TECHNICAL FILE

By Grain Wyson Phillip Malunga FIMMM Mining and Environmental Management Expert

Building Community Trust in the Mining Sector

ABSTRACT

FPIC and Social Contracts offer opportunities for building community trust in the mining sector. During mining project development cycle, mining companies need to acquaint   themselves with the environment in which they are going to operate. They become neighbours of local communities and for them to be welcomed, they need to identify interest groups whose rights and way of living needs to be protected or improved through benefit sharing and protection of the environment.

This paper is trying to encourage all stakeholders to work together to build community trust for obtaining social contract through FPIC.

1. INTRODUCTION

The global perception about mining is mostly negative. Resource rich poor countries are characterised by corruption and lack of transparency in the management of mining  revenue. Mining communities feel there is lack of equitable benefit sharing of mine revenues and governments lack transparency and accountability. Environmental issues are not adequately addressed. The above issues have led to lack of trust between mining communities and mining companies. The only solution to this is to undertake community engagement to address issues that will lead to obtaining of “Social Contract” or what OXFAM prefers to call “Free Prior Informed Consent (FPIC)”. This Social Licence leads to smooth and orderly implementation of mining projects through endorsement of local communities.

This looks at ways in which FPIC directly helps local mining communities to directly benefit from mineral resources.

2. FACTORS THAT BUILD COMMUNITY TRUST IN MINING

Governments should come up with pro poor mining policies that protect local communities and empowers them to have better livelihoods. Improving rural livelihoods requires provision of infrastructure, public utilities and promotion of local content through stimulation of entrepreneurship to support provision of goods and services in the mine. Bryan et. al., 2007, confirms this by stating that mineral resources can be used as a basis for industrialization, job creation, poverty eradication, capacity building and community empowerment and improvement of people’s lives.

Government, mining communities and mining companies form a tripartite relationship that promote this trust and this tripartite relationship leads to sustainable development.

Figure 1: Building Community Trust in Mining – Malunga, 2016

Mining community expect social investments, economic benefits and environmental protection from mining companies under monitoring by government. Social investments include provision of water, health services and education facilities. These should be reasonable enough and should not replace government obligations. Communities are happy where mining companies contribute to local economic development such as employment, partnerships with local communities on programs that empower local people to supply agriculture produce and other services. Electricity and roads open up rural areas to industrialisation and access to markets. Environmental protection helps local communities to avoid pollution to water, air and land. Compensation and minimum deforestation build long lasting relationship with local communities.

Government is trusted by its people when it is transparent and accountable. Access to information on mine revenue generation and use is of paramount importance. Pre-agreed benefit sharing with local communities helps projects to be implemented smoothly without any disruptions. Community engagement at all levels of project implementation must have the presence of government officials too.

Mining companies are attracted by projects that offer high return on investment. This encourages them to engage communities on benefit sharing. Community engagement should dwell on benefit sharing, infrastructure provision, economic empowerment and environmental protection. These should be the basis for FPIC. Sustainable development is a product of the three stakeholders working together in a transparent and accountable manner driven by mutual respect for each other.

3. BENEFITS OF FPIC

FPIC is a process that helps mining companies identify interest groups whose rights must be protected. These groups or communities are first identified and participatory approach is used to understand socio-demographics, economic activities, political and cultural dynamics that are essential in building community trust during mining project implementation.

It is imperative that the mining sector should undertake inclusive participation throughout all stages of exploration, development, mining and post mining closure activities in order to obtain consent, minimize misconception and risks such as disputes and conflicts.

4. CIVIL SOCIETY ORGANISATIONS (CSOs)

The role of CSOs in promoting FPIC rests in them working with local communities and mining companies as mediators not instigators of social conflicts and violence. The more CSOs act on non-evidence based issues the more they will become irrelevant to mining communities, government and mining companies.

Mining is capital intensive, highly technical and does not generate super profits as communities think. This is why government has a special tax called resource rent to also benefit from super profits. Similarly arrangements can be made for local communities to benefit from such revenue. Mining companies expect CSOs to be responsible, respectable and relevant to all stakeholders in mining.

5. BIBLIOGRAPHY

• Bryan, S and Hofmann, B.2007. Transparency and Accountability in Africa’s Extractive Industries: The Role of the Legislature. Washington DC: National Democratic Institute for International Affairs.
• Malunga, G. W. P. 2016. Sustainable development, mining and EITI. Paper presented to media experts on 28th October 2016 in Blantyre.
• Wise, H. and Shtylla, S. 2007. The Role of the Extractive Sector in Expanding Economic Opportunity. New York: Harvard University and John F. Kennedy School of Government.

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This piece was initially published in Malawi’s Mining & Trade Review Issue Number 59 (March 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

Mkango scales up CSR activities in education sector

…hands over facilities for school feeding programme

By Deborah Manda

Mineral exploration and development firm, Mkango Resources, has pledged to continue assisting communities surrounding its flagship Songwe Hill Rare Earth Project in Phalombe with various interventions in the education sector.

Country Manager for Mkango Burton Kachinjika made the pledge recently when he handed over two kitchens and dining halls to Changa and Mphembedzu primary schools in the area.

Kachinjika said Mkango decided to help with the school feeding facilities following its fact finding mission which confirmed that the two schools did not have a feeding programme, which negatively affected the lessons.

Our fact finding mission established that Namalimwe Primary School in this same area has a feeding programme and noticed that learners there were more attentive and happier than the pupils at Changa and Mphembedzu schools which did not have feeding programmes,

said Kachinjika.

Kachinjika explained that the President of Mkango Resources, Alexander lemon, thereafter approached a well-wisher Nishkam Langar in London where the two agreed to pursue the project.

The community contributed bricks and sand while Mkango provided construction materials and equipment at a cost of 15 million Kwacha. UK based non-governmental organization, Zero Hunger and Langar, will be providing food stuffs to the schools.

Our aim to improve class attendance as currently a good number of children do not go to school. We hope that with this school feeding programme, more children will be attracted to enroll at the schools and be able to concentrate on the lessons without worrying about hunger,

said Kachinjika.

He said the company’s mission is to have an educated community in the Songwe Hill area and a part from coming up with the school feeding programme for the two schools, each year the company awards scholarships for secondary education to six students (three boys and three girls), and so far the company  has 18 students under the scholarship scheme.

Zero Hunger Country Manager Amargeet Singh urged the school authorities to effectively coordinate with the organization to ensure that there is constant supply of food at the schools.

The school committee should keep us informed on the stock so that we send the next stock of food in good time,

said Singh.

Member of Parliament for Phalombe North East Denis Namachekecha Phiri commended Mkango and its partners for the initiative saying though the company is only in exploration stage, it is doing a lot for the people of the area.

Surely, these are the kind of investors we need. Here, you have given our children hope with the roaming hunger as they are assured that they will be able to eat porridge at school,

he said.

Primary Education Advisor for Nazombe Zone Abdul Gama also expressed gratitude to Mkango for the initiative saying with the development his zone will continue to be a star performer in terms of education standards.

Gama said:

My zone has 11 schools and only three schools did not have feeding programmes. With the latest development, there will only be one school without a feeding programme. This will ensure that my zone continues shining in Phalombe district by getting more learners selected to national secondary schools.

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This piece was initially published in Malawi’s Mining & Trade Review Issue Number 59 (March 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

Kanyika court case goes for mediation

By Deborah Manda

The Malawi High Court has referred for mediation a court case in which communities in the area hosting the Kanyika Niobium Exploration Project in Mzimba sued tenement holder Globe Metals and Mining and the Malawi Government claiming compensation and damages.

This is according to an article posted on the website of a regional human rights organization, the Southern Africa Litigation Center (SALC), which is assisting the Kanyika Community in seeking justice on the issue.

SALC, which is jointly working with Livingstonia Synod’s Church and Society, says in the article that it commenced the action in the Malawi High Court on August 28, 2017 but on September, 11 2017, the Attorney General, on behalf of the Malawi Government who are the second defendants in the case filed defence denying the Kanyika Community’s claims and later the first defendants, Globe Metals and Mining followed suite.

In 2006, ASX-listed Globe Metals started prospecting niobium, tantalum and uranium at Kanyika after it was granted an exclusive prospecting licence by the Government of Malawi.

But members of the Kanyika Community claim they were not consulted by either Globe Metals or the Government of Malawi before commencement of operations in the area.

In 2011, Globe Metals, working in collaboration with Mzimba District Council’s office, entered into negotiations and consultations for the resettlement of the Kanyika Community and the payment of compensation for any loss and damage occasioned to the Community as a result of the implementation of the project.

Globe Metals said it would resettle all members of the Kanyika Community adversely affected by their operations by the year 2012 (the ‘resettlement undertaking’) and compensate any loss and damage suffered as a result of the project,

says SALC.

The Mzimba District Council is reported to have given assurances to the Kanyika people that it would ensure they were paid compensation and relocated from the Kanyika Area by the year 2012 which has not been done to this day.

In return the Kanyika Community significantly laid off the use of their land, ceased long term activities such as the growing and maintenance of perennial crops and ceased maintaining their homes which were marked for demolition by Globe Metals,

the SALC report says.

The article alleges that Globe Metals with the authorisation, approval and full knowledge of the Mzimba District Council, continued with the project for over five years without paying any compensation to the Kanyika Community and without effecting their resettlement from the Kanyika Area contrary to what had been promised.

Project Manager for Mining Governance at Church and Society of the Livingstonia Synod, Paul Mvula, said he cannot comment much on the issue as it is in court but said that the people of Kanyika deserve better as they have suffered a lot from the effects of the mineral exploration activities, which involved drilling works.

Mvula said the Kanyika people’s right to dignity has greatly been violated and it is high time government became very responsible with regard to the plight of communities around mining activities in Malawi.

The Kanyika Community consists of 1042 individuals – and their forefathers have occupied and used the customary land in the area since time immemorial; growing seasonal and perennial crops, rearing animals, residing within the area and maintaining cemeteries and burial sites to which they attach great sentimental, religious and cultural value.

An important river which they rely on for their water supply needs also passes through the prospecting area.

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This piece was initially published in Malawi’s Mining & Trade Review Issue Number 60 (April 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

Government launches investment guide

By Deborah Manda

Government has launched an online portal, the Malawi Investment Guide (iGuide), which will help investors to find required information under one platform hence doing away with the cumbersome scenario of moving from one office to another in search of information.

Minister of Industry, Trade and Tourism Henry Mussa told Mining & Trade Review that the iGuide, among other things, provides information on the laws of the country pertaining to foreign investment.

The iGuide also provides information on the compendiums of all bankable projects that investors out there can be attracted into, and beyond that the incentives that are on offer to both foreign and local investors,

said Mussa.

The Minister explained that the iGuide is an important tool that will disseminate information, which potential investors have labored to obtain by travelling from one office to another, at a touch of a button.

From now on, all relevant institutions and ministries that have the information that would attract and motivate investors will be under one roof via a touch of a button through the investment guide,

said the minister.

Mussa bemoaned lack of interest by local investors to attend the launch, which was mainly patronized by foreign investors and members of the diplomatic community.

He said:

I thought locals would have been in majority to express keen interest to go into joint ventures with foreign investors and enlighten the foreigners on the status of the local investment climate in this forum.

We are not only targeting foreign investors but local investors as well, who are accorded investment incentives similar to those on offer for foreign investors,

said Mussa.

United Nations   Economic Commission for Africa (UNECA) Chief for Sub-Regional Data Center Southern African Office Sizo Mhlanga described the launch of the iGuide as a national approach to investment and touted the portal as a vibrant marketing tool for Malawi to attract investors.

Mhlanga explained that the iGuide will help investors to easily acquire information about the country and the sectors in which they are planning to invest.

What the iGuide does is that it brings together all the institutions into a web based platform and an investor can access the information from registration of companies to tax information under one platform,

said Mhlanga.

Malawi is the second African country to launch this project after the Democratic Republic of Congo while Zambia and Nigeria are also in the process of coming up with a similar portal.

UNECA worked jointly with the United Nations Conference on Trade and Development (UNCTAD) to develop the portal which has been handed over to the government of Malawi, which will be responsible for updating the website.

Principal Secretary for Ministry of Industry, Trade and Tourism Dr Ken Ndala said the development of the iGuide emanates from the National Investment Policy whose role is to support the creation of an enabling policy and legal frameworks that would encourage private sector investment and facilitate economic growth.

The Malawi Government has scaled up measures to improve the country’s business climate and attract more foreign direct investment to spur economic growth.

In addition to developing the iGuide, the government has established the One Stop Service Centre at the Malawi Investment and Trade Centre (MITC) to facilitate more investment, streamline and simplify business set-up processes such as company registration, granting of immigration permits, taxation and land acquisition issues.

***

This piece was initially published in Malawi’s Mining & Trade Review Issue Number 60 (April 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

EDITORIAL

Govt. has goofed by leaving out mining in development strategy

It is unfortunate that the third phase of the Malawi Growth and Development Strategy (MGDS III), which has been officially launched by State President Arthur Peter Mutharika, has downgraded the significance of mining as a driver for economic development.

The focus is now on the following national development priorities: Agriculture and Climate Change Management, Education and Skills Development, Transport and ICT infrastructure, Energy, Industry and Tourism Development, and Health and Population Management.

We regard all these sectors as important to uplift the economy of Malawi, which in 2017 was ranked by the International Monetary Fund as the sixth poorest country in the world with Gross Domestic Product (GDP) standing at US$1,172 as compared to resource rich Qatar which tops the rich list with a GDP of US$124,927 and conflict plagued Central African Republic, which emerged as the poorest country with GDP pegged at US$681.

But looking at the world’s rich countries list, it is evident that countries that are achieving greater economic value as compared to Malawi are those which are developing their extractive industries.

Here we are talking about copper-rich Zambia whose GDP is at US$3,997, Tanzania (US$3,283), Zimbabwe (2,277), Mozambique (1,266), South Africa (US$13,403) and Botswana (US$18,146).

It is, therefore, a worrisome development that instead of borrowing a leaf from its regional peers which are developing their extractive industries to spur economic development, Malawi has chosen to take a retrogressive path to exclude the minerals sector in MGDS III.

The surprising thing is that the government included the sector in MGDS II and its implementation saw projects such as the World Bank and European Union funded Mining Governance and Growth Support Project (MGGSP) which has gathered significant data on the country’s mineral potential through an Airborne Geophysical Survey.

The ongoing Geological Mapping and Mineral Assessment Project, being implemented with debt relief financing from the French government, is continuing from where MGGSP has left by interpreting this data and coming up with digital data on mineral occurrence in Malawi which is set to attract investors into this important sector.

We, therefore, expected the government to continue to embrace the mining sector as a priority so that donors continue to devote more funding to develop the sector, which is showing more potential with the continued discovery of sizeable quantities of important minerals including gold, gemstones, rare earths, graphite, titanium, bauxite, coal, uranium, and iron ore.

The government has to bear in mind that mining is a primary industry which supports all the economic and social sectors such that even agriculture stands to benefit from mineral sector development. In this case, it would have made sense for the government to concentrate on the mining of agro-minerals such as phosphate found in districts like Phalombe to ease the burden of importing fertilizer.

With the President ever busy laying stones signaling the onset of construction projects, the government technocrats who have developed MGDS III would have reasoned that all these projects require mining of development minerals such as sand, quarry and brick molding.

It is, therefore, absurd to neglect mining of these minerals in coming up with a development plan. The best would be to encourage such mining activities so that they contribute to the government purse in form of taxes besides aiding in development projects by providing the necessary raw materials.

But by ignoring the minerals sector in MGDS III, the government has neglected the large group of small-scale miners who extract the said development minerals and precious minerals including gemstones and gold, who unlike the large scale miners need much assistance from the government to ensure economic survival.

We, therefore, request the government to review MGDS III and consider mining as a priority area. We should not get back to the past when politicians used to say the country has no minerals and people should work hard in subsistence farming when neighbouring countries with similar geological set-up are developing their mineral sectors for socio-economic gains.

***

This piece was initially published in Malawi’s Mining & Trade Review Issue Number 60 (April 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

EYE ON MALAWI’S EXTRACTIVES

Tax incentives and Malawi’s mining sector

Tax incentives are put in place to attract foreign direct investment (FDI), to compensate businesses for other challenges (like high-cost, unreliable electricity provision), and to compete with other countries. Yet their long-term effectiveness is contested. Investment   climate surveys usually indicate that tax incentives are not as decisive for investors as other aspects of the business environment, such as access to infrastructure, the rule of law, or stability [1].

Tax incentives – ‘any special tax provisions granted to qualified investment projects or firms that provides favourable deviation from the general tax code’ [2] – include reductions in taxes like corporate income tax (CIT), tax breaks, credits and holidays, stability agreements, accelerated depreciation, and investment allowances.

The effectiveness and impact of tax incentives is much debated. Opponents post that they can distort the economy by encouraging otherwise unprofitable ventures to go ahead, encourage tax abuse, reduce public revenue, and may result in the high grading of mineral reserves. Evidence seems to point in both directions about whether incentives really lead to an increase FDI. One of the most extensive studies of tax holidays in 51 developing countries using data from 1985 to 2014 in the manufacturing sector concludes that their effect on FDI is negligible and does not translate into capital accumulation or growth, they have overall a negative impact on sustainable development, and they are negatively correlated with tax revenues [3].

The 2007 mining development agreement signed for Kayelekera Uranium Mine included, among others, a reduction of the royalty rate for the life of the project, a CIT reduction, exemption from resource rent tax (RRT), accelerated depreciation, and a stability clause [4].

The government argued that this was necessary given the risk Paladin took providing the largest FDI at the time and as the first multinational large-scale mining project. According to the agreement, reductions in CIT and RRT were in exchange for the government’s 15% equity stake in Paladin Africa that held the mining licence. As Paladin Africa has not declared a profit, they have not had to pay CIT and the RRT would not have taken effect if there was no exemption. Would Paladin have invested without these incentives?

In a financial model, Grain Malunga and I worked on with OpenOil [5], we show that the reduction in royalty rate did not greatly affect the break-even price for the company although it did result in forgone revenue for the government. Preparing financial models to assess potential revenue streams and losses is key when the government designs a fiscal package that deviates from the general tax code or general fiscal regime for mining. In Malawi, with the passage of the mining fiscal regime as part of the general tax code [6], it appears the government does not plan to introduce project-specific tax incentives going forward although it still has room to offer sector-wide incentives.

On another topic – this will be my last column for several months as I head on maternity leave.

References for further reading, look at:

1. James, S., 2013. Effectiveness of Tax and Non-Tax Incentives and Investments: Evidence and Policy Implications (SSRN Scholarly Paper No. ID 2401905). Social Science Research Network, Rochester, NY, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2401905.
2. The World Bank, 2015. Options for low income countries’ effective and efficient use of tax incentives for investment: a report to the G-20 development working group by the IMF, OECD, UN  and World Bank (No. 100756), https://www.imf.org/external/np/g20/pdf/101515a.pdf.
3. Stausholm, S.N., 2017. Rise of ineffective incentives: New empirical evidence on tax holidays in developing countries. SocArXiv. https://doi.org/10.17605/OSF.IO/4SN3K
4. See the Mining Development Agreement, February 2007; the Fiscal Regime is set out in ‘Attachment B’, http://resourcecontracts.org/contract/ocds-591adf-4270474629/view#/pdf.
5. Malunga, G. & Etter-Phoya, R. 2016. Kayelekera Uranium Mine Narrative Report and Financial Model. OpenOil, http://openoil.net/kayelekera-model-narrative-report/.
6. Malawi’s mineral fiscal regime was passed as an amendment to the Taxation Act in 2016, https://mininginmalawi.files.wordpress.com/2013/04/taxation-amendment-2016-mining-fiscal-regime.pdf.

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This piece was initially published in Malawi’s Mining & Trade Review Issue Number 60 (April 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

People demand oil exploration progress updates

…secrecy bleeding public mistrust

…ministry must face communities directly

By Chiku Jere

Nkhotakota District Council, traditional leaders and fishing communities have demanded periodical disclosure of progress reports of oil exploration activities taking place in the lakeshore district saying this will help them make an informed decision on whether to embrace the investment or not.

Mining & Trade Review learnt about this during random interviews the publication conducted in the district to assess communities’ awareness of the project.

The Ministry of Natural Resources, Energy and Mining granted oil exploration licences which were divided in six blocks across the country with block 1 which covers Chitipa and part of Karonga being awarded to South Africa’s Sacoil Holdings, blocks 2 and 3 stretching from parts of Karonga, Rumphi, Nkhata Bay and Nkhotakota to UAE firm Hamra Oil, Rakgas MB45 got blocks 4 and 5 while Pacific Oil Limited had block 6.

But interviews with members of the Nkhotakota community indicate that a large number of people is not aware of oil prospecting activities in the district portraying an over-all picture that there has not been adequate consultations and sensitisation of the communities about the project.

Our chat with Village Headman Chande whose subjects mainly comprise fishermen gave out the first indicator that more awareness and civic education need to be done on oil exploration in the district.

The chief feigned complete ignorance of the project saying no one has come forth to inform him about oil exploration in his area.

I am first hearing it from you. If you did not come I could not have known that there is oil exploration happening on the lake. But why are we kept in the dark?

wondered the chief.

Chande went ahead to question the wisdom behind keeping the information about the investment from the very same people who will be required to grant the passage for the investment’s activities.

I really do not understand. But what government should know is that people have now opened their eyes and they will demand answers,

he said.

Chande, who is a retired teacher, explained that on his part he can easily understand and embrace the project, but when it comes to his subjects, whose livelihood wholesomely depends on the lake, it will take some systematic sensitization to convince them because they are misled by civil society groups who use the radio to spread messages that oil drilling in the lake will kill fish.

This laissez-faire approach they have deployed in their awareness activities will not work. They should rather try serious engagement for the locals to embrace this important project,

he said.

The chief reiterated that, personally, he supports the investment, because he foresees it bringing development to his area and creating other opportunities such as employment and market for local businesses.

On the part of fishermen, oil exploration taking place in their side of the lake is nothing but a grapevine story heard on radios.

We just hear it on the radio but I have not seen anyone carrying out the oil exploration-related activities, neither has someone formally approached us fishermen to share information about the issue,

said Limbani Mdutu, a fisherman we found preparing his boat and net for the next fishing errand.

The 35-year-old old said the noise which they heard much was about the Kaunini (airborne geophysical survey), which was conducted by the government through the Mining Governance and Growth Support Project (MGGSP) with funding from the World Bank and European Union.

We saw a plane flying and the issue was all over the airwaves, both on radio and television. After that, we heard nothing and up to now we do not know what is happening and where the issue ended, but we could have loved to learn about the results of that survey. Why all this secrecy? Are they afraid of something?

he wondered.

Mdutu’s narrative was corroborated when he took the Mining & Trade Review crew to a home of one of his colleagues, where four fishermen were fixing their nets in readiness for the evening fishing escaped.

They all refused to be identified by names but the four agreed to the notion that there has not been community engagement on the issue, adding if there was any, even in their absence, they could have heard about it, because they live in a closely linked community, where news reach is fast.

Normally such important matters are delivered through village headmen or our vibrant Village Development Committee (VDC) and we make sure that every household is aware of what is happening amidst us,

said one of them.

He said all they hear are murmurings against the activity by some civil society on radio with their argument premised on the fear that oil drilling in the lake will kill fish, something which, he said, instills fear in them, as they are afraid of losing their only means of livelihood.

Another fisherman said they could have loved if government and oil investors had organised meetings to update community on the progress of the exploration works and assure them that nothing wrong would happen in the process of the oil search.

Doing so would have eased the fear and sense of insecurity that the people of this area are dealing with,

he said.

When contacted, Acting Director of Planning and Development (DPD) for Nkhotakota District Council, Derek Mwenda, acknowledged that community awareness has not been conducted and cited lack of funding as the reason.

However, he explained that the investor, Hamra Oil, brought in a consultant, a renowned but now retired human rights activist Undule Mwakasungula, who only sensitized members of the District Executive Committee (DEC) and full council comprising sector heads of government departments present in the district, council officials, members of parliament and councilors.

These are the only people who know about the issue. But we proposed and it was agreed that before engaging communities, the consultant should allow DEC and full council members to inform their respective communities so that they should not be taken unawares when the consultant visits them.

We have not done that yet because of, as I already alluded to, financial constraints that the council is facing, but our commitment still stands,

he said.

He said the issue was further tackled during a recent full council meeting where it was agreed that they should first sensitise Area Development Committee (ADC) members, who will, in turn, be able to use their frequent contact with village traditional leaders to pass on the message to the people.

Nonetheless, Mwenda said he was optimistic that the task will be done and people will be able to appreciate the multiply effect that the oil activities will have in their area, that will end up spurring development in the district and the nation as a whole.

In an earlier interview Chief Mining Engineer responsible for Oil and Gas, Cassius Chiwambo, made an assurance of government’s commitment to sensitizing communities in all areas where exploration is taking place.

He said government has already started, and they are lobbying for more resources to conduct more community sensitisation meetings. He also urged exploration companies to sensitise the communities before they begin geological mapping processes as part of their social licence obligation.

Chiwambo assured the communities not to be worried about fish dying during exploratory drilling as that does not happen often.

Last year, President Peter Mutharika assured Malawians that the Malawi Government will work with multinational oil firms in applying clean technologies to explore for oil in the country’s portion of the Great African Rift Valley which has potential for oil discoveries.

Mutharika said his government made a decision to go ahead with oil resources exploration because it does not want Malawi to stay behind as other countries in the region are doing the same.

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This piece was initially published in Malawi’s Mining & Trade Review Issue Number 60 (April 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

Kayelekera nightmare

Uranium mining leaves Kayelekera community destitute

 …former mine employees wallowing in poverty

 …natives cry foul over compensation issues

By Marcel Chimwala

There can be no development for indigenous peoples without their free, prior and informed consent and without them being involved in every step of a project. These fundamental principles are enshrined in the UN Declaration on the Rights of Indigenous Peoples.

Former UN Secretary-General Ban Ki-moon.

Despite hosting an imposing uranium mine which is so far Malawi’s largest investment in the sector, members of the community in the Kayelekera area in Karonga say they are wallowing in abject poverty as mining activities have brought more harm than good to their day to day livelihoods.

During a media tour of the Kayelekera area organized by a civil society grouping, Publish What You Pay Malawi, with funding from the Open Society Initiative for Southern Africa (OSISA), the community members mainly complained of poor handling of compensation and labour issues by the government and the mine owner, Paladin Africa.

In narrating their ordeal, representatives of the Gondwe clan who were the native settlers of the mining site said that in 2006 they just woke up one day to receive a visitor who happened to be an official from Karonga District Council’s office instructing them to move to a new village site allocated to them as the government had earmarked their home area for mining activities.

It was a nightmare for us because we had to unexpectedly move to the new place about 5km from Kayelekera with all our belongings including livestock. The sad thing is that the soil at our original home was fertile that we never applied fertilizer in our maize gardens and there was also better grazing land for our livestock while in our new village, we have to apply fertilizer to our gardens three times a year which is expensive for us and we have also lost our flock of cattle due to lack of grazing land,

said a clan leader Hayson Gondwe, who claimed to have lost 38 cattle, 30 goats and herds of pigs.

Hayson said 12 households were displaced and government only gave K80,000  to five families which was even quite inadequate to compensate for the losses associated with the displacement from their ancestral land now hosting the mine.

His sentiments were echoed by Gracious Gondwe who said the gardens at their new home, Mbutuka Village, are not productive as the soil is sandy.

When we were at Kayelekera, we used to harvest enough for consumption and sell the surplus. This is not the case here because the soil is sandy and infertile so we have annual food shortages and we are failing to pay school fees for our children since we depend on the sale of agricultural commodities as a source of income,

he said.

He also said the family left fruit trees at Kayelekera which cannot grow in the sandy soils of their new location.

Gracious further claimed that Paladin promised to build the displaced families decent houses at their new location but never fulfilled the promise.

We were surprised that we were just forced to move from our original houses to temporary shelters made of stems and mud to pave way for the mine. Government never evaluated our property for compensation purposes and we signed no documents to that effect. These grass-thatched shelters never lasted a month before they fell. We have, therefore, struggled to build new houses as up to now Paladin’s promise to construct houses for us remains a pipedream,

he said.

Another descendant of the Gondwe clan, Stuart Gondwe, said the other issue of concern is that Paladin never retained anyone of the Gondwe clan as an employee of the company although its Kayelekera mine was constructed on their ancestral land.

He said, in his case, he was employed as a watchman at the mine with a K10,000 monthly salary but claimed that he was dismissed after only six months.

Surely, I have nothing to show as a benefit from the mine. This mine has only added more miseries to my life and that of my family,

said Stuart.

Their new home is 5km from Kayelekera Primary School and children going to school cross four rivers without bridges.

Another member of the clan Maskin Gondwe told the visiting journalists that such a situation makes it difficult and risky for the children to go to school especially during rainy season when rivers are flooded.

It was better when we were in Kayelekera Village, our original home, as it was close to school. In the current situation, our children cannot concentrate in class because they are always tired of travelling over the hills,

he said.

Maskin said in order to address the situation, they tried to construct a grass thatched junior primary school at their new location with the hope that Government and Paladin would support the initiative and come up with a better facility but their plea for assistance was met with deaf ears.

He also complained that it is difficult to get patients including pregnant women to the hospital from their new home which is far away from the main road to Kayelekera mine.

Maskin and his septuagenarian father Hayson were initially employed by Paladin as a driver and security guard respectively, as part of the deal for the family to relocate, only to be unceremoniously sacked six months down the line.

But the misery associated with the government’s poor handling of mining issues at Kayelekera is not only confined to the original inhabitants of the mining area. The mine’s ex-workers are also feeling the pinch.

A sad story is of Maneno Kandulu Milanzi who worked as a cook at Kayelekera mine for 10 years starting from 2007 and has now lasted 1-year and 4-months without employment.

Milanzi, who is originally from Mangochi, said he only received K680000 as terminal benefits when he was retrenched last year.

I left Mangochi to seek employment at the mine because I thought that my economic status will improve as has been the case with my colleagues from Mangochi who worked at mines in South Africa and are now rich. But alas, this mine has not benefitted us retrenched workers!

He lamented.

Another retrenched worker Alice Munyenyembe worked as a cleaner at near-by Malcoal mine for 8-years then Kayelekera for 4-years but is still living in a grass-thatched house just as several other Kayelekera retrenched workers.

National Coordinator for Publish What You Pay Cynthia Simkonda said the suffering the people of Kayelekera are going through is all because of poor governance of the country’s mining sector due to inadequate legal provisions.

She said:

The country needs legal provisions that will empower and protect communities in mining areas from exploitation.

Thus when the government grants a licence to an investor to pursue a mining project, the community has to be consulted and must be allowed to take part in decision making on every step of the project.

Community Development Agreements must also be legally binding as reflected in the Revised Mines and Minerals Bill yet to be enacted. We urge government to fast-track the enactment process for this bill.

Simkonda is advocating for the Malawi Government to uphold the concept of free, prior and informed consent (FPIC) which is a specific right that pertains to indigenous people and is recognised in the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP).

FPIC allows indigenous communities to give or withhold consent to a project that may affect them or their territories and once they have given their consent, they can withdraw it at any stage.

Furthermore, FPIC enables the communities to negotiate the conditions under which the project will be designed, implemented, monitored and evaluated which is embedded within the universal right to self-determination.

In addition to empowering communities to take part in decision making on mining projects, Simkonda said Malawi needs to incorporate specific provisions that protect mine workers from exploitation in its laws.

The calamities Paladin’s retrenched workers at Kayelekera Mine are facing are an indication that in most cases, working for a mine cannot be a lifetime job so there is need for government to ensure that there are specific laws that ensures better working conditions and packages including terminal benefits for mine workers,

she said.

Kayelekera community proposes enactment of EITI legislation

…demands allocation of mine revenue proceeds for local development

By Chiku Jere

Members of the community surrounding the Kayelekera Uranium Mine in Karonga have proposed the need for Malawi to enact an Extractive Industries Transparency Initiative (EITI) legislation that will provide legal enforcement for adherence to principles of the global standard on transparency and accountability in oil, gas and mineral resources governance.

The call was made when representatives of a civil society grouping Publish What You Pay (PWYP) Malawi with funding from Open Society Initiative for Southern Africa (Osisa) went to the area on a fact-finding mission as to whether the project has benefitted the people of the area or not.

The members of the community, who were sensitized on EITI issues by PWYP Malawi, said enactment of the EITI legislation will help uphold transparency and accountability, which are lacking at the Kayelekera Uranium Mine, the biggest mining project in Malawi’s history operated by Paladin Africa Limited, a subsidiary of ASX- and TSX-listed Paladin Energy.

If the Kayelekera people’s wish is granted, Malawi will join neighbouring Tanzania, Liberia, Nigeria and Ukraine that have enacted dedicated EITI legislation.

The community members said that they believe such legislation will play a role in ensuring compliance with EITI requirements by companies engaged in exploration or mineral extraction and relevant government agencies, which are mandated to timely provide accurate information for the EITI annual report.

PWYP and EITI are some of the commonly used approaches to transparency and use what is commonly known as the pillars of change to advocacy along the whole extractive value chain, from licensing, production to revenue management.

PWYP National Coordinator, Cynthia Simkonda, said in its initial MWEITI Report, the Malawi government published revenue it received from Paladin, and PWYP wanted to know if that money has had any impact on the livelihoods of the Kayelekera community.

So we took the report and enlightened the people of what the document was all about. We made them understand issues of transparency and accountability in the sector and how they can hold authorities accountable,

she said.

She said it was after being sensitised that Kayelekera village groupings called ‘Reflection Action Circles’, whose main objective is to allow communities consensually reflect on the impact of the mine on their lives and make informed demands vis-à-vis their rights and needs, were formed.

It is through group reflections that the community is now making demands for an EITI law, because they believe that adherence to requirements of the initiative’s process will ensure transparency and accountability,

she said.

Simkonda urged authorities to take the Kayelekera people’s demands seriously as they are the ones that have experienced the impact of the mining activity.

The community also demands an insertion of a legal provision in the EITI legislation and Mines and Minerals Bill that ensures mandatory allocation of a certain percentage of reported revenue to a community where the mining activity is taking place to finance development activities.

Village Development Committee (VDC) chairperson for Kayelekera-Mwenechanga area Edward Kapondi Sichinga explained that they are making such a demand because it is the only way mining areas would be assured of benefitting from mining investments.

Despite being subjected to numerous livelihood disturbances such as loss of farming land, displacement of villages as well as environmental damage, 10 years down the line, there is little we can point at as benefits from this so called largest mining investment in the land,

Sichinga said.

However, he said blaming Paladin alone will be unfair, because they were brought to the area by government.

Government needs to also own this mess as it could have put conditions in place to prevent the abuse that people have suffered

he said.

Joining Sichinga in condemning government was Welani Mweso, Chairperson for Uwembe Village-based Tikondane Reflection Circle who said officials botched everything during the mining contract negotiations.

They could have facilitated a binding development agreement between the community and the company to ensure that the area attains tangible benefits from this investment. This is why there is need to put measures in place to prevent this from happening again,

Mweso suggested.

He said most of the development infrastructure that Paladin put in place were substandard and incomplete, citing the collapsed and washed-away bridges and an Under Five Clinic that has no doctor, medicine, equipment supplies and furniture.

This clinic which is in a state of non-operational remains a telling symbol of promises and lies that people of Kayelekera have been fed with for years by authorities,

said Mweso, an assertion that was cheered by women present during the meeting.

The clinic issue triggered emotions from the women, who had initially remained quiet, to start adding their voice to the contributions.

I was present when council officials came on December 7th last year and promised that, within a week, a doctor, drugs and necessary furniture will be supplied to the clinic, but it has now been months of waiting,

Hilda Maluwa Gama said.

Her contribution emboldened other women and one after another they rose to speak, with most of them focusing on the clinic issue.

Wyness Mkonda took a swipe at Paladin and Government for conducting a handover ceremony of the clinic to the community before it was completed wondering why a whole high-level delegation from government and the company would travel all the way from ‘wherever they hide; gather members of the community, and literally lie to them’.

I was also here when they handed over the clinic and I find their lies demeaning and disrespectful towards humanity. Imagine being told to leave your chores, to attend to a ceremony which you thought would address our crucial problems once and for all, only to discover later that it was all lies? We really feel insulted,

said Mkonda.

Delays in operationalising the clinic implies that the Kayelekera people continue to travel a 7km distance to seek medical services at Wiliro Health Centre.

The only personnel at Kayelekera Clinic is Blessing Chikwera, a Healthy Surveillance Assistant (HSA) who only plays the advisory role to community on health issues as he is not qualified to perform medical duties.

The area really needs a fully functional medical facility because there are a lot of health issues here. Sometimes, I am forced to attend to patients, though that   is not my line of duty, but as someone who cannot stand to see people suffering, I just improvise,

Chikwera said.

In his remarks, Village Headman Fologo said the Kayelekera Uranium project, which has been touted by some quarters as a ‘big thing’ that has ever happened to Malawi, let alone his area, has proven to be nothing, other than a rip-off of land, livelihood and dignity of his people, whose impact will remain forever.

Let me tell you that for us there is nothing to tell about the investment, but only misery, betrayal and insult to our dignity as a people,

the visibly exasperated traditional leader, who was flanked by colleagues, village headmen, Nyirenje and Chisulo said.

Like all speakers, Fologo, had no kind words towards government and the area’s elected representatives whom he blamed for being responsible for what he described as the ‘Kayelekera social mess’.

Charged Fologo:

For God’s sake! Do they hate us that much? How could they play dumb and deaf to our suffering?

The community has since agreed that the re-opening of the Kayelekera mine, currently on ‘care and maintenance’ since 2014, must now depend on the signing of a government-facilitated and binding community development agreement between the people and the company.

Simkonda said PWYP Malawi, a campaign run by a coalition of 16 organisations drawn from 33 Natural Resources Justice Network (NRJN) member-organisations that advocate the following of paper trail of the payments made to government by extractives sector companies, will continue conducting public awareness activities on EITI issues in Malawi, so that citizens’ understanding of the is reasonably improved.

She said:

We very much support the community perspective on EITI to be backed by a legal provision that will empower communities in mining areas to demand part of revenue the government has generated from a mining project in their area for local development.

We want to avoid situations like that of Kayelekera where the government is not showing interest to provide the necessary amenities such as water, electricity, drugs and a medical practitioner to have the Health Centre, which was constructed by Paladin, up and running. This is despite the EITI report showing that the Government has been collecting money in form of royalties, taxes and licence fees from Paladin.

***

This piece was initially published in Malawi’s Mining & Trade Review Issue Number 60 (April 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

Mining & Social Issues with Ignatius Kamwanje

Labour Laws and Working Conditions in the Mining Sector in Malawi

“From a Mine Workers Perspective”

Extractive industries hold significant development potential in any country. In Africa, these industries bring about much suffering to the local people. Although many companies have mined and exploited these valuable resources, there is not much to show for improved lives of people. Most multi-national mining companies undermine the position of locals in many ways such as depressed wages, violations of the people’s rights, deliberate avoidance of national labour laws and practices, swearing in their language for a local not to grasp, perpetuation of inequality and injustice through authoritarianism, exploitation, racism and other forms of discrimination.

The paradox of plenty is a reality for many African countries. There’s an abundance of natural resources such as oil, natural gas and minerals, but there has not been much economic growth and development for many countries. The resource curse is a reality for many African countries in terms of minerals. The natural resources that are abundant in most African countries tend to benefit not the communities and countries within which the minerals are found and extracted but the mining companies themselves who are foreigners. It is concerning to note that many of the mining deals on the continent benefit companies operating in the various communities more than they benefit African people. These resources should be a blessing for the African countries and communities.

In Malawi, Labour and work conditions are regulated by three main areas.

• The Employment Act which regulates matters of work hours and remuneration.
• Workers Compensation and Welfare Act which is incorporated into the Employment Act
• The Industrial Relations Act which regulates work related issues between the employee and the employer.

There is also the Labour Relations Act that deals with unionism at workplace that protects and promotes the freedom of association, and collective bargaining.

The main challenge which the legal Framework of the Labour Act has when applied to the mining industry is that different pieces of labour legislation are generic and there is need to develop a comprehensive Act that would speak on mining related work conditions, handling of exposure to mining related occupational diseases and also mine accidents. A good example is the Occupational Diseases and Works Act Number 78 of 1973 of South Africa, which despite its inherent shortfall that it talks of miners as black people, deals with almost all diseases exposed to mining work and how these would be handled.

Challenges faced by mine workers in Malawi

There are so many challenges that are faced by mine workers in Malawi. These among others include but not limited to the following:

(a) Homogeneity in the minimum wage in the Employment Act as if all the sectors are the same.

– Much as many mining companies pay workers above the minimum wage, there is need however that a minimum wage for mining related work of dangerous and hazardous sectors be set. This is because the nature of work and the profits that often times these companies make should commensurate with the pay given to the peopl who provide the labour.

(b) Different labour related legislative issues are also homogenous

(c)  Absence of Workers Compensation Fund and its implementation

(d)  Absence of Mining Charter

(e)  Lack of freedom of expression and flexibility

(f)  Language problem

(g) Inadequate/ lack of occupational safety and health standards and enforcement.

– From visits in some mines, especially the coal mining areas in the north, it has been observed that most of the workers are exposed to harsh conditions and even working without Personal Protective Equipment(PPE) and a careful assessment shows that government officials under OSHE rarely or they do not go to these mines. It is also a requirement that mining companies must have implementation of an EHS Plan that addresses such issues and remedies to overcome them to achieve maximum production.

(h) Lack of periodic checking on workers’ conditions

– Safety, health and protection from work hazards.  This is hampered by the fact that mine sites are more or less protected areas so much so that even the Minister of Labour cannot visit any mine site without prior appointment and approval to do so by the management for the mining company.

(i)  Weak job protection measures of labour in the sector…no job security.

– The legal framework does not stipulate clearly what work at a mine could or should be done by local people and which should be done by expatriates.  In other words, there is little job protection and some mining companies are taking advantage to source cheap labour outside Malawi when such jobs could equally be done local Malawians although there is a backup of exposure or work experience.

(j)  Workers denied rights to access some company policies

– Some policies are deliberately targeted at locals as victims than their expatriate counterparts.

(k)  Absence of proactive unionism for fear or reprisals.

– Most local employees in Malawi working in mines either fear the formation of the union or they form but still progressively inactive. This is because the selected leaders/individuals often fear reprisals from the Management whenever unionism seems very active. As a result, most of the issues to do with labour laws and conditions are left unattended by the local employees so that the union sometimes dies a natural death.

(l)  Absence of frequent monitoring of OSH by concerned authorities to minimize hazards.

(m) Labour related issues are not taken seriously by most mining companies due to laxity by concerned supervisors from government.

(n)  Mine workers lack knowledge of their labour rights. They are only recognized when there is an incident e.g. strike, unionism, accidents, occupational diseases.

Women Involvement

The mining industry is perceived to be dominated by males and women are not necessarily welcomed. Women face stigmatization in mining. They are treated as inferiors and when they participate in any mining activity as such, they are perceived not to have passion for their families even culturally. It is therefore considered by males that these   women abscond family responsibilities from their matrimonial homes. There is also lack of technical capacity among women to compete favourably with their male counterparts in the mining industry.  Therefore, there must exist incentives that try to address women challenges in mining in Malawi as a country as it is in other sectors. There also exists lack of cohesive base in women in mining and this results from poor response from government and other key stakeholders.

The labour and employment environment for mine workers described shows that much as there are laws and policies to regulate labour, there is need to attune them to mine related work and where possible create new laws that will have to deal with emerging labour and employment matters including those specifically on women although gender plays an integral part in the sector in Malawi. Some mining laws could be strengthened to incorporate realistic and manageable demands. This should be paired with an approach toward devising a mining code that emphasizes rationalization. One must understand that minerals are a national asset as such benefits need to be fairly shared.

Recommendations

– There is need to match minimum wage with mining related work because of the hazards associated with it.

– The profits realised from mining companies with the nature of work should commensurate with the wages provided.

– Develop a comprehensive Labour Act specifically for the mining sector because of its complexity.

– Incorporate women and gender issues into the agenda at least to balance the inequality that exists.

– Enforce job protectionism/security measures. Some mining companies are taking advantage of sourcing cheap labour from outside at the expense of local Malawians.

– Frequent sensitisation of labour related issues to mine workers by concerned parties.

– Empower local workers to form unions and persuade/enforce mining companies to adhere.

– Devise measures that restrict ministers or labour officials/supervisors to book an appointment to visit mines or the visits should be ad hoc.

***

This piece was initially published in Malawi’s Mining & Trade Review Issue Number 60 (April 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

TECHNICAL FILE

By Grain Wyson Phillip Malunga FIMMM Minerals, Geology, Environment & Corporate Affairs Consultant

Malawi Growth Development Strategy III and the Minerals Sector

ABSTRACT

The minerals sector is the driver for economic development in most African countries. South Africa, Zimbabwe, Zambia, Democratic Republic of Congo, Tanzania, Nigeria, Ghana and Angola are some of the countries that have benefited from the minerals sector. It is therefore surprising that Malawi has downgraded mining, in Malawi Growth and Development Strategy III (MGDS III), as a low key priority area. The country continues to dwell much on social development and not economic development. Economic development comes from private sector growth whose revenue to government should meet the needs of social development.

What the country should do is to speed up conclusion of Development Agreements, enact the Mines and Minerals Bill, promote import substitution and oversee speedy development of rare earths, niobium and graphite projects within the next 3 to 5 years.

This paper tries to focus on how the minerals sector could have enriched the MGDS III.

INTRODUCTION

The Malawi Growth Development Strategy III (MGDS III) has downgraded the importance of mineral resources as a driver for economic development. The focus is now on the following national development priorities:

1. Agriculture and Climate Change Management
2. Education and Skills Development
3. Transport and ICT infrastructure
4. Energy, Industry and Tourism Development and
5. Health and Population Management

MGDS III states that agriculture contributed 28% to the GDP 28% in 2017 though lower than 38% in 1994. Between 2012 and 2017, the inflation rate was stable, but relatively high at around 20% as compared to single-digit levels in the first half of the decade. The bank lending rate is high and at 22% increasing significantly the cost of goods and services produced from bank loans businesses.

Overreliance on rain fed agriculture means being at the mercy of unpredictable weather pattern. Wrong choice of components of education and skills development lead to mismatch with the needs of energy development and industrialisation. Mining plays a big economic role in promoting market availability for agriculture produce and triggers skills development in the areas of welding and fabrication, automation, environmental health and infrastructure development.

The development agenda states that 50.7% of the population are still living under the poverty line of below $1 a day.  Ultra-poor population has increased from 22.4% to 25%  between 2005 and 2015. The Gini coefficient, the most commonly used measure of inequality increased from 0.39 in 2005 to 0.45 in 2014.

For Malawi’s economy to grow there is need to include the minerals sector as key priority area.  The minerals sector offers an opportunity for economic linkages, growing local content and creating employment for the youth both skilled and unskilled.

MDGS III AND LOST LINKAGES WITH THE MINERALS SECTOR

The Table below shows how promotion of the minerals sector should have benefited economic growth:

THE MINERALS SECTOR HAS THE POTENTIAL TO STEER ECONOMIC GROWTH IN MALAWI

Fiscal Policy and National Development Program uncertainty poses a lot of risks and challenges to investors. Malawi’s economy needs to graduate from tertiary industry to secondary industry through proper planning and realising full benefits of economic diversification.

The country imports mineral based commodities such as lime, fertilizer, ceramic products, coal and steel. These can be produced locally to promote import substation and save foreign exchange. Malawi has a lot of limestone deposits that can be used for manufacture of agriculture lime, chemical grade lime and cement. We import fertilizer when we can manufacture our own through locally based minerals such as rock phosphate and pyrite. We continue to import ceramic products such as sanitary ware and tiles when we have clays. We continue to export scrap metal instead of recycling to metal products such as reinforcement steel and flat metal sheets. We continue to import coal for steam generation when we can develop our coal deposits for domestic use (coal briquettes), agro processing and energy generation.

Malawi has immediate potential to generate export revenue through graphite, rare earths, niobium and uranium. The projects are well spread to steer regional economic growth. Real opportunities are emerging in the renewable energy sector and battery industry to support exploitation of the above minerals within three to five years. These projects are can be developed with a short period if the government can be serious with timely conclusion of development agreements and timely enactment of the new mines and Minerals Bill that will put into effect the Mines Taxation Act. There is also need to remove Value Added Tax in exploration programs as resources used are risk based with no clear opportunity of pay-back.  The nuclear sector has a lot of projects under way in China, India, America, Europe and Africa. These will require uranium as fuel and therefore Malawi stands to benefit again and more   opportunities are there to discover more deposits.

New focus for exploration should be in gold, copper, lithium, nickel, platinum, diamonds, gemstones and dimension stone. This is only possible if government puts mining as one of its Key Priority Areas in order to attract development cooperation and private sector investment.

As the world evolves towards electric cars and renewable energy, the importance of rare earths, lithium and graphite to the global wind energy and battery industry will be a strong driver of mining investment in this country. President Trump’s revolution of developing America’s steel industry will also require niobium as part of the steel alloys.

We now see that mining projects are increasingly seen as an opportunity to provide communities with significant financial and educational benefits.

CONCLUSION

Exclusion of the Minerals Sector in the MGDS III as a key priority sector slows down progress that was gained in MGDS II when the Minerals sector saw generation of geoscientific information necessary to trigger exploration activities in the mining sector. MGDS III should have firmed up this progress and concentrate on investment into import substitution projects and concentrating on promoting and facilitating development of niobium, graphite and rare earths projects for export. The policy strategy would be to link the mining industry with tertiary education that promotes economic linkages, local content and youth and women employment. Agriculture sector stands to benefit from the mining sector through development of agro minerals and promoting marketing of agro produce to mines. Infrastructure developed through mining will promote agro processing and create access to other markets.

Revenue from the minerals sector will also boost revenue generation for government. Super profits will be used to create sovereign fund for critical infrastructure projects and funds for future generation.

***

This piece was initially published in Malawi’s Mining & Trade Review Issue Number 60 (April 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

Japan courts Malawi for renewal of Mulanje rare-earth licence

By Chiku Jere

Japan has asked Malawi to renew an exclusive prospective licence for Springstone Limited, a joint venture between Japan, Oil, Gas and Metals National Corporation (JOGMEG) and Canada’s Gold Canyon Resources, which is exploring for rare earth elements at Chambe Basin in Mulanje Mountain.

This is contained in a communique detailing engagements of Minister of Natural Resources, Energy and Mining, Aggrey Masi, in Cape Town, South Africa, where he led a Malawi delegation that attended the 2018 Investing in Africa Mining Indaba.

The Ministry says in the statement that Masi met a Japanese delegation led by Dr Masaki Oguchi, Parliamentary Vice Minister, Ministry of Economy, Trade and Industry of Japan on February 5, 2018, and the discussions, among other things, focused on renewal of exploration licence by Springstone Limited, which has JOGMEG as a major shareholder with 67% shares while the rest of the shareholding is in the hands of Gold Canyon.

The statement says Masi also discussed with the Japanese delegation about Japan’s interest in minerals such as nickel, cobalt, graphite and lithium following the advent of electric vehicles and green energy.

The discussion as well centred on Japenese assistance to Malawi on capacity building in the areas of geological information systems and remote sensing for Malawian Geoscientists.

Says the statement:

The two countries have an existing memorandum of understanding that binds Japan to assist Malawi in capacity building in the said areas and the discussion centred on the need to review the MOU.

The Hon. Minister expressed gratitude for the technical assistance it gets from the Japanese Government. He pledged government’s support to exploration companies from Japan investing in Malawi.

In 2013, Spring Stone announced the completion of a field exploration programme at Chambe basin, which paved way for mineral resource calculation and an economic analysis of the project including an infrastructure survey.

The company also said it was conducting additional research and development work to seek the optimum rare earth element leeching process.

Spring Stone, which kick-started the exploration campaign in 2011, engaged Japan’s Mitsui Mining Company as the contractor for exploratory drilling at the 400 km2 exclusive prospecting licence area.

Phase 1 drilling ran from September to October 2011 and involved the digging of 24 holes while Phase 2 drilling was conducted from May to November 2012, and involved the drilling of 176 holes.

The campaign discovered a superficial horizon of rare-earths-bearing kaolinite/halloysite clay ranging from 3 m to 26 m in thickness.

Independent analysis of core from these holes indicates that the clay contains comparable levels of total rare earths enrichment to its Chinese counterparts, as well as similar heavy rare earths enrichment.

Springstone says very low radio- activity is associated with the clays, which is potentially a positive metallurgical attribute.

In addition to drilling, the company undertook extensive baseline environmental work, including a study on how indigenous vegetation could be regenerated as part of future development of the site.

Seasoned geologist and former Principal Secretary for the Ministry of Mining, Leonard Kalindekafe, describes the Mulanje Mountain deposit as an important and interesting discovery for Malawi because few such rare- earth deposits (with an ion-adsorption clay type similar to China) have been found elsewhere.

It is interesting because this is a rare deposit and I find it an important discovery for Malawi. Such types of deposits are cost effective in terms of rare-earth element recovery,

says Kalindekafe.

In a report on rare earths occurrence in Malawi, Kalindekafe indicates that most of the country’s rare-earth deposits are of the carbanatite type.

He reports that the country has great potential for the minerals, mostly found in the Chilwa alkaline area, in the southern region.

The report highlights the Kangankunde deposit in Balaka and the Songwe Hill deposit in Phalombe as some of the potential deposits in the area.

JOGMEC is a Japanese government organization established under administration of the Ministry of Economy, Trade and Industry, and is responsible for fostering international exploration and development of strategic minerals, amongst other mineral and petroleum related activities.

***

This piece was initially published in Malawi’s Mining & Trade Review Issue Number 60 (April 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

Publish What You Pay Malawi Press Release: What happened to oil and gas contracts renegotiation?

Malawians would like to understand the status of oil and gas contracts that have remained a secret for a long time. Time has come for Government to inform Malawians about the status of all the contracts that were signed with oil and gas companies
and the revenues being generated from the sector. If the oil and gas intuitive is meant to benefit Malawians, it is only fair that Government should inform Malawian citizens about the renegotiation of the oil and gas contracts.

The following are some of the key issues and questions:
1. Non-disclosure of the Production Sharing Agreement (PSA) signed with RAK Gas for Blocks 4 and 5, and with Pacific Oil for Block 6.
– What is the motive behind this secrecy on PSAs signed with RAK Gas for Blocks 4 and 5; and with Pacific Oil for Block 6?
– Confidentiality breeds suspicion, make known the contracts and its proceedings to the public.

2. Non-disclosure of the addendum that includes revisions to the fiscal terms for the RAK Gas PSAs and its justification for the changes.
– Has the Addendum been published?
– Let’s end secrecy by disclosing oil and gas deals and profits to the public;

3. Questionable allocation of petroleum licenses or PSAs
– What are the criteria used to allocate Petroleum licenses or Production sharing agreements?
– Take a turn towards transparency by explaining how oil and gas contracts were allocated.

4. The absence of a report on all payments made by companies holding petroleum Licenses or PSAs, including Corporate Social Responsibility to any organization.
– Malawians deserve to know what companies are paying to the Government; what Government is receiving from companies and the benefit from the value of wealth
beneath our feet

5. Nonexistence of information on the beneficial owners of petroleum rights holders.
– Malawians need to know who owns what in the petroleum rights in Malawi.

6. The absence of a national policy for the petroleum sector and outdated Petroleum (Exploration and Production) Act of 1983.
– Develop a petroleum policy now!
– Can a 35-year-old Petroleum (Exploration and production) Act be relevant today?
– Give a new face and dimension to the 35 years old Petroleum Act.

Mining in Malawi Note: In relation to point one, the government made the PSAs public one year ago. They are all available here.

LafargeHolcim launches Kumanga Malawi project in style

By Marcel Chimwala

There was glamour and pomp at Ufulu Gardens in Lilongwe’s Area 43 when the country’s  leading cement manufacturer LafargeHolcim Malawi took to the venue to launch Kumanga Malawi, which is a comprehensive corporate social responsibility programme aimed at improving people’s livelihoods through interventions in various sectors including education, health and housing.

The launching ceremony, which attracted a number of stakeholders including government officials, architects and contractors included a cocktail party which allowed Lafarge officials to mingle with the stakeholders and share ideas on the project.

LafargeHolcim Malawi CEO Albert Sigei described Kumanga Malawi as the company’s coordinated approach to sustainable, long term stakeholder engagement.

As a responsible corporate citizen, Lafarge Cement understands and values its role as a thought leader in the construction industry,

he said.

Kumanga Malawi Program is built on four pillars which include road and workplace safety, training and product usage awareness, small and medium enterprises (SME) support and sustainable building solutions.

On Road and Workplace Safety, LafargeHolcim Malawi has spent $100,000 (K73.5 million) on on-going training of over 140 drivers from its logistics partners and staff to minimise road related incidents and loss of life.

We also partner with the Department of Road Traffic and Safety Services on general road safety matters,

said Sigei.

As part of Training and Product Usage Awareness, Lafarge will revamp its masons training program to assist technical training providers in equipping masons with relevant skills for their trade.

Sigei explains that the company will also increase knowledge and information on correct cement products usage through mainstream media.

In the area of SME Support, LafargeHolcim Malawi will provide support to a growing base of 70 SMEs in business management skills as well as assisting and advising on access to working capital and entrepreneurial opportunities.

In terms of Sustainable Building Solutions; this is a pillar which is the key focus of the launch. It is involved with the provision of high quality, sustainable and low cost designs for schools, clinics and houses,

Sigei said.

He explained that the LafargeHolcim Group which subscribes to international protocols on climate change such as UN Sustainable Development Goals and the Paris Climate Agreement has, through the programme, taken a lead to introduce low cost, high quality and sustainable designs for schools, clinics and homes.

These innovative, forward looking and modern designs are aptly named Makono Schools, Makono Clinics and Makono Homes,

he said.

Speaking on behalf of Minister of Lands, Housing and Urban Development Anna Kachikho, Principal Secretary for the Ministry Charles P. Msosa welcomed the Kumanga Malawi Programme saying it is aligned to the Government of Malawi’s flagship Decent and Affordable Housing Subsidy Programme (DAHSP) which aims at providing housing to low income households.

Kumanga Malawi will accord the Government, Non-governmental organisations as well as the private sector an opportunity to access professional designs of schools, clinics and homes that are environmentally friendly, scalable, and efficiently use local building resources,

he said.

He said of particular interest is the push towards sustainable building that will encourage use of renewable energy and aid the country’s migration from use of burnt bricks to Soil Stabilised Bricks (SSBs) and concrete blocks.

Such designs will certainly aid the Government’s own efforts to eradicate the use of burnt bricks, the negative environmental impact of which cannot be over emphasized,

he said.

In her speech, Malawi Institute of Architects (MIA) President Maliam Mdoko said the project will play a major role in boosting the professionalism of Malawian architects.

The Designs Competition

The project include a design competition, which will allow four architect-led teams to submit designs for Makono Schools, Makono Clinics and Makono Homes.

Detailed Terms of Reference have been developed by LafargeHolcim Malawi in collaboration with the National Construction Industry Council (NCIC), Malawi Institute of Architects (MIA), Malawi Institute of Engineers (MIE), ICT Association of Malawi (ICTAM) and other professionals affiliated to the construction industry.

Although cash prizes will be awarded to the winning designs, the real winner is indeed the people of Malawi as these designs will push a new frontier in public and private construction,

said Mdoko.

Her words were supported by Msosa who said “it is a delight to the Ministry of Lands, Housing and Urban Development and indeed to the Government that a private sector partner, Lafarge Cement Malawi, has taken a lead in advancing the future of the country’s construction sector by investing time and resources in this worthwhile cause to design innovative, high quality and sustainable schools, clinics and homes.”

Lafarge Cement, which has been operating in the country for over 60 years, is a wholly owned subsidiary of the LafargeHolcim Group, the world leader in cement and related construction materials.

The company manufactures and markets four cement brands in Malawi, namely the multi purspose/ general usage cement Duracrete, the heavy duty Supaset cement and the masonry cements of Kumanga and Khoma.

It provides employment to approximately 300 people and partners with numerous local businesses to offer support through its supply chain.

***

This piece was initially published in Malawi’s Mining & Trade Review Issue Number 61 (May 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

Bushiri gold chase

…firm linked to Prophet lays ground for Malawi, Dwangwa search

By Chiku Jere

A company linked to renowned South Africa-based Malawian preacher Prophet Shepherd Bushiri, Tushiya Gold Mining, is laying ground to kick-start prospecting work for gold in a tenement South of Dwangwa River.

A search on Malawi Mining Licensing Cadastre Portal run by the Department of Mines in the Ministry of Natural Resources, Energy and Mining shows that a gold and base metals exclusive prospecting licence (EPL0470), whose concession area lies 51.5 square kilometers in Kasungu East, south of Dwangwa River, was granted to Tushiya Gold Mining Company Limited on August 6, 2017 and will expire on August 5, 2020.

Managing Director for Tushiya, Gift Msowoya told Mining & Trade Review that the company, which he owns with Prophet Shepherd Bushiri’s brother, Otis and another Malawian Gift Master as partners, is currently working on gathering data from previous exploration work conducted in the area before commencing field work.

We are working towards commencing the development of the concession,

said Msowoya.

According to 2012 exploration results by the previous tenement holder, UK firm South East African Mining Exploration (SEAMEX), which involved systematic stream sediments sampling and geological observation, there is proven gold occurrence in the area.

The study found five water courses and identified three targets south of Dwangwa River that were carrying the precious metal with a conspicuous cluster of positive results for gold occurrence being noted around Kadyalumba Hill, where gold was thought to be derived from quartz stringers in the gneisses and in proximity to felsite dykes.

Occurrence of alluvial gold in the drainage of south side of the Dwangwa River was initially reported by the British South Africa Company (BSAC) in the 1930s, which found out that two types of lode of gold (quartz stringers and ferruginous) could be panned out of the stream sediments samples over a wide area.

The area lies within the Mozambican orogenic belt and has metamorphic rock on the Precambrian to the Paleozoic ages.

The involvement of Tushiya in Malawi’s mining sector confirms the growing interest by Malawians to invest in the medium to large scale mining industry, which has all along been dominated by foreigners.

However, Mining & Trade Review could not directly establish whether Prophet Bushiri who is popularly known as ‘Major 1’ is a silent partner in the investment as Ephraim Nyondo, the prophet’s spokesperson, did not respond to our e-mailed questionnaire.

But one thing that connects the ‘Miracle Money’ pastor to the Dwangwa gold licence is the name ‘Tushiya’ itself as ‘Tushiya Annointing’, which translates to ‘Unleashing the Hidden Wisdom’, is the title of one of the 17 books the flamboyant ‘man of God’ has published which describes God’s wisdom as a treasure that one must seek before   thinking of deluding wealth.

The book enlightens readers that one can access God’s wisdom; prosper and excel in all his endeavours.

Msowoya acknowledges to have derived the name of the company from this book, explaining that his company is driven by a set of principles promoted in the book, whose message is basically influenced by a biblical story of Solomon who, of all things, preferably asked God for wisdom, instead of wealth.

Otis Bushiri, who also uses ‘Reverend’ or ‘Prophet’ titles on social media, runs a considerably well-followed Facebook page called ‘Billionaire Coach’ which discusses inspirational and motivational business and financial tips.

The elder Bushiri who on his Twitter-Handle describes himself as a ‘life coach, renowned business leader, motivational speaker and best-selling author, is president and founder of Rich Mind Company which was launched in Malawi last year (2017) at Capital Hotel in Lilongwe with the aim – ‘to spearhead the bridging of the gap in financial management that the country’s education system has failed to tackle’.

In his speech at the event, Bushiri noted that many Africans are poor not because they deserve it but because of failure to manage their financial and natural resources.

Otis said his company, Rich Mind, will ensure that Malawians have access to financial management skills, by among other ways, hosting educational financial summits and organizing public lectures in the country’s universities and colleges.

He also pledged to provide flexible low interest-rate loans to those that do not have financial capabilities but have the ability to craft workable business ideas.

Director for Mines Department Jalf Salima expressed ignorance of Bushiri’s interest in Malawi’s mineral sector but said the Prophet just like anybody else is welcome to apply for a prospecting or mining licence in Malawi.

Take note that Prophet Bushiri has every right to apply for a mineral tenement and have his application scrutinised just like any other applicant,

said Salima.

Prophet Bushiri, an entrepreneur said to own multiple entities under the Shepherd Bushiri Investments (SBI), six years ago launched SBI Ltd., a global investment company which was duly incorporated under the Company Laws of the Republic of South Africa 2015.

The ECG charismatic leader has never hidden his interest in mining as last year he launched SB Mining (SBM) Limited Company in neighbouring Zambia, where he partnered Ndola-based Malabwe Mines as a major shareholder in a mine valued at USD$1.2billion, which produces several minerals including emeralds.

Some of the said SBI entities include SB Airways, a private jets charter company at Lanseria Airport in South Africa, SB Hotels in Mauritius and South Africa, SB Telecommunication (PSB mobile network) in South Africa, SB Beverages, SB Mining which owns gold mines across Africa, oil and gas companies in different African countries, as well as several other companies in Dubai, Ethiopia and Cyprus.

Bushiri’s notable investments in Malawi include Rainbow TV Channel and a reported purchase of a K15billion worth elegant building in Malawi’s Capital City Lilongwe, opposite Crossroads Hotel, which he intends to turn into a luxury hotel.

***

This piece was initially published in Malawi’s Mining & Trade Review Issue Number 61 (May 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

Minerals sector blurred in MGDS III

By Chiku Jere

Mining gurus have taken a swipe at the government for ignoring the minerals sector as one of Malawi’s Key Priority Areas (KPAs) in the recently-launched Malawi Growth and Development Strategy (MGDS III).

The MGDS III is anchored on five KPAs namely: Agriculture, Water Development and Climate Change; Education and Skills Development;  Energy, Industry and Tourism Development; Transport and ICT Infrastructure; and Health and Population, which government says were chosen on the basis of their strong linkages among each other as well as other sectors of the economy.

However, mining experts argue that the sector still retains proven potential to turn-around Malawi’s economic fortunes hence it deserves to be highlighted as one of the KPAs in the development strategy.

Grain Malunga, Coordinator for Chamber of Mines and Energy, expressed dismay over the exclusion of the mineral sector as a KPA in MGDS III saying it will likely slow down progress that was gained in MGDS II which embraced mining as a KPA and saw generation of geoscientific information necessary to trigger exploration activities.

He said inclusion of the sector among KPAs would have enriched MGDS III as the sector could complement rain fed agriculture whose contribution to the economy is dwindling due to unreliable and unpredictable weather pattern.

But in his foreword address during the launch, Mutharika described the strategy whose theme is “Building a Productive, Competitive and Resilient Nation” as having been prepared in response to multiple shocks, such as floods, drought and financial leakages that have been experienced midway through the implementation of MGDS II.

The Malawi leader said the cycle of food deficit and surplus has kept the country preoccupied with fighting disasters instead of focusing on the development agenda, which has propelled the government to come up with such a theme for the blueprint.

With this theme, Government undertakes to continue with efforts to be a productive nation that competes on the global scene while ensuring that the nation builds systems that can best deal with natural shocks and disasters,

he said.

The President said based on the comprehensive reviews and results of the consultations on the implementation of MGDS II, the successor strategy has departed from the formulation of multiple thematic areas by going straight into the choice of fewer KPAs chosen on the basis of their strong links among themselves, with the Sustainable Development Goals (SDGs), the AU Agenda 2063 and with the rest of the economy.

Minister of Finance, Economic Planning and Development Goodall Gondwe said the development strategy which will be implemented from 2017 to 2022, is the fourth medium-term national development strategy formulated to contribute to the attainment of country’s long-term development aspirations as enshrined in the Vision 2020.

The Minister explained that the MGDS III is the final strategy that will take Malawi to the expiry of Vision 2020 following implementation of other development strategies that were developed to implement the same vision such as the Malawi Poverty Reduction Strategy Paper (MPRSP), and the Malawi Growth and Development Strategy (MGDS) I and II.

Unlike its immediate predecessor, the strategy is built around one theme that aims to improve productivity, turn the country into a competitive nation and develop resilience to shocks and hazards,

he said.

Gondwe also said the strategy which is the outcome of a year-long process of consultations, brainstorming, and validation meetings with different stakeholders both within and outside government also consolidates the efforts that Malawi is undertaking to reposition itself as a global player.

But in his Technical File column that appeared in the April edition of Mining & Trade Review, Malunga wrote:

Mining plays a big economic role in promoting market availability for agriculture produce and triggers skills development in the areas of welding and fabrication, automation, environmental health and infrastructure development.

He said overreliance on rain fed agriculture means being at the mercy of unpredictable weather pattern.

He argued that for Malawi’s economy to register tremendous growth, there is need to include the minerals sector as a KPA because the sector offers an opportunity for economic linkages, growing local content and creating employment for the youth both skilled and unskilled.

Malunga cited African countries where the minerals sector remains the driver for economic development including South Africa, Zimbabwe, Zambia, Democratic Republic of Congo, Tanzania, Nigeria, Ghana and Angola.

The former minister further wondered why the country continues to dwell much on social development and not economic development, stating that economic development comes from private sector growth whose revenue to government should meet the needs of social development.

Sustaining his critical observation on Chamber of Mines and Energy’s Facebook page Malunga suggested an addendum that will ensure that the significance of the mining sector is highlighted in MDGS III for attention of development partners and investors.

Many of the page followers, among them former president of Malawi Confederation of Chambers of Commerce and Industry (MCCCI) Martin Kansichi Banda seconded the sentiments.

Kansichi Banda wrote:

I was very surprised that this sector was not included as a priority. The people responsible for economic plans should have just looked around us to see the great contribution to GDP derived from the Mineral Sector in neighbouring countries.

Common analysis describes the extractives sector as a primary industry which supports all the economic and social sectors such as agriculture, education, health, infrastructure development, among others.

Earlier on, Mutharika’s administration had touted the sector as key in the quest to diversify from over-dependence on agriculture sector as a driver of the economy but subsequent State of the National Addresses have seen mining relegated to the periphery.

***

This piece was initially published in Malawi’s Mining & Trade Review Issue Number 61 (May 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

EDITORIAL

Govt. needs to encourage local investment in mining

It is a welcome development that Malawians, who in the past were made to believe in the political tune that they have to work hard in agriculture because the country has no minerals, are now waking up from their slumber and are showing interest to invest in mining.

Looking at the mineral licensing cadastral portal developed by the Department of Mines, one would notice that there are a number of local firms that have acquired mineral tenements.

An example is Tushiya Gold Mining Company, which we have featured in our lead article. The company, which is owned by locals including Otis Bushiri who is a brother to renowned prophet, Shephard Bushiri, is laying the ground to kick-start gold prospecting in the South of Dwangwa River in a tenement which used to be owned by British firm, South East African Mining.

The government needs to encourage such local investments in the minerals sector by providing the investors with the necessary tools including updated geological data.

It also needs to encourage local banks to provide capital to local mining investors because lack of access to capital is a big hindrance for Malawians to invest in mining.

It is unfortunate that the government signed memorandums of understanding with several local commercial banks to support mining ventures but the banks have become quite and vividly there has never been any follow up by the government on the agreements.

Ironically, instead of encouraging local investment in mining, the government is busy organizing investment forums to attract foreign investors in mining, energy and other sectors.

However, what the government should understand is that no country was developed by foreigners.

They are citizens of the emerging economic powerhouses such as China and India who are developing the countries and not foreign investors.

Of course, it is important that foreign investors should come into the country with their capital and expertise but we should not solely depend on them to develop our minerals sector.

Malawians need to rush and acquire licences for strategic minerals so that when foreigners come in with their expertise and capital, they should join the locals in joint ventures.

There is also need for the government to scale up awareness on mining issues in Malawi to ensure that more Malawian investors are attracted into the sector.

This is because the country has no rich mining history and as we pointed out already, politicians in the past reigns used to encourage Malawians to only work hard in agriculture because the country has no minerals.

In this awareness drive, the government needs to provide enough data on mineral occurrences and mining activities taking place in the country.

We think enough data is not provided at the moment because questionable figures come from government on the mining sector’s contribution to gross   domestic product (GDP).

For example, we are told mining contributes less than 1% to GDP but the question is; does that include all the sand and quarry mining plus brick molding by the country’s masses? What about the gemstones that are being smuggled out of the country on daily basis?

Surely, the remedy to answer these questions and correct things in the   mining sector is that the government must be serious and provide all the requirements for Malawians to establish sound investments in the sector from which the government can collect ample taxes.

***

This piece was initially published in Malawi’s Mining & Trade Review Issue Number 61 (May 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

Globe applies for renewal of Kanyika licence

By Marcel Chimwala

ASX listed Globe Metals and Mining says it has submitted an application for renewal of its Kanyika exclusive prospecting licence (EPL) to the Department of Mines in the Ministry of Natural Resources, Energy and Mining.

Malawi’s cadastral portal indicates that Globe was awarded a 308 square kilometres EPL for Kanyika in Mzimba covering feldspathoids, uranium, niobium, rare earths elements, tantalum and zircon on May 21, 2015 and is pending renewal as it expires on May 20, 2018.

MD for Globe Metals and Mining, Neville Huxham, told Mining & Trade Review that Globe already submitted an application for renewal of the licence to the Malawi Government because it is determined to develop a mine at Kanyika.

We are definitely going ahead with the project and we already lodged our application with the Malawi Government,

said Huxham.

Globe has undertaken prospecting work at Kanyika including a bankable feasibility study and a definitive study which involved the setting up of a metallurgical pilot plant at Guangzhou Research Institute of Non-Ferrous Metals (GZRINM) using a 40-tonne bulk sample that was shipped to China from Kanyika.

In February this year, Globe announced that it had commended work aimed at finalizing the technical components of the feasibility study in order to provide project funding initiatives in light of the changing outlook for the mining and resources industry generally, and in particular for niobium.

To facilitate this, the company has engaged specialists to revise and update the previous engineering study to incorporate the findings and outcomes of the pilot plant work undertaken and other necessary engineering design changes,

Globe’s Company Secretary Michael Fry said in the announcement.

Globe is, currently, engaged in negotiations with the Malawi Government for a development agreement for Kanyika, which are based on a draft development agreement which it submitted to government.

Huxham explained to Mining & Trade Review that Globe hopes that the Malawi Government will issue it with a mining licence when these negotiations are finalized.

He said currently market prospects for niobium and tantalum are promising, and the company is ready to enter into off-take agreements with buyers and financiers when negotiations for a development agreement are finalized.

Niobium (Nb) is a rare, soft, shiny, grey-white, ductile transition metal which is primarily found in the minerals pyrochlore (Nb>Ta), columbite (Nb>Ta) and tantalite (Ta>Nb).

Minerals containing niobium often also contain tantalum, an element that shares many chemical and physical characteristics with it.

Niobium is found in alkaline intrusive rocks, carbonatites, granites and pegmatites.

World reserves of niobium are estimated at 484Mt, and the largest reserves are located in Brazil and Canada.

Niobium is used with iron and other elements in stainless steel, high strength low alloy (HSLA) steels and other alloys.

Niobium alloys are strong and are often used in pipeline construction, superalloys for jet engines and turbines, and heat resistant equipment.

Tantalum (Ta) is a rare, hard, corrosion-resistant, blue-grey, lustrous transition metal which is primarily found in the mineral tantalite, and usually occurs along with niobium, an element which shares many chemical and physical characteristics with it.

Tantalum containing minerals are mostly found in pegmatite ore bodies. Tantalum-bearing tin slags (a by-product of tin smelting) are an additional source of tantalum.

World reserves of tantalum are estimated at 153,000 (2011): the largest reserves are located in Brazil (87,000t) and Australia (40,500t), followed by China and South East Asia (7,800t), Central Africa (3,200t) and other African regions (12,500t).

The largest producers are Brazil, Australia, Mozambique, Rwanda, Burundi, Ethiopia, Uganda, Congo and Zimbabwe.

***

This piece was initially published in Malawi’s Mining & Trade Review Issue Number 61 (May 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

Malawi to enjoy long term benefits of MCA compact

By Deborah Manda

The Millennium Challenge Account Malawi (MCA-Malawi) says though its Malawi compact winds up in September this year, the country will continue enjoying long term benefits of the five year programme.

MCA-Malawi, which is under the US Federal Agency, Millennium Challenge Corporation (MCC), rolled out its US$350.7-million compact to revitalize Malawi’s power sector and reduce poverty through economic growth in Malawi in September 2013.

MCA-Malawi Communications and Outreach Director Zilani Khonje told Mining & Trade Review in an exclusive interview that the programme now in its final year has successfully carried out a number of projects which will continue to benefit Malawi including the upgrade of the backbone of the country’s transmission network to increase the quality and reliability of power supply in the northern, central and southern regions of the country.

Khonje said through the compact, Malawi has increased the capacity to move power from the Southern Region where 98% of power is generated to the Central and Northern Regions, reduced technical losses on transmission lines and provided a secure transmission link between the Southern and Central Regions.

She said:

There is also the construction of new transmission lines including the 400kV line from Phombeya in Balaka to Nkhoma in Lilongwe which is almost complete and 132kV line parallel to existing 66kV and 32kV lines from Chintheche in Nkhatabay to Luwinga in Mzuzu and from Luwinga to Bwengu in Rumphi.

This implies that if there are new investments in generation in the southern region including the Mozambique-Malawi power interconnector, the new highway and the upgraded transmission network will be able to evacuate power from the south to the Centre and North.

Khonje said MCA-M is also in final stages in the construction, rehabilitation and upgrading of Nkula A which will result in an increase in power generation capacity of the station by 12MW thus from 24MW to 36MW.

MCA-M is also constructing several sub-stations including Phombeya which will be the landing point of 400kV Mozambique-Malawi power interconnector.

Substations under construction in Lilongwe include one at New City Centre and Area 25 and in the northern region there is the Sonda distribution substation.

These new distribution sub-stations are going to at least increase and stabilize power supply within these areas. It is of paramount importance that priority areas like City Centre in Lilongwe have their own substations,

she said.

The expected net present value of benefits to be accrued from the compact are estimated at US$67.2million to US$832.0-million projected to be realized during the next 20 years.

The estimated economic rate of return ranges from 18.7% to 24.6% during the compact implementation period with the interconnector as the potential investment to come.

 So you can see that the compact will contribute to more access to power in future and not immediately after we complete the programme. I am saying this because there is a thinking that immediately after the compact ends there will be massive change, no! We should look at the future,

she said.

MCA-M has also been working on strengthening power sector institutions including Malawi Energy Regulatory Authority (MERA), the Electricity Supply Corporation of Malawi (ESCOM) and the Ministry of Natural Resources, Energy and Mining so that there are effective in managing the sector and to create conducive environment for investment in the sector.

For instance to make it efficient in its operations, ESCOM was unbundled and two companies sprung up thus ESCOM and Electricity Generation Company (EGENCO). What this implies is that other companies can come into the market and be competing with EGENCO in selling power to ESCOM,

said Khonje.

Khonje said MCA-M is also working with MERA and the other stakeholders to come up with the right price at which companies will be selling electricity to Escom at a profit so that private players are attracted to invest in the power sector.

Surely, to attract investors the cost of producing power, transmitting, and distributing has to be looked into because everyone wants to invest and make profits and that profit is not for them to keep but it is for them to grow and expand their businesses,

she said.

Khonje also urged Malawians to desist from vandalism and take care of the infrastructure erected by the compact saying it is not only the companies that are benefitting but rather the whole country.

***

This piece was initially published in Malawi’s Mining & Trade Review Issue Number 61 (May 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

MINING & SOCIAL ISSUES with Ignitius Kamwanje

Cut Off Grades, Costs and Production Rates in Mining

The first element of any mining project is mining itself or rock extraction. Mining is very complex in strict sense as such, involves a set of interrelated activities before an ore can be extracted.

Starting with the Mine or Grade Control model which represents the grade and quantity of ore in space, it now    remains to calculate the least expensive way to get an ore out of the ground. Usually this means moving the least amount of waste. A grade control model can be thought of as set of blocks which could measure 25 meters long by 25 meters wide by 10 meters high with a single grade representing the ore value. So, the end result is manipulation of all possible ways that can take the blocks apart to get a good ore material and this is possible by running computer assisted simulation models or programmes.

(a)         Cut -off Grade

The cut-off grade is that grade of material (volume or weight of ore divided by the total bits of stuff) below which mining is uneconomic. Or it is the amount of the ore that must be obtained from mining a given amount of material in order that all the costs are recovered and no profit is left. Calculating the cut-off grade involves a mini-feasibility study in which all the known and potential costs of the    project are accounted for.

Models of “orebodies” are formulated as early as possible in the exploration cycle and this is doubly true for the calculation of a cut-off grade. Having a model of the mineral occurrence leads inevitably to a calculation of the tonnage and grade of the occurrence. For any given assumptions about costs, the analysis can determine the amount of ore that needs to be found and at what grade in order that the project is attractive. If there is no hope in finding the size or grade of deposit, then the project can be dropped as early as possible thereby saving lots of money.

(b)         How to calculate the cut-off grade

There are some techniques for calculating the cut-off grade. The most easily understood involves calculating the annual net cash flows for the proposed operation at 3,4 or more different, realistic grades for the assumed deposit and then calculating the net present value for the operation at these selected grades. When this is done, a graph of net present value versus grade can be drawn and that grade at which the project net present value is zero becomes the cut-off grade of the mined ore.

This methodology includes the cost of the capital to build the project and is a more useful tool in determination for new and proposed projects than just looking at the operating costs of the operation.

If the project has been around for a number of years and the original investment has been paid back (payback period sustained amicably) then including the original capital cost is not important. So, when one reads the companies reports which mention cut-off grades it is always very important and realistic to investigate how they define this grade.

The costs to calculate the cut-off grade must involve all the capital used in purchasing the property, exploration, engineering and construction, working capital and any ongoing capital costs to maintain the project (replacement of equipment, painting tanks etc.) These are the initial and sustaining costs. Then there are the ongoing operating costs for the mine, plant, supervision and overheads, maintenance, tailings, marketing, head office and minesite allocations, interest, royalties, taxes and a list of other mostly forgotten expenses. These, one might notice, are all the elements necessary for a feasibility study.

(c)          Aspects of a feasibility Study

In a feasibility study, there are really only three issues that need to be settled;

– Does the technology exist to accomplish the goals established for a given project?

– Will the project generate revenues that pay back all the capital and operating costs plus generate a return for the investors?

– Does anyone in the world want to buy what is going to be produced and will they sign a marketing letter of intent?

– Will the government grant a permit to develop the project?

• This question involves environmental and social development sensitivities which rightly have to be addressed in a way which improves the life of the general population in the area.

The conceptual or feasibility stage of a mining project commences with the collection and verification of enormous amounts of data ranging from topographic surveys, drilling information, bench scale metallurgical testing, infrastructure surveys and a whole host of environmental surveys. Feasibility studies are generally required for any significant commercial venture and mining is no different. It seems simple enough but these studies typically involve teams of so many specialists, months of time and millions of dollars. What follows then is a description of the elements of a   mining feasibility study.

When the data has been accumulated, indexed and verified, the feasibility study can begin. A feasibility study is an insurance policy for the project success. Feasibility design must consider everything from mine design, production rate, building foundation, slope or excavation stability, mining method, equipment selection, water control, sources of process water, sources of contamination, building construction, plant layout, power sources, emissions controls, process technologies, dilution and recovery, marketing, transportation, sources of construction materials, sources of manpower, impact of large capital projects on the local economy (inflation impact), animal migration patterns, rare plants and animals, land claims, local business opportunities and lots of other considerations as well. The whole point of the conceptual design is to develop a list of major materials and labour from which an estimate of the cost to build, maintain and operate the facilities is calculated. Added to this is an assessment of the market into which the mined and processed ore will be sold to calculate how much money will be made.

When all these costs are put into a financial model, one quickly gets a sense of whether the project is worth pursuing or not. If the model is built early in the exploration cycle then one can get a sense of how many tonnes and at what grade the ore needs to be in order to make a mine. If subsequent exploration determines that the tonnage and grade targets can’t be met then there is an argument to drop the project and look for something else.

In the early days of the project, there will be lots of assumptions rather than data but by testing the assumptions in the model, one can determine which costs are most important to project success and work can be directed to getting more data in the areas that are important. For example, if the type of milling process is the most important factor in determining project success then rather than drilling holes maybe it is best to spend the money on metallurgical testing (extractive metallurgy). This is because the manner in which the minerals occur is an important determinant of operating cost. Without a financial model, companies always spend the money on drilling but this is not always the best allocation of the money.

(d)         Production Rates

Once the mine is designed with all the necessary roads, wall slopes, water drainage systems, power distribution systems and waste dumps, stockpiles it is necessary to create a schedule for the removal of the ore and waste material and the reclamation of the slopes or benches that are left behind. This is an iterative process that starts with the selection of a production rate. To determine the production rate, it is usually sufficiently accurate to take the proven reserves(an estimated quantity and grade of  part of a deposit for which the size, configuration, and grade have been very well established by observation and sampling of outcrops, drill holes, trenches and mine workings) and divide them by either 10 or 15 years. The mine design provides a table of ore and waste volumes for each bench or stope (depending on whether the mine is open pit or underground). With this table it is simply a matter of calculating the waste to be removed to get the required ore otherwise known as the Stripping ratio for each year (or quarter or month) of the project or mine life. There are millions of possible schedules but are quickly narrowed down into real possibilities which can then be calculated – reduced into a spreadsheet format.

(e)         Mining Costs

When the production schedule has been prepared then it remains to determine the size and quantity of mining equipment required to meet the production requirements. This is largely an exercise in applying actual experience and lots of factors into real world using few simple equations.

With the production schedule and equipment list at hand, one can then calculate the annual number of hours for each piece of equipment based on the productivities of the equipment selected. Multiplying the number of hours by the cost to operate the equipment per hour gives the operating cost. Dividing the annual number of hours required by the annual number of hours available for a single piece of equipment results in the number of pieces of that type of equipment required each year. And finally, the design of the mine and the cost to build and operate it is determined.

The Author, Ignatius Kamwanje, is a Consulting Geoscientist with experience in Mineral Exploration, Mining Geology, ESIA, Ground Water Resources and Occupational Safety, Health and Environment.

He can be contacted on: igkamzy @yahoo.com – 0999216869.

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This piece was initially published in Malawi’s Mining & Trade Review Issue Number 61 (May 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

TECHNICAL FILE

by Grain Wyson Phillip Malunga FIMMM  Minerals, Geology, Environment & Corporate Affairs Consultant

Resource Curse and Sovereign Wealth Fund

Abstract

Resource curse and sovereign wealth funds are put into local context in order to guide their proper interpretation and how they can promote sustainable development through strategic determination of fiscal policies that influence effective national revenue management.

Introduction

Fiscal policies determine how governments benefit from profit sharing with resource companies. Government revenue expenditure determines how economic growth and poverty reduction benefit its people. Fiscal policy dilemmas include resource revenue planning for sustainable growth, intergeneration equity in case of non-renewable resources and fluctuating resource prices.

Problems related with poor fiscal policies and revenue management lead to resource curse. What is resource curse and how can it be mitigated against? This paper looks at how it is defined, its causes and how it can be mitigated against.

Resource Curse

Resource rich and mineral producing countries need to ensure that there is a fair benefit sharing with resource companies and that the benefits so realised are used for the benefit of its people and future generation. Resource curse comes in if these countries have its people continue leaving in abject poverty, illiteracy and poor health services. This is worsened by existence of poor and weak institutional set-up that manages the resource sectors. Poor accountability and political driven development agendas lead to misallocation of revenues.

Resource Endowment and Economic Development

Developing countries rely much on the extractive industries. These industries can serve as a source of economic prosperity and serve as link to the global economy through involvement of multi-national resource companies. Low income countries can reduce poverty if they properly understand and link national fiscal policy and wise revenue management with proper planning, development and utilisation of revenue into programmes that grow the economy such as vocational entrepreneurship, infrastructure development and rule of law.

It is also important to understand that taxation and rents are not significant channels for economic development. Attracting foreign investment and generating export earnings strengthen national economies. In resource rich countries, countries can benefit between 3 and 20 per cent of fiscal revenues while accounting for up to 90% of foreign direct investment (ICMM, 2015). The sector can contribute up to 60% of total exports in developing countries. This economic situation is misunderstood and results in disruptive tendencies in fostering consistent political decision making and bringing coherent positive social, economic and environmental consensus by all stakeholders.

Sovereign wealth Fund

Countries with trade surplus or windfall revenue from resource extraction invest those surpluses into foreign currency fixed deposits. These funds take also the form of Future Generation Funds, Stabilization Funds and Strategic Development Sovereign Wealth Funds. Middle Eastern Countries are expected to invest USD 9.0 trillion by 2020 arising from oil exports while China has accumulated USD 3.0 trillion for investment into real estate, infrastructure and state-owned businesses. The China – Africa Development Fund is one of its Sovereign Wealth Funds and is worth USD 5.0 billion.

Countries that create Sovereign Wealth Funds show a sign of fiscal discipline in that they have a limit to their budgeting philosophy and reserve the money for future generation and strategic investments that bring high income. Fiscal policies that bring sustainable development in resource extraction need to balance between spending on consumption e.g. direct cash transfer and investing for future generations through National Development Plans.

Mitigating Factors

Resource curse can be avoided if balanced fiscal policies and wise revenue management are adhered to. Fiscal policies should generate fair benefits to both government and resource companies with an effective tax rate within the range of 60 – 40 as universally agreed. Effective tax rate is the total revenue sharing between government and resource companies. Wise revenue management entails balancing government budget in such a way as addressing social development with supporting infrastructure development that grows the economy through private sector expansion while saving any trade surplus or surplus revenue in form of sovereign wealth fund.

Communities around resource extraction areas need to be engaged in benefit sharing in order to create economic opportunities. This should be through channelling of resources to community trusts that look into area development activities such as health, education, water, agriculture and infrastructure services in order to promote local content and other economic linkages.

Conclusion

A well-governed country is more likely to maximise the contribution of resource extraction by designing good fiscal policies for attracting resource companies’ investment and to build strong institutions that collect, manage and spend revenues wisely while creating an enabling environment to enhance employment and economic development.

Reference

• ICMM (2007). Chile. The challenge of mineral wealth: using resource endowments to foster sustainable development. Country case study. March 2007. London: ICMM.
• ICMM (2016). The role of mining in national economies (3rd edition). London: ICMM
• Humphreys, M., et al, 2007. Introduction in “Escaping the Resource Curse”(Columbia University Press, 2007).
• McMahon, G. 1997. The natural Resource Curse: Myth or reality? Economic Development Institute. World Bank, Washington, DC.

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This piece was initially published in Malawi’s Mining & Trade Review Issue Number 61 (May 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.