Mining in Malawi’s Political Party Manifestos 2019-2024

Malawi’s tripartite elections on 21 May 2019 are just three weeks away. Here, I briefly (and off the cuff!) look at promises made about mining in the manifestos of the four main political parties. Undoubtedly, I’ve missed things (especially as I have not looked at other related sectors like energy).

So, over to you readers, what’s been left out of the manifestos? What seems feasible? Are you convinced?

DPP Manifesto 2019 Front Page

The Democratic Progressive Party (DPP) 2019 Manifesto ‘Sustaining a people-centred government’, is built on the pillars of patriotism, integrity and hard work. The president of the party (and current president) is Arthur Peter Mutharika and his running mate is Everton Chimulirenji, who is MP for Ntcheu North East. Between 2019 and 2024, if re-elected,

The DPP government will embark on extensive but cautious mining and utilisation of our oil resources, now that the legal and institutional frameworks have been developed.

The DPP government will embark on mining for rare earth metals (tantalum, zircon and nobium) in Kanyika Hills in Mzimba, Songwe Hills in Phalombe, Makanjira in Mangochi, and Kanga Nkude in Balaka. We will develop mines for graphite in Malingunde in Lilongwe and Ilomba in Chitipa. We will mine ruby in Chimwazulu in Ntcheu and bauxite in Mulanje. 

The DPP government will also begin extensive exploitation of our oil resources now that the legal and institutional frameworks have been developed.

I expect it was not the intention to confuse the public, but here it sounds as if the government will lead exploration and production of all sorts of minerals. Rather, simplistically put, the current arrangement in Malawi is that private companies are awarded licences by the government to carry out exploration and production. In return, the government collects royalties and taxes. Yes, sometimes, the government gets free carried equity (i.e. a stake it doesn’t have to pay for in a subsidiary of a company carrying out mining, or in the case of Kayelekera, in exchange for some tax breaks) but this does not mean the government or its officials are actually mining.

Take, for example, the rare earths projects that the ‘DPP government will embark on’. In fact, these exploration projects are being carried out by Australian-listed company Globe Metals & Mining in Kanyika, Mzimba, and Mkango Resources in Songwe Hill, Phalombe.

The last few years has indeed seen progress in legislative reform – a new Mines and Minerals Act (2018) and a National Artisanal and Small-Scale Mining Policy (2018) – and Malawi joined the Extractive Industries Transparency Initiative, which was a promise made in the Democratic Progressive Party’s previous manifesto, but why no continuity between the promises then and now?

It is also a little misleading to say that ‘The DPP government will also begin extensive exploitation of our oil resources’ when the companies with licences are still in the exploration stage. As of yet, as far as I am aware, no economic reserves of petroleum have been proven, and until they are, we cannot talk of ‘exploitation’. And unless something changes dramatically in our legal framework and with contracts already signed, it will not be the government exploiting reserves, but companies.

What will change in the mining sector if the Democratic Progressive Party are reelected? In short, it’s not clear. We probably can presume things will continue as they have been, which includes implementing the new Act, unless the party really intends to start mining and exploring itself.

MCP Manifesto 2019 Front PageContinuing in alphabetical order, Malawi Congress Party’s (MCP) 2019 Manifesto has a little more to go on. So it’s broken up below. The party’s president is Lazarus Chakwera, who is currently MP for Lilongwe North West and was leader of the opposition in the National Assembly from 2014-2019. His running mate is Sidik Mia, formerly a member of parliament and part of the cabinet in both previous Democratic Progressive Party and People’s Party governments.

The Malawi Congress Party seeks to ‘Build a new Malawi on the foundation of a democratic developmental state powered by the Chakwera Super Hi5’. What’s this Super Hi5, you ask? Servant leadership, United Malawi, Propsering together, Ending corruption, Rule of law.

MCP Lazarus Chakwera .png

The author of this section of the manifesto has very clearly been inspired by the Africa Mining Vision, which all African presidents and heads of state endorsed in 2009. Laudably, in short, the Africa Mining Vision ‘presents a paradigm shift away from a resource development model anchored on extractives toward one in which mineral resources are harnessed to accelerate broad-based development and build resilient, diversified, and competitive economies‘.

Mining has great potential to contribute to the country’s fundamental structural transformation and sustainable development. The ambition stated in various policy documents since the turn of the Century has been to raise the contribution of the mining sector to 20% of the country’s GDP by 2020. Estimates indicate that currently
mining and quarrying contribute between 0.9% and 2% to the country’s GDP. This is attributed to the absence of a viable management regime to ensure that the country fully maximizes benefits from the mining sector.

Let’s start with the premise that the low contribution of mining to the nation’s gross domestic product is ‘attributed to the absence of a viable management regime’. Yes, there are challenges in management that all stakeholders acknowledge, even if we don’t agree on all the details. However, arguably, global depressed prices for commodities is the biggest reason that mining has not taken off as expected in Malawi. Since there is less demand for all types of minerals (and especially for uranium) with resultant low prices, there’s less money around for companies to explore new sites. In Malawi, most projects are in the exploration stage. In addition, running a mining project is expensive in Malawi (we don’t have the best energy or transport infrastructure yet), so we haven’t seen as much mining as was anticipated in the commodity boom years of the early 2000s.

Nevertheless, managing the sector well will serve citizens better and create an fairer operating environment for companies who play by the rules. Illegal mining, dubious contracting and licence issuance (usually the political party is at fault here!), shady companies, tax evasion and avoidance, and non-declaration of exports are some of the challenges that need tackling.

The MCP believes that the capacity of a country to meaningfully benefit from mining is directly linked to its governance architecture. A well-governed country is more likely to maximize the contribution of mining by negotiating good terms with mining companies; collective managing and spending revenues wisely; and creating an enabling  environment to enhance employment. There is currently limited transparency and accountability especially in the issuance of mining licenses and management of proceeds from mining. The MCP government will create a viable and robust mining management regime with an optimal mix of legal, regulatory, fiscal, environmental and social development policy tools and approaches.

To do this, the Malawi Congress Party says that it will:

Implement the new mining policy and its related laws and regulations to ensure that appropriate institutional and legal settings, safeguards and quality control are in place.

Revise Malawi’s Petroleum (Exploration and Production) Act, 1983 so that our laws adhere to international standards and are also capable of addressing emerging sectoral issues such as technical, fiscal and environmental challenges.

Develop the sector’s local content policy to ensure that Malawians benefit directly from the investment activities.

Arguably, the above are already in the works. So, if elected, the Malawi Congress Party government would continue what is already started. Very few countries in Africa have actually implemented the Africa Mining Vision, but Malawi started work on a country mining vision at least three years ago. In this vein, the Malawi Congress Party will

Promote transparency and accountability in the issuance of mining licenses and management of the proceeds for the sector to meaningfully contribute to cause of national development through the attainment of winwin situations between the country and the investors as enshrined in the African Mining Vision (AMV).

Domesticate the AMV, Africa Resource Utilization Strategy, and Hope Strategy adopted by the African Heads of State in 2009 by coming up with a workable and investment based Country Mining Vision (CMV).

Develop a Comprehensive Mining Strategy (CMS) that provides for domestic and  foreign investment in mining; joint venture mining operations involving state, communities and international investors; publication of monthly reports on mining operations and incomes generated; and provide guidelines for effective corporate social responsibility strategies.

Further, to assist the sector, the Malawi Congress Party will take a number of steps. This includes improving communication between and with stakeholders (yes!),

Promote the sector so that it emerges as an attractive destination for investment by both local and international companies through strict adherence to, and compliance with the laws.

Ensure consistent and factual updates to all stakeholders on progress made in both solid and petroleum sectors as provided in the laws of the country.

Develop and operationalize the sector’s laboratory services ensure that testing of both mineral and petroleum samples is done locally.

Finalize geo-mineral resource mapping across the country and develop a comprehensive exploitation plan in line with the country’s strategic national development goals.

On artisanal and small-scale mining, the Malawi Congress Party seeks to formalise and legalise the sector.

Implement the Artisanal and Small Scale Mining (ASM) policy which favours ASM subsector and among other things, promotes formalization of ASM illegal miners and the existence of small-scale miners through formation of cooperatives.

Develop the ASM sector by championing the identification of potential mineral buyers and re-establishing the abandoned Gemstone Marketing Centres across the country.

Order immediate stop of all illegal mining activities across the country in order to ensure that the country’s mineral deposits are exploited to the benefit of a nation

The party concludes with a realistic take – mining is no panacea to the challenges facing the country.

The MCP realizes that mining presents opportunities, challenges and risks to sustainable development. Our motivation is to get the framework that governs mineral resources right as a critical first step to leveraging mining for broader national development. The ultimate goal of the MCP’s government mining regime will be to ensure that adequate institutional and technical capacity of different stakeholders is developed to effectively implement the policies, tools and approaches to manage mining more sustainably.

What will change in the mining sector if the Malawi Congress Party are elected? Framing mining through the lens of the Africa Mining Vision gives an indication of the party’s thinking. Improving sectoral management to increase investment and local benefits for structural transformation seems to be the first step. To some extent, there is continuation with what the government is currently doing or supposed to be doing according to commitments in policy documents. Given the party’s recent alliance with the People’s Party, it will be interesting to see if dubious oil contracts awarded and payments allegedly received by former president Joyce Banda’s government will still be investigated.

UTM Manifesto 2019 Front PageUmodzi Transformation Party’s (UTM) 2019 Manifesto also has a lot to say about mining. Current Vice President of Malawi Saulos Klaus Chilima is president of the Umodzi Transformation Party and his running mate is Michael Usi (famous as Dr Manga).

With the motto, Tsogolo Lathu: Lowala, Labwino, Lafika [Our bright and good future has arrived], they have just released a video on what they would bring to the country if elected.

Malawi’s mineral sector has not been promoted and marketed sufficiently resulting in very low exploitation of the resources. There is lack of sufficient geological data and information about Malawi’s mineral resources and the allocation of resources for developing the mineral sector is inadequate.

The mining sector also lacks accountability and transparency which breeds corruption; there is no education in the artisanal mining sector on the benefits and risks of the mining operations; and the State has failed to develop Competence Person’s Reports (‘CPRs’). The lack of the CPRs means that, as a country, we do not know the value of our mineral resources, the opportunity costs or the risk (or lack of) to the environment.

Again, probably we can argue with the premise that limited promotion and marketing is to blame for the state of Malawi’s mineral sector. Global prices and demand have had greater influence and will continue to affect the future of Malawi’s mining sector. Of course, this is outside the control of the political parties.

Paucity in geological data is one challenge, and accountability and transparency are necessary for reducing corruption. Yet disrupting the close-knit relationships between political parties and some private sector actors and ethnic associations would probably have the greatest impact on addressing corruption in Malawi across all sectors. In fact, all parties have some members or associates who have been accused of meddling corruptly in the mining sector so perhaps it is not surprising that state capture is not a concept that crops up frequently in the manifestos.

UTM mentions introducing Competent Person’s Reports, which are independent technical reports on a company’s assets. They are usually required by stock exchanges and hence these are public documents which you can find online. Such reports, also known as Qualified Expert’s or Technical Expert’s Report are meant to provide investors with a a responsible, unbiased and independent opinion on the technical aspects of a company and projects.

For example, in Canada, these are referred to as the National Instrument 43-101 for the Standards of Disclosure for Mineral Projects. You can take a look at a recent one Mkango Resources filed for Songwe Hill Rare Earth Project. So while the term may be misused in this context, the spirit of this, if we are being generous, is that UTM wants to make sure Malawians and the government know exactly what minerals we have and for this to be done independently – not depending on the companies own reporting and applicable to all projects and companies. Right now, most mining companies operating in Malawi are not listed on international stock exchanges so would not be required to publicly file such technical reports. The Mines and Minerals Act places reporting requirements on companies domestically, but these are not as robust as a Competent Person’s Report.

So what does UTM say they will do? ‘Aggressively implement the Mines and Minerals Policy’,  ‘re–open the review of the Mines and Minerals Act’, ‘Harmonise the various mining related departments’, and ‘respect every person’s right to property in land’.

UTM is concerned with the way agreements have been entered, so they will,

Ensure that Mining Development Agreements (‘MDAs’) are properly negotiated to ensure that the Government of Malawi gets a fair share of revenues from the mineral resources.

Proper negotiation of contracts shall ensure that 1) Companies provide meaningful employment for Malawians especially in senior management positions and that there is an open, merit–based skills development programme. 2) There is strict adherence to community development agreements in the mining sector. 3) Malawi shall have at least 49 per cent shareholding in any mining investment. And 4) there is strict enforcement of environment and social impact assessment reports.

Strictly ensure that the award of contracts is open, accountable and transparent.

Make all contracts public, and provide updated and validated information mineral revenue collection and management.

First of all, under the new Act of 2018, there will be no more mining development agreements just licences with specific conditions, which include employment and local business development. Prioritising enforcement and adherence seems prudent as ‘Malawi has best policies, problem is implementation’, according to economist Thomas Chataghalala Munthali who has just taken on the role of director general of the National Planning Commission

Here, it’s not entirely clear what is meant by a 49% shareholding by Malawi – is this the government or Malawians? Let’s break this down. If it is the government, we are asking our government to invest public finances in a mining company with a project in Malawi to acquire a 49% stake, likely through a state-owned enterprise. A far more certain return is if we levy royalties on the company. If the argument for this shareholding is to oversee the operations, we already can do this as a government through the Constitution and rights in the Mines and Minerals Act of 2018 and many other pieces of legislation that give the government the right to monitor, enforce, inspect and raise revenue.

Our government has a stake in Paladin Africa (the subsidiary of Paladin Energy that runs Kayelekera uranium mine). We have 15% in this company, and we got this for ‘free’ (free carried equity) in exchange for some tax breaks to the company. What did we get for the 15%? So far, nothing in the way of revenue. Paladin Africa has always declared an accounting loss so it has not distributed dividends to shareholders. We would have been better just levying the standard royalty rate on the company rather than the reduced royalty rate we gave them. So far, we lost out of USD 15 million as a result of the tax breaks. More here.

If we require mining companies to list locally to allow Malawians to invest in shares of up to 49%, then we anticipate that there are citizens who have the capital and risk appetite to invest. For Kayelekera uranium mine, we would have been talking of investment of USD 250m or thereabouts.

UTM’s radical shareholding proposal seems to sit contrast the language of competitiveness around taxes and royalties (below). Be warned though, the tax breaks we gave to Paladin Energy did not dramatically affect their break-even price, so one can conclude that they were not necessary for the mining project to kick off. The conventional idea is that tax incentives encourage investment, but research and surveys among investors indicate that these are not the most important determining factor, and especially for mining, as minerals are location specific.

Ensure that the mining fiscal regime is competitive within the region to attract investment in the mineral sector;

Ensure mineral royalties are competitive in the regional and international markets

Although UTM does not explicitly mention the Africa Mining Vision, the emphasis on linkages (value addition, improve research and development, and employment, for example), speaks in part to this vision. They will

Link the mining economy to the rest of the national economy by deliberate policy that shall encourage local sourcing.

For the artisanal and small-scale mining sector, they seek to:

Establish an applied research and development facility for high-level skills  development, and the development and application of mineral development technologies including appropriate technologies for artisanal and small-scale miners

Establish a dedicated mineral fund to provide loans for mining equipment to artisanal and small-scale miners

Promote the formation of cooperatives in artisanal and small-scale mining to enable collective bargaining, access markets and better recognition by the financial institutions

Simplify licensing procedures, and the issuing of respective mineral rights or permits to artisanal and small–scale miners

Promote value–addition to mineral production including value addition of precious and semi–precious stones at village level

What will change in the mining sector if the Umodzi Transformation Party are elected? The Mines and Minerals Act of 2018 will be reviewed, shareholding for Malawians or the Malawi Government (not clear which) will be increased to 49%, there will be more support for artisanal and small-scale miners, upstream and downstream linkages will be enhanced, there will be more openness in contract issuance and award, and policies will be implemented. The party will revisit the fiscal regime and royalties to check these are competitive.

UDF Manifesto 2019 Front PageThe United Democratic Front’s 2019 Manifesto connects mining with energy and the environment. The party is ‘United for change, united for delivery’. The president is Atupele Muluzi, who has had a cabinet portfolio responsible for mining in the past, and is currently Minister of Health as well as MP for Machinga North East. His running mate is Frank Mwenifumbo, MP for Karonga Central and Chairman of Coronation Mining.

UDF hits the nail on the head with the energy challenge facing the country. They probably mean inextricably instead of inexplicably, though!

Malawi’s growth potential remains constrained by the lack of reliable power, particularly in attracting international private sector investment. Electrification is inexplicably [sic] linked to economic development and poverty reduction; with only 11% of our population electrified, of which 60% live in urban environments we have a long way to go.

This has had an impact on the mining sector, they rightly say,

Malawi’s mining resources are largely mapped but high costs and low returns mean that efforts need to be undertaken to develop the sector further to ensure it becomes an element of our economic growth. However, we support further studies of existing sites to identify any credible sources of new technology metals or minerals.

The only specific action besides improvements in the energy sector is that they will ‘Implement the revised mines and minerals act 2019’.

What will change in the mining sector if the United Democratic Party are elected? There’s not much to go on, except the changes that are already afoot with the Mines and Minerals Act.

After a quick read through of the manifestos, I am surprised by the lack of mention of workers’ and womens’ rights. What else is missing, incoherent, or could be improved? What do you like?

 

Correction: I added an incorrect link to the story about the Anti-Corruption Bureau investigating Mudzi Transformation Trust for payments received in relation to the oil and gas contracts awarded by Joyce Banda’s government 8 days before the last elections: https://mwnation.com/acb-probes-k3-5bn-mudzi-transformation-payments/

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