Malawi tunes up on mining contracts negotiations

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There has been an outcry from members of the public that Malawi is not adequately benefitting from the exploitation of its mineral resources because the country gets raw deals on mining investments due to failure by government officials to negotiate win-win deals with multinational mining firms.

But it seems this will soon be a thing of the past thanks to the African Minerals Development Centre (AMDC) two-year project entitled “Strengthening the capacity of African governments to negotiate transparent, equitable and sustainable contracts in the Extractive Industries (EI) for broad-based sustainable growth and socio-economic development,” which is being implemented in Malawi and four other pilot countries namely: Chad, Congo, Equatorial Guinea and Niger.

Malawi Mining

Malawi tuning up on mining contracts and negotiations.

The project launched on June 2, 2016 encompasses training programmes for stakeholders to   competently negotiate deals with mining investors who unlike government officials are mostly technically equipped and experienced in negotiating such deals.

In Malawi, the project included a five day African Development Bank Group (AfDB) financed training workshop that drilled local stakeholders in ‘Best Practices for Negotiating and Drafting Mining Contracts’ which took place at Bingu International Convention Centre (BICC) in Lilongwe and attracted participants from government ministries and departments, Malawi Revenue Authority, the private sector, civil society, and Parliamentary Committee on Natural Resources and Climate Change.

AMDC conducted the training workshop in partnership with the African Legal Support Facility (ALSF) and International Senior Lawyers Project (ISLP) under the Africa Mining Vision (AMV), an initiative adopted by African governments in 2009 to ensure that natural resources form inclusive sustainable foundation for the continent’s socio-economic development.

Minister of Natural Resources, Energy and Mining, Bright Msaka SC, whose speech to officially open the workshop was delivered by the Ministry’s Principal Secretary Patrick Matanda, said in the case of Malawi, the project could not have come at an opportune time as the country under the leadership of President Peter Mutharika is undertaking reforms aimed at improving service delivery to its citizenry.

Msaka said for more than a century of mining; many African countries, including Malawi, have not derived maximum benefits from mining in terms of soliciting tangible sustainable development outcomes, including improved livelihoods of people across the continent due to several complex causes including inadequacy in negotiating mining development agreements (MDAs).

He said MDAs are often highly complex and many African governments are less informed about the technical details and geological endowments than the mining companies which come to negotiate, backed by highly qualified international lawyers and reputable technical experts.

Bright Msaka

Mining should bring us benefits: Msaka

‘’It is, therefore, timely that the AMDC, partnering with the ALSF and ISLP, has considered it necessary to conduct this workshop which will technically and legal-wise equip and empower our negotiating team to ensure sustainable development and exploitation of mineral resources in the country,’’ Msaka said.

He applauded the AfDB, AMDC, and ALSF for considering Malawi’s mining industry as one of the beneficiaries of the technical and financial support, a development, which he said is in line with the ongoing review of Malawi’s mining sector legal and regulatory framework.

‘’It is our ambition to be one of the model countries in Africa whose extractive industries optimally and equitably benefit the citizenry,’’he said.

He said with support from AMDC, the Ministry, in conjunction with relevant stakeholders, is also developing an AMV-inspired Country Mining Vision (CMV), to complement other equally important initiatives to ensure promotion of sustainable mineral development in the country.

The AMV is informed by the outcomes of several initiatives and efforts made at sub-regional, continental and global levels to formulate policy and regulatory frameworks to maximize the development outcomes of mineral resources exploitation.

ALSF, which is hosted by the AfDB, was set up to strengthen the legal capacity of African governments in   negotiation and conclusion of agreements that are sustainable and maximise their economic benefit, and about 40 % of its operations to date constitute that of extractive sector.

The ALSF has assisted many African countries in negotiation of extractives agreements (petroleum and mining) and in training government officials on negotiation of complex contracts in the extractives sector.

Resident Representative of African Development Bank Group, Andrew Mwaba, said the AfDB believes that the extractive sector can help drive the continent’s economic transformation by providing much needed resources for inclusive, sustainable and diversified development.

So to reap the full benefits from our natural resources and catalyse economic growth and development, countries need to address some of the challenges being faced in the extractive resources sector – among them, policy weaknesses and unfairly negotiated extractives contracts,” he said.

Mwaba said the AfDB is committed to working with African countries to address some of these challenges and to ensure that African countries derive the maximum benefits from their natural resources.

He pointed out that the Bank has a long history of involvement in Africa’s extractive resources sector and over the years, the entity has been working with African countries in promoting private investment, institutional capacity building; facilitating policy reforms and in providing direct investment in private sector operations.

He said such initiatives are necessary because Africa’s rich natural resources -land, water, forests and minerals- have become valuable in global trade and the object of investor attention.

‘’We believe that sustainable investments in the sector are inextricably linked to economic growth, job creation and by extension poverty alleviation in Africa,’’he said.

In his remarks, Senior Mining Engineer and Coordinating Officer of AMDC/ALSF led projects in Malawi’s extractive sector, Cassius Chiwambo, said Malawi will hugely benefit from the capacity building project, which covers all critical areas of MDA’s including fiscal, environmental and technical.

Chiwambo, an expert in technical and mineral law, conquered with Msaka on the timeliness of the project saying Malawi may soon start engaging mining companies in contract negotiations.

‘’There are already several projects in advanced stages of their exploration and we hope this training will equip us to engage the mining firms. Possibly, there will not be talk of Malawi getting a raw deal on a mining investment in the future,’’said Chiwambo.

On his part, AMDC Director and Coordinator, Dr. Kojo Busia, said contract negotiation is the cornerstone of the Africa Mining Vision as it goes to the heart of how mineral resources are used to benefit the citizens of a particular country as well as the continent’’ Busia said:

Dr. Kojo Busia

Dr. Kojo Busia: This is way to go.

In this sense, it goes beyond the issue of just simply mineral sector policy but rather it goes to the heart of how we view minerals and what role we want mineral resources to play in the economy and society at large.

We have to ensure that contracts are on board human resource development, technology transfer, safety measures and transparency, which are needed for growth and development.

More recently, the issue of illicit financial flows in the extractive sector has attracted attention on the continent with former South African President Thabo Mbeki led high-level panel on Illicit Financial Flows (IFFs) revealing the loss of the continent’s much needed funds for investment and developmental spending.

The panel disclosed that over 50 billion dollars leave the continent every year driven largely by the extractives sector.

In this regard, Busia advanced the need for stronger contracts governing the declaration and payment of taxes at each step in the mineral value chain and the need for tougher rules and measures to be enforced both within Africa and abroad.

According to AfDB , if fully utilized, Malawi’s natural resources will contribute over USD 30billion annually in government revenues over the next 20 years.

The Bank also estimates that revenues from oil, gas and natural resource discoveries could contribute between 9 % and 31 % of additional government revenues for the first ten years of production.

***The article was initially published in Malawi’s Mining & Trade Review Issue Number 45 that is circulating this January 2017.

(Report by Chiku Jere)

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