Front PageNational News

Mweiti’s report queries Nyala Mines over records

A report on extractive industry has raised eyebrows on Nyala Mines Limited on whether it is fulfilling its tax obligations after the company’s files could not be traced.

But Nyala Mines Limited has dismissed the report as untrue, arguing the company has always been tax complaint and questioned why its input was never sought before the report came out.

Abdul Mahomed, majority owner of the Chimwadzulu mine, with rubies in their amphibolite matrix (Photo by Vincent Pardieu, GIA) In September 2014, the gemol
Abdul Mahomed, majority owner of the Chimwadzulu mine, with rubies in their amphibolite matrix (Photo by Vincent Pardieu, GIA)
The revelations are in a scoping study commissioned by Malawi Extractive Industry Transparency Initiative (Mweiti), a technical committee comprising Malawi government officials, development partners and civil society in preparation for Malawi’s entry to the global transparency initiative, Extractive Industry Transparency Initiative (EITI).

Mweiti is hosted by the Ministry of Finance and spokesperson Nations Msowoya last Saturday to audit again the company after initial audits failed to produce evidence of any tax records.

However, Msowoya attributed the missing records to administrative challenges and said the ministry expects the details to be found during the second audit.

“The first audit failed to get the necessary documents, but we have resumed auditing the company and such details are expected to be provided during this audit,” said Msowoya.

However, Nyala Mines Limited managing director Abdul Mahomed insisted in a written response that the company was tax compliant.

“We, as Nyala Mines, have never been interviewed by Mweiti and, therefore do not know, where their findings could have come from,” said Mahomed.

Minister of Finance Goodall Gondwe in an interview said he was yet to read the report and promised to investigate reports of non-tax compliance.

“Let me quickly investigate and come back to me later when I have details,” said Gondwe.

According to the report, government, while signing a development agreement (DA) with the company, agreed to give tax exemptions on Resource Rent Tax, value Added Tax (VAT) on capital purchases, duty and tax for imported materials, equipment and consumables – for the use in the mining and processing of minerals but the company was expected to pay tax on other returns.

Additionally, government signed a secrecy (non disclosure) agreement with the mining company which mines and exports ruby, allowing it not to disclose contents of development agreement signed between government and the company.

The reports say government has 30 percent participation in Nyala, 10 percent equity in the company and receives 10 percent royalty on the gross value of corundum exported after entering into the DA with Nyala Mines Ltd identified under the registration number 7976 and the license ML0150/2007.

So far, government indicated it has received $ 100 000 through signature bonuses as stated in the Production Sharing Agreements in the oil and gas sector although Mweiti says there is no independent verification of whether signature bonuses should have been paid or actually have been paid.

“Government which owns a 15 percent stake in the uranium mine owned by Paladin Energy has also not received any dividends to date attributed to losses, which have been projected to continue into the foreseeable future. Government owns a 10 percent stake in the Nyala Mines, but no payments could be attributed,” reads the report.

The report lists companies currently undertaking mining identified with taxpaying code and license numbers naming 12 companies with Nyala absent.

The initiatives makes it mandatory for mining firms to publish details of their contracts with government and proceeds from mining ventures and listings of government payments currently being received from industry shows that despite the company being operational in the country, it is also not paying tax.

According to the report, Nyala Mines Limited is the only mining venture alongside Paladin Africa Ltd and Paladin to have Development Agreement (DA) with Malawi Government with Paladin’s agreement coming into effect on February 22 2007 with Nyala Mine on June 18 2008.

The report further laments that stakeholder views from civil society say the content and implementation of the DA is not well known to the public and further criticised the non-disclosure agreement.

“Information cannot be disclosed without the consent of the license holder. The Director of Mines (DoM) has rights to waive this only in connection with individuals carrying out their duties. A fine or prison term or both await violation. One needs to be careful about what information this prohibition covers.

“For example, payments to government may not be in this prohibition: these can and must be disclosed through government receipts in accounting and budget records of government. But ownership and all other transactions not related to government may be a problem to declare without consent,” adds the report

Department of Mining a couple of weeks ago acknowledged receipt of a questionnaire on the matter but was yet to respond as of Thursday and Malawi Revenue Authority (MRA) was also yet to respond to a separate questionnaire on the matter.

Reinford Mwangonde, executive director for Citizen for Justice, a civil society organisation working on the mining sector, said the report demonstrates the challenges in accountability and transparency in the Malawi’s mining sector.

“Most of us have for years lobbied for revenue transparency in the extractive industry sector; achieving transparency in the exploitation of mineral resources is one of the most fundamental aspects of development. Our authorities should take action on this and MRA should be allowed to do its job without any political interference,” said Mwangonde.

Related Articles

One Comment

  1. Where will the State President and his cadres benefit if the details of the agreement of the contract are made public? The persons at the centre of systemic corruption are cabinet members, Ps and directors. Unless we deal with them, corruption will not end.

Back to top button