Mining woes continue

More talk, less action, bad results! As politicians continue making policy statements on podiums, with minimal implementation, results from the mining sector show how a sector billed to help improve the country’s revenue continues to nose-dive.

Projections made in the 2014/15 fiscal year was that the mining sector would contribute 20 percent to the Gross Domestic Product (GDP) by 2020, but the latest mining report shows the sector contributed just 0.8 percent in 2020, and the same is expected this year.

In the 2014/15 fiscal year, when the projection was being made, the sector contributed 0.9 percent to GDP, the same in 2015/16, then 0.88 percent in 2016/17 fiscal year and down to 0.8 percent in the 2017/18 fiscal year, which forms the fourth Extractive Industries Transparency Initiative (Eiti) report.

The oil and gas sector was still at the exploration stage during the year 2017/18 fiscal year, and had; therefore, non-significant contribution to exports, GDP and total employment of the country.

It is forestry which seems ticking. The sector’s contribution to GDP in 2019 was at 6.7 percent, but sadly, it shrunk to 6.5 percent in 2020 while it will further go down to 6.3 in 2021 due to effects of Covid-19.

These figures present to President Lazarus Chakwera some serious test on his vision and policy on mining, aimed at supporting government’s efforts to restructure the country’s largely agro-based economy.

Even in terms of revenue, while there was a jump from K11 billion in 2016/17 to K20 billion in 2017/18, total unreconciled discrepancies amounted to K6.2 billion, representing 32.3 percent of total revenues included in the reconciliation scope.

Reads the report: “Total revenues received from the extractive sector amounted to K20 038 million in 2017/18 FY [K20 billion]. The Malawi Revenue Authority [MRA] accounted for 79 percent of the total revenue streams generated by the sector, followed by the Department of Forestry accounting for 18 percent of total extractive industry revenues.

“After adjustments and reconciliation work, a total difference negative of (K6 201 546 472) remained unreconciled, which represents 32.3 percent of government revenues.”

These unreconciled differences include payments not reported by extractive companies at K1.3 billion, payments not reported by the government agencies at K909.7 million and missing extractive companies details at K417.3 million.

Further, five out of 17 companies included in the reconciliation scope did not submit their reporting templates. Total reconciled revenue was K19 billion.

Reporting templates not submitted relate to Lafarge Cement Company Limited (K2.6 billion);  Optichem 2000 (Malawi) Ltd (K140.4 million); Raiply Malawi Ltd (K1.8 billion) and Vizara Plantation K608 million, according to the report.

The auditors, EMJ Advisory Services, have since said they are unable to conclude that the financial data submitted by reporting entities, and included, were subject to audits which have been performed in accordance with international standards.

Meanwhile, as the situation is at the moment, new large mining projects namely, Kanyika Nobium Mine in Mzimba and Mkango Rare Earth Mine in Mulanje are likely to delay their commissioning dates due to the impact of Covid-19 pandemic, which would also be catastrophic on the country’s revenue.

Last Sunday, President Lazarus Chakwera outlined how mining could transform the country’s economy and the steps his administration will take to push forward a vision of industrialisation in the country, which he described as “mineral rich”.

Said Chakwera: “As a country, we have issued over 250 mining licenses, but we still have no proper mining industry or returns to speak of. This is a crime we cannot allow to happen again. Nor can we allow our mining sector in general to be the unstructured, exploitative, and lawless free for all it has been in recent years.”

Major policy directions announced by Chakwera include establishment of a mining authority to regulate the industry, whose bill he said is expected to be introduced in the June sitting of Parliament; establishment of a new national mining company to implement business interests of the country’s mining sector, and the establishment of a gold market by the Reserve Bank of Malawi.

The President further announced that he had instructed police and mining authorities to work on stamping out smuggling of minerals, and pledged that his administration will ensure good governance in the mining sector for the country to fully benefit from the industry.

Earlier, mining expert Grain Malunga, who once served as energy and mining minister under the Bingu wa Mutharika administration, said focus should be on ensuring quick and efficient implementation of outlined policies.

“It is good that at the highest level of government, we now have a vision on turning the mineral sector into a conduit for industrialisation and development.

“I hope the officers tasked to turn this vision into reality will take the President’s speech seriously,” he said.

On his part, Chamber of Mines chairperson Burton Kachinjika said they are excited that the President has taken steps towards ensuring that the country benefits from its mineral resources.

“We would like the mining industry to grow. Mining becomes pivotal to development if you look at various countries such South Africa,” he said.

Malawi joined an Extractive Industries Transparency Initiative (Eiti) candidate country in October 2015. The country published its first EITI report covering the 2014/15 financial year in April 2017.

The Mweiti process covers mining, oil, gas and forestry.

Eiti was first announced at the World Summit for Sustainable Development in Johannesburg in 2002 (the ‘Earth Summit 2002’), and officially launched at Lancaster House Conference in London in 2003.