Tomorrow almost 7.5 million Malawians will choose a president, parliamentarians and councillors in the country’s first tripartite elections. This election has been described as “too close to call“.
Mining and oil and gas are peripheral topics in the elections yet it is interesting to consider how the extractive industries are positioned in political manifestos of the four main contenders. Of course these manifestos are not the only ways in which parties and presidential candidates have presented their views on mining in Malawi. For example, we already blogged about the discussion around mining raised in the presidential debates held in April and May 2014.
In alphabetical order, the four main contending parties are the Democratic Progressive Party (DPP), the Malawi Congress Party (MCP), the People’s Party (PP) and the United Democratic Front (UDF). All parties have had presidents in office since Malawi’s independence in 1964. Eight other parties are also fielding presidential candidates. See here for more facts about the election.
The four main political parties launched their party manifestos last month. Improving the fiscal regime, updating legislation and regulation, and ensuring mining contracts are negotiated to benefit the nation are common themes across the manifestos with a focus on the outcomes of mineral exploitation for communities.
However, the parties do not go so far as to provide for free, prior and informed consent of communities in mining and other natural resource related projects. In addition, artisanal and small-scale mining is not highlighted in the manifestos. Promoting local content – although not described as such – and the training and education of Malawians to enter the sector across the value chain also receive some attention in the manifestos. All the parties focus on the importance on improving the energy sector and electricity supply which is a constraint for business including mining operations in Malawi.
Only DPP explicitly underlines the importance of joining the Extractive Industries Transparency Initiative although this is spelled out in both Malawi’s National Export Strategy (2013-2018) and Mines and Minerals Policy (2013). PP sets a goal to see at least one mine opened every two years, while UDF champions public-private partnernships in the energy and mining sectors. MCP emphasises, among other things, the importance of environmental and social assessments.
The use of revenue from the extractive industries is not discussed in the manifestos, nor is the dispute with Tanzania over Lake Malawi and its oil addressed. This is a concern. As Malawian blogger Steve Sharra puts it
There is mounting interest in other minerals and on oil exploration in Lake Malawi, and people are anxious to see how these can benefit the country rather than the foreign companies that are given the contracts in collusion with the ruling elites.
Below are excerpts from the party manifestos that relate to mining and minerals.
Democratic Progressive Party (presidential candidate: Arthur Peter Mutharika)
Party Manifesto “Toward a People-Centered Government” is available here.
Our Collective Vision
Our collective vision is our country transformed from being a predominantly importing and consuming country to a predominantly producing and exporting country; and a food self-sufficient country where hunger is eliminated, and our agricultural primary commodities, other raw materials and minerals transformed, in the process creating jobs and new wealth for our people.
Chapter 5: Creating New Wealth
13. The DPP has been very successful during the time it was governing in creating wealth for the majority, reducing poverty significantly from 66% to 42%; made Malawi the fastest growing economy in Africa, and improving the livelihoods of mainly the poor. In 2014-2019, it will continue to focus on investment in productive sectors as the basis for creating new wealth. Without economic growth and development, no democracy can be sustainable. The DPP will utilise Malawi’s vast agricultural, mineral and human resources to improve the country’s economic prospects through expansion of manufacturing, production and export of non-traditional agricultural and industrial products, and further development of services such as tourism.
Chapter 6.3: Monetary and Fiscal Policy
b. The tax regime governing the mining sector and other extractive sectors shall be reviewed and allow maximum benefits from mining proceeds to Malawi. The legal framework shall make investments into the extractives sector predictable and also allow more community voices in key decisions on economic activities that affect their communities.
Chapter 13: Diversification of the Economy
70. The DPP believes that Malawi needs to diversify from primary agriculture especially tobacco, in order to increase its resilience and sustain economic growth and development. The DPP government will therefore use Malawi’s vast agricultural, mineral and human resources to improve Malawi’s economic prospects through expansion of manufacturing, production and export of non-traditional agricultural and industrial products, and further development of services such as tourism.
Chapter 16: Science and Techology
94. The DDP is aware that there has not been a conscious policy for developing science and technology for macroeconomic growth in our country. We have also largely depended upon external institutions to drive our research programmes. The DPP government will change this by giving very high priority to locally-based research programmes and adaptation and utilization of science and technology specifically designed to convert our agricultural primary commodities, minerals and other natural resources into new wealth. Therefore the DPP led government will place Science and Technology at the center of the nation’s economic growth.
Chapter 18: Managing our Natural Resources
105. Malawi is richly endowed with high value natural resources which constitute important wealth for development of Malawi. However, the competing needs from growing population, industrial development, physical infrastructures and wild life, make the issue of land and natural resources very critical for our development. Apart from providing economic returns, natural resources also provide the basis for our tourism industry. Because of the extreme pressures on land and natural resources, the protection of the environment and the ecology has become a very serious problem.
106. The DPP is aware that Malawians have not yet fully benefited from the natural resources. This has been due to the lack of a coherent and up-to-date land, natural resources and environmental policy coupled by lack of adequate financing and investment. The DPP Government will carefully preserve our natural resources consisting of the land itself, lakes, rivers, forestry, wild life, fish and minerals. The effective exploitation of these resources to provide a boost for our development efforts will always be a priority for the DPP.
107. Mining provides an untapped source of foreign exchange for the country. The DPP will ensure that people benefit the most out of the mining investments in Malawi. We will support and provide an enabling environment for attracting investments into mining but will critically negotiate the mining contracts so that the country and its people benefit the most. DPP will also subscribe to the EITI, and create an independent contract negotiating unit in extractive resources.
108. The DPP Government will adopt the following policies for the management of our land, natural resources and the environment:-
i. Finalise a comprehensive inventory of our natural mineral resources so as to determine how these will support our industrialization strategy.
ii. Develop an appropriate policy framework linking natural resources, environment and tourism to economic and social progress.
Chapter 19: Mining and Energy
109. The DPP believes Malawians are rights holders who must benefit from a just extraction and distribution of natural resources. Policies and practices in the sector should therefore protect the rights of citizens to fair access to natural resources and beneficiation.
110. The DPP government will therefore develop and implement transparent, accountable and efficient mobilization and utilization of natural resources for the development of the country. This will include ensuring contracts that benefit citizens, while providing stable environment for the investors.
111. The DPP abhors the fact that Malawi is just sitting on many high value minerals including gold, diamonds, bauxite, lime, uranium and heavy mineral sands, yet we do not have enough energy. It is time to place high priority on investment that leads to the identification and exploitation of minerals and energy, to provide the technology and financing that will lead to discovery, exploitation and use of new minerals and energy resources of our country.
112. More advanced technologies will be introduced for exploitation of commercial hydropower, wind and solar power for rural electrification through, inter alia, the use of coal, geo-thermal, solar and wind energy.
113. The DPP shall actively search for alternative sustainable energy sources and only initiate energy projects that are cost effective and centred on the priority needs of the people and of investment. We shall encourage Public Private Partnerships (PPP) in the energy sector.
114. The DPP will promote research and usage of biofuels in the form of biogass, bioethanol and biodiesel. A Bioenergy Commission will be established to regulate and promote the usage of bioenergy in the form of biofuels. Furthermore incentives will be provided to agro-industries that use agriculture waste products for the co-generation of electricity.
115. The DPP will however prioritise:
(i) Development of new legal and institutional frameworks for natural resources that protect the long term interests of the country.
(ii) Introduction of alternative sources of energy such as solar, wind and biogas.
(iii) Provision of new incentives to people in rural areas to use electricity while growing more trees, especially fast growing trees.
(iv) For efficiency, the DPP government will separate the functions of ESCOM into electricity production, distribution, and marketing, and have them run as autonomous institutions. In addition, we will encourage more private sector players to invest in the energy sector.
28.2 The Private Sector
174. We will establish “one-stop” investment centres to promote and encourage increased investment in the productive sectors especially in agriculture, mining and manufacturing so as to increase our export earnings through value addition.
Party Manifesto “A Better and Prosperous Malawi is Possible” is available here.
MCP has identied seven strategic priority areas for the next ve years. These are key performance enablers that
will restore the integrity of Malawi economy. These are:-
- Policy and institutional reforms
- Agriculture and food security
- Infrastructure development
- Youth development and empowerment
- Energy and Mining
6. Wealth Creation
The MCP led government shall deal with Malawi’s economic problems by promoting establishment of new industrial activity such as mining, manufacturing, and processing. This will generate additional incomes as well as create jobs for our people.
8. Natural Resources Management
MCP believes that our natural resources and the environment constitute important wealth for development of
Malawi. Natural resources in Malawi are facing challenges of competing needs of a growing population, industrial
development, physical infrastructures and wild life. This is making the issue of land and natural resources management very critical for our sustainable development to meet the needs of current and future generations.
MCP will adopt the following policies for the management of natural resources:-
- Ensure that in every project, environmental impact assessment is conducted and outcomes adhered to.
- Encourage technologies that conserve natural resources.
- Make a comprehensive survey of our natural resources, including minerals, so as to determine how these will support our industrialization strategy.
- Review policy framework linking natural resources, environment and tourism to economic and social progress.
- Intensify reforestation and control programmes working with all stakeholders including individual families.
- Encourage licensing and concessionary arrangements that focus on efficient utilization and replenishment of our natural resources.
- Encourage the exploration of minerals in Malawi and greater allocation of resources to this sector.
- Develop policy, legislation, and regulatory framework that will ensure transparency, accountability, and sustainable use of the resources.
- Develop capacity and skills to support the industry.
9. Infrastructure and Development
The MCP government will:
- Invest in oil and mineral resources mapping to develop a strategic understanding of the wealth endowment available under the Malawi soil including the lakes.
- Upgrade fuel storage capacity to increase lead time for imports.
- Review the levy structure and management of petroleum products in Malawi.
10. Industry and Trade
MCP Government will actively promote and prudently manage trade and industrial development at all levels based on an export led development strategy within a competitive market framework. The goal is to create and operate vibrant domestic trade and industry along with active participation in trade protocols with SADC, COMESA, World Trade Organisation (WTO), and other international bodies.
MCP will give high priority to developing and strengthening the capacity of the private sector to participate effectively in investment, production and trade. MCP will adopt specic policies and programmes to deal with trade and investment relations as well as those relating to regional trade within the framework of regional economic groupings and domestic trade.
Specfically, the MCP will undertake the following:-
- Strengthen “one-stop” investment centre to promote and encourage increased investment in the productive sectors especially in agriculture, mining and manufacturing so as to increase our export earnings through value addition.
People’s Party (presidential candidate: Joyce Banda)
Party Manifesto “Transforming Malawi Together: It Is Possible (Nzotheka)” is available here.
11.1 Fiscal and Monetary Policy
- Promote expenditure within the budgetary constraints to begin to move towards a balanced budget.
- Build capacity for financial programming in the Ministry of Finance, and the Reserve Bank of Malawi as a strategy to develop a systematic, comprehensive and consistent programme to ensure efficient, effective and prudent use of public resources;
- Widen the tax base by strengthening administrative capacity and reforming the system for granting exemptions and eliminating tax evasion;
- Undertake a thorough review of the tax code in order to develop a progressive tax structure that will meet the demands of transforming the country; and
- Ensure maximum collection of budget revenues from investments in the extractive industry.
12.0 The Economic Recovery Plan [ERP]
The ERP focused on immediate policy reforms, and short and medium term measures that would bring quick wins to the economy. The ERP also isolated sector projects that had an impact on foreign exchange generation, employment creation, reduced power outages, improved transport and information communication technology. In this regard, the following five sectors were prioritized: agriculture, energy, tourism, mining and infrastructure development.
The PEOPLE’S PARTY Government will therefore in the next five years move from healing to prosperity and from recovery to sustainable growth. While the broad principles of the PEOPLE’S PARTY economic governance have been outlined in the preceding chapters, the actual economic transformation will be realized through a series of interventions in a number of priority economic sectors. These sectors include: i) Energy ii) Tourism; iii) Mining; iv) Industry, Trade and Private Sector Development; v) Science and Technology; vi) Water Development; vii) Environment and Natural Resources; viii) Land Development; ix) Labour; and x) Local Government and Housing.
The PEOPLE’S PARTY government recognizes that mining is increasingly becoming important in the country’s economic portfolio. Its contribution to GDP has risen from 3% to 10% over the last ten years. However, the PEOPLE’S PARTY believes that with a proper supportive infrastructure, mining’s contribution to GDP can be raised to 20% within the next five years. The PEOPLE’S PARTY government will therefore do the following to fully exploit the mining sector’s potential:
- Fast-track the completion of the audit of the country’s potential mineral endowment that is currently underway through airborne geophysical exploration;
- Fast track the completion of the revision of the 1981 Mines and Minerals Act, the 1983 Petroleum (Exploration and Production) Act, and the Explosives Act of 1968 to align them with the demands of 21st Century to ensure that the country fully benefits from its mineral resources;
- Design a simple and unique mining fiscal regime which should be both stable and predictable over time;
- Open at least one mine every two years. Immediate targets are the niobium deposit in Mzimba where a mine will open in 2015, the rare earths projects in Phalombe, Mulanje and Kangankunde in Balaka where mining will start from 2017, and the various coal deposits;
- Establish means for auditing mining companies accounts to ensure accuracy of information provided for taxation purposes and the maximization of income from royalties;
- Implement a capacity development programme on the basis of a comprehensive needs assessment and institutional audit exercise for the mining sector;
- Encourage local and foreign ventures in the mining sector with the aim of empowering local entrepreneurs and maximizing the benefits of mining to the country;
- Engage with different levels of the education system to develop relevant courses that will support the mining sector, particularly through research and development;
- Construct state of the art geochemical laboratory that will ensure that all the necessary analyses are carried out in the country.
United Democratic Front (presidential candidate: Atupele Muluzi)
Party Manifesto “Delivering Change in Malawi” is available here.
1. Introduction: Malawi at the Cross-Roads
[…] Furthermore, efforts to stabilize the economy have not been adequately balanced with those to improve the business environment. The slow-down in foreign direct investment (FDI) and reduced competitiveness highlights a massive deterioration of the business environment. Reforms to harness the key enabling sectors for growth (transport and energy) are desolate and yet, Malawi sits at the cusp of a regional infrastructure hub. Energy shortages continue to hamper public and private investments. There is a severe skills gap especially in vital growth areas such as mining, agriculture, tourism and the construction industry. […]
3. Delivering Inclusive Growth
The Economy: We will stabilize the economy and promote investor confidence to broaden and deepen national savings.We will also restructure the economy to diversify and broaden sources of stimulating economic growth, with key growth sectors such as mining, tourism, ICT assuming a significant role. We will aggressively strengthen tourism as a key economic growth sector.
Infrastructure, Land, Housing, Mining and Energy: We will expand and modernize infrastructure to match our vision to modernize the economy. Our focus will be on the road, rail, water, power, airways and ICT infrastructure. This is consistent with our strategy to promote forward and backward linkages within the domestic economy to enhance wealth generation and retention. We will ensure that the country has adequate power generation capacity and explore our natural resources for potential energy sources and expand existing infrastructure for energy supply. We will redirect public expenditure programmes to create new urban centres. We will roll-out new urban centres to serve as sources of economic growth and development for rural areas. We will provide good and safe housing. We will undertake progressive land reforms and restructure the land sector. We will make mining a major earner of foreign currency, alleviate poverty and bring wealth to all Malawians.
3.8 Energy and Mining
Malawi’s growth potential is undermined by limited energy availability, which continues to greatly affect returns from public and private investments. Malawi has a vast deficiency in energy, with a peak demand of 350MW compared to an installed capacity of 287MW available. A large segment of the population is not connected and electrification rates stood at just 8% in 2012 with a target of 30% by 2030. Outages in Malawi are far worse than its peer countries. Almost half of formal sector enterprises have a back-up generator which is twice the share found in other similar African low-income countries. The percentage of business turn-over lost to power outages is extremely high and power outages are estimated to cost the economy around 2% of GDP. Malawi has the highest hidden costs for power utility, with inefficiencies estimated at 250% of ESCOM’s turnover. Malawi’s mining resources are largely mapped but remain un-exploited. Mining has yet to become an engine for growth and investment for Malawi.
The UDF will:
- Ensure that electricity generation covers local demand reliably with sufficient stand-by power.
- Upgrade transmission and distribution systems to reduce energy losses and improve both energy efficiency and transmission interconnections to the Southern African Power Pool (SAPP) to diversify supply sources.
- Establish new hydro-power facilities and sites whilst repairing obsolete and allocated sufficient resources for maintenance of existing facilities.
- Upgrade generation and transmission systems.
- Reform state owned utilities and amend regulations to improve and facilitate private participation.
- Stay on course to meet maximum demand of 600MW by 2015 and cater for needs of domestic customers expected to rise by 1 million in 2030.
- Restructure PPP, including investing in regional interconnectivity projects. Encourage more private sector spending especially in transport and irrigation.
- Conduct feasibility studies for power generation and explore alternative energy sources including clean energy.
- Reform power tariffs and address inefficiencies such as by ensuring 100% collection of bill payments, better recovery of costs, maintenance, distribution losses and capital budget execution.
- Promote renewable energy system.
- Revise the legal framework for mining in Malawi, including the 1981 Mines and Minerals Act. This should include a legal framework that protects and ensures proper auditing and contract negotiations with potential international exploration companies.
- Fast track the provision of licensing and foster public/private partnerships in mining as well as joint ventures with international and local entrepreneurs.
- Build the technical capacity of small mining ventures to allow for growth and expansion of the industry.
3.7 Infrastructure, Land and Housing
The UDF will:
- Unlock Malawi’s potential as the transit route for the increasing volume of minerals being produced, including initiating PPP agreements between the Government of Malawi and private sector especially in rail transport.
To follow the elections, keep an eye on Boni Dulani, Kim Yi Dionne, Kondwani Munthali and the Malawi Election Information Centre, and the main media houses, including Capital FM, The Daily Times, The Nation, Nyasa Times, and Zodiak Broadcasting.