Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has asked the Malawi Stock Exchange (MSE) to incentivise the private sector to support small and innovative businesses with long-term investments.
In its 2020/21 pre-budget consultation submissions to Minister of Finance Felix Mlusu on Wednesday in Blantyre, MCCCI director of business environment and policy advocacy Madalitso Kazembe said access to finance remains a major obstacle to the growth of domestic investment in Malawi.
She said despite the establishment of MSE, few companies are accessing long-term capital through public listing, which has hampered private sector growth.
Kazembe said: “Capital markets remain largely under-developed and under-utilised relative, for instance, to growth of pension funds.
“This is despite the fact that alternatives to finance are arguably the most vital service the financial sector can deliver for private businesses in Malawi.”
To encourage listing on the 16-counter MSE, the chamber has proposed introduction of a preferential corporate tax of 27.5 percent to companies that raise capital through listing for the three years post-listing.
The chamber has also proposed a withholding tax exemption on interest income earned on infrastructure bonds.
Kazambe said: “We would also like to see a stamp duty exemption on transfer of property acquired using the capital raised through an initial public offering for real estate investment trusts valid for up to two years post-listing.
MCCCI also suggested that a dividend tax exemption for the initial five years after listing for venture capital firms would also be beneficial to the private sector.
She said: “There is need to subsidise listing costs for small and medium enterprises through creation of a fund to cater for listing expenses as is done in other jurisdictions.
“Majority of listing expenses are outside the scope of the exchange.”
Commenting on the proposals, MSE operations manager Kelline Kanyangala admitted that some companies are reluctant to list despite there being benefits.
She said: “These proposals are based on research and experience in other jurisdictions.
“We, thus, need to place deliberate incentives to bring companies to list, this is one of the ways we can grow our private sector.”
Responding to the submissions, Mlusu said the ministry has taken note of the proposals and will take on board some of them.
The minister said: “We will look at the views and ideas that will give us quick-wins in our implementation.
“We will also look at the views and ideas which enable us pluck the low hanging fruits and those that set a foundation to anchor our budget in line with the Malawi 2063.”
MSE has been in operation since 1994, but started equity trading in November 1996 when it first listed National Insurance Company Limited now Nico Holdings plc.
Prior to the listing of the first company, the major activities undertaken were the provision of a facility for secondary market trading in government securities namely, treasury bills and local registered stocks.