47
Malawi
– Maxton Grant Tsoka
M alawi is a landlocked, highly indebted, LDC located
in Southern Africa. Established in 1891, the British
protectorate of Nyasaland became the independent nation Population:
PROFILE
11 million***
of Malawi in 1964. After three decades of one-party rule, GDP (Current US$): 1.7 billion***
the country held multiparty elections in 1994 under a Per Capita Income: 160 (Atlas method)***
provisional constitution, which took full effect the (Current US$) 580 (at PPP.)**
following year.
Surface Area: 118.5 thousand sq. km
Economy Life Expectancy: 37.8 years**
The economy is predominately agricultural, with about 90
Literacy (%): 61.8 (of ages 15 and above)**
percent of the population living in rural areas. The economy
depends on substantial inflows of economic assistance from HDI Rank: 165***
the IMF, the World Bank, and individual donor nations. Sources:
The Government faces strong challenges, e.g., to spur - World Development Indicators Database, World Bank, 2004
exports, to improve educational and health facilities, to - Human Development Report Statistics, UNDP, 2004
(**) For the year 2002
face up to environmental problems of deforestation and (***) For the year 2003
erosion, and to deal with the rapidly growing problem of
HIV/AIDS.
produced and distributed under monopoly, monopolistic
Further, the economic performance of Malawi has competition and oligopolistic conditions. Notwithstanding,
remained quite unsatisfactory in the past number of years. the market structure remains imperfect and there are a lot
Relative stability and growth have been experienced but of restrictive practices as in certain instances businessmen
only to limited extent. The major reasons for this are collude to avoid competition.
numerous and include high level of inflation, fiscal
imbalance, external shocks, depreciation of Kwacha Malawi is also liberalising and privatising some sectors,
(Malawi currency), high interest rates etc. which aims at creating an environment in which public
enterprises will ultimately be converted into private
Competition Evolution and Environment commercial entities. This will enhance competition. One
The elimination of trade restriction through the of these is the power sector. There is an apprehension that
liberalisation programme has led to surge in imports, often in some sectors where privatisation is taking place, private
of cheap and substandard goods. Importation of expired monopolies may replace public monopolies.
goods like drugs, canned food, powdered milk and tires as
well as re-labelling and repacking of such goods pose In facing these challenges, Malawi undertook a number of
health and safety threats to the consumers and the economy policy reforms. In 1990s, Malawi Government adopted a
at large. These developments have raised complaints of policy of economic liberalisation and formulated
unfair competition mainly due to either comparative competition policy. The competition policy for Malawi was
inefficiency of domestic firms or dumping by foreign approved in 1997 with a broad policy objective to promote
sellers. economic efficiency and protect consumer interests,
comprising of three broad strategies namely lowering
The Malawian economy depicts some of the structures that barriers to entry; reducing RBPs; and protecting the
characterise imperfect markets. Most goods in Malawi are consumer.
Malawi 249
The policy focused on four specific areas, namely: • promoting or participating in consumer education
• First, on uncompetitive business behaviour (fixing, programmes and activities and disseminating consumer
collusive tendering or customer allocation and tied sales) information to the public.
aimed at eliminating or reducing competition.
• Second, unfair business practices aimed at taking unfair CFTA aims at encouraging competition in the economy
advantage of consumers. Examples of these unfair by prohibiting anticompetitive trade practices; providing
business practices include: for the establishment of the Competition Commission;
W hoarding of producer and consumer goods for the regulating and monitoring monopolies and dominant firms;
purpose of bringing about a price increase protecting consumer welfare; strengthening the efficiency
W misleading the public as to the nature, price of production and distribution of goods and services;
availability, characteristics, suitability for a given securing the best possible conditions for the freedom of
purpose, or quantity or quality of any product or trade; and facilitating the expansion of the base of
services entrepreneurship among others.
W supply any product which is liable to cause injury
to health or physical harm to consumers when The Competition Commission and its Competencies
properly used, or which does not comply with The functions of the Competition Commission include:
consumer safety standards • carrying out investigations on its own initiative or at the
• Third on market structures which permit abuse by a request of any person who may be adversely affected by
dominant enterprise; and a proposed merger;
• Fourth is on Government legislation, which may impact • taking such action as it considers necessary or expedient
on the free market. to prevent or redress the creation of a merger or the abuse
of a dominant position by any enterprise; and
The policy called for the enactment of a law that would • providing information for the guidance of consumers
make unfair business behaviour an offence and also protect regarding their rights under this Act.
the consumer by making a manufacturer or importer liable
for defective or sub-standard products or services. It also The powers of the Commission include:
called for the establishment of a trade remedial system • to summon and examine witness;
where civil and criminal suits for the purpose of recovery • to call for and examine documents; and
of damages suffered as a result of an uncompetitive or • to administer oaths.
RBP could be dealt with.
The Act also enumerates what constitutes anticompetitive
Specifically, the policy called for: trade practices, and these include:
• Creation of an autonomous Competition Commission (a) Making the supply of goods or services dependent
whose role will be to administer restrictive business upon the acceptance of restrictions on the distribution
practices legislation and consumer protection legislation; or manufacture of competing or other goods or the
and provision of competing or other services;
• Establishment of a specialised tribunal to resolve (b) Imposing restrictions where or to whom or in what
contentious issues in certain specific fields subject to form or quantities goods supplied or other goods may
judicial review on matters of law. be sold or exported;
(c) Resale price maintenance; and
(d) Predatory behaviour towards competitors including the
Competition Law and Policy use of cost pricing to damage, hinder or eliminate
The Government’s effort is evident from the resultant competition.
enactment of Competition and Fair Trading Act (1998),
which was brought into legal force on January 28, 2000, Sectoral Regulation
and the Consumer Protection Act (2003). The Competition Presently, the regulatory framework consists of:
and Fair Trading Act (CFTA) has the following principal • Establishment of the National Electricity Council in
objectives: October 1998;
• Changing the functions of the Petroleum Control
• promoting competition and enhancing efficiency in Commission from importing fuel to controlling and
Malawi’s economy; regulating the fuel sub-sector in May 2000;
• regulating and monitoring monopolies and concentrating • Establishment of the Malawi Communication Regulatory
economic power, addressing the interest and needs of Authority (MACRA) in May 1999;
consumer and identifying price mechanism, M&As and • Licensing and operation of a second cellular phone
restrictive trade practices, such as collusion and price service provider in 1999;
fixing and determining whether the quality and prices • Splitting of the former Malawi Posts and
of goods and services are justifiable; and Telecommunication Corporation (MPTC) into the
250 Competition Regimes in the World – A Civil Society Report
Malawi Posts Corporation (MPC) and Malawi by statute. Their dominance has not substantially changed
Telecommunications Limited (MTL) as separate despite subjecting their investments to a divesture
businesses in May 2000. programme under the Privatisation Act.
For example, MACRA under the Ministry of Information, The enactment of Privatisation Act did not ensure complete
Posts and Telecommunications regulates the competition in the economy as three major corporations:
telecommunication sector in Malawi. In line with the need Agricultural Development and Marketing Corporation
to open up the sector, a Communications Bill was processed (ADMARC), Malawi Development Corporation (MDC)
by Parliament and includes the establishment of criteria and Press Corporation limited (PCL) were not
and a formal procedure for tendering and issue of (immediately) privatised. As a result, the new private firms
communication licences, as well as establishing a regulatory found it difficult to compete with the trio that was already
body to oversee them. However, MTL is still the sole operator enjoying economies of scale and some Government
of basic services in Malawi’s telecommunication market subvention.
and its privatisation has been put on hold after some
irregularities were discovered in its sale. Another development is state-owned monopolies simply
ended up being private monopolies following public
Anticompetitive Business Practices reforms. For example, the state-owned Petroleum Control
There has not been any comprehensive study on Commission (PCC) that relinquished its monopoly on
anticompetitive practices in Malawi. However, the problem petroleum imports was replaced by a cartel-inspired
of anticompetitive practices appears to be quite pervasive. Petroleum Importing Company. This is essentially a joint
The anticompetitive practices are being carried in the company that a few petroleum importers formed to be
following manner: charged with the importation of fuel – the very activity
PCC was undertaking.
Cartels
Cartels operate openly in many sectors, and are suspected Apparently due to lack of competition law, the privatisation
of operating under cover in many more. Cartels that seem programme was badly designed and implemented to the
to have sprung up in response to price liberalisation on the extent that in most cases it was virtually the transfer of the
Governments’ part are the major problem. These are in Government monopoly to private monopoly.
effect attempts by the cartel members to appropriate the
benefit of price decontrol in the form of monopoly rents Unfair Trade Practices
instead of allowing them to accrue to the public in the form There are number of UTPs in Malawi. These include
of competitive prices. misleading advertisements, hoarding, and selling of
counterfeit goods. The Consumer Protection Bill though
Restrictive Business Practices (RBPs) not yet passed shows some Government effort to curb such
Most RBPs are well hidden in Malawi. However, one unfair trade practices that are detrimental to consumer
instance of RBP that has been detected is in the service welfare as misleading adverts and counterfeit goods.
sector. In the mid-90s, the Malawi Government encouraged
the formation of association in the service sector including Consumer Protection
the professions (legal, education, building etc). This was The Consumer Protection Act (CPA) contains provisions
to promote development of the relevant services and to for regulating fair business practices. The consumer is
safeguard standards. However, the activities of the given protection under this, among other things, against:
associations tend to include those that are clearly RBPs to
the detriment of consumer welfare and sometimes even Box 47.1: Offensive Advertisement
the promotion of the services. Typically minimum charges
are prescribed and sometimes market sharing arrangements There are a number of UTPs in Malawi. There was a
are also made. There is also a potential predatory and case regarding UTPs where Population Services
exclusionary behaviour. International (PSI) was being accused by the Malawi
Censorship Board for showing a nude woman on
Abuse of Dominance billboards advertising Chishango condoms.
Malawi’s domestic activity is characterised by high market
concentration with tendency towards monopoly or The board and some members of the public argued
oligopoly particularly in the plantation agriculture, that the advert was immoral and aimed at misleading
manufacturing, financial and other services. The ownership the public. The Board, therefore, ordered PSI to
of assets in manufacturing is concentrated in the hands of remove the adverts from the billboards.
few domestic and foreign investors. SoEs are the dominant
domestic investors. A few domestic investors have Source: Why is a Competition Law Necessary in Malawi? CUTS
2002
historically been state-owned companies charged to invest
Malawi 251
(a) excluding liability for defective goods;
Box 47.2: Hike in Rentals
(b) claiming payment for unsolicited goods or services;
(c) engaging in unconscionable conduct in carrying out
The Malawi Housing Corporation (MHC), the
trade in goods or services;
country’s housing utility company, has lost a major
(d) engaging in pyramid selling;
lawsuit against its tenants on the corporation’s decision
(e) engaging in bait selling;
to hike rentals on its housing units aimed at making it
(f) offering gifts or prizes with no intention of supplying
operate on a commercial basis.
them; and
(g) putting out an advertisement, which is misleading or
The High Court ruled that the MHC, which raised rents
deceptive.
by more than 100 percent, violated Section 7 of the
Malawi Housing Act, which states that the organisation
The Act also provides for the establishment of a Consumer
is a non-profit making entity.
Protection Council. The Council is charged with the
responsibility of protecting the consumer from a host of
The MHC increased rents in April 1996 by more than
unfair trade practices. It also provides for channels
100 percent in a bid to make the institution operate on
consumers can take for trade remedies arising from unfair
a commercial basis and to enable the organisation to
trading practices by suppliers of goods and services.
put up more housing units as well as improve the
maintenance of existing houses. Some MHC tenants
Functions of the Council can be enumerated as follows:
with the help of the Consumers Association of Malawi
• to investigate any complaint received regarding challenged the increase of the rentals in court.
consumer protection, and where appropriate, refer the
complaint to a competent authority and ensure that action
In his ruling, Justice Duncan Tambala ordered that the
is taken by the competent authority to whom the
tenants be credited the rents paid since April 01 last
complaint has been referred;
year.
• to carry out investigations or inspections on its own
initiative or at the request of any person regarding matters Source: Malawi News Online (29)
relating to consumer issues;
• to identify price mechanisms in Malawi to determine • to recommend to Government, where appropriate,
whether the prices are justifiable and to monitor the minimum standards for basic or essential needs
frequency and magnitude of price increases;
• to co-ordinate and network consumer activities and liaise Concluding Observations and Future Scenario
with consumer associations and organisations, any Malawi has the Competition and Fair Trading (C&FT) Act,
competent authority and agencies within and outside which is aimed at curbing all anticompetitive practices in
Malawi to protect consumer interests; the market. It also has a Consumer Protection Act aiming
• to formulate and submit to the Minister, policy and at protecting consumer welfare. Although these two legal
legislative proposals in the interest of consumers, instruments constitute the major components of
consider and examine, and wherever necessary, advise competition policy, the problem is that the institutions that
the Minister on the modification, consolidation or would make the legal instruments effective have not been
updating of legislation providing protection to consumers put in place. Some movement has been detected regarding
in the areas covered under, or related to the CPA or any the Competition Commission as Government has appointed
other written law; the Commissioners in early 2005. However, there is no
• to provide advice to consumers on their rights and Secretariat and it may take another year before the
responsibilities under the CPA and any other written law Secretariat is functional. There is no movement towards
and make available to consumers general information the establishment of the Consumer Protection Council. The
affecting their interests; following conclusions follow from this state of affairs:
• to carry out, promote or participate in consumer
education programmes and activities;
• Most of the laws existing in Malawi lack enforcing
• to create or facilitate the establishment of conflict mechanism; Government should, therefore, address these
resolution mechanisms on consumer issues; shortfalls to ensure an effective regulatory regime in a
• to advocate for the effective implementation of the CPA liberalised economy. These laws will complement the
and any other written law affecting consumers; C&FT Act in ensuring a level playing field in the
• to maintain a complaints register; economy; and
• to disseminate consumer information to the public; • Consumer movement in collaboration with all
• to collaborate with other institutions to ensure that the stakeholders (e.g. Malawi Bureau of Standards (MBS),
quality of technology, goods and services imported into Ministry of Commerce & Industry) should be accelerated
the country comply with the Malawi Standards; and
252 Competition Regimes in the World – A Civil Society Report
to educate the public on anticompetitive practices and likely to bear. There may be a need to harmonise sector-
their effect on consumer welfare and economy. specific regulations with competition principles. Currently,
the relationships between sector regulations and the
The telecommunications, utilities (electricity and water) competition regime are not yet clear. Further, the work
and others are known to be less efficient due to limited and indeed the functions and powers of two bodies
competition. In some of these sectors like electricity and themselves may need to be harmonised to maximise their
telecommunications, there seem to be competition-friendly impact and cost-effectiveness.
legislation and regulations put in place yet there is slow
progress towards implementation of the necessary reforms. The consumer movement needs to vigorously lobby for
the establishment of the C&FT Commission and the
Even with the two bodies in operation (CC and CPC), more enactment and operationalisation of the Consumer
work will be needed. The market structure requires some Protection Law, which is still at the Bill stage.
solution in order to lessen the burden the two bodies are
Suggested Reading
CUTS: Why is a Competition Law Necessary in Malawi?
Maxton Grant Tsoka obtained his Bachelor of Social Science majoring in Economics and Computer Science in 1985, at
Chancellor College of the University of Malawi and a Master of Arts in Economics at Vanderbilt University, Nashville,
Tennessee in 1990. He joined the Government of Malawi in the Ministry of Economic Planning and Development as an
Economist in 1985. He was promoted to Senior Economist in 1991 and Principal Economist in 1993. He worked in the
transport, macroeconomics and Commerce and Industry sections of the Ministry. He also headed the Commerce and
Industry from 1992 to 1995. Earlier, he worked in the University of Malawi as a Research Fellow responsible for public
policy at the Centre for Social Research in 1995. As a research fellow, his major assignments have been on public
expenditure analysis, poverty analysis, impact analysis of projects, programmes and policies and policy analysis.
Malawi 253
