Private sector gears to spur Malawi’s ICT industry


With a less vibrant private sector, the government is the single largest and most attractive consumer of technology in Malawi, a situation which has spurred corruption, bribery and political business cronyism, thereby goading the country’s ICT industry into stagnation. Alfred Jiyah, Managing Director of Almatec Solutions says the concentration of funding into government departments and agencies has over the years seen few ICT companies that are politically connected getting government contracts at the expense of more experienced and creative ones. “To say the fact, the ICT industry is one of the fastest growing industries in Malawi,” says Jiyah, “But since most of the country’s money is with the government, business has turned to be political which has led to the monopoly of the acquisition of government business by the very same and handful companies.”

Jiyah also says small and medium companies suffer from heavy taxation. “Small and medium companies are the ones who feed government coffers with almost a third of what they get on the market,” he says urging government to create a tax band of about US$120, 000 in order to make SMEs more competitive on the market which he says is being taken away by big foreign investors. Recently, President Joyce Banda said her government will try to maximise the capacity of Malawians to realise their social, political and economic empowerment. She said her government intends to eradicate poverty through economic growth and wealth creation where citizens get jobs not because of where they come from, but because they qualify for it. She said her vision was “to see businesses winning tenders not because they have bribed, not because they sponsor the ruling party but because they qualify to deliver”. In his parliamentary 2012/2013 budget presentation, finance Minister Ken Lipenga announced that government has removed minimum tax on turnover and scrapped capital gains tax on profits earned.

The new reforms has earned the Banda led administration applauds from the Malawi Confederation of Chambers of Commerce and Industry (MCCCI), Malawi Economic Justice Network (MEJN) and Economic Association of Malawi (ECAMA) who say the removal of the punitive taxes which made the private sector to post losses and downsize their operations will create a private sector led economy. However, Jiyah says that apart from the removal of the punitive taxes, the government must review the punishments small companies are slapped with when they default on various tax measures. But President Banda has responded by saying her “government will achieve the people’s aspirations by putting in place an end to predatory tax audits, unfair and arbitrary appeals procedures by the Malawi Revenue Authority (MRA)”. She says her government will review and simplify tax regime to make it more encouraging for business, investment and to support job creation. “Procedures for licensing, work permits and visas will be reviewed and simplified to encourage foreign investment and tourism,” she says adding, “If we have to attract investors in those industries which have a global choice of destinations, we have to be globally competitive in terms of our regulatory and policy environment”.

Outlining the vision of her two month old government, Banda says her government is determined to promote a private sector driven growth by empowering small and medium enterprises, establishing linkages between industry and small businesses, promoting access to capital and reforming the financial sector. “This Government, will develop the SMEs through a decentralised programme where focus will be on establishing a Small Industry Support Fund (SISF), and expand its activities so that it will more effectively support micro, small and medium-sized enterprises”. SMEs in Malawi, include the informal economy who cover a large segment of the economy that is mostly not monitored nor regulated by specific statutes, and whose activities are not factored in the national accounts. President Banda says her government will put strong emphasis on the deployment and use of information and communication technology as a key catalyst for the economic development of the country to facilitate informed and results-oriented decision-making. “Malawi needs a strong Telecommunications, Information and Technology (TIT) platform in order to launch its industrial programme,” she says pointing out that the TIT platform should be able to integrate security, banking and insurance, taxation, deeds office, immigration, courts, traffic licensing, business registration, National Register, education and health sectors in order to realise integrated planning and monitoring.

Meanwhile, government is building telecommunications infrastructure in the rural areas to support rural development initiatives and broaden the formal economy. In the past year, it has established seven community telecentres in Ntcheu, Mwanza, Neno, Mangochi, Mulanje, Phalombe and Nsanje districts under the Infrastructure Services Project, bringing to 51 the number of telecentres in the country. Banda says her administration will restructure the telecommunications industry by establishing a public limited company that can drive infrastructure development in rural areas and pioneer technological advancement and invite a strategic private sector partner for technology, skills transfer and private capital.

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