merchandise exports (Table AI.2).  The main e xport crops are tobacco, sugar, tea, and cotton.  
Maize is the principal subsistence crop;  the staple food of most Malawians ( nsima ) is made from 
ground maize.  Other food crops of growing impor tance include cassava, rice, sorghum, and millets. 
2. Self-sufficiency in maize is one of the central elements of food security in the country.  About 
80% of the smallholders grow maize.  Malawi su ffers from severe land pressure because of its fast 
growing population, and loss of soil fertility.  With out fertilizer, productivity is low.  Agricultural 
production is largely dependent on rainfall, as capital  intensive irrigation is out of reach for most 
farmers. There is very little mechanization; the ha nd hoe remains the smallholder's main farm tool. 
3. The Ministry of Agriculture and Food Security, whilst promoting maize farming system, has 
adopted a diversification policy towards cash crops  and livestock.  The commercial livestock sector 
contributes about 11% to GDP, according to the au thorities.  Malawi has a nascent dairy industry, 
with some exports to regional markets but , overall, 60% of dairy products are imported.2  Malawi has 
about 4,000 registered dairy farmers producing a pproximately 6,500 tonnes of milk annually.  
Malawi’s milk consumption is ve ry low at about 5 litres per capita.  Malawi is a net-exporter of 
poultry products, including eggs. 
4. Malawi has aligned its agricultural developm ent programme with N EPAD's Comprehensive 
Africa Agriculture Development Progr amme (established in 2003) to reverse a general trend of under-
investment in agriculture.3  Governments agreed, amongst other things, to commit the resources 
needed to achieve 6% annual growth in agriculture  and to allocate at least 10% of their national 
budget to agriculture.  Malawi's agricultural GD P growth has exceeded 10% in recent years 
(Table I.2) and 14% of the national budget was allocated to agriculture in 2008/09.4  Under the 
Malawi Growth and Development Strategy (MGD S) for 2006/07-2010/11, agriculture has been 
targeted as an engine of economic growth. Th e Agriculture Sector Wide Approach (ASWAp) 
programme is Malawi's umbrella programme for pr ioritized investments in agriculture aimed at 
increasing production, productivity, and diversification of production.5   
5. The main support instruments employed in the ag riculture sector are the tariff (Table AIV.1), 
price support, tax holidays, duty waivers on agri cultural equipment and machinery, and input 
subsidies.  Under a World Bank pilot project in pa rtnership with Opportunity  International Bank of 
                                                      
1 This estimate is for commerci al agriculture but Malawi also has a large subsistence sector. 
2 World Bank (2009c),Vol. 1. 
3 FAO online information.  Viewed at:  http://www.fao.org/docrep/005/y6831e/y6831e00.HTM. 
4 Minister of Finance (2008). 
5 Target crops under the ASWAp include beans, groundnuts, soybeans, pigeon peas, and horticultural 
products.  Specific programmes incl ude the Farm Input Subsidy Programm e (FISP);  the Greenbelt initiative 
(aimed at increasing production and productivity through irrigation);  the Agricultural Development 
Programme-Support Programme (aimed at increasing pro ductivity of rain-fed maize cropping systems);  the 
Dairy Development Project;  the Irrigation, Rural Livelih oods and Agricultural Development Project (IRLADP);  
and the Farm Income Divers ification Project (FIDP). Malawi WT/TPR/S/231 
 Page 39 
 
 
Malawi Ltd, some peanut and maize farmers have access to subsidized weather insurance against the 
risk of drought-related default.6 
6. Malawi has two emerging commodity exchanges that provide price information and trade 
facilitation services to farmers (Agricultural Commodi ty Exchange for Africa (ACE), and the Malawi 
Agricultural Commodity Exchange (MACE).  Th ese are complemented by the public system 
(Agricultural Market Information System) run by th e Ministry of Agriculture and Food Security, and 
COMESA's regional Food and Agriculture Market Information System (FAMIS).  
(ii) Selected agricultural products 
(a) Maize 
7. Maize plays a central role in the economy.  The price of maize has a direct impact on urban, 
as well as rural poverty, as 90% of the agricultural producers are net buyers of maize.7  Policy 
responses to ensure food security have included tari ffs, input subsidies, minimum prices, strategic 
reserves, and export prohibitions.  The Government has also used the derivatives (call options) and 
insurance to stabilize maize prices indirectly and control government expenditures for maize 
purchases.  Drought insurance purchased on the inte rnational weather derivatives market partially 
covers payments of food in the case of a shortage.8 
8. The Agricultural Development and Marke ting Corporation (ADMARC), a commercial 
parastatal with a poor financial performance, is in the process of reorganization into "social" 
ADMARC, and the Malawi Warehousing and Tradin g Company (MAWTCO).  MAWTCO originates 
from the Government's decision to transfer ADM ARC's warehousing functions to a new commercial 
company, with the objective of improving the efficiency of agricultural marketing. 
9. Social ADMARC essentially functions as the Government's arm for implementing its 
agricultural policies for maize and other agricultural products and is a service provider to smallholder farmers in areas where it is difficult for the privat e sector to operate.  ADMARC's operations include 
domestic and international trade in agricultura l commodities produced by smallholders (maize, 
groundnuts, rice, beans, soybeans, sesame, grams, pi geon peas, cow peas, and sunflower);  storage (it 
owns most of the storage capacity for food crops);  agri-processing (rice, groundnuts, and grains);  
and sale of farm inputs (fertilizer and pesticides). 
10. ADMARC has functioned as a buyer of maize pr oduction from smallholders for storage and 
sale during the lean season from November to Marc h.  Its trading monopoly was removed in 1987 and 
the market was opened to competition from private traders, but ADMARC remains the main operator 
in the domestic grain markets.  The Governme nt provides price support for maize producers via 
guaranteed farmgate prices (MK 40 per kg in 2009/10) and price ceili ngs at retail, implemented by 
ADMARC.  However, the minimum price policy has been only partially effective due to ADMARC's 
financial constraints. 
11. The National Food Reserve Agency (NFRA) manages Malawi's strategic grain reserves.  The 
current target is a minimum of 60,000 tonnes.  In su rplus years, the agency h as been a major buyer on 
                                                     
 
6 Micro Insurance Agency online information.  Viewed at:  http://www.microensure.com/crop_ 
insurance.html. 
7 World Bank (2009c), Vol. 1.  Food inflation, heavily influenced by changes in the price of maize, 
accounts for about 58% of the consumer price index. 
8 Minister of Finance (2008).  This is under the World Bank Weather Insurance Scheme;  the premium 
has been sponsored by DFID. WT/TPR/S/231 Trade Policy Review 
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the domestic market.  In 2009/10, the Government allocated MK 2.0 billion (about US$14 million) for 
the purchase of maize on the domestic market.9  Official grain reserves are not for sale but released 
for free distribution in case of emergencies or for other relief purposes. 
12. Malawi applies a 25% tariff on imports of maize meal from MFN and SADC origins;  imports 
of maize meal from other origins, and imports of maiz e, are duty-free.  There has also been substantial 
informal cross-border trade in maize, as well as other commodities, between Malawi, Mozambique, Tanzania, and Zambia.
10  Small-scale traders move commodities across the porous borders either on 
foot or bicycle.  Generally, there is a lack of  knowledge on the duty-free status for such imports.  
Under a COMESA initiative, a simplified trade re gime policy is being de veloped in Malawi to 
encourage operators of the cross-border trade to use main immigration points. 
13. Malawi has been self-suffici ent in maize since 2005/06 and has even exported maize 
(Table IV.1).  However, Malawi has no competitive advantage as a maize exporter11;  its export 
performance has been distorted by input subsidies (Box IV.1). 
Table IV.1 
Production of selected agr icultural products, 2002/09 
(Tonnes) 
Crops 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 
Maize 1,557.0 1,847,476 1,733,125 2,611,486 3,444,000 2,777,438 3,742,408 
National 
requirement 1,925.1 2,036,052 2,059,291 2,115,317 2,183,506 2,244,000 2,444,000 
Deficit/surplus -368,109 -188,576 -326,166 496, 169 1,260,494 533, 438 1,298,408 
Self sufficiency (%) 80.9 90.7 84.2 123.5 157.7 123.8 153.1 
Sugar 260,411 259, 878 256, 706 263, 536 285, 234 266,000 304,000 
Tobacco 94,312 106,187 72,504 121, 600 160,238 117,412 192,516 
Rice 88,155 46,493 44,815 91,450 114,905 113,166 131,058 
Cotton 40,039 53,581 59,212 58,569 76,761 63,290 67,098 
Tea 39,085 41,693 50,043 37,978 45,010 48,141 41,639 
 
Source:  The authorities of Malawi. 
14. Formal maize exports are largely based on g overnment-to-government contracts, carried out 
mainly by the private sector (Grain Traders Asso ciation of Malawi) and monitored by the National 
Food Reserve Agency.  The Government has periodi cally resorted to ad hoc bans on exports by 
private traders, the last time in September 2008;  the export ban was lifted in May 2009. 
                                                      
9 Minister of Finance (2009). 
10 FEWS Net Malawi online information "Cross Border Food Trade Updated December 2007".  
Viewed at:  http://v4.fews.net/docs/Publications/M alawi%20Informal%20Cross- border%20Trade%20Update% 
20Decem ber%202007.pdf. 
11 World Bank (2009), Vol. 1. Malawi WT/TPR/S/231 
 Page 41 
 
 
Box IV.1:  Malawi's Farm Input Subsidy Programme 
Malawi was on the brink of famine in 2005.  Drought throughout southern Africa e nded with a disastrous maize harvest 
that left over half of Malawi's population in need of emer gency food aid.  In order to increase agricultural productivity 
and improve food security, fertilizer subsidies were re-int roduced in 2005.  The main component of the Farm Input 
Subsidy Programme is fertilizer subs idies for maize (120,000 tonnes in 2005/06; 150,000 tonnes in 2006/07-2008/09; 
160,000 tonnes in 2009/10).  Fertilizer for tobacco, legumes, an d seeds, and pesticides for cotton producers have also 
been subsidized.  In 2008/09, fertilizer subsidies were exte nded to smallholders producing tea and coffee as a cushion 
against the surge in international fert ilizer prices.  In the 2009/10 season, cas h crops are no longer eligible for input 
subsidies. 
The targeted beneficiaries of the fertilizer subsidies are sm allholders (about 1.5 million) too poor to purchase fertilizer at 
market prices.  Coupons, used to reach the beneficiaries, entit le them to purchase two bags of fertilizer at a subsidized 
price (50 kg NPK – Nitrogen, Phosphorus, Po tassium – and 50 kg of urea).  The quan tity is considered to be sufficient 
for 0.4 hectares of land, which most sma llholder farmers cultivate.  Beneficiarie s were previously required to purchase 
subsidized maize seed;  in the 2008/09 programme, hybrid ma ize seed was distributed fre e of charge.  Beneficiary 
identification and distribution of coupons takes place at communi ty level.  Malawi is still e xperimenting with eligibility 
requirements.  
According to the International Food Polic y Research Institute (IFPRI), the even tual failure of many input subsidy 
schemes in Africa during the 1970s and 1980s was in part becau se the distribution by state- owned enterprises displaced 
commercial input suppliers selling at full  cost.  One policy challenge  thus lies in building a sustainable fertilizer supply 
system that involves private operators.  In the Malawi sche me, smallholders used to have the choice to redeem their 
coupons at public or private sector outlets.  In the 2008/09 season, the parastatal ADMAR C handled about 80% of the 
allocated inputs.  The Smallholder Farm er Fertilizer Revolving Fund of Malawi  (SFFRFM) is the other major outlet for 
subsidized fertilizer.  In the meantime, the Government ha s withdrawn participation of private traders in fertilizer 
distribution due to cases of fraud.  However, all subsidi zed seeds in the 2008/09 season were supplied by the private 
sector, according to the authorities. 
Overall, the Farm Input Subsidy Programme together with favourable rainfall has been a success in improving food 
security in Malawi.  From a nati onal maize deficit in 2002/03 to 2004/05 (before commencement of the programme) 
Malawi has advanced to surplus production in the past four seasons (Table IV.1).  The average maize yields improved 
from less than 1 tonne per hectare to 2 tonnes per hectare.  After removing the effect of above-average rainfall, the 
impact on the national maize harvest that is attributable to increased use of fertilizer and improved seeds has been 
estimated in the range of 300,000-400,000 tonnes in 2006 , and 600,000-700,000 tonnes in 2007.  The value of the 
additional maize production, estimated at US$100-160 million in 2007, significantly exceeds the cost of the fertilizer 
subsidy of about US$70 million.  However, crop-specific fe rtilizer subsidies normally le ad to substitution effects 
between crops. 
Budgetary expenditures for the subsidy scheme in 2005/05 we re about US$50 million.  The cost increased sharply to 
about US$270 million in 2008/09, mainly as a result of surging world market prices for fertilizer (the average price 
reached US$1,600 per tonne in 2008/09, compared with US$800 per tonne originally budgeted).  However, the 
Government has also successive ly lowered the subsidized price paid by beneficiaries.  In the 2009/10 season, fertilizer 
was distributed at MK 800 per 100 kg, a small fraction of the market price.  The programme has a very high subsidy 
element, reaching about 90% in recent seasons.  Expenditu res are estimated at US$150 million in 2009/10.  Expenditures 
have been co-financed through logistics and dedica ted budget support by the donor community, notably the 
U.K. Department for International Deve lopment (DFID).  In part, the ferti lizer subsidies therefore constitute fertilizer 
aid, clearly a more efficient form of aid than food aid. 
On the other hand, the programme is administratively burdensom e, not least to keep fraud and leakage in check.  There are 
also opportunity costs when spending about 50-60% of Ma lawi's agriculture budget on input subsidies (90% of the 
agricultural budget or almost 5% of GDP in 2008/09);  there is little room for investments with a higher long-term rate of 
return than fertilizer subsidies, such as agricultural resear ch, irrigation or measures to reduce crop losses of maize (40% by 
some estimate). 
Source:  WTO Secretariat;  and WFP (2009), Country Portfolio  Evaluation of WFP Assistance to Malawi, Rome.  
 Viewed at:  http://documents.w fp.org/stellent/groups/public/docum ents/newsroom/wfp207899.pdf;  and 
 International Food Policy Research Ins titute (2009), "Fertilizer Subsidies in Africa", Washington,  D.C.  Viewed 
 at:  http://www.ifpri.org/sites/defa ult/files/publications/ib60.pdf;  and ADMARC online information.  Viewed 
 at:  http://www.admarc.co.mw;  and DFID online information, "A record harvest in Malawi".  Viewed at:  
 http://www. dfid.gov.uk/Media-Room/Case-Studies/2007/ A-record-maize-harvest-in-M alawi/;  and World Bank 
 (2009c), Malawi:  Country Economic Memorandum – Seizing Opportunities for Growth through Regional 
 Integration and Trade , Vo l. 1, Washington, D.C. 
 
 WT/TPR/S/231 Trade Policy Review 
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(b) Tobacco 
15. Tobacco is Malawi's most important cash crop and the tobacco industry is its main driver of 
growth, with significant multiplier effe cts on other sectors of the economy.12  The industry contributes 
around 13% to GDP and around 60% of foreign excha nge earnings.  Malawi is the world's number 
one exporter of burley tobacco (currently about 25% of world production);  it also produces flue-cured 
and dark-fired tobacco.  Malawi is thus vulnera ble to anti-tobacco smoking campaigns by other 
countries.  In this regard, Malawi and other Me mbers have raised their concerns in the TBT 
Committee about recent tobacco legislation adopt ed by Canada (Cracking Down on Tobacco 
Marketing Aimed at Youth Act) which they c onsider unnecessarily trade restrictive to achieve 
Canada's legitimate public health objective of reducing the incentives for young people to smoke.13 
16. The tobacco industry is regulated by the Tobacco  Control Commission.  Its functions include 
registration and licensing of tobacco growers and sellers ; regulation and supervision of auction sales 
(except for oriental tobacco);  licensing of auc tion floors, auction buyers, and commercial tobacco 
graders;  and issuing of certificates of origin, as well as import and export permits.   The Commission 
is also authorized to allocate delivery quotas to re gistered growers, to manage the supply of tobacco. 
The delivery quotas are not tradeable among producers a nd there is strict enforcement, according to 
the authorities. 
17. All sales of green leaf tobacco (unprocessed tobacco) must pass through the market-place of 
Auction Holdings Ltd. (AHL);  direct exports ar e not permitted.  AHL's main shareholders are the 
tobacco growers and ADMARC.  AHL is also Malawi 's major collection point of foreign exchange 
(about US$2 million per day);  prices are quoted in U.S. dollars.  Intermediate tobacco buyers are not 
permitted.  Auctioning fees remain high, although they have been reduced from 3.25% in 2003 to 
currently 2.5% of the selling price, and 1.85% for direct sales.  In addition, statutory levies apply:  the Agricultural Research and Extension Trust (AR ET) levy (1%);  Tobacco Control Commission 
(0.13%);  and Tobacco Association of Malawi (TAMA) and other associations (US$0.7 per kg). 
18. Since the last TPR of Malawi, contract ma rketing (direct sale) of tobacco has been 
introduced.  Under this system, buyers sign contracts with individual growers to buy their leaf at the 
AHL auction floors; some farmers are sponsored by the prospective buyer (contract growers).  Prices 
are negotiated between the buyer and the grower .  The volume of direct sales increased from 
2,000 tonnes in 2005/06 to 30,000 tonnes in 2007/ 08 and 78,000 tonnes in the 2008/09 season.  By 
comparison, sales under the auction system amount ed to 153,889 tonnes in the 2008/09 season. 
19. There are currently seven tobacco buyers repr esented in Malawi, mostly foreign-owned:  
Alliance One Tobacco Malawi Ltd;  Limbe Leaf Tob acco Company;  Africa Leaf Ltd;  Malawi Leaf 
Company Ltd;  Premium TAMA Ltd;  Associated Tobacco Company;  and RWJ Wallace.
14  These 
merchant companies buy, process and sell tobacco to cigarette manufacturers. 
20. Since the 2007/08 season, tobacco sales have been subject to minimum prices, based on 
understandings between the Government, the Tobacco  Control Commission, and the tobacco buyers.  
                                                      
12 Lea and Hanmer (2009). 
13 WTO documents G/TBT/M/49, paras. 8-18, 22 D ecember 2009, and G/TBT/W/329, 24 march 2010. 
14 Alliance One Tobacco Malawi, a subsidiary of Allia nce One International in the United States, is the 
largest exporter of Malawi tobacco (about 25% of the to tal);  Limbe Leaf Tobacco Company is a subsidiary of 
the U.S. company Universal Corpora tion, the world's largest tobacco merchant, and Press Corporation of 
Malawi;  Africa Leaf Ltd. is a subsidiary of Tribac Leaf  Ltd. in the U.K.;  Malawi Leaf Company Ltd. is a 
subsidiary of the AHL;  and Premiu m TAMA Ltd. is a subsidiary of the Tobacco Association of Malawi 
(TAMA) representing the tobacco growers. Malawi WT/TPR/S/231 
 Page 43 
 
 
The minimum prices are established for each grade of  tobacco (the grades are determined by the 
Commission).  The minimum prices for the 2009/10  season are fixed at US$2.15 for burley tobacco, 
and US$3.09 for flue-cured tobacco.  Work permit s of several buyers have been withdrawn for 
alleged failure to adhere to agreed minimum pri ces.  As a price-taker on the international tobacco 
market, however, Malawi has limited scope to rai se farm incomes through minimum prices.  On the 
other hand, farmers are penalized through an overval ued exchange rate that effectively reduces farm-
gate prices. 
21. In 2008, Malawi introduced new excise rates on cigarettes, in conjunction with a local-content 
scheme for the manufacture of cigarettes c ontaining at least 70% Malawian tobacco 
(Chapter III(3)(v)).  One company, Nyasa Manufactur ing Industries, currently produces cigarettes in 
Malawi.  The normal applied tariff is US$18 per t housand sticks for a hinge-lid packet, and the 
equivalent of US$12 per thousand sticks for a soft packet;  the reduced rat es based on local content 
are US$9 and US$6, respectively.15 
(c) Sugar 
22. Sugar has become Malawi's second-most-important  foreign exchange earner in recent years, a 
place traditionally held by tea.  Production has expand ed substantially in two of the last three seasons, 
supported by favourable world market prices since 2006 (Table IV.1).  Malawi has preferential market access to the EU unde r the EBA initiative for LDCs
16, to SACU under SADC's Sugar 
Cooperation Agreement (Annex VII to the SADC Pr otocol on Trade), and to the United States' 
Generalized Scheme of Preferences.17 
23. According to the authorities, Malawi is cu rrently among the top five low-cost sugar 
producers, which include Brazil and Australia.  Ma lawi produces both raw suga r and refined sugar.  
Its MFN tariffs on sugar products average 23.1%, w ith a range from 10% to 25% (Table AIV.1).  
Sugar tariffs  appear to be relatively high for a competitive producer, albeit co mparable to those of 
Zambia and Zimbabwe, according to the authorities.  Domestic retail sugar prices at about 36 cents/lb 
are lower than in neighbouring countries and Sout h Africa but slightly higher than in Swaziland. 
24. The sugar industry in Malawi is dominated by Illovo Sugar Malawi Ltd, a subsidiary of the 
Illovo Sugar Group based in South Africa (Africa's largest sugar manufacturing company).18  Illovo 
owns two sugar estates, and sugar mills and refi neries at Nchalo and Dwangwa, which account for 
Malawi's entire milling and refining capacity.  Illo wo also has out-grower schemes (private sugar cane 
growers) associated with each of these operati ons (Dwangwa Cane Growers Limited and Kasinthula 
Cane Growers Ltd), which account for around 10% of its cane supplies.  
(d) Tea 
25. Malawi is Africa's second-largest exporter of tea after Kenya.  Production takes place on nine 
commercial estates;  and almost 10,500 smallholder farmers (under the umbrella organization of the 
National Smallholder Tea Development Committee) acc ount for about 8% of total production. Tea is 
                                                      
15 Minister of Finance (2008) . 
16 Tariff and quota-free access for LDC sugar exports to the EU was introduced in October 2009.  
See WT/TPR/S/214/Rev.1, p. 107. 
17 For 2008/09, returns on sugar exports (free on board) were around US$0.25 /lb in the EU market, 
US$0.20 /lb in the United States, and US$0.12 /lb on the world markets (Illowo Sugar Ltd., 2009). 
18 In 1998, Illovo acquired a controlling stake in the state-owned Sugar Corporation of Malawi 
(SUCOMA) from Lonrho Sugar Corporation Ltd. WT/TPR/S/231 Trade Policy Review 
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an important provider of permanent and seasonal em ployment with about seven months of production 
annually.  
26. The tea industry is largely self-regulated under the auspices of the Tea Association of Malawi.  
Marketing decisions for tea are free from government intervention.  Tea is sold mostly at the Limbe 
auction or directly to (foreign) buyers.  Some tea production is auctioned at the much larger market-
place in Mombasa, Kenya. 
27. In July 2009, the import tariff for tea, am ong other agricultural products, was increased to 
25% (Chapter III(1)(iii)(a)).  The rationale for this  measure is not clear, given Malawi's position as a 
traditional net exporter of tea;  in the long run, it may adversely affect the competitiveness of Malawi 
tea on the international markets. 
(e) Cotton 
28. Cotton is Malawi's fourth most important ex port crop, earning about US$22 million in 2008 
(Table AI.2).  It is a smallholder cash crop, an d production has increased steadily (Table IV.1).  
Malawi has a competitive advantage in co tton production according to the World Bank.19  T h e  
Government is in the process of developing a co tton development policy and related legislation to 
enhance cotton production, marketing, and processing. 
29. In 2008, the Government and ginners agreed on a minimum price for seed cotton MK 65 per 
kg.  Major buyers have threatened not to buy Mala wi cotton.  Malawi sellers lack sufficient market 
power vis-à-vis  major international buyers, such as Cargill Malawi Ltd., to achieve a price increase by 
means of minimum prices. 
30. About half of cotton production is processed lo cally.  Processing is limited to cotton ginning, 
cooking oil extraction, with residues being processe d into cotton seed cake used as livestock feed.  
There are three ginning companies (Great Lake s Cotton Company, Clark Cotton Company, and 
Iponga), which are running far below capacity.  In  2009, the Malawi Cotton Company, a Chinese FDI 
project, started operations in Balaka with the pl an to start manufacturing textiles and garments.  
Applied MFN tariffs on textiles average 19.5%, ranging from 0 to 25% (Table AIV.1). 
(2) ENERGY  
(i) Electricity 
31. One of the main growth constraints in Malawi is a significant shortfall in electricity supply.20  
Load-shedding (planned power cuts) and unannoun ced outages are frequently used to ration power 
supply.  The electricity shortage has also been re cognized as a factor in deterring investors, and in 
weakening the competitiveness of local industries.  Many enterprises have their own back-up diesel-
driven generators, an expensive alternative.   
32. A small portion of Malawi's population has access to electricity; most people depend mainly 
on firewood, charcoal, and other forms of biomass.  In 2009, customs duties were removed on certain 
equipment to encourage renewable energies (wi ndmills, solar panels, solar energy lamps, and 
batteries).21 
                                                      
19 World Bank (2009c),Vol. 1. 
20 World Bank (2009c), Vol. 1. 
21 Minister of Finance (2009). Malawi WT/TPR/S/231 
 Page 45 
 
 
33. About 98.5% of Malawi's electricity supply is  generated from hydroelectric plants operated 
by the Electricity Supply Corporation of Malawi (ESCOM).22  ESCOM is a parastatal utility, holding 
a de facto monopoly over the generation, transmission, and distribution of electricity.  Its generating 
capacity is about 243 MW compared with peak demand of about 290 MW.23  Transmission and 
distribution losses are large (estimated at about 20% ).  Private generators produce about 60 MW for 
their own consumption. 
34. Malawi is one of the few SADC countries not yet connected to the regional grid, SADC's 
Southern African Power Pool (SAPP).  The SAPP is aimed at creating a common and competitive market for electricity within SADC.
24  To take advantage of the SA PP, a transmission connection with 
Mozambique's grid is under consideration. 
35. Reform of the legal and institu tional framework of the electricity sector has been under way 
since 1998.  Steps include the removal of ESCOM's legal monopoly in the supply of electricity (ESCOM (Repeal) Act of 1998);  licensing proce dures for operators, including independent power 
producers for the generation, transmission, distributi on and trade in electricity (Electricity Act No.22 
of 2004)
25;  establishment of a Rural Electrification Fund (Rural Electrification Act No. 21 of 2004);  
and the merger of the regulators for electricity (National Electricity Council) and petroleum 
(Petroleum Control Commission) to form the Malawi Energy Regulatory Authority (Energy Regulation Act No. 20 of 2004, which entered into force in 2007).  Malawi's Power Sector Reform 
Strategy of 2003 envisaged the establishment of sep arate legal entities (unbundling) for electricity 
generation, transmission, and distribution but  this has not yet been implemented.   
36. Electricity tariffs are controlled through a base ta riff review undertaken every four years, and  
an "automatic tariff adjustment" mechanism introdu ced in 1998.  The base tariff review takes into 
account the cost of new investments to meet dema nd.  Automatic tariff adjustments are triggered 
when inflation or foreign exchange rate movements vary by more than 5%;  the mechanism also takes 
into account "other unavoidable cost increases and e xpected efficiency gains" (Electricity Act No. 22 
of 2004).  Any increase of ESCOM's tariffs requires approval from the regulator;  tariffs of rural off-
grid electricity suppliers are also subject to approval. 
37. ESCOM's tariffs were raised in October 2005 (+25%) and Apr il 2006 (+10%), and remained 
unchanged until December 2009 at US$0.03 -0.05 per kWh for domestic users.
26  Malawi's electricity 
tariffs were amongst the lowest in southern Afri ca and in the world, and too low to encourage 
investment.27  Moreover, electricity consumption has b een indirectly subsidized, since ESCOM's 
financial losses are borne by the Government.28  These subsidies are regressive, benefiting the 
wealthier segments of the population with access to electricity.  At the end of the 2008/09 financial 
year, ESCOM had 180,000 customers, of which 130,000 were residential. 
38. To improve the financial and investment performance of ESCOM, a 36% tariff increase took 
effect on 1 December 2009.  A further 22.2% in crease has been approved fo r 1 December 2010.  The 
                                                      
22 World Bank (2009c), Vol. 1. 
23 World Bank (2009c), Vol. 1. 
24 Southern African Power Pool online information.  Viewed at:  http://www.sapp.co.zw/index.cfm? 
siteid=1.  The SAPP does not yet have independent power producers (IPPs) as members, limiting the 
opportunities for competition. 
25 There are no independent power producers (IPPs) in Malawi. 
26 ESCOM online information.  Viewed at:  http://www.escommw.com/tariffs.php.S. 
27 IMF (2009). 
28 By November 2009, ESCOM had accumulated losses amounting to MK 9 billion (about 
US$64 million) and the company announced that it was "technically bankrupt" but sustained by subsidies. WT/TPR/S/231 Trade Policy Review 
Page 46 
 
 
approved tariff increases are subject to performan ce targets by ESCOM, including increasing access 
to electricity to 13% of the population by 20 13, and providing new generation capacity.  The 
December 2009 average effective tariffs for domestic and industria l users were MK 5.76/kWh and 
MK 7.34/kWh, respectively. 
(ii) Petroleum and gas 
39. Malawi imports almost all of its fuel.  About 80% of fuel is imported by Petroleum Importers 
Ltd, (PIL), a private company owned by the five  oil companies in Malawi and managed through a 
body of their directors.29  The remaining 20% is imported by two small private importers. 
40. A small share of Malawi's fuel supplies (about 3%) comes from ethanol produced locally 
from sugar cane.  Petrol has been subject to a blending requirement of 90:10 fuel/ethanol, but 
production capacity of about 18.5 million litres is insufficient to meet this requirement.30  According 
to the authorities, production capacity is expected to double in the coming year following the revision 
of the blending ratio from to 80:20.  
41. The legal framework of the petroleum and g as sector, including ethanol and bio-diesel, is 
based on the Liquid Fuels and Gas (Production and Supply) Act No. 23 of 2004.  Under the Liquid 
Fuels and Gas (Production and Supply Regulations) of 2009, commercial operators must hold 30 days 
of  minimum reserve stocks. This is to be supplemen ted by a fuel reserve of at least 60 days held by 
the Government. 
42. Fuel prices remain under government control, alth ough an "automatic pricing mechanism" has 
been introduced, which links retail prices to pr ocurement costs (in-bond landed cost).  Price 
adjustments are triggered when an increase or decr ease of the product procurement price exceeds 5% 
(Liquid Fuels and Gas (Production and Supply) Regu lation, 2009).  Fuel prices, including for bio-
fuels, are subject to approval by the Malawi Energy Regulatory Authority (MERA) based on a 
recommendation by the Energy Pricing Committee, an  advisory committee of the MERA representing 
the Government and other stakeholders.  Prici ng of lubricants has been fully liberalized. 
43. Import duties on "petroleum refineries" average 5.6%, ranging from zero to 20%;  the average 
tariff on "manufacture of miscellaneous petroleum and coal products" is 2.3%, with a range from zero 
to 10% (Table AIV.1).  Exports of liquid fuels and gas are prohibited (Liquid Fuels and Gas (Production and Supply) Regulation, 2009). 
(3) F
INANCIAL SERVICES  
44. Malawi's institutional and legal framework for fina ncial services has not changed since its last 
TPR.  Its regulatory regime remains fragmented.  Financial services are partly under the authority of 
the Reserve Bank of Malawi (banking and insurance) , and partly under the Ministry of Industry and 
Trade or Registrar General (savings and credit c ooperatives, development finance institutions, and 
pension funds).  Overall, providers of non-ba nk financial services are not duly regulated or 
supervised.31   
45. The regulatory regime for financial services is soon to be reformed, according to the 
authorities.  A new Banking Act and a new Insurance Act were enacted by Parliament in November 
2009.  However, these have not yet entered into  force and are awaiting enactment of the new 
                                                      
29 British Petroleum, Mobil, Ca ltex, Total, and Petroda. 
30 Government of Republic of Malawi (2003). 
31 IMF (2008). Malawi WT/TPR/S/231 
 Page 47 
 
 
Financial Services Bill, the umbrella Bill that will govern subsidiary financial sector laws, including 
the new Banking and Insurance Acts.  The Financ ial Services Bill, and Bills on microfinance, 
pension, and credit cooperatives have been drafte d, and once enacted will consolidate supervisory 
powers under the Reserve Bank of Malawi and create a comprehensive regulatory framework. 
(a) Banking 
46. Banking services are regulated by the Banking Act of 1989.  The Reserve Bank of Malawi is 
in the process of implementing the Basel II framework  and, according to the IMF, complies with the 
majority of the Basel Core Principles.32  Supervision of the banking sector has been improved.  The 
Central Bank has taken steps to improve its capacity to combat money laundering and the financing of 
terrorism-related transactions.33  Malawi does not have a deposit insurance scheme. 
47. Malawi's banking system is stable and has weat hered the turmoil on the international financial 
markets.  Most banks have remained well capitali zed with an overall capital adequacy ratio ranging 
between 15% and 20%;  banks' liquidity ratios are al so high.  Some of Malawi's banks are very 
profitable: foreign currency trading contributes to banks' high profitability.  Differentials between 
borrowing and lending rates are high by regional sta ndards (over 20 percentage points) (Table I.1).34 
48. Malawi has 11 commercial banks, mostly privat ely owned;  Malawi Savings Bank is state-
owned, and INDEBank is partially state-owned.35  Bank assets amounted to about 26% of GDP in 
September 2007 (US$930 million), which is low by regional standards.  The market is highly 
concentrated with the top five banks controllin g about 90% of assets (end 2005).  Malawi does not 
have a framework for mergers and acquisitions, no r for preventing cross-ownership by corporate 
holdings, which may raise prudential concerns.  Ac cording to the authorities, the pending Financial 
Services Bill will prevent controlling cro ss-ownership by corporate holdings. 
49. Malawi's banking system has very limited outr each.  The vast majority of the population 
(90% by some estimates) does not have access to commercial banking services;  fees for checking and 
savings accounts are relatively high.36  Mobile payment services (mobile banking) for mobile phone 
customers who do not have a bank account, such as M-PESA  in Kenya, has yet to develop in Malawi.  
The legal framework currently prohibits non-licenced entities from engaging in banking services. 
However, the telecom operator, Zain, in conj unction with National Bank and NBS Bank has been 
permitted to conduct mobile banking on a pilot basis. 
50. Under the GATS, Malawi has made full commitm ents in modes one to three for banking 
services (mode four is unbound).  In practice, banks are required to incorporate in Malawi;  branches 
of foreign banks are not allowed.  The mini mum capital requirement for commercial banks is 
US$5 million.  Five banks have fo reign ownership.  There are no se parate categories of bank licences. 
Banks are required to seek prior approval from the Reserve Bank to introduce a new product.  
Offshore banking is not permitted, nor are non-banking activities. 
51. The Reserve Bank of Malawi is responsible fo r licensing banks, although the final decision to 
grant or revoke licences rests with the Ministry of  Finance, limiting the independence of the Reserve 
                                                      
32 IMF (2008). 
33 Money Laundering, Proceeds of Serious Crim e, and Terrorist Financing Act of 2006. 
34 IMF (2008). 
35 National Bank of Malawi, Standard Bank of Malawi, First Merchant Bank, Ecobank Malawi Ltd., 
INDEBank, NEDBANK, NBS Bank Ltd, Malawi Savings Bank, Opportunity International Bank of Malawi, 
FDH Bank, and International Commercial Bank. 
36 IMF (2008). WT/TPR/S/231 Trade Policy Review 
Page 48 
 
 
Bank (Articles 7 and 10 of the Banking Act).  Once the Financial Services Bill is enacted, the Reserve 
Bank will have sole responsibility for granting a nd revoking licences, according to the authorities.  
Prospective applicants are screened by the Reserve  Bank, which takes into account whether their 
market entry would be "in the interest of the na tional economy and public in terest" (Article 6).  
According to the authorities, the Reserve Bank of Ma lawi also consults with the Central Bank of the 
applicant-bank's home country before recommending that a licence be granted to a foreign bank;  RBM applies reciprocity requirements. 
(b) Insurance 
52. The insurance industry operates under the Insurance Act of 1957.  The outdated legislation is 
to be replaced by a new Insurance Act.  Curre ntly, under delegated powers from the Ministry of 
Finance, the Reserve Bank of Malawi is responsib le for supervising the insurance industry.  The 
Insurance Institute of Malawi is the industry's pr ofessional organization, devoted mainly to education 
and training.  The law allows establishment of subsidiaries of foreign insurance establishments. 
53. Insurance penetration (ratio of gross wr itten premiums to GDP) is about 2%.
37  The insurance 
market, both general and life, is highly concentrat ed, with the two leadi ng companies accounting for 
about 80-90% market share.38  Nico General Insurance Co Ltd, the leading insurer, also provides 
bank-assurance services in partnership with Opportunity International Bank of Malawi.  Companies 
are not permitted to engage in bot h general and life insurance, though th is restriction is not effective 
due to interlocking ownership by corporate holdings (e.g. Nico Holdings or Press Corporation Ltd).  
Minimum capital requirements are MK 50 million fo r general insurance;  MK 75 million for life 
insurance;  and MK 100 million for re-insurance.39  Insurance premiums are market-determined.  
Third-party liability motor-vehicle insurance is the only obligatory insurance in Malawi. 
(c) Securities 
54. The capital market in Malawi is in its infancy.   Market capitalization totalled 45% of GDP at 
the end of 2008 (US$1.79 billion, up 38% compared with end-2007).40  The number of listed 
companies increased from 13 to 15 in 2008.  Malawi was one of the few African countries that did not 
experience a decline in its stock market in 2008 as a consequence of the financial crisis.  However, in 
first three quarters of 2009, the Malawi All Share Index (MASI) lost almost 20%, one factor being significant sales by international investors. 
55. The capital market is regulated under the Cap ital Market Development Act of 1990.  New 
legislation (the Securities Act) is pending.  The Malawi Securities Exchange (MSE) is a self-
regulatory institution opera ting under the supervision of the Reserve Bank of Malawi.  The MSE 
                                                     
 
37 Daily Times  online (29 September 2008).  Viewed at:  http://www.dailytimes.bppmw. 
com/article.asp?ArticleID=11759. 
38 IMF (2008). 
39 General insurers:  NICO General Insurance Co. Ltd; Charter Insurance Company Ltd;  Citizen 
Insurance Co. Ltd;  General Alliance Insurance Co. Ltd;  Prime Insurance Co. Ltd;  Reunion Insurance Co. Ltd;  Royal Insurance Co. Mw Ltd;  and United General Insurance Co.  Re-insurers:  Zimbabwe Reinsurance Co. Ltd 
Life insurers:  Vanguard Life Assurance Co. Ltd;  Old Mutual Life Assurance Co. Mw Ltd;  NICO Life 
Assurance Co. Ltd;  and Smile Life Assurance Company Ltd. 
40 Malawi Stock Exchange online information.  Vi ewed at:  http://www.mse.co.mw/current/annual.pdf. Malawi WT/TPR/S/231 
 Page 49 
 
 
started equity trading in 1996, with the aim, inter alia , to provide a means for privatization of state-
owned enterprises.41 
56. Instruments traded at the MSE are shares, while Malawi Government local-registered stocks  
and treasury bills are no longer traded at the MSE;  banks have not yet used the capital market for 
issuing debt instruments.42  Foreign investment in any MSE-lis ted company is limited to 49% and 
investment by a foreign individual to 10%.  Po rtfolio investment is subject to capital account 
restrictions. 
(4) TELECOMMUNICATIONS  
(i) Institutional and legal framework 
57. Malawi's institutional and legal framework for te lecom services has not changed since its last 
TPR.  The Communications Act, 1998 and the Comm unications Sector Policy Statement of 1998 are 
being reviewed to modernize Malawi's regime  for information and communication technology.43  A 
new National ICT Policy (draft) has recently  been circulated by the Government.44 
58. The Malawi Communications Regulatory Authority (MACRA) has the mandate, amongst 
other matters, to license telecommunications, postal, and broadcasting operators;  resolve disputes;  
approve tariffs and interconnecti on rates;  and monitor and promote competition among operators.  
MACRA is autonomous in the performance of its  functions.  Its licensing procedures must be 
objective, transparent, and non-discriminatory (Secti on 20(2) of the Communications Act, 1998).  The 
licensing regime, established in 2000, provides fo r "individual" licences for fixed, mobile, and 
international connection services, which gives the li censee specific rights and obligations, such as 
targets for the expansion of services (network roll- out).  Internet services and other value-added 
services require "general" licences without explicit aut horizations.  Legalization of voice over internet 
protocol (VoIP) services is intended w ith the revision of the current law. 
(ii) Selected issues 
59. Telecommunication services are relatively expensive, which some observers attribute to high 
taxes and lack of competition.45 While customs duties and excise tax on handsets were eliminated in 
2008 to counter smuggling, an excise tax of 10% was introduced on mobile airtime (16.5% VAT is 
also levied).  With the introduction of the airtim e levy, Malawi followed the approach of Zambia, 
Kenya and Tanzania.46 
60. The market for telephony services has been served by four operators during the review period.  
The partially privatized incumbent, Malawi Te lecommunications Ltd. (MTL) no longer holds a 
monopoly for fixed-line services, as another operator h as entered the market (Access Communications 
Ltd. Malawi).  Mobile telephone services are offere d by Zain Malawi (formerly Celtel), with the 
largest customer base, followed by Telekom Ne twork Malawi, in which MTL currently holds a 
                                                      
41 The MSE has the following member s:  Stockbrokers Malawi Limited (a state-owned enterprise), 
Trust Brokers Ltd, (in the process of deregistration), FDH Stockbrokers, African Alliance Securities Ltd, and 
CDH Stockbrokers Ltd. 
42 Shares of SMEs are traded on the MSE Alternative Capital Market. 
43 Draft Malawi Communications Amendment Act.  Viewed at:  http://www. macra.org.mw/index.php? 
link=publication. 
44 National ICT Policy (draft).  Viewed at:  http://www.malawi.gov.mw/ ict_policy.pdf. 
45 National ICT Policy (draft).  Viewed at:  http://www.malawi. gov.mw/ict_policy.pdf. 
46 WTO (2009). WT/TPR/S/231 Trade Policy Review 
Page 50 
 
 
minority stake.  The third operator licence for mob ile services, held by Malawi Mobile Ltd., is 
currently subject to litigation.  To further enha nce competition, MACRA awarded a fourth mobile 
licence to G Mobile, in March 2010, and is receiving bids for an a dditional mobile operator licence.  
Malawi's mobile telephone penetration rate in creased from 0.7% in 2002 to 12.5% in 2008, but 
remains among the lowest in Africa.47 
61. Tariffs charged by MTL are subject to approva l by the regulator. MTL's tariffs are also 
subject to tariff rebalancing:  the effect of the incr ease of the price of one service (e.g. monthly rental) 
must be fully compensated by a decrease of the tari ff of another service (e.g. call charges).  Tariffs for 
the other operators are market-determined, accordi ng to the authorities.  Operators are, however, 
required to advise MACRA seven days in advan ce of price adjustments and MACRA may suspend 
any proposed tariff adjustment if it is consider ed unjustifiable.  Interconnection charges were 
established by MACRA in 2004 at a rate of US$0.04 pe r call, as a result of failure by operators to 
agree on an interconnection rate. 
62. Telecom operators are required to expand cove rage of fixed and mobile services in rural 
areas, without recourse to any subsidy.  Under the Universal Access Fund, envisaged in the draft 
Malawi Communications Amendment Act, a subsid y is be provided (amounting to 1% of net 
operating revenues) to all universal service providers. 
63. The internet user rate, especially the broadband subscriber rate (estimated at 0.02% in 2008), 
is very low.  Twelve internet service providers are currently active;  tariffs for value-added services are market-determined.  Significant improvements, in terms of internet speed, and lower prices are 
expected from the completion of a fibre-optic bac kbone for high-speed voice and data transmission.  
The infrastructure connection with neighbouring countr ies is close to completion, which would allow 
a link-up with the rest of the world via the submar ine cable systems of either Seacom or the Africa 
Sea Cable System (EASSy).
48  The international interconnectivit y initiative is part of the Regional 
Communications Infrastructure Project (RCIP) funded by the World Bank. 
(5) TRANSPORT  
(i) Institutional and legal framework 
64. Malawi's transport policy is based on a fra mework established in 1999 (Malawi National 
Transport Policy).  Important principles of the po licy include liberalization (removal of entry and exit 
restrictions), deregulation (marke t-determined tariffs), privatiza tion, and promotion of competition 
within and between modes of transport.  The Ministry of Transport and Public Infrastructure oversees 
the formulation of Malawi's transport policy with line departments responsible  for each of the four 
modes of transport.  According to the authoriti es, Malawi's transport policy has been reviewed 
recently and changes are being implemente d;  details have not been provided. 
65. The institutional framework for public road tran sport has been reformed in the period under 
review.  Because of poor performance of the Nati onal Roads Authority in terms of financial 
accountability, management of funds was handed to  the new Roads Fund Administration (Roads 
Authority Act No. 3 of 2006).  The Roads Aut hority retained responsibility for construction, 
maintenance, and rehabilitation of  public roads.  The Roads Fund Administration is mainly funded 
                                                      
47 ITU online information.  Viewed at:  http ://www.itu.int/ITU-D/ict/sta tistics/at_glance/af_ 
ictindicators _2007.html. 
48 Seacom online information.  Viewed at:  h ttp://www.seacom.mu/overvie w/overview.html;  and 
EASSy online infromation.  View ed:  at http://www.eassy.org/. Malawi WT/TPR/S/231 
 Page 51 
 
 
through fuel levies (US$0.07 per litre);  road-u ser charges and transit fees are minor sources of 
revenue. 
66. Regional road hauling has been liberali zed under COMESA initiatives.  The COMESA 
carrier licence provides for the fifth freedom for road  transport.  The parastatal Malawi International 
Transport Company (MITCO) is no longer in existe nce.  The largest bus operator in Malawi, the 
parastatal Shire Bus Lines, was liquidated in  2007 because of poor operational and financial 
performance.  Public bus transport is now entirely in  the hands of the private sector.  The network of 
Shire Bus Lines has largely been taken over by  the National Bus Company, a private operator. 
67. The management and operation of Malawi Ra ilways was privatized in 1999.  A 20-year 
concession is held by Central East African Railway s (CEAR), a consortium of Mozambican investors, 
which owns the railway's rolling stock.  The ra ilway connects the major cities of Lilongwe and 
Blantyre with the railway system in Mozambique , with access to the Indian Ocean at the port of 
Nacala (Nacala Corridor).  The concessionaire has the freedom to set tariffs on freight services, while 
tariffs for passengers require government approval .  The Government is currently undertaking a 
review of the railway concession because CEAR's operational performance has been below 
expectations.  
68. Malawi Lake Services Ltd is the largest opera tor for transport on Lake Malawi.  Shipping 
services reverted to the parastatal following a peri od under private management by Glens Waterways 
(2002-08).  Malawi Lake Services operates domestica lly and internationally between lake ports in 
Tanzania and Mozambique (containers, dry cargo, fu el, passengers).  The Government is looking for 
another private company to operate on the lake. 
69. In the civil aviation subsector, the Department of Civil Aviation functions both as regulator of 
the subsector and operator of Malawi's airports.  Kamuzu International Airport in Lilongwe is owned 
by the parastatal Airports Developments Limite d (ADL). The legal framework based on the Aviation 
Act of 1970 (as amended) is outdated according to th e authorities.  Malawi has signed bilateral air 
service agreements (BASAs) with a number of countries, however, most are dormant, as no services 
are operating.  The active agreements are those between Malawi and South Africa, Zimbabwe, 
Zambia, Mozambique, Kenya, Ethiopia, and Tan zania. The BASAs mostly cover the first four 
freedoms of the air, which allow designated airlin es of the two parties to operate services between 
specified points in their respective countries.  Ther e are only five foreign airlines currently flying to 
Malawi (Ethiopian Airlines, Kenya Airways, S outh African Airways, Zambian Airways, and Air 
Zimbabwe).  Fifth freedom traffic rights under th e Yamoussoukro Decision to liberalize Africa's air 
transport markets are not yet applied, nor is cabotage permitted for foreign airlines.  
70. Air Malawi, a parastatal and national flag carri er, holds exclusive traffic rights for regional 
service (currently Dar-es-Salaam, Harare, Lusaka, and Johannesburg).  Domestic routes are open to competition.  Nyasa Air Taxi, and Bush and Lake Aviation provide charter services within Malawi 
and also to some destinations in  neighbouring countries.  Accordi ng to the authorities, Air Malawi 
does not receive direct government subsidies, but due to poor performance it has amassed considerable debt. 
71. Air freight services (domestic and internationa l) and ground handling services are provided 
by subsidiaries of Air Malawi (Air Cargo Ltd ., and Lilongwe Handling Company (LIHACO)) whose 
operations have helped to cross-subsidize Air Malawi.
49  Malawi Catering Services Ltd., a subsidiary 
of ADL, provides catering services to airlines operating from Lilongwe, while Sun Bird caterers 
provides services for airlines operating from Blantyre. 
                                                      
49 Privatisation Commission (2008). WT/TPR/S/231 Trade Policy Review 
Page 52 
 
 
(ii) Transit corridors 
72. As Malawi is land-locked, facilitation of trans it is an important factor for boosting economic 
performance.  Most goods are moved by road and ra il, especially bulk commodities, such as fertilizer 
and sugar.  Importers a nd exporters use mainly four competing transport corridors for Malawi's total 
volume of trade of about 2 million tonnes (Table IV .2).  The Mozambican port of Beira handles most 
of Malawi's trade (about 47%), followed by Durban  (about 15%).  The Durban corridor logistics are 
valued for the consistency and re liability required for time-sensitive  goods (such as garments).  The 
Beira route is shorter but not as reliable.  The Na cala railway corridor is generally the lowest-cost 
option, but port delays may be long and unpredictable. 
Table IV.2 
Transport corridors 
Corridor Mode Annual 
freight vol. 
(tonnes) Traded goods Port 
delays Transit 
time Transit issues 
Beira 
(Mozambique) Road 950,000 Tobacco, general 
cargo, fuel 2 weeks 2-3 days Non-harmonized road transit user 
charges;  transit procedures are 
manual and differ from 
SADC/COMESA formats 
Durban Road 300,000 Garments, tobacco, 
tea 1 day 1 week Declarations are required at each 
of seven border points 
Nacala 
(Mozambique) Railway 215,000 Maize, containers, 
fuel, fertilizer, 
cement, tobacco, sugar 3 weeks un-
predictable Same as for Beira 
Dar-es-Salaam Road Marginal Fuel, fertiliz er 4 weeks .. One-stop border post at Songwe 
not yet operational 
 
.. Not available.  
Source:  World Bank (2009c), Malawi Country Economic Memorandum – Seizing Opportunities for Growth Through 
 Regional Integration and Trade , Vol. 1, Washington, D.C.;  and the authorities of Malawi. 
73. Overall, transit procedures are lengthy and have yet to be fully harmonized in the region.  The 
SADC Transit Guarantee Scheme between Durban , South Africa – Beitbridge, South Africa and 
Mwanza, Malawi is at a pilot stage.  The one-s top border post at Songwe at the Malawi-Tanzania 
border is not yet operational (Chapter III(1)(i)).  Ha rmonized road user charges for transit were agreed 
by COMESA (US$0.6 per km for trucks up to three axles50) but it appears that in practice the 
harmonized rates are not applied.51 
74. Transport costs are high in Malawi, albeit r oughly in line with the sub-Sahara Africa 
average.52  Malawi's landlocked position is estimated to add about US$120/tonne or 12.5% to the 
import value.53  Total transport costs account for about 56% of the cost of Malawi's imports and about 
30% of the cost of exports, according to the author ities.  High transportation costs impede Malawi's 
export competitiveness directly but also indirect ly when the production of export goods requires 
imported inputs.  On the other hand, domestical ly produced goods benefit from a considerable 
advantage (natural protection) against imported goods , a factor to be taken into account when setting 
tariffs. 
                                                      
50 COMESA online information.  Viewed at:  h ttp://programmes.comesa.int/index.php?option=com_ 
content&view=article&id=64&Itemid=50&lang=en. 
51 World Bank (2009c), Vol. 1. 
52 World Bank Doing Business Project online information.  Viewed at:  http://www.doingbusiness.org/ 
ExploreEconomies/?economyid=118#TradingAcrossBorders. 
53 World Bank (2009c), Vol. 1. Malawi WT/TPR/S/231 
 Page 53 
 
 
Box IV.2:  The North- South Corridor Project 
The North-South Corridor Pilot Aid for Trade Programme is a joint initia tive of COMESA, the East African 
Community (EAC), and  SADC.  Its aim is to reduce the time, and so the costs, of road and rail travel along 
two priority corridors identified by the New Partners hip for Africa's Development (NEPAD) programme:  the 
Dar-es-Salaam Corridor, which links the port of Da r-es-Salaam to the Copperbelt;  and the North-South 
Corridor, which links the Copperbelt to the southern ports of South Africa.   
The North-South Corridor, along with its spurs, services  eight countries:  Tanzania, Democratic Republic of 
Congo (DR Congo), Zambia, Malawi, Botswana , Zimbabwe, Mozambique,  and South Africa. 
The Pilot Programme aims to improve the physical infrast ructure for transport (e.g. roads, rail, border-posts, 
ports) and electricity (e.g. distribution and generati on), as well as the regulator y environment for trade, 
transport (i.e. by simplifying and reducing cross-border clearing procedures, harmonizing transit and transport 
regulations and simplifying administrative requirements, etc.), along the length of the North-South Corridor. 
Stakeholders recognize that there ar e a number of other equally important trade and transport corridors in 
eastern and southern Africa, many of which link to the North-South Corridor.  The intention is to use the 
North-South Corridor programme as a pilot project to develop methodologies and approaches that can be 
applied to other similar projects. 
A major high-level conference on the North-South Corridor was held in Lusaka, Zambia on 6-7 April 2009, at 
which around US$1.2 billion was pledged by the international community to upgrade infrastructure and 
improve trade facilitation and regulatory measures, specifically in relation to the North-South Corridor.  A 
further US$500 million was made available for improvements to other corridors that link to the North-South 
Corridor .  In addition, the Development Bank of Southern Africa (DBSA) announced that it was making 
available US$1.5 billion to support projects in the energy, ICT, and transport sectors. 
Source:  North-South Corridor – International Financing Conference (2009).  Viewed at:  www.northsouth 
 corridor.org.