Mining & Trade News

Malawi will host an international construction industry conference at Nkopola Lake Conference Centre in Mangochi from August 5 to 7 this year, the National Construction Industry Council (NCIC) has announced.

NCIC’s Corporate Affairs Officer Daniel Nyirongo says in a Press Statement that the main objectives for the international conference include to share and take stock of the current best practices for construction excellence, adopt resilient and inclusive strategies in infrastructures development, to explore ways to enhance collaborative regulation for the industry, consider ways of harnessing the formal and the informal sectors in the industry and consider the matters of capacity building, quality and standardization for the industry.

“The international construction industry conference will significantly contribute to the social economic development of many countries through provision of products and services that support agriculture, transport, health, education and many other sectors,” says Nyirongo.

He explains that NCIC, in collaboration with stakeholders, continue to exert efforts towards creating an enabling environment for the development and operation of a vibrant, efficient and sustainable construction industry through multifaceted collaboration.

“The Council envisions sustainable and internationally competitive industry,” he says.

The theme of the conference is ‘’Sustainable infrastructure development – a Catalyst for National Socio-Economic Development.”

The sub themes of the conference include; resilient and inclusive infrastructure, collaborative regulation of the industry, capital development, quality and standardization and harnessing the formal and informal sectors in construction.

Meanwhile, researches, practitioners, developers and persons engaged in the construction industry are invited to submit papers and insightful case studies on the theme and its subthemes for the conference by February 29, 2020.

The Council says all the submissions will undergo a review process and the successful ones will be published for the conference.

The Civil Society Agriculture Network Malawi (CISANET) has stressed the need for transparency in the award of contracts in the agricultural sector in order to curb corruption, which is a stumbling block to growth of the sector.

CISANET Director of Planning Alfred Kambwiri said in Mzuzu during a media training workshop on open contracting, which it organized in partnership with the Malawi Economic Justice Network and Hivos Malawi, that there is need to uphold transparency and accountability in the contracting processes if Malawi’s economy is to adequately benefit from the agriculture sector.

Kambwiri told the journalists that as a watch dog of the society, the media needs to play a role in ensuring that there is openness in the procurement process for goods and services.

 “As CISANET, we recognize the crucial role that the media has in ensuring accountability and transparency, so we organized this training because we believe that if the media is equipped in the ethics of accountability and transparency in open contracting they can do a very great job to actually influence those ideals in the agriculture sector and all other sectors in government where procurement processes are done’ said Kambwiri

Kambwiri pointed out that almost 70% of government’s budget is spent on contracts that go through procurement which calls for the media to play an oversight role in ensuring that there is transparency in public procurement processes.

“A lot of money is spent on contracts, and if the procurement processes are not more accountable and transparent, we will lose a lot of money as a nation,” he said.

Open contracting is about publishing and using open, accessible and timely information on government contracts to engage citizens and businesses in identifying and fixing problems.

It also looks at issues of accountability and transparency in the procurement of goods and services in the public sector.

One of the workshop participants, Alex Banda of Zodiak Broadcasting Station, described the training as useful saying it has enlightened the journalists on how government undertakes procurement processes for contracts.

He said with the knowledge gained from the training, the journalists will be able to competently carry out investigations regarding breaches of procurement procedures in public institutions.

CISANET is implementing a project on open contracting in Mzimba South.

Mineral resource revenues are special because they are finite, volatile and if they are large enough, they can easily impact other industries and paralyse them. They also generate large economic rents and are location-specific, which can lead to conflicts over their control in other areas. As a result, they may need to be managed and distributed differently from other types of government revenue.  There are various techniques that governments can employ to respond to the special challenges of natural resource revenues in a country like Malawi. These among others include;

• state-owned enterprises.
•  subnational jurisdictions.
• distributing revenues to natural resource funds.
• the national budget, or directly to citizens in the form of cash. Each of these institutions requires a unique management strategy.

Natural Resource Revenue

Many countries do not see their expected returns of social and economic development when they discover mineral resources. This challenge is in part linked to how the countries manage the natural resource revenues, or the money received by the government because of the extraction or sale of natural resources. The reader must understand that mineral resources are unique and to understand the uniqueness there are characteristics that make them to be in such a state and belong to a special way  as compared to other natural resources for a country. Below are some of the selected few  properties that make mineral resources uniquely identified;

1. Mineral Resources are volatile.

 Prices of natural resources like minerals, fluctuate with respect to market forces. When government revenues are tied to natural resources, their revenues will fluctuate accordingly. In this case,volatility is amplified by  production cycles of mining and unexpected stoppages. This makes the mine planning or the countrys development planning difficult and may lead to company’s/countries go into debt when revenues decline in order to maintain the same standard of living as before the downturn. Volatility can create problems because it means public expenditure becomes less effective than it was before so countries must try to put in place mechanisms that can minimise this kind of risk because the end result to this  is poor investment decisions and higher probability of debt crises.

2. Mineral Resources are Non Renewable ( Finite).

Each mining project cycle has a life span called the Life of Mine(LOM) upon reaching the Goodbye Cut. This is usually so many years but mostly less than 50 . While new technology or exploration generates new discoveries, ultimately mineral resources are finite because they cannot be renewed once and for all. Some countries have experienced large economic booms during their peak production phase of the mineral resources both in areas of operation and the country as a whole but ultimately, only to fall into poverty as soon as the resources are fully exhausted. An example in Malawi is the mining town of Karonga from Kayelekera Uranium Mine  in the north where there was an economic boom but later phased out slowly due to its temporary closure (under Care and Maintenance) and also the phosphate exploited and entirely depleted in the tiny Island of Nauru in Oceania.

3. Mineral Resources can damage other industries.

When mineral resources are discovered, they can represent a large percentage of the country’s GDP and government revenues. If the economy does not have the absorptive capacity to make efficient use of these revenues, the result can be inflation or exchange rate appreciation. This increases the cost of domestically produced goods in foreign markets, especially manufactured goods, harming exporters. Also, the large revenues in the private sector often attract skilled workers to extractive industries like mining. When the number of skilled workers in a country is small, this can make it more difficult for other sectors to find expertise. Together these trends can make it more difficult for other industries to successfully operate and can make a country more dependant on natural resources like minerals. Together, these effects are often referred to as Dutch disease. In other words, Dutch disease leads to accumulation of wealth from resources like minerals and the consumption that comes from that wealth leads to a demand for a lot of non-traded goods and this pulls resources away from other internationally traded goods that would be competitive.

Politically a Dutch Disease is a highly valued resource that acts as a natural rent which is just as income that is free. It’s a massive wealth that can sometimes lead to internal conflicts of a country.

4. Mineral resources can be large and geographically concentrated.

Mining revenues can be enormous relative to the size of an economy, yet, as a capital-intensive rather than labour-intensive industry, they tend to employ only a very small portion of the population. This is often misaligned with the expectations of the communities that surround the extraction point. Furthermore, the profits can be captured by a selected few or be exported to foreign investors. This can cause frustration and unnecessary expectations among locals, leading to conflict, especially in the region where the mines are located. The large amount of profits from a single source is vulnerable to state capture or government mismanagement unless oversight mechanisms are in place.

Some selected institution for management and distribution of revenue in mineral resources

Revenue distribution refers to the manner in which a government allocates, or distributes, natural resource revenues to different levels of government, institutions, or directly to citizens. Some of the decisions of where to allocate revenues are fundamentally political. Economic efficiency criteria consider questions of the absorptive capacity of different levels of government, whether individual citizens have access to the ability to save transfers, and how costs differ over different locations or sectors. Combining the economics with the political analysis can be challenging, particularly when trying to respond to the special qualities of natural resource revenues realised from extractive sector like mining. For instance, allocating an appropriate percentage of revenues, determined by an economic formula, to a long-term savings fund can help mitigate Dutch disease and improve national spending efficiency, though it can also starve the government of much-needed development financing. Allocating some revenues to subnational governments may also improve local service delivery. However in allocating resource revenues directly to citizens, it may reduce poverty and improve natural resource revenue accountability. Therefore governments, with input from citizens, must decide how to manage risks and opportunities in the sector. Allocation of revenues is only part of a bigger picture and mining related/natural resource revenue institutions should have established procedures or principles to plan, organize staff and control their operations. These activities are referred to as revenue management, as opposed to revenue distribution, which simply refers to the allocation of revenues. Some key institutions that manage resource revenues are:

(a) Natural resource funds.

Governments can establish special extra budgetary funds—outside the regular budget process—to manage natural resource revenues such as from mining of a mineral resource. When these funds are used to invest at least partly in foreign assets, they are referred to as sovereign wealth funds or natural resource funds. Ideally, the government dictates how much to deposit and withdraw from these funds by fiscal rules. Sometimes governments that are dictatorial ones, manage these natural resource funds willy nilly without clear rules or objectives.

How successful are natural resource funds

• When they  are established with clear objectives
•  Strong fiscal and investment rules
•  Division of responsibilities between actors.
•  Sufficient disclosure for proper oversight.

(b) State-owned enterprises

 State-owned enterprises are companies that are more than 50 percent owned and operated by the government. In mining, state owned enterprises can play an important role in revenue management, as natural resource revenues often pass through them on their way to the budget, or there are large budget allocations of mineral revenue to these. Countries often find them attractive, as  national mining companies can generate revenues for the state and serve other functions, such as training domestic workers and improving sector control e.g. Botswana. However, there is a risk that State Owned Enterprises can act as a drain on government finances or become a financial risk and thus they can divert scarce government revenues away from public investments in other sectors. They are also responsible for non-fiscal expenditures that can be an inefficient use of public resources, such as Corporate Social Responsibility (CSR) projects. If a government clearly establishes the fiscal relationship between these state owned enterprises  and the budget, it can work better to avoid  problems.

The Ministry of Natural Resources, Energy and Mining says a minimum of 800 MW of energy is required to power the mining sector.

The Ministry said this during a stakeholder’s workshop on the identification and prioritization of advocacy in the implementation of the National Energy Policy which was held at Sunbird Capital Hotel in Lilongwe.   

The Electricity Generation Company (EGENCO) produces an average of 363.75 MW against a demand of over 450 MW which is expected to grow to over 1000 MW by 2020 this year.

In a report presented at the workshop dubbed ‘Status of energy sector in Malawi,’ the Ministry explains that the Government has embarked on various initiatives to attract private investors in the power generation industry.

It leads: “Some of Government’s interventions to allow private sector participation in the power industry include: Amendment of Electricity Act; development of the Independent Power Producer (IPP) Framework; conduction of Cost of Service Study; conduction of feasibility study; development of an Integrated Resource Plan (IRP) and; construction and rehabilitation of transmission and distribution lines and substations for evacuation of power.”

The report indicates that the country has a huge potential to increase hydropower generation capacity to 1, 300 MW.

There is also potential for coal-fired power generation and renewable energy including solar energy, wind, geothermal and mini/micro hydro.

It says despite such potential, 99% of the nation’s electricity is generated from hydropower stations cascaded on the Shire River.

Meanwhile, the Ministry has signed a Power Purchase Agreement (PPA) with an investor to develop a wind energy project at Lunjika in Mzimba and conducted resource mapping across the country for development of solar power, geothermal and mini hydro power stations.

“The country receives 2, 640 sunlight hours in a year with annual average insolation levels in the range of 5.21 to 5.79metres kWh/m2/year.”

“There is also potential for wind energy with measured annual average wind speeds of 3.8 to 4.0 m/s at 10m heights; 12m/s in Chikangawa and at 70metres in Bolero, Rumphi,” reads the report.  

Besides the mining sector, other sectors that are yearning for increased power supply include: Tourism, education, banks, ICT, hospitals and offices, all requiring a minimum of 500MW.

The Green Belt Irrigation Initiative requires a minimum of 130MW; manufacturing and processing industry demands not less than 700MW while domestic demand is pegged at a minimum of 700MW.

Malawi’s access rate to electricity stands at 11.4 percent overall with only about two percent in rural areas and blackouts are the order of the day in the country owing to inadequate generation capacity; ageing transmission and distribution networks; non-cost reflective tariffs; slow rate of connection to the grid; and environmental degradation.

Power projects underway in the county include the 19 MW Tedzani IV to be completed by 2021; the 70MW grid connected solar project; the 350MW Mpatamanga hydropower plant whose construction will start this year 2020 or 2021; the 200MW Kholombidzo hydropower plant; the 261MW Fufu hydropower and the 190MW Songwe hydropower plant.

The National Energy Policy (NEP) of 2018 is based on a goal of increasing access to affordable, reliable, sustainable, efficient and modern energy for every person in the country.  

Mineral exploration is advancing in a number of mining projects which will require a substantial amount of power including Makanjira Heavy Sands in Mangochi, Songwe Hill Rare Earths in Phalombe, and Kanyika Niobium in Mzimba.

The Kayelekera Uranium Mine in Karonga, which is currently on care and maintenance, uses diesel generators.

The impending sale of the Kayelekera Uranium Mine in Karonga has triggered panic among the workers of the mine who are not certain of their future when the new owners take over the mothballed mine.

The Ministry of Natural Resources, Energy and Mining has given consent to Australia’s Paladin Energy to sell its 85% majority shareholding in Kayelekera to Lotus Resources Limited Pty Limited, a subsidiary of Hylea Metals Limited (ASX: HCO).

In an exclusive interview with Mining and Trade Review during a recent visit to the mine, Kayelekera employees said they want Paladin to retrench and pay them their terminal benefits before they sign fresh contracts with the new owner of the mine.

“We were told that our contracts will be intact regardless of the ownership changes but we are in panic because we do not know what the new Company will offer. Many of us have been working here for over 10 years and it will be fair for Paladin to give us our dues before they leave,” said one of the employees who pleaded for anonymity.

He explained that the employees wrote a letter to Paladin management, which was signed by about 50% of the members of the workforce, but the Company is dilly-dallying to give them feedback.

The Kayelekera employees, therefore, urged “the Government to come to their rescue on the issue as they have proven powerless to demand their labour rights from Paladin.”

But Paladin General Operations Manager Mike Hoey parried down the demands from the workers saying since Lotus Resources are purchasing Paladin Africa as a going concern, all existing entitlements will be transferred to the new owner.

Hoey said: “We will follow the country’s labour law that mandates the transferring of the employees to the new owner when you are selling an entity. Both Paladin and Lotus will continue to comply with all relevant Acts and Legislation of the Republic of Malawi.”

Meanwhile, Paladin has quashed allegations by some members of the community that it is polluting the nearby Sere River.

Speaking during a media tour to the site organized by Ministry of Natural Resources, Energy and Mining, Kayelekera Senior Environmental and Compliance Officer John Msachi explained that the Company follows all the procedures as spelt out in the country’s regulations and internationally set standards in handling uranium.

Msachi said: “We do not just dispose uranium into the environment.  We even take that water that we think is contaminated with uranium back into the processing plant for extraction of uranium deposits. Before disposing the water used for processing of uranium into the river, we make sure that the value of uranium is not beyond the standard which is 0.30.”

He also explained that the company undertakes regular environmental monitoring activities and produces regular reports that are submitted to the Government through Environmental Affairs Department.

The reports include: Annual environmental; Quarterly data reports; quarterly license compliance reports and; monthly data reporting – from joint Paladin/Government of Malawi monitoring programs.

Paladin has three water treatment ponds at Kayelekera and also planted grass and trees at the site.

“We use native grass and trees from the area and also monitor the rehabilitated areas for sustainable and self development post mine closure and water post closure for about five years as the area consolidates,” he said.

Spokesperson for the Ministry, Sangwani Phiri commended Paladin for proper management of the environment at Kayelekera.

 “As we have seen after touring the area, no any poor disposal is being made here,” he said.

In the Kayelekera buyout deal, the Malawi Government will retain its 15% stake in the uranium mine.

Lotus MD Simon Andrew said in the statement that following consent granted by the Ministry of Natural Resources, Energy and Mining, completion of the sale remains subject to customary terms and conditions, including Reserve Bank of Malawi (RBM) approval, which is expected to follow.

Kayelekera hosts a high-grade uranium resource with an existing open pit mine but Paladin suspended mining at Kayelekera in 2014 following a slump in global uranium prices.

The mine has since remained on care and maintenance as directors anticipated a pickup in global uranium prices.

The stake in KUM, according to Paladin will be sold for US$5 million (about K3.7 billion), comprising $200 000 (about K148 million) in cash and $4.8 million (about K3.5 billion) in Hylea shares which will be issued to Paladin.

There is uncertainty over the reopening of Ilomba granite sodalite mine in Mbilima, Chitipa as the people of the area through a civil society group dubbed the Concerned Citizens of Chitipa (CCC) have put their foot down that the mine will not reopen until the investor honors Corporate Social Responsibility (CSR) obligations.

Production at Ilomba was suspended in November 2019 following protests by the Concerned Citizens who were demanding that government closes the mine for failing to honor corporate social responsibility obligations.

The protests turned violent as the protesters burnt shelters of mine workers and even seized a vehicle which was supposed to carry the product for export.

In response, Ilomba Granite Mine Company sued leaders of the Concerned Citizens in December 2019, and applied for an interlocutory injunction restraining the people of Mbilima from interfering with the operations of the company through protests or whatsoever.

But during a court hearing at Mzuzu High court on January 6, Ilomba withdrew the case “in the interests of peace, and to avoid further conflicts and ease tension.”

Chairperson of Natural Resources Justice Network (NRJN), Kossam Munthali, who was one of the defendants said he was delighted that the case was dismissed with no costs attached to it.

However, the Concerned Citizens have stood their ground that the mine be temporarily closed “until some sticky issues are sorted out regarding the Chinese miners.”  

“Our demand still remain that the mine be temporarily closed until some sticky issues are sorted out, the communities need to be told who the Chinese miners are because the license holder is a Malawian of Asian origin Faisal Hassen, furthermore the new Chinese owners did not carry out  any community sensitization,” said Chairperson of the Civil Society Network Sydney Simwaka.

Hassen, however, dismissed the CCC’s assertions saying his Chinese partners met up with the traditional leaders of the area before commissioning mining operations.

Hasssen said on Mining Review readers Whatsapp group: “The truth is that we have done nothing wrong as a Company. When my Chinese partners moved to the site and met up with the chiefs, they were overwhelmed by the welcome they received hence they pledged to assist the community. Among others, they pledged a borehole, the building of a classroom and a clinic. The borehole has already been completed and the other projects are on their way.”

But commenting on Hassen’s remarks, Munthali described them as an insult to the community of Mbilima explaining that constructing a borehole alone is not enough considering the 24 years that the company has been in operation in the area.

Munthali also lashed out at Ilomba Mining Company for being secretive in its dealings.

He said:“What even shocked the community when we met was the size of their mining area which is 3.4 square kilometers, implying all the villages in Mbilima area are within the mining area.”

 This information was not even known to the community, so hiding the information for 24 years is not fair.

 “The people do not even know who the Chinese people are, they were just surprised.”

The Department of Tourism in the Ministry of Industry, Trade and Tourism will use this year’s Takulandilani Malawi International Expo to provide a platform for participants to have firsthand experience of Malawi’s tourism products and share best practices on how to network and package the products.

The expo will also, at the local level, provide various business opportunities for those in the fields of catering, arts and crafts as well as stand branding.

Secretary for Industry, Trade and Tourism, Ken Ndala, has announced in a press statement that this year’s Takulandilani Malawi International Tourism Expo (MITE)—the fourth of its kind—will be held in April at the Bingu International Convention Centre in Lilongwe.

Malawi’s travel and tourism sector contributes 7.7 percent to the country’s gross domestic product (GDP).

At last year’s Expo, government unveiled a master plan to develop the tourism sector which includes putting up necessary infrastructure ‘to create a conducive business climate for existing players in the industry and intensifying promotional activities to attract more tourists and investors.’

The master plan will be implemented over a period of 25 years and will guide planning, zoning and promotion of tourism investment in the country.

As part of the plan, the government has already constructed two access roads in the tourism district of Salima connecting lakeshore resorts to the main road and acquired over 17 hectares of land along the lakeshore for development of public beaches which will act as a model for tourism development along the lake, according to Ndala.

The Ministry has also upgraded the Kamuzu International Airport with assistance from the Japanese Government through the Japanese International Cooperation Agency (JICA).

The government is also implementing the Promotion of Investment and Competitiveness in the Tourism Sector (PICTS) project with financial support from the African Development Bank (AFDB) to the tune of US$10-million.

The project seeks to build and strengthen institutional capacity in tourism statistics development and implementation of Tourism Satellite Accounting for Malawi.

The project also seeks to build capacity of 500 Small and Medium Enterprises (SMEs) in the tourism sector through training and provisions of loans.

The PICTS project will further enhance law enforcement in Kasungu and Lake Malawi National Parks to reduce wildlife poaching and strengthen the Malawi Tourism Council, which is the voice of the tourism private sector so that it serves its members more effectively.

The Japanese Government will finance the long awaited construction of a dual carriage way from Lilongwe Hotel to Lali Lubani Road Junction.

CEO for Lilongwe City Council John Chome says in a statement that the Council in conjunction with the Ministry of Transport and Public Works and the Roads Authority have started the process to remove structures, trees and relocation of services such as water pipes, sewer lines, Electricity Supply Corporation of Malawi (ESCOM) poles, street light poles and telecommunication cables, that are in the path of the road expansion project.

The Government wants to turn the section of the M1 road in the city of Lilongwe into a dual carriage way in order to overcome the problem of traffic congestion in the Capital City.

The plan to construct of the dual carriage way comes after Government completed the construction of the Lilongwe City West By-Pass road, which was constructed with financing from the African Development Bank with a similar aim of reducing congestion in the City.

The Japanese Government also financed the expansion of the Chipembere Highway in Blantyre into a dual carriage way.