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Local businesses decry investor capital ceiling

Small and Medium Enterprises (SMEs) say the current minimum investment capital of not less than $50 000 (about K37 million) for foreign investors is failing to protect local firms.

To obtain investment capital from the Malawi Investment and Trade Centre (Mitc), prospective investors are required to have investment capital of not less than $50 000 (about K37 million), which is issued within five working days.

Some of the investors at one of the investment gatherings in Lilongwe

In an interview on Tuesday, Chamber for SMEs Association executive secretary James Chiutsi said at the current rate, investors are likely to be small traders and in the process crowding out local SMEs.

He said: “A sensible venture would be worth much higher. Mitc should do a proper research to determine an amount that would protect local firms.

“Clearly, $50 000 is too little because foreigners with better resources engage in businesses that would rather be done by SMEs, depriving them of employment or economic livelihood,” he said.

To apply for the investment certificate, an investor is supposed to pay $200 (K148 000) application fees and $800 (K592 000) issuance fees, payable in US dollars upon the approval and collection of the investment certificate.

National Working Group on Trade Policy chairperson Frederick Changaya said Malawi needs people that bring transformational projects and not basic trading.

He said: “To put it in its perspective, South Africa talks of not less than R2.5 million and then there are all sorts of other restrictions.

“Otherwise if they do what we can do, how do we compete with them that have access to cheap and long-term financing?” 

But Mitc chief executive officer Clement Kumbemba said the investment threshold has been revised upwards and is just awaiting gazetting before it is effected.

He, however, said unlike the current arrangement where the minimum threshold applied to all sectors, the new rates will be based on sectors.

Said Kumbemba: “Threshold for capital requirements will now depend on sectors, but they will be quite hefty and will be as high as $250 000 [K185 million] and $500 000 [K370 million] depending on the sectors.

“For instance, some sectors like consultancy will have high minimum investment capital threshold.”

Meanwhile, Mitc says it has facilitated investment certificates for about 15 firms and managed to attract investment pledges worth $76.9 million in the first quarter of 2019/2020 financial year. Mitc public relations manager Deliby Chimbalu said the investment pledges are in energy, manufacturing, mining and construction, agriculture and agro processing sectors.

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