Mining contracts under microscope

In a bid to maximise the country’s natural resources benefits, government is taking steps to tighten fiscal measures in mining contracts with investors.

Speaking at the opening of a two-day mining pre-lab in Lilongwe yesterday,  Ministry of Mining Principal Secretary (PS) Joseph Mkandawire said there is need for the country to ensure that any mining contracts protect the resources while ensuring gains for Malawians.

He acknowledged that the pace of Mining Development Agreements (MDAs) has been slow and that the government seeks concessions on several fiscal matters, including Capital Gains Tax (CGT), Automatic VAT Refund Offsetting, and exemptions from VAT on goods and services.

Other critical issues include currency policies, tax compensation definitions, and contract termination clauses.

Said Mkandawire: “I was talking about the capital gains tax, we want to gain something from the minerals, on automatic VAT refund you can’t be playing around with books of accounts without involving the Malawi Revenue Authority.

“All those are revenue streams that we want to get as a nation because mind you these are our minerals. We want MDAs that will benefit both parties.”

However, one of the investor representatives Grain Malunga, who is also taking part in the discussions, argued that the investors are willing to pay taxes and that the government’s stance could discourage potential investment.

He said there is a need for a balanced approach that considers both investor needs and national benefits.

But in an interview on the sidelines of the meeting, Deputy Secretary to the President and Cabinet Janet Banda observed that that some foreigners are using Malawians as fronts for illegal mining, intending to export minerals.

To address this challenge, Banda said the Ministry is proposing the formation of cooperatives among Malawians to eliminate such practices.

In his remarks earlier, Mkandawire said the government has undertaken deliberate efforts to create an enabling environment for investors, including the establishment of the Malawi Mining Company, the Mines and Minerals Regulatory Authority, and the introduction of various investment incentives to attract and retain mining investment in the country.

He also said the government has identified “Quick Win” projects whose MDAs negotiations are at different stages, and some are near conclusion.

Among the key projects are the Kanyika Niobium, Kasiya Rutile, Malingunde Graphite, Kangankunde monazite project (rare earths), Makanjira heavy minerals sands and the Songwe Hill Rare Earth Project, which he said are progressing steadily.

The mining sector regulatory framework has been strengthened with the recent repeal and replacement of the Mines and Minerals Act (No 8 of 2019).