Mining & Trade News

By Modester Mwalija

The Mining Development Agreement (MDA) between the Government of Malawi and Lotus Resources Limited to reopen the Kayelekera Uranium Mine in Karonga has raised mixed reactions among stakeholders.

While the MDA promises jobs, skills development, and revenue generation, Civil Society Organisationms (CSOs) are urging greater transparency, inclusion, and accountability to ensure the benefits truly reach local communities.

The MDA, signed in early 2024, outlines several key commitments, including a 5% royalty on gross revenue and 30% corporate tax terms that the government says are an improvement from previous deals.

The agreement also includes a Community Development Agreement (CDA), which sets aside 0.45% of the mine’s annual gross sales for projects in health, education, infrastructure, and technical training.

However, the Agreement appears dodgy on payment of Resource Rent Tax which is integral the the country’s taxation regine.

It reads: “20.1 Resource Rent Tax (a) (b) The Parties agree to an alternative supernormal profit tax in lieu of Resource Rent Tax being applied. The State commits to review the existing formula for implementation from FY2026. Until such time as the existing formula has been reviewed and implemented in accordance with clause.”

“20.1 (a), no Resource Rent Tax shall be payable by the Company.”

The reopening of Kayelekera comes at a time when Malawi is seeking to position mining as a key driver of its economy under the Malawi 2063 development vision.

As one of the country’s few large-scale mining operations, Kayelekera carries both the promise and burden of demonstrating how mining can deliver inclusive development.

ASX-listed Lotus Resources, which acquired the mineral rights from another Aussie firm Paladin Energy, owns 85% of the Kayelekera Uranium Mine with the remaining 15%  stakes in the hands of the Malawi Government.

In the previous agreement that Paladin operated on, the royalties were pegged at 3% instead of the 5% stipulated in the Laws which sparked an outcry from CSOs.

However, Coordinator for Natural Resources Justice Network (NRJN), Kennedy Rashid commented that while the fiscal terms of the deal show progress this time, what matters most is how effectively the commitments are carried out.

Rashid said: “Compared to the Paladin deal, this is definitely an upgrade, but on paper alone, it changes nothing.”

“Communities need to see actual benefits in jobs, training, clinics and not just promises in documents they never even get to read.”

The MDA indicates that over 200 people have already been employed at the site, with further job opportunities expected as full operations resume.

It also highlights the provisions for training and capacity building that are embedded in the Community Development Agreement (CDA) and Employment and Training Plan, with an emphasis on preparing Malawians for skilled and managerial roles.

However, Rashid stressed that local employment must be more than a checkbox, saying, “the government should push for guaranteed percentages of local hires. As we have seen projects where locals only get short-term, low-paying jobs while skilled positions go to outsiders,”.

 “Will these training programs happen consistently? Will they be monitored? That’s what people need to know,” Rashid added.

Rashid also raised concerns about revenue loss through exemptions on taxation. The MDA grants Lotus Resources various tax concessions, including relief from export duty, import duty on capital goods, and VAT, as well as resource rent tax and withholding tax exemptions.

“These exemptions may attract investors, but at what cost to national development, this is a trade-off that needs scrutiny. Every kwacha that is exempted is a kwacha not going to schools or hospitals,” said Rashid.

Rashid also touched on the issue of transparency saying although Lotus Resources conducted stakeholder engagements during the CDA process, the broader MDA negotiations were largely closed-door.

He noted that Malawi has often struggled to track and audit tax deductions claimed by mining companies, especially when the laws and contracts are not publicly accessible.

Rashid said: “Citizens deserve to know what is being signed on their behalf without access to these agreements, the communities cannot hold anyone accountable,” said Rashid.

 “If the community is expected to benefit, it must also be involved in shaping what those benefits look like.”

The agreement also obliges Lotus Resources and its contractors to procure goods and services from Malawian-owned businesses, following an approved Goods and Services Procurement Plan. The aim is to stimulate local entrepreneurship and broaden the economic benefits of mining.

In an interview with Mining and Trade Review, Coordinator for the Chamber of Mines and Energy, Dr. Grain Malunga, expressed confidence that this part of the deal will work.

“The agreement includes local procurement obligations, and companies are required to submit annual procurement plans to the regulatory authority. These plans will guide local sourcing and ensure enforceability,” Malunga said.

He described the royalty rate as competitive and appropriate saying, “the 5% royalty rate aligns with international norms. It ensures the country benefits while remaining attractive to investors.”

Malunga acknowledged that government negotiation capacity is improving but said local experts must be trusted more in high-level negotiations.

He, however, said that more can be done to build trust and capacity in mining governance with more support and autonomy given to local experts.

He said: “We have capable negotiators in our Ministries. The challenge is that they are sometimes sidelined or limited in using their full expertise. Going forward, we must trust our own people and strengthen home-grown capacity. We must also be cautious with outsourcing too much to foreign consultants and our future must be in our hands.”

The Kayelekera mine was previously operated by Paladin Energy between 2009 and 2014, before being placed on care and maintenance. During its operation, there were frequent complaints from communities and civil society organizations about lack of transparency, limited community investment and minimal national revenue gain.

Malunga said: “With the right policies and political will, Kayelekera can be a flagship for responsible mining in Malawi. But it will not happen automatically, it requires monitoring, transparency, and shared responsibility between government, company and the communities.”

As uranium prices rise on the global market and Malawi looks to diversify its economy, the stakes are high. The Kayelekera MDA may offer new opportunities but whether those translate into improved livelihoods, sustainable development, and public trust will depend on the decisions made now and in the years ahead.

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