Malawi’s extractives on global transparency radar

By Collins Mtika

MUZUZU – Two years after admission into the Extractive Industries Transparency Initiative (EITI), Malawi launched its first ever transparency report, showing the sector raked $8 million into state coffers.   

The production of the EITI report means Malawi’s natural resources will be stewarded with global standards of transparency and accountability.

In accordance with EITI Standards, Malawi was required to publish its first report within 18 months of becoming a candidate, publish an annual activity report for 2015 by 1 July 2016.

The government projects that by 2020 the extractives sector will contribute 20 percent to the country’s Gross Domestic product (GDP).

But the nascent report shows that the revenue represents about one percent of the GDP.

Paradoxically, the report which fell short of the global EITI standards also starkly showed that about 34 percent of the revenue representing $1,2 million cannot be reconciled.

Malawi’s Minister of Natural Resources, Energy and Mining, Aggrey Masi feigned ignorance on the report’s discrepancies but said the government aspires to better the legal and policy framework for sector.

“I will try to figure out what happened. We will ensure there is accountability and transparency,” he told The sourthern Times in capital city Lilongwe.

New data unearthed in 2015 indicates that Malawi is a new entry in the league of resource rich countries because a high-resolution airborne geophysical survey bankrolled by the World Bank and the EU exposed traces of platinum, gold, diamonds, niobium, iron ore, uranium, copper, coal, gas and gem stones, among others.

The ministry of mines says so far it has issued more than 180 licenses both exploration and mining and is also processing many more.

The only large-scale mining operation in Malawi is the Kayelekera uranium mine in northern Malawi run by the Australian Stock Exchange listed Paladin Energy Limited. But for more than five years, the mine is not operating and is under ‘care and maintenance’ because of global low uranium prices.

“We are now focusing on creating an appropriate investment environment by reviewing mining legislation and establishing a mining cadastre. We will also continue to collect, asses and dissemination geo-scientific data related to the geology and resources of Malawi,” President Mutharika said when he opened the budget session in July this year.

Apart from that Malawi has amended its tax laws for the mining sector as another way to fast track the entry of investors.

In his budget statement for the 2017/2018 fiscal year, Minister of finance Goodall Gondwe announced that prospective mining companies will be eligible for Value Added Tax registration and input VAT claim in exploration stages.

Previously, mining companies invested lots of money in acquiring both exploration and mining licenses and were unable to get refunds because of the old tax regimen.

“It takes time for a mine to be operational and during the exploration phase, a miner or prospector will have incurred VAT which he will not be able to claim because he is not registered for. This was a disincentive for investors. Now the new law will act as an incentive and spur the nascent mining industry,” Gondwe said.

However, while the Malawi Chamber of Mines and Energy, a grouping of companies in the extractives sector and Natural Resource Justice Network, a grouping of NGOs working in the sector, both hail the production of the EITI report but also called for greater transparency in the sector.

“Transparency is key to understanding a misunderstood industry. We hope the report will clear a lot of misconceptions and myths on the sector,” Dean Lungu, Chairperson of Malawi Chamber of Mines and Energy said.

August 2017
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