Mining profits fail to grow
Revenue figures from the draft Fifth Malawi Extractive Industry Transparency Initiative (Mweiti 5) Report show that the country’s mining sector’s contribution to gross domestic product (GDP) is failing to grow.
The report covers the fiscal years 2018/19 and 2019/20. In the fiscal year 2017/18, the country raked in K18.711 billion which rose to K23.594 billion in 2018/19, only to drop to K18.703 billion in 2019/20.
These figures, in terms of the sector’s contribution to GDP, accounted for 0.85 percent in 2017/18 financial year, then 0.84 percent in 2018/19 financial year and 0.85 percent in 2019/20 fiscal year.
It reads: “Total revenues received from the extractive sector in the financial year 2018/2019 amounted to K23 594 million [K23.5 billion]. The Malawi Revenue Authority [MRA] accounted for 54.1 percent of the total revenue streams generated by the sector, whilst the Ministry of
Transport and Public Works and the Department of Forestry accounted for 38.9 percent and 3.9 percent, respectively, of total extractive industry revenues.
“Total revenues received from the extractive sector in the financial year 2019/20 amounted to K18 703 million [K18.7 billion]. The MRA accounted for 68.5 percent of the total revenue streams generated by the sector, whilst the Ministry of Transport and Public Works and the
Department of Forestry accounted for 20.9 percent and 5.8 percent, respectively, of total extractive industry revenues.”
According to the 2014/15 fiscal year report, the dream was to grow the mining sector’s contribution to GDP 20 percent by 2020, but the new report has shifted the target to the year 2023.
The report says the shift is as a result of the current situation at Kayelekera Uranium Mine in Karonga still being under maintenance.
It says: “It is estimated that with increased emphasis on mineral extraction, the sector’s contribution to GDP has potential to grow to 20 percent by 2023. However, this is difficult to attain in the current situation with the largest mining project at Kayelekera still being under care and maintenance due to low global uranium prices.
“The expected new large mining projects’ namely Kanyika Niobium in Mzimba and Songwe Rare Earth Project by Mkango Resources Limited are likely to delay their commissioning dates due to the impact of Covid-19 pandemic.”
In 2019/20, the report analysis showed that the mining sector accounted for 54 percent of the total extractive revenues, followed by the transport and forestry sectors which accounted for 21 percent each of the total extractive revenues.
However, it noted that the forestry sector faces many challenges, including continued encroachments in protected areas through commercial charcoal and firewood production, illegal cultivation and settlements, illegal logging and forest fires.
According to consultants EMJ Advisory, the main challenges are that some extractive companies could not submit their reporting templates amounting to over K9 billion, and that some reporting entities did not follow the guidance and instructions for completing the templates.
Reads the consultant’s report: “For the Financial Year 2018/19, five active companies out of the 16 included in the reconciliation scope did not submit their reporting templates.
Receipts reported by Government Agencies and relating to these extractive companies amounted to K4.718 billion.
“For the Financial Year 2019/2020, six active companies out of the 16 included in the reconciliation scope did not submit their reporting templates. Receipts reported by Government Agencies and relating to these extractive companies amounted to K4.472 billion.”
Such results are a slap in the face of President Lazarus Chakwera’s dream of mining to transform the country’s economy.
Major policy directions announced by Chakwera—who in May 2021 outlined steps his administration will take to push forward a vision of industrialisation—include establishment of a mining authority to regulate the industry and establishment of a new national mining company to implement business interests of the mining sector.
The consultant has since asked, in accordance with Requirement 2.4 (a) of the 2016 EITI Standard, that Malawi should publicly disclose contracts and licenses that provide the terms attached to the exploitation of oil, gas and minerals.
It has also challenged the Department of Mines to ensure monthly follow up and reconciliation of production data declared by the companies and collected by it, but that it should also be adequately equipped to perform its functions.
The Mweiti 5 report shows that the Mines Ministry has submitted a K5 billion budget proposal to Treasury for consideration during the 2022/23 financial year towards the formation of the mining company, while the process on Mining Regulatory Authority is underway.
