The piece “Eye on Malawi’s EITI: Setting the Stage for Malawi’s First EITI Report” featured below was initially published in Malawi’s Mining & Trade Review Issue Number 36 that is circulating this April 2016.
The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.
Eye on Malawi’s EITI
Setting the Stage for Malawi’s First EITI Report
In December 2015, stakeholders in Malawi’s mining, forestry and oil and gas sectors gathered to hear the initial results of the Malawi Extractive Industries Transparency Initiative (MWEITI) Scoping Study. This Study was commissioned by government, civil society and private sector in the multi-stakeholder group to determine which natural resources, revenue streams and companies should be included in the first report. At the same meeting, the then Principal Secretary of Natural Resources, Energy and Mining, Ben Botolo, announced that all contracts are transparent and accessible to the public for the mineral and oil and gas sectors.
The Scoping Study sets the scene for Malawi’s first report that is due in April 2017. This report will include contextual information on the natural resources sector as well as detailed revenue information – i.e. what has government received from companies and what have companies paid to access Malawi’s non-renewable resources.
The Scoping Study revealed for the first time information on what Government has received from companies working in mining, oil and gas and forestry. The Scoping Study provides only a preliminary examination of how the MWEITI multi-stakeholder group and its chosen Independent Administrator/Reconciler can go about collecting the relevant information for the first EITI report. Yet, since much information is not yet in the public domain, the information in just the Scoping Study solicited otherwise unknown information for most Malawians. For example, according to the cash control books at the Department of Mines, the Government received significant sums from oil and gas companies between 2013 and 2015.
Payments by Oil and Gas companies (Page 40 MWEITI_Scoping_Study)
|Payments (MWK million)|
|Oil and Gas||2013/14||2014/15||Payment day||Comments|
|Hamra Oil in Joint Operating Agreement with Surestream Petroleum||10.21||02/2015||Ground rent|
|Pacific Oil Limited||0.25||07/2013||Application license fee|
|RAKGAS MB45||136.39||04/2014||No GR|
|SacOil Holdings Limited||14.08||12/2014||No GR|
Source: Cash control books at the Department of Mines.
According to the Scoping Study team, there are four potential options for the first MWEITI report. The primary recommendation is that the first report should include the reconciliation of payments made by approximately 25 mineral licence holders (companies) with oil and gas and forestry included in the contextual chapter. The first report should cover the financial year 2014/2015 and include available data on the beneficial owners of companies and contract transparency. The Scoping Study clearly outlines how each recommendation aligns with the EITI Standard Requirements that Malawi is bound to.
For the first EITI Report, the Malawi Revenue Authority will have to report along with the relevant departments determined by which natural resource sectors will be included for the initial report. The Reserve Bank of Malawi and the National Audit Office will also be called upon to contribute and consolidate data. Revenues from the Moatize railway may also need to be disclosed by the Public-Private Partnership Commission as this could be one of the largest sources of revenue from the extractive sector in the form of transportation payments.
Companies will likely be requested to disclose corporate tax, PAYE and VAT as well as non-resident tax, royalty and ground rent fees. This reporting is voluntary for companies yet the participation of the key mining and exploration companies in the multi-stakeholder group and the recent establishment of the Malawi Chamber of Mines and Energy suggest that most companies will comply.
The Scoping Study highlights that if the Government is to effectively report it needs to address the disjointedness of current reporting systems and its archival systems for managing data, licences and revenue. Some of this is expected to be addressed through the World Bank financed Malawi Mining Governance and Growth Support Project, but this may not be in time for the initial reporting cycle for EITI. Due to shortfalls in bank reconciliation for the Department of Mines, which “is a government-wide accounting practice shortfall”, some wire transfers may be left out of reporting on payments received by companies, according to the Scoping Study.
The onus will be on the multi-stakeholder group to ensure that both companies and Government report comprehensively. This will ensure that information through the EITI report is useful for providing evidence for the improved management of Malawi’s natural resources and associated revenue.