Honourable Henry Mussa, M.P., Minister of Industry & Trade;
Professor Chikaonda, Chairman of the Investment Forum;
His Excellency Dr. Moto, Malawi High Commissioner to the United Kingdom;
Leader of Delegation of the Commonwealth Business Council;
Distinguished Ladies and Gentlemen.

1.0

 I appreciate the honour and privilege to address our distinguished investors from the Commonwealth Business Council.
I am particularly happy to welcome you to Malawi as you explore investment opportunities available in our country.  The meeting today is a follow-up to the Malawi Government sponsored Investment Forum held in London early this year.

2.0

 Distinguished investors, ladies and gentlemen, the Government of Malawi has designed and implemented policies aimed at transforming this country from a predominantly consumer and importer economy to one that produces and exports.  Our government also believes that sustainable growth can only be private sector led. The role of Government therefore has largely focused on developing infrastructure (roads, electricity, water, telecommunication, etc) and a legal and regulatory framework that supports private sector business.

3.0 

Distinguished guests, we in the banking industry are now reaping dividends of the government’s strong economic policies and purposeful management.  I am glad to report today that the Banking Industry in Malawi is strong, healthy and very profitable.  This comes on the back of strong economic performance recorded in the last three years.  In 2007 Real GDP growth for Malawi was recorded at 7.9 percent compared to 8.2 percent in 2006.  The economy is expected to grow by 7.4 percent in 2008.  The remarkable performance of the economy is largely on account of the agricultural sector that has benefitted from the government’s fertilizer and seed subsidy programme.  It is important to note, ladies and gentlemen, that while agriculture remains the backbone of the economy, other sectors have also performed very well.  For instance, manufacturing, transportation, telecommunications, banking and financial services have performed exceptionally well in the past three years.  We expect the mining sector to play an increasingly important role in our economy in the coming years.  Recently we have witnessed substantial investment taking place in the Northern Region of Malawi at the Kayelekera Uranium Mines.
When output from this mine reaches its peak in a few years time, it will contribute over 30% of Malawi’s export earnings which have up to now been predominantly from tobacco, tea and sugar.

4.0 

Macroeconomic conditions for Malawi have also been good.  We have managed to bring down inflation to single digits level in the past twelve months from the rates of 30 – 40 percent some three years ago.
We have also managed to maintain stability in the exchange rate.  This has created an opportunity for us to bring down interest rates to current levels so that the cost of funds for investment in Malawi is no longer prohibitive.
The banking industry has recorded strong growth in private sector credit in the past years because of low interest rates and a strong fiscal position that has seen government repaying some of its domestic debt.

5.0

 Distinguished guests, ladies and gentlemen, Malawi, as many other countries in the region, operates in an unfriendly external environment.  As you all know, we have recently experienced unprecedented price rise in fuel and fertilizers, the two commodities that are key to sustained growth in our economy.  As a result, Malawi’s terms of trade have since deteriorated quite considerably.  It is therefore imperative that the country should urgently address investment requirements of our export sector if we are to reverse the deterioration in our terms of trade. This notwithstanding, economic prospects for Malawi in the near term look good.  As alluded to earlier, the economy is expected to grow at levels in excess of 7 percent per annum in the short to medium term, while inflation is expected to stabilize around 6 to 7 percent over the same period.   Expectations are that inflation will rise to 8.3 percent at the close of this year before it comes down.  The Malawi Kwacha exchange rate should also maintain stability owing to strong macro economic conditions in the country.

INVESTMENT CLIMATE IN MALAWI

6.0 

The Malawi economic monetary and financial environment offers a competitive investment climate to both local and foreign investors.  Stability of macro economic conditions, high GDP growth, low inflation, low interest rates, stable exchange rate, and a regionally competitive tax regime provide a conducive investment climate.

7.0

In the banking and financial sector, the Reserve Bank of Malawi has undertaken several reforms to ensure effective regulation and supervision of those institutions that it already supervises as well as bringing under its institutions those that are currently unregulated but are  systematically important.  The reforms include the following:

• Existing laws are being reviewed to make them more robust to deal with various challenges in the industry.  For example the Banking and Insurance Act are being reviewed.

• New laws are being drafted to incorporate financial services that are currently not regulated.  These include microfinance, retirement and pension fund bills.

• The Reserve Bank of Malawi is implementing a risk based approach to regulation and supervision of the financial sector.  This will help the Central Bank to allocate regulatory resources where they are needed most.

REQUIREMENT FOR ESTABLISHING A BANK IN MALAWI

8.0 

Distinguished guests, ladies and gentlemen, investors wishing to establish a bank in Malawi are required to have a minimum paid up capital of the Malawi Kwacha equivalent of US$1.5 million as startup capital.  They should be Honest and have an unquestionable integrity. They should not have been convicted of a criminal offence before.  In addition, investors are obliged to prove that they have additional resources to be used should the institution encounter problems that require shareholder’s support.  Further, investors are required to demonstrate capacity to attract and retain high caliber management and staff that will effectively manage the bank.  The details of these requirements are spelt out in application forms and guidelines that are available on request.

OPPORTUNITIES FOR INVESTMENT IN THE FINANCIAL SECTOR

9.0 

Investment opportunities exist in various areas of the financial sector.  These include:
• Commercial/Retail Banking
• Merchant/Wholesale Banking
• Savings/Thrift Banking
• Mortgage Banking/Building Society
• Investment/Development Banking
• Export/Import
• Trade Financing
• Leasing and Financing
• Fund Management
• Investment Advisory Services
• Microfinance
10.0 Three entry options exist for a prospective investor into the Malawi Financial Sector:
• Set up a new bank (or a financial institution) wholly owned by the investor
• Full or partial acquisition of an existing commercial bank (or a financial institution) where existing shareholders opt to sell shares.
• Acquisition of a listed institution through purchase of stock at the Malawi Stock Exchange.

CONCLUSION

11.0 

The Government of Malawi has developed its development blue print   called the Malawi Growth and Development Strategy (MGDS).  The Strategy is comprehensive and spells out the government’s vision for growth and development and deliberately identifies areas that should be targeted for investment.

12.0 

Recently the World Bank and the International Monetary Fund did a joint assessment of Malawi’s Financial Sector, i.e. Financial Sector Assessment Programme (FSAP).  The aim of the exercise was to evaluate Malawi’s financial system against an international standard or best practice.  The mission concluded that Malawi’s financial system, although small and unsophisticated by international standards, was financially sound, profitable, dynamic and met most of the international standards.  Investments in the sector will therefore go a long way in deepening and strengthening our financial system.  I therefore invite you distinguished investors, ladies and gentlemen, to invest in our country.

13.0 

I thank you for your attention.

Reserve Bank of Malawi