Malawi Corruption Report

The public services sector carries a very high risk of corruption. More than a quarter of companies expect to give gifts to obtain a water or electrical connection, while less than two in ten companies expect to give gifts to obtain an operating license (ES 2014). Government regulations are moderately burdensome; red tape and delays are impediments to investors (GCR 2015-2016; ICS 2015). Starting a business takes 38 days and includes 8 procedures, more than the regional average (DB 2016).

More generally, the vast majority of households in Malawi deem connections an important factor to getting things done in the public sector (GCB 2013). This supports evidence suggesting that the public administration relies on large patronage and clientelistic networks (Transparency International, Sep. 2014). Cronyism is also widespread in the public administration (BTI 2016).

The tax administration is a high-risk sector (ICS 2015). Bribes and irregular payments are often exchanged when meeting with tax officials (GCR 2015-2016). More than two-thirds of respondents perceive tax authorities to be corrupt to some extent, while three-quarters find the tax system opaque and inaccessible (Afrobarometer, Mar. 2014). Furthermore, almost half of respondents in Malawi perceive tax evasion as wrong but understandable (Afrobarometer, Mar. 2014). Paying taxes is less time-consuming and less costly than the regional average, taking over 170 hours per year (DB 2016).

There’s a very high risk of encountering corruption when interacting with Malawi’s customs authorities. Bribes and irregular payments are widespread when importing or exporting goods, and border operations are opaque  (GCR 2015-2016; GETR 2014). Corruption is more prevalent when dealing with importing than with exporting (GETR 2014). Trading across Malawi’s borders is generally less costly and less time-consuming than elsewhere in the region (DB 2016).

Companies operating in Malawi’s public procurement sector face a very high risk of corruption, and several large-scale corruption cases have become public in recent years (ICS 2015). Bribes are often exchanged in the procurement process; one-third of businesses expect to give gifts to officials to obtain a public contract (GCR 2015-2016; ES 2014). Major tenders do not involve competitive bidding, the process of awarding contracts is opaque, and even the system for allocating bids is not transparent (Transparency International, Sept. 2014; GI 2016). Reportedly, the government has awarded contracts to companies bidding on projects with no relevant experience (GI 2016). In addition, entrenched networks of patronage and clientelism in the Malawi economy have undermined transparency in the procurement process of public contracts; favoritism of procurement officials’ decisions is a known problem (Transparency International, Sept. 2014; GCR 2015-2016). Discrimination against indigenous Malawians is also reported to occur in the awarding of contracts, a consequence of the opaqueness of the evaluation criteria used to decide on awards (GI 2016). The diversion of public funds due to corruption is widespread in Malawi (GCR 2015-2016).

The Office of the Director of Public Procurement (ODPP) oversees all public procurement activities and most tenders are published on the ODPP website. The Public Procurement Act stipulates the necessary provision of thresholds for the application of procurement methods, bid evaluation procedures and contract management; however, these provisions are poorly enforced due to the inefficiency of the ODPP (Transparency International, Sept. 2014). Companies found guilty of corruption are prohibited from participating in future bids, a provision that is fairly well enforced (GI 2016).

A high-level corruption case involving the diversion of public funds broke out in late-2013; USD 250 million of public revenues were siphoned by public officials into private bank accounts (Transparency International, Sept. 2014). The case became known as the ‘Cashgate’ affair and triggered foreign donors to withhold USD 150 million in aid to the country (Transparency International, Sept. 2014). Former accountant general David Kandoje was arrested in connection with the case in March 2015 for allegedly authorizing the payment of two cheques to contractors without appropriate documentation (GI 2016). Approximately 70 people have been prosecuted in connection with the case as of 2015 (HRR 2015). Nevertheless, the Anti-Corruption Bureau has been criticized for only going after lower-level officials and failing to investigate former presidents Bingu Mutharika and Joyce Banda, despite allegations of their involvement in the case (GI 2016).

Businesses may face high corruption risks when operating in the natural resource sector. Malawi was accepted as a candidate country to the Extractive Industries Transparency Initiative (EITI) in 2015; the EITI standard requires greater disclosure of revenues from natural resources and licenses and contracts awarded within the extractive industries. To ensure the implementation of these standards, the government set up a multi-stakeholder group that includes representatives from the government, the private sector and civil society (EITI, Oct. 2015). Nonetheless, evidence suggests that financial records of and documentation related to the exploitation of natural resources are not available for public scrutiny (GI 2016).

In late-2014, the government suspended oil and gas exploration licenses of different companies including Surestream Petroleum Limited, SacOil and Rak Gas, pending review. The following year, the attorney general had found that underlying production-sharing agreements between companies had been signed before the award of licenses and before oil discoveries were made. The attorney general also reported that the licenses breached the Petroleum Act as three of the six companies were revealed to be owned by a single shareholder. The government eventually restored the licenses to some of the companies but did not disclose which had breached the regulations and which did not, thus reflecting the secrecy that plagues the extractive industries and the obscure ownership of companies operating in the sector (The Times, Apr. 2016).