Leader of Malawi’s opposition People’s Transformation Party (Petra) Kamuzu Chibambo has exposed the guarded contents of a development agreement between Malawi Government and Paladin Africa Limited, describing the deal as a “gift” to the miners at the expense of Malawians.
In his analysis of the deal presented to the Ministry of Mining, Chibambo— who is also a prominent lawyer—trashes some of the clauses in the development agreement, saying they favour Paladin Africa Limited (PAL).
In a letter dated March 5 2013, addressed to Mines Minister John Bande, Chibambo emphasises the need to re-negotiate the deal, failing which, he warns that Malawians would be mobilised to compel a fair agreement as the current one displays lack of seriousness on the part of the Executive to protect the interests of poor Malawians.
Chibambo says he is particularly concerned about Clause 28.5 of the development agreement.
He notes that under this clause, government granted exclusive rights to Paladin to borrow against “all ore and mineral—bearing material, sand, slimes, tailings and residues of whatsoever nature located on and under the Tenement”.
“Clause 28.5 has to be read with the definition of the word ‘Tenement’ in Clause 1 on page 12 of the development agreement. By virtue of Clause 28.5 above, Paladin can mortgage all the uranium and ore being both on and under at Kayelekera Mine or Mchina Mine in Nthalire,” he argues.
In his analysis, Chibambo likens such a potential for mortgage to “a tenant of a house having power to mortgage the landlord’s house to secure a personal loan.”
He says: “How could Government of Malawi give Paladin such a blank cheque? Malawians may soon discover they have nothing at Kayelekera because Paladin’s creditor has taken over the entire mine. This is extremely reckless on the part of Malawi Government.”
“This is one of the compelling justifications for calling for renegotiation of the contract. The right to mortgage all uranium deposits at Keyelekera Mine is a flagrant violation of Section 12 (1) of the Republican Constitution as the contract terribly fails to protect and serve the interests of the people of Malawi. Government has no right to grant such a wild and reckless right,” he says.
Chibambo also trashes Clause 2.9 of the deal, which mandates Paladin—upon discovery of additional minerals—to inform government within 30 days of the discovery.
“There is no penalty on Paladin in the event of default by Paladin. Government’s attitude is just too simplistic and miserably fails to properly manage this high grade non-renewable resource. The agreement ought to be re-negotiated to allow government to immediately deploy its own personnel on fulltime basis to closely monitor all activities going on at Kayelekera Mine,” he says.
In Clause 2.10(b) of the agreement, any uranium found outside the contract area may at the discretion of Paladin, be treated at the plant located in the contract area, an arrangement which the Petra leader says shows lack of government seriousness.
Says Chibambo: “The question to be answered by government is: What control, if any, does it have over such uranium outside the contract area? Is government not simply failing to exercise due care? Such reckless abandon does not even happen in everyday life.”
He says Paladin has been given unfair 10-year exemption from paying both import duty and export value-added tax on the costs, insurance, freight, value of all equipment and consumables used in the mining and processing of ore, materials, fuels and lubricants which are for the use in the business.
“Renegotiation is feasible under Clause 40 [of the development agreement]. It is provided that the parties in such event are to hold discussions in good faith.
“Any person supporting this deal as it currently stands is, in my view, not fit to be in Cabinet or hold any public office in Malawi. The agreement unequivocally gifts away this resource to Paladin,” he says.
In the letter to the minister, Chibambo says an objective and sober analysis of the issues he has raised could economically help the country and that the aim was not to intimidate investors as some have erroneously intimated, but to secure a fair deal.
Chibambo says unless the deal were renegotiated, Malawi would continue to lose out in the mining sector and called upon all Malawians to galvanise their voices to press government to enter into negotiation with the miners.
However, Paladin Africa has insisted that Malawi did not get a raw deal in the agreement as noted by general manager for international affairs Greg Walker in an interview with Business Times last week.
Walker said the company had invested $500 million (K200 billion), which has helped in job creation and that the position Paladin has taken not to renegotiate the agreement was not unreasonable.
“We will not renegotiate the agreement,” said Walker. “And people think that’s terribly unreasonable. We came in as a foreign investor and we are prepared to do so. But this is a high risk business. And we are demonstrating that with uranium prices.”
He admitted that government has said there were some things in the development agreement which it does not like. But he said there were also some aspects in the deal which the company does not like as well.
“And I have said to some officials that if we are going to renegotiate this, don’t think that everything will be changed in favour of Malawi. We too could ask that some things should be changed. But we are saying we will stick with our side of it. And we are demonstrating that because we keep bringing money in. Walk the talk. We are walking the talk,” he said.
However, Bande, who is reportedly outside the country, two weeks ago said government has started a process to have the confidentiality clause removed from the agreement to enable it to make public the contents of the contract.
Karonga Business Community, a local non-governmental organisation, also threatened to hold demonstrations against the mine if their demands, among them turning Karonga District Hospital into a referral facility, were not met.
Civil society activists and Members of Parliament have in past also urged government to re-negotiate its contract with PAL., which owns 85 percent of Kayelekera Mine. Government owns the remaining 15 percent.