Africa Mining: Malawi seeks to get its house in order for a burgeoning mining sector

Malawi published its first EITI Report for 2014/2015 in April 2017.  The mining sector in Malawi accounts for less than 1% of the country’s GDP and about 1% of government revenue, but developing the sector has become a government priority. The petroleum sector is at exploration stage.

Seeing the woods from the trees

The Malawi report also covers the country’s forestry sector. The country used to have the largest man-made forestry in Southern Africa (Chikangawa), but today most of the twenty plantations managed by the Department of Forestry are degraded. Forestry resources across the country are depleting rapidly (2.6% per year) given the reliance on fuel wood and the expansion of agricultural land. By also covering forestry, the EITI in Malawi aims to provide relevant and reliable information on the governance of important natural resources in the country.

Providing an overview of the extractive sector

The full report is available on the EITI website and total revenue for the extractives reported was MWK 5,935 million (equivalent to USD 13.6 million); 49% from forestry, 40% from solid minerals, and 11% from oil and gas. Rock aggregate, coal, and agricultural lime were the top three minerals in volumes produced and value. Most artisanal miners are informal and have not been included in the report. In additional to key information on the contribution of the sector in the country, the report provides an overview of the relevant laws and regulations governing the sector, as well as information on licensing and contract disclosure. It highlights relevant reforms, such as the status of the ongoing review of the Mines and Minerals Act.

Highlighting key challenges for improved sector governance

The report indicates several areas where government systems might be improved to shore up revenues and reduce tax evasion, particularly related to monitoring of production. Some of the recommended next steps for Malawi include:

• Making the license process more transparent by clarifying the role of the Minister of Mines in granting licenses and providing for disclosure of criteria for awarding licenses.
• Reviewing the license cadastre to ensure that all existing licenses are included, that information on these licenses are complete and that inactive licences are removed. The register should also include tax identification numbers to help track the payments.
• Developing procedures for collecting and controlling production data.
• Improving monitoring of non-tax payments such as royalties and ground rent, in particular in the forestry sector, and addressing inconsistencies in the legal framework with regards to calculating royalties.
• Considering more regular disclosure of statistical information on the extractive sector.
• Ensuring that the information disclosed is reliable, including clarifying whether financial information has been audited.

The report and its recommendations will be an important tool to help Malawi be more transparent and accountable in the management of the country’s natural resources.(source: ITIE)