Malawi belongs to a group of the world's least developed countries and is thus heavily dependent on donor funding to support the national budget and as a contribution to foreign exchange. Business development is marked by macroeconomic instability which has resulted in private companies mainly operating in the informal sector. Malawi remains a skeleton of a modern structure with lots of bureaucracy and red tape. Together they provide a fertile environment for facilitation payments and pose an obstacle to the development of the economy by making it harder to do business.
Positive developments in relation to corruption and investment:
- Malawi has a comprehensive anti-corruption legal framework and many observers agree that the country is making a serious attempt at curbing corruption.
- Processing of commercial court cases has improved in recent years and the commercial courts are now working efficiently.
- Malawi is part of the Construction Sector Transparency Initiative (CoST) pilot prgoram, which aims at enhancing transparency and accountability in the construction sector, focusing specifically on public disclosure of information.
Risks of corruption:
- Companies report encountering corruption in more than a third of all encounters with the police.
- Decision-making in granting investment approval is neither transparent nor purely based on merit, and corruption is recognised by the business community in several areas, such as obtaining approval for the recruitment of expatriate staff.
- There are frequent allegations of bribery in civil and criminal cases concerning property rights, and corrupt practices are also known to exist in purchasing land and allocating land for development.
- Companies should note that customs administration is considered to be one of the most corrupt public areas, and corrupt practices are known to take place when trying to obtain import and prospecting licences.