By Kingsley Jassi:
Much of Malawi’s mineral revenue will not remain in the country due to the dominance of foreign capital, the World Bank has warned.
According to the bank, in its Public Finance Review, the lack of domestic financing for mining ventures will cost Malawians significant mineral proceeds, limiting the domestic impact of the projects.
With projected annual mineral proceeds possibly reaching $2 billion in the mid-2030s, the bank highlights the need to manage expectations from mining, which remains key to Malawi’s export diversification and higher economic growth.
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“However, most export proceeds will cover capital and operating costs and will be remitted to foreign investors,” the bank observes.
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Annual government revenue is projected at $200 million (about K350 billion), from the first mining ventures, including Kayelekera Uranium, Kangankunde Rare Earth and Kasiya Rutile mines.
Adding other higher risk mines is expected to push revenue to $500 million (about K875 billion). These include Kanyika Niobium, Songwe Hills Rare Earth, Makanjira Heavy Mineral Sands and Malingunde Graphite mines.
While Kayelekera Uranium Mine is operational following a reopening cost of $50 million, Kangankunde has also advanced development of its mine in Balaka with an initial capital cost of $40 million.
That $40 million in foreign capital is expected to unlock gross revenue of $83 million annually for about 45 years, with a payback period of just one and a half years. However, such figures were not enough to attract domestic investors.
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Nico Group recently admitted that a lack of awareness about mining investment has contributed to low participation by local investors, stating that it has made strategic moves to get involved in the sector.
Efforts to increase local participation in mining ventures have resulted in a requirement for large-scale mining companies to list on the Malawi Stock Exchange (MSE) and offload a minimum percentage of shares.
Minority Shareholders of Listed Companies Secretary General Frank Harawa said that while they are still waiting for mining companies to issue Initial Public Offerings on the MSE, this is expected to be a game changer, as it will expand a narrow market with very limited shares at a time when local investor interest is growing.
Malawi Chamber of Mines national coordinator Grain Malunga recently argued that local interest in mining should begin at the higher risk exploration stage if domestic participation is to be meaningful.
According to Malawi Mining Company Chief Executive Officer Leonard Kalindekafe, several projects are being considered for possible investment, but the state-owned firm remains short of financing.
