Glaring gaps in mining industry
As expert decries low funding
Malawi’s aspiration to turn the mining sector into the next big thing for the economy continues to be riddled by glaring disparities between plans and amount of investment made by both the public and private sector.
Experts say low public funding and failure to swiftly negotiate deals with potential foreign direct investors (FDIs) continue to cripple take-off chances for most mining and minerals exploration activities in the industry.
Malawi’s mining sector accounts for only one percent of gross domestic product but the government says plans are underway to scale up the sector’s contribution to between 10 and 15 percent by 2030.
On May 2 2021, President Lazarus Chakwera reaffirmed his government’s commitment to make the mining sector the mainstay of the economy after agriculture, which has lately also been faced with myriad challenges including low financing and harsh weather conditions.
But the dream is far from being attained as, among other factors, budget allocations to the sector still fall way short of the aspired levels.
For example, in the 2021-22 national budget, the government allocated K5 billion meant for establishment of a Mining Authority and a National Mining Company— the two entities which could lay a foundation for regulating the industry and spearhead investments in various mining projects through partnerships — but nothing much has been done.
In his State of the Nation Address two weeks ago, President Chakwera, however, said the establishment of the authority was on course.
“It is an established fact that under our feet are rich minerals like uranium, gold, bauxite, coal and phosphates. And more recently, it has been discovered that just outside this city is the largest deposit of rutile in the world.
“My administration is determined to leverage these resources for economic transformation,” Chakwera said.
But in an interview Tuesday, mining governance expert Grain Malunga faulted the government for failing to substantially invest in the sector which, he said, has potential to contribute substantially to the national economic development.
“Our failure to fund the sector to kick off is a choice of priorities. While we recognise that the sector can turn around the economy, it appears we don’t have the capital.
“It is unfortunate that our budgets are not for economic development but are crafted for political survival. That is why key sectors seem to be ignored in the interest of populist programmes and initiatives,” Malunga said.
He said while mining investment and capital remained intensive, the government’s hastening in setting up its own company could be an ideal step towards making the sector lucrative.
Malunga then lamented the time it takes to have an FDI operate in the country, which, he said, remains a challenge.
This far, the government says it is constructing a state-of-the-art mineral processing laboratory complex, which is now at 95 percent completion.
Also, the Reserve Bank of Malawi has made strides towards creating a structured market for gold, which, as at November 2022, had procured a total of 186.96 kilogrammes of gold bought at a total purchase cost of K9.4 billion.
The government is also reviewing ‘poorly negotiated mining agreements’ from the past in order to close all loopholes and conflicts of interest that were designed to deprive
According to the 2022 Malawi Government Annual Economic Report, mining is a strategic sector that has potential to support industrialisation and remains one area of realistic economic diversification through which Malawi can increase its exports, attract foreign direct investments as well as diversify the government’s revenue base.