Privatization in Malawi

Privatization in Malawi
Country Fact Sheet

Produced by MIGA and the Africa Region of the World Bank – June 2001

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	FDI Information in IPAnet
	Doing Business Guides in IPAnet

Relevant Web Sites

Pride Africa - Malawi

Map of Malawi

For Further Information Contact

Malawi Privatization Commission

CDL House, Independence Drive
P.O. Box 937
Blantyre, Malawi
Tel: +(265) 623 655
Fax: +(265) 621 248
Email: privatisation@malawi.net

URL: http://www.winne.com/Malawi/Pc.htm

Source Documents

Privatization Background

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In August 1997, the Divestiture Sequence Plan (DSP) consisting of a list of 100 public enterprises (PEs) was approved. However, to date, the parastatal sector is still large, putting pressures on Government of Malawi’s (GOM) fiscal position and inhibiting private sector development. GOM is now, under a poverty reduction strategy, committed to create better conditions for growth with a strong emphasis on private sector. In that sense, and to reduce the size of an underperforming public sector, a Parastatal Enterprise Reform and Monitoring Unit was recently established in the Ministry of Finance. Compared to African countries like Uganda, Zambia or Côte d’Ivoire, Malawi has a short experience in the implementation of a privatization program with the collaboration of the World Bank; therefore, conclusions cannot be drawn at this point on whether the program is successful or not.

Regulatory Framework for Privatization

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Prior to the approval of the DSP in 1997, a Privatisation Commission (PC) was created in 1994 to undertake the reforms needed. In 1995, a Privatisation Policy Statement was approved and in 1996, the Public Enterprises (Privatisation) Act was published. Also, to efficiently implement sound sector policies, the regulatory environment is in permanence strengthened specially in the utility sectors.

The World Bank is currently supporting privatization in Malawi through the Privatization and Utility Reform project adopted in June 2000. For that, US$ 28.9 million is made available to improve quality of and access to economic and physical infrastructure for private sector development. From that amount, US$ 15 million is used to develop divestiture options and implement the privatization program. The program will close in December 2004.

The Fiscal Restructuring and Deregulation Program project approved in December 2000 for an amount of US$ 55.1 million, is also one of the current Bank’s project with a significant privatization component.

Privatization Program Status

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As of June 2001, 35 out of 100 PEs on the DSP were privatized. The remaining balance will be privatized in a phase manner by 2004. GOM is actively rationalizing the regulatory environment and strengthening the regulatory authorities in order to efficiently implement and bring to a closure a transparent privatization program.

Outlook

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Today, and under the recent PURP, an accent is put on privatization in major utility sectors such as telecommunications, power and water. The postal sector is also targeted.

In the telecommunications and postal services, three major companies are involved:

1- the Malawi Posts and Telecommunications Corporation (MPTC) provides basic telephone and postal service. MPTC was divided in May 2000 into two entities, Malawi Telecommunications Limited (MTL) and Malawi Postal Corporation (MPC).

2 - Telekom Networks Limited provides mobile voice service

3 - Malawi Net provides internet services

Priority is now for GOM to increase the coverage rate and to improve the quality of service. For that, participation of the private sector is actively sought.

In the power sector, the major company is the Electricity Supply Corporation of Malawi Limited (ESCOM). The company has a limited distribution network due to its inability to generate adequate funds for system maintenance and required investments. The result is that access to electricity is among the lowest in the world. Reforms are adopted and privatisation in distribution and generation are now being considered.

In the water sector, supply services are still insufficient to meet the demand. This has motivated the government to seek for more private sector involvement in the two primary urban centers, Blantyre and Lilongwe.

Good investment opportunities exist not only in these three sectors but also and more notably in the banking, transport and agriculture sectors as indicated in the list of enterprises to be privatized before December 2004:

1. Commercial Bank of Malawi, CBM (Recently sold to Stanbic, South africa)

2. Air Malawi (Ongoing privatization)

3. Malawi Telecommunications Ltd (MTL) (Ongoing privatization)

4. Malawi Rural Finance Corporation

5. ESCOM distribution

6. ESCOM Generation

7. Blantyre Water Board

8. Lilongwe Water Board

9. Tourism Development and Investment Corporation

10. Malawi Housing Corporation

11. Malawi Savings Banks

12. Agriculture Development and Marketing Corporation (ADMARC) – Partial Privatisation

Although not scheduled yet, the following companies are also potential candidates for privatization:

13. National Bank of Malawi

14. David Whitehead and Sons (Textile and Clothing)

15. Shire Bus Line

16. Airports

17. Indebank/Fund

18. Malawi Posts Corporation

Sources

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Memorandum on the Economic Policies of the Government of Malawi, December 2000

Project Appraisal Document on a proposed credit in the amount of SDR 21.8 million (US$ 28.9 million equivalent) to the Republic of Malawi for a Privatization and Utilility Reform Project. The World Bank, June 2000.

Privatisation Commission