Market Turbulence: Navigating Malawi’s Fiscal Shift and Its Impact on Business Growth

Key Business Points

• The Malawi Stock Exchange (MSE) has recorded a 5.91 percent drop in the Malawi All Share Index (Masi) since the introduction of a 30 percent capital gains tax on share disposals, affecting investor confidence and market liquidity.
• The tax measure has led to a decline in market capitalisation by approximately K916 billion, with major counters such as FMB Capital Holdings, NBS Bank, and National Bank of Malawi posting consistent losses, impacting the overall performance of the stock market.
• The Minority Shareholders Association of Listed Companies (Misalico) has proposed alternative revenue measures, including a 1 percent levy on trades and listing of government-owned companies, to mitigate the negative effects of the tax on the market and encourage long-term investment.

The introduction of a 30 percent capital gains tax on share disposals has sent shockwaves through the Malawi Stock Exchange (MSE), with market indicators showing a bearish trend and investor confidence shaken. The Malawi All Share Index (Masi) has fallen by 5.91 percent since the tax measure was announced, with market capitalisation declining by approximately K916 billion. This represents a significant drop in the stock market’s performance, affecting the overall economy and business sector.

The tax measure, which removes the exemption previously granted to shares held for more than one year, has drawn sharp criticism from market participants, including Misalico. The association has warned that the tax will discourage Malawians from investing in the stock market and could undo the progress registered so far. "Zinthu zitakumana patsogolo" (things will get worse), said Misalico General Secretary Frank Harawa, as people will be dis-incentivised to sell their shares and try to avoid the hefty tax.

The weekly trading data supports Misalico’s concerns, with major counters such as FMB Capital Holdings, NBS Bank, and National Bank of Malawi posting consistent losses. For example, FMBCH dropped by 17.24 percent, while NBS Bank fell by 11.33 percent. Only a few companies, such as Illovo Sugar and Sunbird Tourism, have posted gains, with Sunbird surging by 134 percent due to a post-Covid tourism rebound.

Misalico has also raised concerns about the broader economic implications of the tax, warning that it could cause a market crush, with pension funds likely to be the biggest losers. The association has proposed alternative revenue measures, including a 1 percent levy on trades and listing of government-owned companies such as Salima Sugar and Escom. "Tikuyambisana ndi boma" (we are working with the government), said Harawa, to find a solution that balances market attractiveness with fair taxation.

MSE Chief Executive Officer John Kamanga has said that the introduction of a capital gains tax triggered a short-term increase in selling, as some investors sought to realize gains before the tax took effect. However, this surge was largely transitional, and the Exchange is engaging with the government to implement measures that balance market attractiveness with fair taxation. The key focus remains expanding participation among low-income Malawians and youth, said Kamanga, to position the capital market as a sustainable and rewarding avenue for long-term financial inclusion and wealth creation.

Minister of Finance Joseph Mwanamvekha has defended the tax measures, saying they target wealthy Malawians rather than the poor. "Wale ambiri adzitchulidwa" (those who have more should contribute more), said Mwanamvekha, during the pre-budget consultation in Blantyre. However, market participants remain concerned about the impact of the tax on the stock market and the overall economy, and are calling for alternative revenue measures to be implemented.

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