Tobacco Industry is a big industry in Malawi and is primarily governed by the Tobacco Industry Act [the Act]. The principal regulator of this very important industry is the Tobacco Commission [The Commission] whose function includes regulating the production, grading, processing, importation, exportation and marketing of tobacco in Malawi. It is as such mandated to issue licenses to investors looking to undertake any of those activities. This write-up will guide an investor looking to process tobacco in Malawi on how they can acquire a Tobacco Processing Licence [TPL].
Categories of Processing
- Primary Processing – involves preparing tobacco leaves fresh from the estates i.e. cutting the stems and drying the leaves;
- Secondary Processing – involves value addition to the tobacco i.e. processing the tobacco into secondary products such as cigarettes.
It is required that an investor obtains an Investment Certificate from the Malawi Investment and Trade Centre [MITC]. The Investment Certificate is proof that the person has financial capacity to run the investment.
Further, prospective investors are required to put up investments of not less than USD 50, 000 as minimum investment capital to be able to obtain an investment certificate from the MITC.
An application for an Investment Certificate contains the following;
- A duly completed investment application form (see attached);
- A detailed Business Plan/Proposal which must contain the following:
- The promoters and shareholding structure of the investor;
- The total project cost and the debt;
- The step by step processing flow of how tobacco is manufactured;
- The management and staffing of the investor whilst indicating the number of expatriates to be recruited and in what positions;
- The marketing strategies and logistics to be employed;
- The location of the project, the housing/accommodation of skilled/non-skilled workers, and the impact of the project on the environment;
- The raw materials to be used in the manufacturing of the tobacco and its source, mode of transfer of the raw materials and its quantity, estimated monthly costs of the raw materials
- Annual production capacity, technology to be adopted for the manufacturing of tobacco, type of equipment to be used, electricity and water requirements and its backup modality;
- An implementation time schedule of the tobacco manufacturing
- A financial analysis of the tobacco manufacturing project including a five (5) income statement/profit and loss statement of the project
- Copy of Memorandum and Articles of Association of the investor;
- A Certificate of Incorporation of the investor; and
- Copy of passports for each of the investors/directors.
The Commission issues licences authorizing the processing of tobacco. It is required under the Act that an entity with ambitions to carry out primary processing of tobacco has to register with the Commission. The application for registration contains the following;
- a certificate of incorporation of the processor under the Companies Act of Malawi;
- processing capacity of the processor;
- planned production of the processor;
- capacity, number and area of warehouses of the processor;
- existing transport facilities of the processor;
- number and quality of skilled, semi-skilled and non-skilled personnel employed or to be employed; and
- the precautions taken with respect of the prevention of the environment.
There are other requirements and particulars that need to be satisfied by the processor in order to meet unqualified approval and issuance of a licence as a primary processor of tobacco. These include;
- the curriculum vitae (CV) of Directors of the processor
- evidence of technical expertise in the tobacco industry of personnel to be employed
- the source of the tobacco i.e auction floors or through a licenced company
- where they intend to sell the tobacco i.e Malawi, Zambia, Mozambique; and
- a minimum of USD 1, 000, 000 as starting capital for hiring and setting up the processing company
For the MITC, upon approval by the Investment Approval Committee [AIC, a committee hosted within MITC] the MITC issues an Investment Certificate within five (5) working days from the date the application is made.
The Commission also has a similar timeline of 5 working days from the time the application is made.
Fees and Associated Costs
- Application Fee in the sum of USD 200. It is payable to MITC at the time the investor submits the application.
- Issuance Fee in the sum of USD 800. It is payable to MITC upon approval and collection of the Investment Certificate;
- Three-year licence fee of USD 5, 000 paid to the Commission upon issuance of TPL
In general, companies/investors looking to process tobacco in Malawi either as a primary or secondary processor can easily do so either by themselves or through an agent, such as legal practitioners who can carry out the process outlined above for them.