Mining & Trade News

Despite an economic meltdown as a result of the novel coronavirus pandemic (Covid-19), mobile communication network provider Airtel Malawi Plc has registered a huge growth in profit after tax.

According to the unmodified financial statement for half of the year ended June 30, 2020 the Company has registered a profit of K11,415-Million up from K2,016-Million for last year.

Airtel Malawi Board Chair Alex Chitsime says in the statement the huge rise in profits is mainly due to an increase in operating profit and lower finance cost.

“Lower finance cost was due to lower interest expense on account of repayment of Shareholder loan in 2019 and also due to stability of the kwacha against the Us Dollar,” says Chitsime.

The results peg Airtel’s revenue growth at 23.7% which was largely driven by the growth of its customer base up by 20.6% to 4-million.

“Revenue growth was broad based across all key segments; voice up 8.5%, data up 55.3% and other revenue up 36.7%. 

Chitsime says despite the economic impacts of Covid-19, the Company’s view on the medium term opportunity for growth in Malawi has not changed as the telco sector will continue to benefit from population growth and need for increased connectivity. “We expect to continue to implement our strategy focusing on increasing mobile penetration in Malawi through investments in rural unserved market as well as digitalize the economy by increasing penetration of data usage,” he says.   

The Malawi Government says it is working to ensure that the 2022 deadline for connecting the country’s power grid to that of Mozambique is not missed.

State President Lazarus Chakwera said in his State of the Nation Address in Parliament that his government is banking on the interconnector to address the country’s power deficit.

“Once this is done, Malawi will have access to the Southern Africa Power Pool,” Chakwera said.

 Chakwera also said in order to address the power shortages, his government is facilitating construction of 60 MW solar power plant in Salima and is in the process of securing a strategic sponsor for the 350MW Mpatamanga Hydro Project on Shire River.

“We are also concluding Independent Power Producer Agreements, which will open the sector to private investors, which will require new leadership at Electricity Supply Corporation of Malawi (ESCOM) to facilitate such reforms as new tariff structures that reflect market realities,” he said.

Chakwera also said his government will revisit existing energy contracts and petroleum production sharing agreements in line with the law, ending those that are economically unsustainable and signed under questionable terms during the era of the previous administration.

Malawi’s electricity penetration rate stands at only 18%.

Minister of Energy Newton Kambala says he is considering plans to initiate the development of nuclear energy as part of diversification of energy sources to deal with power interruptions and blackouts which are having a knock-on effect on the growth of the country’s economic sectors.

Nuclear is produced through enrichment of uranium and Malawi has the Kayelekera Uranium Mine in Karonga, which is being operated by ASX-listed Lotus Resources, and a number of sites with uranium anomalies.

In an exclusive interview with Mining and Trade Review, Kambala said government is pushing for diversification of power sources because the country’s power crisis is as a result of overdependence on the hydro power from the lone source, Shire River.

He said hydro power generation is prone to natural fundamental vulnerabilities largely from the climate change effects including drought and flooding which greatly affects production.

 “We are exploring nuclear as a possibility in Malawi electricity generation and several companies have expressed interest in this,” he said.

Government is also working on diversifying sources of power to renewable sources such as solar, wind, geothermal and waste to energy.

Kambala said government committed a couple of Solar Independent Power Producer (IPPs) which would have come on stream by April 2020 but failed due to complications related to the Covid-19 pandemic travel restrictions.

He said in the medium and long term, Government has signed PPAs for IPPs committed to supply power from various sources such as wind, coal, and geothermal sources.

Government is also preparing to build interconnectors with Mozambique and Zambia in order to be able to tap power from the neighboring countries, the Southern Africa Power Pool (SAPP) and Eastern Power Pool (EAPP) when the Songwe River Power Generation project is finalized.

Kambala, nonetheless, said the energy diversification drive will not absolutely do away with hydro power as government plans to source more stable power from the planned Kholombidzo and Mpatamanga projects which will be supported by environmental protection initiatives started during the United States of America (USA) funded Millennium Challenge Corporation power project.”

He also disclosed that currently there is Shire Environmental Protection Trust, a body which ensures that the catchment area of the river is conserved to avoid excessive silting.

Kambala said the weeds problem that blocks power generating machines almost every year is being managed by the country’s power generating company Electricity Generation Company (EGENCO) through the EGENCO harvesters at Liwonde in Balaka district.

He said: “The hydro source still remains a feature in the Country’s Power Plans because we have lots of potential sites across the country.”

“Accordingly, Government will in the medium to long term implement additional hydro projects on other rivers such as Fufu and Songwe rivers,” he said.

Kambala said government has embarked on a campaign to encourage mutual participation of the IPPs who would bring along their own financing for the power projects in the country.

He said: “These IPPs will go into carefully negotiated contracts with government through Power Purchase Agreements (PPAs) for the benefit of the sector and the nation. Government now encourages the use of private financing in addition to the public finance sources.”

“We will continue to go into partnerships with the private energy companies or financiers for the development of the strategic power plants. Government is already currently developing the Mpatamanga Power Plant in the PPP format.”

The Minister said government intends to structure more large power generation projects in a financing model similar to that of Mpatamanga Power Plant which involves bringing on board strategic financial partners from the private sector.

“Government is looking at the short, medium and long term measures of improving the power supply to the general public and to the industry in particular,” he said.

Kambala said in the short term the country will continue to rely on the emergency solution of generators to fill the generation gap from hydro sources while it is monitoring diversification programs for delivery.

On the issue of political influence which has all along affected operations of state owned companies such as Electricity Supply Corporation of Malawi (Escom) and EGENCO, Kambala said government will ensure that the companies have capable professionals to follow applicable laws, policies and guidelines.

He said: “As a Minister, I will be engaging Board of Directors for parastatals in the Energy Sector to ensure that they understand clearly government expectations and that they will be held liable for the performance of the Institutions.”

“The Board of Directors will have to commit to the performance of their companies and they will be appraised against clearly laid down Key Performance Indicators (KPIs).”

The Minister hailed ESCOM for the campaign conducted against illegal electricity connections which has resulted in the arrests of the culprits.

Kambala, however, pointed out that most of the illegal connections were done due to the long waiting time before being connected by ESCOM, and said that his Ministry already instructed the body to ensure that all applications for connections are cleared to cut off the demand for the services.

Besides ensuring fairly quick electricity connections to customers after application, the Minister is also pushing for improved response time to faults, and improved customer care at Escom.

Standard Bank Malawi has announced its financial results for the six months ended June 30, 2020 which indicate that the Group’s profit after tax for the first half of the year went up by 56%.

In a statement signed by CEO William le Roux, the Group made good performance in the first half of the year notwithstanding a challenging operating environment that was characterized by unstable political environment and coronavirus (COVID-19) pandemic.

Le Roux says: “Total assets grew by 8% when compared with same period in the prior year. The total asset growth was a result of the Group’s focus on growing its customer base which grew by 5% year on year. Growth of the funding base in the first half resulted in a corresponding increase in loans and advances to customers which grew by 22% year on year and financial investments which also grew by 22% year on year”.

“The low interest rate environment prevailed in the first half and resulted in a modest 2% growth in net interest income despite sizeable growth of interest earning assets. Non- interest revenue grew by 17% year on year arising from the Groups focus on growing the transactional business as well as one off gain on disposal of securities.”

 He, however, says operating costs were 11% above prior year mainly due to increase in prices of goods and services.

Le Roux says the Group will continue with its cost management drive to ensure a healthy cost to income ratio and efforts to recover previously written off loans as well as focus on prudent risk taking and management.

The Bank expects foreign exchange supply to remain weak which will continue to exert pressure on the kwacha.

“The impact of the COVID-19 on supply chains and exchange rate dynamics will have strong influence on the direction of the inflation rate and interest rates. Therefore, economic growth is expected to be muted.”

Despite foreign exchange market disruptions caused by the COVID-19 pandemic, the local currency still held its ground to trade at just under MK750 to the US Dollar during the first half of the year.

The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) says its random survey has unveiled that many local consumers consider imported goods as being of higher quality, a tendency which is hindering the “Buy Malawi Strategy” from meeting its goal.

MCCCI’s Head of Membership Development and Communications Tione Kafumbu said the Malawi Government needs to scale up sensitization campaigns on the strategy to support growth of local industry.

Kafumbu said: “The awareness campaign should focus on convincing local consumers on the importance of buying locally produced products. Additionally, government has to be exemplary in its procurement processes through giving local preference to locals, and the general public will adopt the same trend.”

But the Ministry of Trade has differed with MCCCI in a separate interview saying Malawians have responded positively to the strategy such that local producers are easily finding a market for their products.

Spokesperson in the Ministry Mayeso Msokera said the exercise has also encouraged local producers to start producing goods of high quality to substitute foreign products.

He also said the strategy has assisted local manufactures to find markets for their products in other countries across Africa, Europe and Asia.

Msokera said the strategy is benefiting locals at producer, consumer and government levels.

He said: “Our producers are able to earn a living since they are able to sell their products, and consumers are now being supplied with goods of high quality hence government is able to collect more revenue in form of taxes.”

“The Ministry assesses each and every product to ensure that it meets our standards.”

The Ministry of Trade has since called on companies and industries to register with the Buy Malawi Strategy for them to start making progress in their operations.

Malawi’s Roads Fund Administration (RFA) is advancing with preparations to construct a state-of-the-art office complex in the Capital City, Lilongwe.

RFA is currently seeking expressions of interest from suitably qualified firms to provide project management service which will include architectural, engineering, design and construction consultancy services.

CEO for RFA Richard Manjanja says the interested firms must provide information that they are qualified to perform the assignment by including the in their submission the firm’s profile, the description of similar assignments undertaken, traceable client references, profile/curriculum vitae of key personnel and project team leader that will be responsible for the overall coordination of the assignment.

Manjanja says the qualified firms shall have a minimum of ten years of experience in providing similar services to those required in this request for the expression of interest.

The firms must have handled at least three similar assignments in the last 10 years, and the information on evidence of previous experience and expertise shall include; the names of project and clients, brief descriptions of scope of work and projects contract values.

He states that the Consultancy shall provide at least three traceable references of past clients for which similar services have been provided including; the addresses, contact persons, contact numbers and email addresses.

‘’It is expected that the firms shall be registered with the National Construction Industry Council (NCIC) and shall give evidence of tax compliance with the Malawi Revenue Authority (MRA).’’

The Consultancy will cover the following three phases; Phase 1, Conceptual drawings and preliminary designs, Phase 2, Detailed designs and bidding document and finally phase 3, the Construction supervision.

The Consultants are expected to specifically carry out the following; Review the conceptual plan/brief of the requirements for the office complex as drafted by RFA Management, Develop the conceptual drawings and preliminary designs for the office complex, Generate detailed architectural, structural , mechanical, electrical and plumbing designs for the office complex, produce bidding documentation to the facilitate the procurement of a competent contractor for the project and Supervise construction of the office complex to completion and finally handover the building to RFA as a client.

‘’Bidding will be in accordance with the Government of Malawi National Competitive Bidding (NCIB) procedures,” Manjanja says.

The deadline for submission of bids is September 4, 2020.

Small and Medium Enterprises Development Institute (SMEDI) has welcomed government’s move to ratify the African Continental Free Trade Area (AFCFTA) saying it has major benefits for Malawian Small and Medium Enterprises (SMEs).

Minister of Trade Sosten Gwengwe announced recently that government is in the process of ratifying AFCFTA which is aimed at boosting trade among African countries.

SMEDI Spokesperson Alinafe Mpoka said SMEs welcome the Trade Area considering vast benefits that will come along with it in terms of easing import and export business between African countries.

“There are major benefits expected to emerge from the CFTA, including boosting trade and welfare gains and fostering a vibrant and resilient African (including Malawian) economic space. These, in turn, will serve as a springboard for more beneficial integration by Africa into the global economy,” Mpoka said.

He explained that  SMEDI’s positive reaction to government’s process of ratifying the Trade Area is based on its mandates which include;establishing a single continental market for goods and services with free movement of business professionals and investments, accelerating the establishment of the Continental Customs Union and the African Customs Union,enhancing competitiveness at the industry and enterprise level by exploiting opportunities for scale production, continental market access and better reallocation of resources.

He said AFCFTA offers many opportunities for developing and promoting SMEs and economic growth in Malawi and Africa as a whole.

Mpoka said: “SMEDI is optimistic that Malawian Small and Medium Enterprises (SMEs) and others from the African continent, will largely benefit from AfCFTA because it will entail lower or no tariffs and free access to market and market information which is vital for startups and established SMEs.”

“We have all the hope that the instrument will indeed lead to removal of tariff restrictions and other barriers on intra-African trade which has been a barrier to many SMEs in Import and Export Business.”

He said with the Trade Area functional, it will also be easier for local SMEs to establish businesses in different African countries.

Mpoka cited Intra-African Trade in agriculture which, he said, is expected to increase, resulting in increase in wages and employment.

The arrangement will also allow businesses to access cheaper raw materials and intermediate goods, and will also improve the conditions of regional value chains and access to global value chains.

Mpoka explained: “SMEDI believes that the AfCFTA agreement will give Malawian SMEs an advantage to grow beyond domestic market into regional one. Other African markets would be much easier for them to enter as opposed to the difficulties they encounter trying to enter the global market.”

“This is of a huge importance bearing in mind that SMEs account for 80 percent of businesses in Malawi and Africa. AfCFTA will also allow SMEs to supply larger regional companies, a feat that is almost impossible without AfCFTA.”

He said Malawi’s AfCFTA ratification and implementation strategy should not only focus on promoting high and sustainable long-term growth but also ensure that the benefits of such growth are widely shared in order to reduce poverty and improve the standard of living for all in Malawi.

If well implemented, the AfCFTA will provide the opportunity for African economies to create the world’s largest free trade area, with the potential to unite 1.3 billion people, in a $2.5 trillion economic bloc and usher in a new era of development.

Meanwhile, SMEDI has also welcomed government’s move to operationalise the Control of Good Act (COGA) saying it will help to control illicit trade.

“This will enable Malawi as a country to find ways to enhance and improve local production, identify high value products and value chains that can be manufactured or grown successfully locally, look at various options, ideas and strategies on how to increase local Product Manufacturing and local Agriculture Production in Malawi so that we become self-sufficient and reduce dependency on Imported Products,” Mpoka said.

Malawi’s Electricity Generation Company [EGENCO] says construction of the Mpatamanga Hydroelectric Power Plant on Shire River will start in early 2022.

Senior Public Relations Officer for EGENCO Moses Gwaza says the power utility in coordination with the Public Private Partnership Commission (PPPC) is currently working on identifying a private strategic partner for the project which will be implemented in a public private partnership (PPP) mode.

“As part of the financing for the project will come from World Bank, the Bank has their own procedures which are progressing in parallel with the strategic partner identification process,” he says.

Gwaza says EGENCO is determined to continue with the project though the coronavirus (Covid -19) pandemic is affecting some ongoing processes.

“We will of course implement Covid-19 prevention measures as well as the safety measures of the projects of this magnitude. Since at this stage most of the processes are negotiations, these are continuing on virtual modes,” he says.

The PPPC announced in June this year that it had prequalified a consortium comprising SN Power Invest Netherlands B.V and Electrite De France SA (SN Power and EDF SA) as a strategic investor for the project.

Gwaza dismisses fears that participation of international private investors in Mpatamanga will translate to higher cost of electricity in Malawi as the investors will be looking for profits.

He says: “Ideally any investor experts returns on his or her investment. But this should cause no worry as government has the interest of Malawians at heart that is why it is involved in the project through EGENCO.’’

 “In other words, while ensuring that there is a return in the investment by the private investor, government will ensure that the prices are realistic and in the best interest of Malawians,

The Mpatamanga power supply project will have a main dam within the Shire river which will produce 309 megawatts. There will also be another regulating dam where 41 megawatts will be produced. This regulating dam is designed in a way that it will help to prevent flooding downstream of shire river especially during peak hour when maximum production is in progress.

Lack of adequate and reliable power supply from the national grid is one of the major factors hindering investment in heavy industries such as large-scale mining in Malawi.

The mothballed Kayelekera Uranium Mining in Karonga, which remains the country’s biggest mining investment, is powered by diesel generators which is more expansive for the company in comparison with utilization of power from the national grid.