Mutharika inspires investor confidence – Mining Review (Special Edition 2014)

The piece “Mutharika inspires investor confidence” featured below was initially published in Malawi’s Mining Review Special Edition 2014 that was circulated in June 2014.

To learn more about this quarterly publication, edited by Marcel Chimwala, read the post about the “Voice of the mineral sector in Malawi”.

Taken from the Mining Review (Special Edition 2014, June, Marcel Chimwala)

Taken from the Mining Review (Special Edition 2014, June, Marcel Chimwala)

Mutharika inspires investor confidence 

  • Experts tip new administration on mining governance

There is an aura of excitement in the mineral sector following the election of Professor Peter Mutharika as state president in the May elections as the President has demonstrated his desire to promote investment in mining and other sectors.

A number of mining firms have come forward to congratulate His Excellency President Mutharika symbolising their support to the leader.

The firms include oil prospectors RAKGAS and Surestream Petroleum, Shayona Cement Corporation, Mkango Resources, Tengani Titanium Mining and Mchenga Coal Mines.

The minerals sector expects Mutharika’s administration to make landmark decisions to uplift the sector, which include giving a go-ahead to Australia’s Globe Metals and Mining to start mining niobium at Kanyika in Mzimba.

Negotiations for a development agreement between the government and Globe Metals and Mining are ongoing with the government relying on the expertise of international mining lawyers to come up with a win-win deal with the investor expected to pump US$400-million to commence mining at the site.

In his inaugural speech, Mutharika gave hope to investors when he expressed his commitment to include the private sector in decision making.

“I went against the norm to pick a running mate (Vice President Right Honourable Saulos Chilima) from the private sector, which underlines my commitment to work with the private sector to develop the country,” said Mutharika.

Meanwhile, experts from the mining sector have advised the Mutharika administration to implement serious reforms on the governance of the mining sector if the country is to reap more fruits from the potential sector.

Former Minister of Mining and mineral sector consultant Grain Malunga says, among other things, the new administration should remove discretion  option in offering tax incentives as well as mining licence validity period.

Says Malunga:

This breeds corruption or frustration because unnecessary delays in issuing licences frustrates investors.”

“Contracts/agreements should be vetted with the relevant Civil Society and local communities where mining will take place.  Issues of corporate social responsibilities should be weighed properly with taxation and local community benefits.  The ministry responsible for mining should take the lead in coordinating these agreements. Where a Mining parastatal exists, it must ensure that any shareholding by government should be in its hands until public divestiture is initiated for economic empowerment of local citizens.”

“Government should hold shares not exceeding 30% through a mining parastatal which can be divested later after recovery of agreed investment capital (either in cash or kind).  No ministry should hold shares on behalf of government to avoid poor monitoring and participation in shareholders meetings.’

“Government should be transparent and accountable to its people in order to build trust.  This is in terms of revenue and its use as well as shareholders after divestiture.”

Another mineral sector expert John Nkhoma says if well managed mining has the ability to transform the economy of the country.

“Mining is at the beginning of the value chain and has the ability to kick start economic development that few other businesses offer,”

says Nkhoma, a veteran geologist who runs a firm called Chiwandama Geo-consultants.

He, however, laments that despite such sector potential, it is unfortunate that Malawi has made very little progress in attracting investors with only a few serious investors moving to establish mineral exploration and mining in the country.

“There is need to carry out a critical analysis of the factors that have an influence on the mining sector as a step towards restructuring the industry.  It should also be recognized that marked improvements in growth can be achieved if avenues for technological dissemination are created and improved; research partnerships are forged with local universities and experienced consultants are hired when needed to transfer skills and experience,” says Nkhoma.

Malawi’s mining sector is largely unexploited though exploration has shown that the country is endowed with a number of mineral resources including uranium, coal, rare earths, iron ore and gemstones.

There are also prospects for discovery of oil and gas, gold, diamonds and platinum group metals.

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