Mining & Trade News

By Marcel Chimwala

Mining & Trade Review has clocked 15 years in news publishing. Despite the newspaper playing a major role in creating awareness on mining issues, our analysis indicates that Malawi’s minerals sector is dogged by a host of challenges that are obstructing growth of the potential sector whose contribution to gross domestic product (GDP) remains rooted at a staggering one percent.

The challenges that Mining & Trade Review has reported over the years range from delays by the Government to sign Mine Development Agreements (MDAs) with foreign mining investors; slow pace is issuing mineral licenses; political interference; lack of necessary infrastructure for development of mining projects; lack of access to financing for medium scale and artisanal and small scale miners (ASMs); slow pace in formalising ASMs and market hiccups for local producers including cement manufacturers.

Delays in signing MDAs

In 2009 when the first issue of the then Mining Review which later rebranded to Mining & Trade Review was published, Malawi saw Kayelekera Uranium Mine in Karonga coming into production as the first ever large scale mine in the country. ASX-listed Paladin Energy through its local subsidiary Paladin Africa operated the mine with the Malawi Government as a minority shareholder with 15% shareholding. Unlucky for Malawi, the mine was put on care and maintenance in 2014 to preserve its longevity due to sustained low uranium prices in the wake of the Fukushima Nuclear Disaster in Japan which resulted in the closure of some nuclear plants in so doing negatively impacting on the market demand for the yellow cake.

With production halted at Kayelekera, Malawi is left without a large scale mine in operation despite hosting proven mineral deposits that can support large scale mining operations. Over the last 15 years, the Government has only concluded MDA negotiations for the Kanyika Niobium Mining Project in Mzimba.

The Malawi Government is for some years now continuing negotiations for MDAs with ASX-listed Lotus Resources to resume mining at Kayelekera and Mkango Resources to start rare earth production at Songwe Hill in Phalombe.

Analysts say these delays in finalising MDAs are a major stumbling block to the growth of the minerals sector in Malawi.

But Government says it is not concluding the MDAs with the two companies because they are seeking tax incentives unlike Globe Metals.

Minister of Mining Monica Chang’anamuno said: “The process has taken a bit longer as the Government is ensuring that the agreements favour and benefit Malawians and that they are not raw deals like some agreements before.

 “For your information Government does not want to rush into signing an agreement that would hurt Malawians and the economy of the country.”

“However, as government we are determined to conclude the negotiations as soon as we reach a win-win situation.”

But Coordinator for Chamber of Mines and Energy Grain Malunga backed the companies in seeking tax incentives.

Writing in his Technical File column in Mining & Trade Review, Malunga said:  “It should be emphasized that investment incentives that are granted in projects with marginal profits can go a long way in building history of mining through attracting more mining investment.”

“It is not enough to talk about investment subsidy or governments losing potential revenue through tax incentives without understanding mining project risks.”

“In order to believe that government negotiates in good faith for the benefit of its citizens, there is need to be transparent in all contract dealings.”

Delays in issuing mineral licenses

Players in the sector have also complained about delays by the government in issuing various mineral licenses and permits.

Speaking on behalf of private resource firms during this year’s Malawi Investment Forum in Lilongwe, Chairman of leading mining and mineral consulting group Akatswiri Holdings Hilton Banda urged State President Lazarus Chakwera to ensure that bureaucratic procedures for acquiring licenses and signing agreements are simplified in order to do away with delays of mining projects.

“This is a young sector, and its challenges are enormous, and therefore, we will continue to count on Government’s support to realise the full potential of this most promising sector,” said Banda, hinting that with the current projects’ projection, mining will be contributing 10% to GDP by 2030 if challenges in the sector are addressed.

Political interference

Over the years, Mining & Trade Review has also unearthed acts of political interference in the sector. Chief among the issues is the recent review of the Mines and Minerals Act 2019 to replace it with the 2023 Act.

Our investigations revealed that politicians bulldozed the Bill to formulate this new Act without consulting key stakeholders including the Chamber of Mines and Energy in Malawi (CMEM), Civil Society Organizations (CSOs) and Artisanal and Small Scale Mining (ASM) groups.

Malunga confirmed in an interview that the Ministry of Mining did not engage the Chamber even any member of the group in formulating the Act.

Malunga said: “We were not engaged. My views are well known. Malawi is a country with a Mining Regulatory Authority with no clear mandates for Geological Survey Department and Department of Mines.”

In a separate interview, ASM subsector consultant Chikomeni Manda concurred with Malunga of not being engaged describing the development as undemocratic.

Manda said Malawi is a democratic country which should have been giving all stakeholders and players in the industry an equal opportunity to participate in formalization of any document.

He said: “Lack of consultations deprived the citizens of a chance to contribute important issues which were left out in the Act.”

“It was selfish on the part of Government to sideline the key stakeholders in the industry. What Government did should have never happened in a democratic country like Malawi.” 

Natural Resources Justice Network (NRJN) Programs Coordinator Joy Chabwera said missing of the CSOs during consultations means the Government is not serious with the sector as the organizations ensure that the law benefits all players in the sector.

He said: “CSOs were not consulted at all. It is also unfortunate to learn that mining companies were also not even engaged and these companies are complaining maybe they see some areas in the Act that are not in their favour.”

Among other things, the new Act has introduced the Mines and Minerals Regulatory Authority whose governance roles appear similar to those of the Departments of Mines and Geological Survey.

It has also given powers to the Minister of Mining to decide on whether Government should acquire minority shareholding in a large scale mine and the amount of stakes while the old Act spelt clearly that Government can acquire up to 10%.

Mining Sector Consultant Peter Chilumanga commented that the Malawi Government needs to learn from other countries in the region when formulating laws in order to excel in the extractive sector.

Chilumanga said: “Obviously most of the countries have clear cut and transparent laws and policies with regard to fiscal issues.”

“The investment fiscal regimes guidelines are specific and not based on a determination of one person.”

“What is wrong in putting it as was in the old Act and in synchrony with Africa Mining Vision and Southern Africa Development Community (SADC) regimes?”

Shortage of infrastructure

Another issue we have reported as choking the development of mining projects is the shortage or poor condition of public infrastructure in mining areas.

For example, though it has a valid mining licence, Chinese firm MAWEI Mining is failing to start minng heavy mineral sands in Mangochi-Makanjira due to the site’s lack of access to electricity and lack of proper transportation models to ferry the minerals to the seaports to get them to the world market.

The company requires approximately 3MW to kick-start the project and 10MW for the rest of the mine life, and there is also a need to operationalize lake transport services from Makanjira to Chipoka to connect to the railway to Nacala for exporting.

Former PRO for Ministry of Mining Christopher Banda reportedly said in an interview: “MAWEI Mining obtained the mining license in 2017 and when we inquired why they remained dormant they cited rains, insufficient power and transportation constraints as key setbacks.”

“Heavy mineral sands have highest potential to boost revenue generated from local extractive sector as these type of minerals are in a class of ore deposits which are an important source of zirconium, titanium, thorium, tungsten, and rare-earth elements, which are also fairing good on the market.”

Besides Makanjira Heavy Mineral Sands Project, there are a number of mining projects that require electricity from the national grid including Songwe Hill Rare Earths in Phalombe, Kayelekera Uranium in Karonga and Kanyika Niobium in Mzimba.

Speaking at the National Mining Investment Forum in Lilongwe, Director of Energy Services in the Ministry of Energy Joseph Kalowekamo said that all existing and planned mining projects that were assessed by the Ministry of Mining were visited by Ministry of Energy to appreciate their energy requirements.

He said the projects were then included in the power demand forecast that Ministry of Energy has produced covering the period from 2022 to 2042.

“Currently, our installed generation capacity stands at 555MW, of which 402MW is from hydro and 101MW is from solar and then there is 52MW from diesel power generation. The mining sector demand stands at 246 MW,” said Kalowekamo.

Commenting on the issue in the panel discussion at the Forum, Malunga stressed on the pressing need for additional resources highlighting that the country does not have enough energy to drive the mining sector.

“We need more hydropower generation to be fed to the national electricity grid,” said Malunga

The Ministry of Energy is projecting planned investments of approximately US$3.5 billion to meet the estimated energy demand by 2040. These investments include the development of hydro, solar, wind, and gas power plants.

Besides energy hiccups, lack of transport infrastructure is another challenge as many mining sites are located in remote areas which are not covered by the national transport network.

Speaking at the Mining Investment Forum, Minister of Transport and Public Works Jacob Hara spelt out the need for collaboration between mining companies, the Ministry of Mining and the Ministry of Transport to come up with plans that can benefit the two sectors.

Hara said: “We need to address the mentality that the government owe us good roads. Everyone should be responsible for providing the good roads through the road tolls and we can have special arrangements with the mining companies focusing on maintaining the roads that they use frequently.”

“Malawi’s decision to join the Central Corridor Transport Facilitation Agency shows government's determination to address challenges in the mining sector and elevate transportation infrastructure to new heights.”

“With ambitious plans to revitalize rail networks and enhance road connectivity, Malawi is heading to the new era of economic growth and development for the betterment of its citizens and the broader international community.”

Local cement market hiccups

With the Electricity Supply Corporation of Malawi (Escom) struggling to meet energy demand, heavy industries such as cement manufacturers opt for coal to power their machines. However, this alternative is also proving unsustainable for the cement producers as they are failing to import coal from Mozambique due to foreign exchange shortages.

Local coal miners are also failing to meet the demand of the industry as they are struggling to acquire loans to expand their operations with coal blacklisted by a number of financial institutions as environmentally destructive.

“We may have to stop our cement plant indefinitely as we try to get coal,” said Chairman for Cement Products Limited Aslam Gaffar, whose company has a clinker plant and cement mill in Njereza, Mangochi with a limestone mine in nearby Maera Village.

Shayona Cement Corporation, which has its factory and limestone mining operation in Kasungu, is also struggling to import coal and other raw materials due to foreign exchange shortages.

These challenges dogging the cement producers have led to a decrease in cement production hence the government resorts to issuing import licenses for cement to traders to address the shortfall.

But Mining & Trade Review investigations have revealed that importation of cement has not entirely helped in normalising the situation on the market as traders are selling the foreign brands at the same price with local brands of similar strength yet in a normal situation the foreign brands would have fetched higher prices taking into account transport cost and surcharge. Such a situation has resulted in a general rise in the prices of cement.

Slow pace on formalisation of ASM activities

Artisanal and Small-scale mining (ASM) in Malawi remains informal but Government is taking steps to formalise the activity by facilitating formation of ASM cooperatives, which can be easily reached with training programmes and loans to boost businesses.

Director of Mines in the Ministry of Mining Samuel Sakhuta told Mining & Trade Review in an interview that the Ministry has facilitated the formation of over 18 cooperatives in different parts of the country.

"We are trying our best so that we control this practice of illegal mining and make sure that the best methods and recommended tools are used,” he said

He said the Ministry is continuing its routine programme of training, teaching, advising, monitoring and inspecting the small scale miners on proper mining methods to minimize accidents that have also resulted in deaths in ASM hotspots. 

"It is through these cooperatives that the Ministry is planning structured training. Our officers will continue training small scale miners on proper mining methods as they need to use recommended and appropriate equipment to minimize accidents associated with illegal mining,” he said.

But the ASMs interviewed by Mining & Trade Review said they are not satisfied with the pace of the formalisation process which they described as slow.

MD for Maleta Gems and Jewels Percy Maleta urged the Ministry of Mining to expedite the process, and establish a loan fund for ASMs.

Maleta said that it is painful to the ASMs to see that the mining sector is not being financially supported by government yet other economic sectors are heavily supported technically and financially citing agriculture which is enjoying substantial support through projects like the Agricultural Commercialization (AGCOM) and the National Economic Empowerment Fund (NEEF).

“It pains to read, hear and see that our counterparts in small-scale agriculture are heavily supported technically and financially, talk of extension workers/officers, AGCOM with its billions of kwachas to support the cooperatives and recently NEEF, nothing is being done to small scale miners other than hearing from the government that mining is the main thing and touted to replace agriculture in the coming years. How do we achieve this without investing in the mining sector?” he questioned.

For Mining & Trade Review, it has been a fruitful 15 years of putting to light pertinent issues to help the sector grow. The journey continues!

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