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CSOs, Chamber tip government on mineral sector development

May 23, 2024 / Wahard Betha
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Rashid: Corruption must not be conducted

Civil Society Organisations (CSOs) working in Malawi’s extractive sector and the Chamber of Mines and Energy in Malawi say there is need for government to implement drastic reforms in order to ensure growth of the mining sector whose contribution to gross domestic product (GDP) remains stuck at less than one percent.

Coordinator for Natural Resources Justice Network (NRJN) Kennedy Rashid said for the sector to grow Government needs to fast-track the development of sector regulations, operationalize the Mining Regulatory Authority and the state owned mining company, review the existing concessions with mining companies to ascertain whether fair deals were negotiated, strengthen the legal framework for the fiscal regime rather than only relying on negotiated agreements and strengthen the capacity of Ministry of Mining and Malawi Revenue Authority in mineral commodity valuation .

Rashid said: “The sector has maintained the trend of contributing a very tiny percentage to the national economy for some years so it indeed requires some soul searching as a country to ascertain why despite all the steps taken, contribution of the sector to the economy is still very minimal.”

“We need to operationalize the state-owned company in order for Government to start directly participating in the mining sector. The lack of a formal vehicle for state equity in mining in Malawi has affected the general economic benefits from the sector.”

He said the country also needs to invest in various infrastructure for energy, transport and local value addition of various minerals.

Rashid said: “There is a need to work on country systems and infrastructure including technical infrastructure like industrial level mining laboratories, transport infrastructure and even energy.”

“Corruption is another vice that should not be condoned. As mining is a heavy investment sector it is always prone to corruption which can affect the general economic output of the sector through Illicit financial flows and tax evasion.”

Rashid said the contribution of the sector to the economy can increase through value realization, enabling environment for investment and prudent revenue management.

He said: “The weak licensing regime has been affecting the sector’s contribution to GDP for some time now and there is still a highly bureaucratic licensing system that delays the process due to political controls.”

 “The fiscal regime is still not reformed to be practical. Though the Mines and Minerals Act, the Taxation Act and other relevant laws that establish revenue streams in mining do exist in Malawi, concessions depend on negotiations and not the law as has been evidenced in the tax incentives that are negotiated in concessions.”

On the revenue collection systems, Rashid said that it is not clear how technically Government ascertains to some of the payments as it depends on the reports from the mining company to determine the amount of revenue to collect from a particular mining venture.

In a separate interview, Coordinator for Chamber of Mines and Energy Grain Malunga told Mining and Trade Review that the sector is not growing because it is sidelined as it is not given specific investment incentives.  

Malunga said the delay to conclude Mining Development Agreements (MDAs) is also frustrating large- scale mining companies.

 He said: “Malawi is promoting Agriculture, Tourism and Mining for wealth creation but mining has not been given specific investment incentives.”

“Those negotiating mining development agreements with companies seem to have preconceived ideas and look to mining companies as not negotiating in good faith.”

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