A Commentary on His Excellency Dr. Lazarus McCarthy Chakwera’s Second National Address on Government Policy on the Mining Sector of Sunday, May 2, 2021.
By Ahmed Mussa | Head of Legal -Transaction Services
On Sunday, May 2, 2021, from 2000 hours, the Malawian President, His Excellency Dr. Lazarus McCarthy Chakwera [the President] delivered an extremely important second National Address on the Government’s policy on the mining sector. This Presidential Address outlined a scrupulous and robust plan aimed and revamping the almost neglected and forgotten mining sector. The President, in his address, has expressed and promised the political will that was lacking from time immemorial to ensure that Malawi and its citizens benefit from its precious stones.
This commentary shall discuss the Presidential Address and how it will benefit all stakeholders as well as make recommendations based on what obtains in comparable jurisdictions and key international best practice tenents for the mining sector.
- Establishment of a Mining Regulatory Authority
The President expressed a shared concern on unregulated mining that has been conducted in Malawi to the sole benefit of exploitative external traders at the expense of ordinary Malawians. To curb this unfortunate reality, the President has proposed for the establishment of a Mining Regulatory Authority [MRA] with the mandate of overseeing the activities of the mining sector.
The MRA shall receive, process, grant, withhold, suspend, and revoke mining licences among others. The MRA shall also monitor and enforce adherence to provisions of the mining laws and regulations. For this to be a success, it must be coupled with monitoring and enforcement mechanisms and sanctions for non-performing mining companies and investors. The MRA must devise working monitoring and enforcement mechanisms to ensure compliance and must be armed with the required human and monetary resources. The MRA must also formulate performance indicators as a guide for evaluating compliance by mining companies and investors.
The issuance of mining licences must be conducted effectively and transparently to ensure that the most qualified investors are issued with such licences. This in turn will create a conducive environment for investment into the Malawian mining sector for the benefit of the whole country. This effectiveness and transparency can easily be achieved by the proposed web-based and publicly accessible mining cadastre. The mining cadastre will administer mineral titles and maintain cadastral registers in an orderly and transparent manner.
The President also spoke to having the MRA re-organizing and formalizing the Artisanal and Small-scale Mining [ASM] sub-sector to foster orderliness. ASM is any mining operation that is done using non-mechanized methods in an area covered by a small-scale mining lease There will be a need to establish an independent ASM Department to directly regulate and administer the operations of ASM miners. The ASM department oversees such small scale, low capital intensive, low technology, and high labor-intensive ASM operations. The ASM Department should conduct various training for ASM miners on entrepreneurship, environment management among others.
- Establishment of a National Mining Company
The President asserted that there will be an establishment of a National Mining Company [NMC] to develop the mining sector by catalyzing private sector investment, holding equity interests in minerals extraction, conduct beneficiation and minerals value addition activities among other important roles.
NMCs are not a new phenomenon in the African mining sector. There are notable examples such as Tanzania’s State Mining Corporation (STAMICO); South Africa’s African Exploration Mining and Finance Corporation (AEMFC); and Kenya’s National Mining Corporation just to mention a few. NMCs ensure maximization of profits from the mining industry by conducting beneficiation and/or value addition to minerals [so that they can be exported with a higher value than raw minerals] and competing with International Mining Companies in participating in the mining sector.
The Malawian NMC must be formulated and operate independently [with little or no interference from the government] and in line with international best practices for it to succeed. The NMC human resource must possess the necessary expertise and it must have the adequate financial muscle to effectively operate. Otherwise, it will be an exercise in futility.
- Mining Infrastructure and Expertise Acquisition
Appropriate and adequate mining infrastructure is of utmost importance to the creation of the right investment climate to attract foreign investors into the Malawian mining sector. Such infrastructure includes physical infrastructure such as motorable access roads, refineries, and processing plants for the beneficiation and/or value addition of minerals. It also includes associated infrastructure such as adequate electricity supply, water supply, telecommunications systems, information technology systems, and port agencies among others. The associated infrastructure complements and provides secondary support for the extraction and processing of minerals.
Without addressing the current mining sector infrastructure gaps, it will be extremely difficult or impossible to realise this brilliant plan of revamping the mining sector. Therefore, the mining infrastructure deficit must be given the attention and priority it deserves. Suggestively, our government may explore the possibility of engaging mining companies to jointly develop and finance shared infrastructure systems. By doing so, the government can leverage the mining infrastructure gaps across. There may be a need for fiscal incentives that will accentuate the said shared and integrated infrastructure by mining companies. Fiscal incentives will allow mining companies to recover their costs and further realise a profit from mining activities. It will be imperative to have such projects as a critical indicator of local content requirements as well as incorporating them as conditions for the award of mining licenses. This may entail subsequently amending our mining laws.
- Concluding remarks
In conclusion, investors in the mining industry are profit-oriented at the expense of the well-being of Malawians directly and indirectly impacted by mining activities. There is thus a need to ensure that the benefits from mining activities are reasonably shared for the improved lives and well-being of Malawi and its citizens. Therefore, the Presidential address and its concomitant plan is a very good starting point in our quest of turning around the fortunes of the mining sector to improve the lives of the current and future generations of our beloved country.
However, implementation of this plan also requires greater coordination and alignment of policy objectives between various agencies and ministries. For example, the Ministry of Finance will be responsible for approving the budget to meet the requirements of these plans, the Ministries of Energy and Transportation will have to be involved in approving all projects under them. It could be a rigmarole for mining companies to get approval from each of these Ministries which may result in a less favourable outcome and make the Malawian mining sector less attractive to investors. The government must formulate regulatory frameworks and institutions to coordinate the good plans of revamping the mining sector. Coordination is crucial in enabling seamless flow of information between government ministries, thereby avoiding regulatory overlap.