Development of Policy, Legal, and Insitutional Framework for - ppiaf

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Development of Policy, Legal, & Institutional Framework for the PPP Program in Malawi Final Report Of the three types of land available in Malawi, customary land is by far the largest type. This is held by chiefs and communities without formal title to it. Although there is provision for converting such land to titled land, the process is long and laborious. ISSUES: A sizeable number of PPP projects will probably involve land. If securing title to such land becomes a very lengthy process, it may place a serious bottleneck to the realisation of those PPP projects. Additionally, even though the PPP project may not require title to land, investors may wish to use such title as security for loan capital. A new Section 24D stipulates that where freehold land is held by a person who is not a citizen of Malawi for a continuous period of more than two years and during that period such person has not shown his intention to develop the land, the Minister may demand voluntary surrender of the land within a period of ninety days. The new provision appears to discriminate against non-citizens. ISSUE: The appearance of discrimination does not auger well for investment. Such a law, if deemed necessary, ought to apply uniformly to all. Section 2(l) of the Land Act Regulations, provides that a lessee may not transfer or otherwise dispose of any portion of leasehold property (including mortgaging the land) without first obtaining written consent from GoM. Section 24A of the Land Act requires anyone wishing to offer for sale any private land to give 30 days written notice to the Minister of Lands. ISSUE: Stories abound of delays in the issuance by the Government of the consent (r. 2(l) and certificate of compliance (S.24A). This would need to change to facilitate PPPs. 5. Lands Acquisition Act Under the above Act, the Minister may compulsorily or by agreement acquire any land if, in his opinion, it is desirable or expedient in the interests of Malawi to do so. Section 10 empowers the Minister to determine the amount of fair compensation to be paid to the person from whom the land is being compulsorily acquired. ISSUE: The lack of predictability regarding amount of fair compensation and the level of discretion given to the Minister makes investors uneasy as the GOM tends to rely on the government valuation surveyors whose independence could be questioned. 6. Conveyancing Act & Stamp Duties Act THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 94
Development of Policy, Legal, & Institutional Framework for the PPP Program in Malawi Final Report Stamp duty at the rate of three percent of the value of the property subject of the transfer or sale is payable to the Government. There is also duty, albeit a much reduced level, on a mortgage or charge. This is a form of tax. It could therefore very be that in trying to encourage investment in PPPs the Government may grant a general or specific waiver for this duty. 7. Companies Act & Protected Flag, Emblems and Names Act PPPs can be undertaken through any myriad of vehicles, although the incorporation of a limited liability company under the Companies Act would be the commonest type. The process for securing the registration of a company in Malawi is fairly simple and straight-forward. If the name of the proposed company wishes to use the word “Malawi” or “National” or “Republic” etc, it is necessary to obtain specific approval from the Government – the Office of the President and Cabinet. ISSUE: Stamp Duty is payable on the nominal capital of the company. This can be costly depending of the amount of the authorised share capital. To facilitate PPPs and help to make new projects viable, one of the potential incentives could be to allow the prospective investors a waiver with regard to this stamp duty. 8. Taxation Act, Customs and Excise Act The Tax Act provides a tax regime for any investor, be it a citizen or non-citizen or indeed a corporate entity. With respect to resident individuals and companies, tax is levied on all income from within or deemed to be within the country. In relation to commercial operations, the Act allows (within some limitations) the carry over of operating losses in the determination of taxes payable in later years. Additionally, the employer is required to withhold employment taxes (popularly known as “Pay As You Earn” or “PAYE”). ISSUES: A recent amendment of the Taxation Act (2005) attempts to limit to six years the ability to carry forward any tax losses. The Investment Promotion Act, on the other hand, suggests that tax losses can be carried forward indefinitely. Work is in hand that seeks to remove the discretion to grant tax waivers from the Minister of Finance. Any incentives for PPP projects therefore will need to be sanctioned by Parliament probably through the new Act. To enable PPP projects to be viable, it may be necessary to accord certain projects preferential taxation rates. The Government may wish to give this matter further thought. 9. The National Transport Policy, 1998 & the Road Traffic Act High transport costs, weak infrastructure and poor access to rural areas remain important issues in the economic development of Malawi. This will prove a major consideration in the implementation of PPPs. It is as much an obstacle as it is an THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 95
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31 March 2007 Mr. Constantine Chiko
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Development of Policy, Legal, and Insitutional Framework for - ppiaf

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