After suspension of oil and gas exploration licences in Malawi what happens now?

Anglo American Corporation was founded in Johannesburg in 1917 with £1 million (what today would have been £75 million, adjusting for inflation according to one inflation calculator).

AngloAmerican

It has since grown into a publicly traded behemoth with a market capitalisation of £31.2 billion and revenues of £29.3 billion (2013). It’s headquarters is now in London and the company is now known as Anglo American Plc, the fourth largest mining company in the world.

Although a net ‘loss’ of $961 million was declared in 2013, Anglo American is undoubtedly one of the big boys in the industry. To give you a scale of just how big they are, Anglo American Plc owns 85% of Luxembourg registered De Beers Investments, the holding company of De Beers, another prominent mining giant which is well-known in Southern Africa. But if that’s not convincing enough then how about this: Anglo American recently walked away from a gold interest worth $300 billion, after investing over $541 million it it. Apparently, the withdrawal is related to environmental risks, in particular the threat the Pebble Mine would pose to Alaskan Salmon (there’s even a campaign), although Anglo’s chief executive claimed the withdrawal was in fact a way of prioritizing “.. capital to projects with the highest value and lowest risks.”

Both Anglo American and De Beers have been criticised over their practices in Africa, including price-fixing, low wages (for Anglo American recently in Chile here) and lack of transparency. In particular, according to a Wikipedia entry:

In 1977, the company [Anglo American] demanded that the paper it owned, Rand Daily Mail, tone down its equal-rights support after exposing the murder of South African activist Steve Biko amid the subsequent government backlash. [words in parenthesis for clarity]

Further, a British charity, War on Want, published a report in August 2007 that accused Anglo American of profiting from the abuse of people in the developing countries in which the mining giant operates. According to War on Want:

“in the Philippines and South Africa, local communities threatened with Anglo American mines have faced severe repression in their fight to stay on their land, while in Ghana and Mali, local communities see little of the huge profits being made by AngloGold Ashanti but suffer from fear and intimidation and from the damaging impact of its mines on their environment, health and livelihoods”

In response, the company subsequently published a report defending itself and disclosing its finances.

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Malawi’s first president Dr Hastings Kamuzu Banda could have begun a state owned mining company in Malawi in the late 1960’s. He could have hired specialists from abroad, bought equipment from Britain or the US, begun prospecting for minerals, and by 1970 laid a foundation for a functional mining industry. The technology was available, and when Malawians had been travelling to South Africa in their thousands to work in the mines, labour would not have been a problem.

Banda didn’t begin a mining company. Instead he focussed on agriculture, which traditionally does not reap large profits as the sort which mining companies the likes of De Beers and Anglo American have been known to reap.

That decision could be a contributory factor further explaining Malawi’s economic woes today. While others were investing in assets and initiatives having huge long-term yields, Malawians were dabbling with agriculture and tobacco.

But to give him credit, while Dr Banda could have thought mining was not a priority to the newly independent country, he must have known that Malawi didn’t have enough capital resources to waste on ambitious projects whose very returns were unknown if not a gamble?

Further, having just broken away from the Federation of Rhodesia and Nyasaland, it’s understandable that while Britain could have been willing to extend Malawi a line of credit, as single-minded as Banda was known to have been, it’s inconceivable to think that he would have wanted to be constrained by such kind of favours from the very same people he so vehemently denounced. As he once declared: “We have no minerals. The soil is our gold mine”. In any case, what did a medical doctor who barely 10 years previously had been running a clinic in London know about the mining industry of the 1950’s and 60’s.

Having said this, would Dr Banda have started a state-owned mining company if he knew what treasures lay beneath the surface of Malawi’s geology? If he knew the value of such treasures on the international market?

Especially since there was information available as early as 1966 as to the Mineral deposits and mining potential of Malawi, according to a research paper titled MINERAL RESOURCES OF MALAWI AND MINING POTENTIAL by Rodney Mshali (The Society of Malawi Journal Vol. 62, No. 2 (2009), pp. 27-35 published by: Society of Malawi – Historical and Scientific ). Banda could have decided to take the risk if he wanted to.

Mineral Deposits

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Whichever way, it’s not my place to make a determination on Dr Banda’s judgement at this time.

But what does all this have to do with the current mining landscape in Malawi?

Well, as can be seen in the following links in Zambia, Chile, South Africa and Ethiopia , some mining companies have been known to be a menace to the countries they operate in. Issues of ownership, corruption, tax evasion in the form of profit shifting, low pay and poor working conditions, and of environmental degradation are often always lingering. In Malawi, recently, it has emerged that Paladin was considering to discharge ‘contaminated’ sludge kept in a dam near its Kayelekera mine into Malawi’s rivers systems for fear that if they did not do so, the rain season would cause their dam to overflow.

Thus, when news broke just under two weeks ago that the government of Malawi had suspended all oil and gas exploration licenses on Lake Malawi, so as to allow government to scrutinise and review each Licence that was issued or signed, I didn’t really know what to make of it. After all,  Malawi has had its fair share of sorry episodes of bad contracts married with irresponsible management, with the Paladin saga at Kayelekera. Although appearing diligent, uncovering any such lax agreements will just remind us all how deep in muck the country really is. It will not be a cause for celebration.

So then, what will the government do?

If they plan to review the oil exploration licenses in all good faith, and if necessary use legal mechanisms to resolve any indications of foul play -including unfair or prejudicial contract terms that do not benefit Malawians; if they plan to bring the miscreants to justice, then the suspension is a noble move.

In addition, the government of Malawi could work with charities [such as SHERPA (France), the Center for Trade Policy and Development (Zambia), the Berne Declaration (Switzerland), l’Entraide Missionnaire (Canada) and Mining Watch (Canada) ] which in 2011 filed complaints against mining companies Glencore International AG and First Quantum Minerals Ltd, to the Swiss and Canadian National Contact Points (NCP) for violating the OECD guidelines for multinational enterprises including for Tax avoidance in Zambia.

However, if the suspension of oil and gas exploration in Malawi is a veiled attempt at ‘rent-seeking’, as is rumoured to have taken place not only during Bingu Wa Mutharika’s regime, but also during the People’s Party administration, then it would be unfortunate because the government would have lost an opportunity to harness the resources that Malawi has. DPP would have lost a chance to show transparency.

One more thing; how can Peter Mutharika be sure that the value of assets or mineral resources declared by Oil companies interested in prospecting, or already prospecting is accurate, and not under-declared/under-valued ? For example, if the actual value (or near estimate) of viable crude oil deposits under the basin of Lake Malawi was US$400 billion, what is to stop the Oil companies holding the exploration licenses from misinforming the government that they had found only US$100 billion worth of confirmed deposits under the lake? Especially when the government was unable to verify those figures?

Wouldn’t an independent state-owned Mining company, that had its own equipment, and that owned a stake in each exploration site, and that was jointly involved in the exploration, so as to be able to verify the findings by its own independently undertaken mapping and surveying reduce such a risk?

Finally, it goes without saying that for them to be successful, any state-owned organisation (including parastatals) should be run and managed by people who by merit are fit to do so, and not by public appointees with little or no experience in the relevant technical field or area.

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Malawi cancels $145 million arms deal with SA firm: report

Original article here (via Times Live)

Malawi cancels $145 million arms deal with SA firm: report

The agreement between the Malawi Government and Paramount Group has been abrogated. That is all I can confirm and say,” Gondwe told Saturday’s Nation newspaper.

The paper quoted a source within the finance ministry as saying the government of President Peter Mutharika told the firm the deal was “illegal and expensive”.

More on original article here

Comment

I think President Peter Mutharika must be hugely commended for doing this. The relationship between Paramount and Joyce Banda was unhealthily close. The whole fiasco regarding the arms deal, and the jet bartering and the comments from the UN had an air of dishonesty and special interests about it. I don’t believe the arms deal was to the benefit of the people of Malawi, and Joyce Banda was wrong to associate her government with these guys. As I wrote here, most of these deals benefit people other than Malawians.

Having said that, I wonder what it will cost the country to terminate the contract? Wait, was there a contract? Or was this another gentleman’s agreeement? We will need to know how much it costs the country, and why the president calls it ‘illegal…’. Presumably, the get-out clause is a better devil than paying $145 million? Although what you don’t want to happen is to spend additional millions of dollars you don’t have in court cases fighting a contract that is impenetrable.

I hope President Mutharika will make do on his promises to clean up government in Malawi, and not waste time with propaganda or fighting opponents. I hope he does away with all such useless and ‘illegal’ commitments Malawians never needed. I’d like to see Mutharika revisit Kayelekera, and ‘abrogate’ the unfair Paladin deal. I’d like to see him push for the completion of the Shire-Zambezi waterway, which his brother Bingu Wa Mutharika began – it will lower the cost of goods in Malawi. I’d like to see Malawians realise real benefit from the Vale railway line. I’d like to see Malawi University of Science and Technology open and begin training students in areas which the country is lagging behind. I’d like to see the restrictive and backward thinking regional quota system for university entrance abolished, and in its place an improved open merit based system established. It will be good to see more Universities built across Malawi, and there are many donors who will support this initiative. The proposed mini Chinese city could have huge benefits in terms of stimulating trade and entrepreneurship for both China and Malawi, the president must pursue the agreement, and see its completion. Why can’t we have our own oil refinery? As the Zambians have done (see another link here). There are many ideas the government can adopt to generate income and raise funds outside of taxes. Over a year ago, I helpfully listed some here.

But most of all, I’d like to see president Mutharika get to the bottom of the Cashgate scandal , prosecute all who were responsible for the theft, and close any remaining loopholes in IFMIS. Malawi can never move forward if people continue to steal from the government – and get away with it.

So far, so good. Well done Mr President Sir!

Paladin reports ‘minor’ uranium spill in Malawi

Uranium miner Paladin Energy has reported a uranium oxide (U3O8) spillage near its Kayelekera mine, in Malawi.

The ASX- and TSX-listed miner reported on Monday that the incident was minor and that it occurred during the routine transportation of U3O8 concentrate for export through the Port of Walvis Bay, in Namibia.

A truck carrying a single container of concentrate toppled on its side about 8 km from the Kayelekera operation. A spill response team recovered the container, with Paladin noting that a small quantity of concentrate had also been recovered from the scene, along with soil which had come into contact with the product for disposal at the Kayelekera tailings storage facility.

More at Paladin reports ‘minor’ uranium spill in Malawi   via Mining Weekly

 

Slow Justice: delays / inaction of Malawi’s institutions symptomatic of a weak democracy?

There’s a bad habit in Malawi of authorities sitting on cases  (in which shady dealings or suspect conduct had taken place) and piling them on the shelf for years and years. This almost intrinsic dormancy does not only affect formal legal cases. Even others which are strictly speaking neither before a court of law nor pending investigations of impropriety (but are nonetheless issues which in any decent democracy would call for investigations) are simply ignored, or at least not attended to. In Malawi, depending on who is in power, people often get prosecuted only after a new leader hostile to the old regime comes into power. At least that’s what seems to have been happening in the past.

And it’s not because there are no competent bodies to do the investigation or order the prosecutions (there is the Anti-corruption Bureau, the Judiciary or even the Public Affairs Committee to highlight wrongdoing). Yet more often than not, you find issues which should have been investigated or cases which should  have been brought to an end dragging on for years and years, when it is clear (or the suspicions are somewhat overwhelming) that wrongdoing may have occurred.

Obviously, such a state of affairs is undesirable and can only mean one or more of a number of things:  (i) A weak democracy with weak institutions incapable of competently undertaking their jobs for the benefit of Malawians – an unattractive market to any investor. or  it can mean (ii) Political interference obstructing the course of justice – making the market even more unattractive to investors ; or (iii) Under-resourced or overstretched institutions failing to allocate resources or cope with workload …

Among the cases / suspicious issues which call for investigation or are yet to be concluded in Malawi are the following:-

  • Bingu Wa Mutharika’s unexplained wealth  (see another source here)
  • Bingu’s relationship with Mota-Engil
  • Malawi: Ex-President Muluzi’s corruption trial – this trial has had some severe delays partly due to Muluzi’s ill health, and at one point last year, the then head of ACB couldn’t make a court date because he had to appear before a magistrate for a matter the ACB director had been arrested over. (see another source here and additional / alleged charges against Muluzi here)
  • Pioneer Chemicals saga which named Goodall Gondwe (never mind his latest turn back into politics) was dropped by the ACB with little explanation other than that ACB lacked evidence. Why then did ACB make the allegation in the first place?? What did they see or hear that drove them to make the allegation?
  • Patricia Kaliati – Nyika Corruption saga   (See another report here. A further corruption case against Kaliati here)
  • Apollo International fiasco in which Ken Lipenga has some explaining to do
  • Fertiliser subsidy saga which raises possibilities of conflicts of interests affecting cabinet ministers in Joyce Banda’s government
  • The Midnight six – how can people who plotted what was effectively a coup in a democracy be dealt with so leniently? Will they be let off the hook? Will they go to prison? Will the President pardon them? Something doesn’t add up…
  • The Paladin Kayelekera Uranium issue  (see other links here and here).  While Paladin has denied any involvement in paying bribes, to me two questions still remain: How could the government have signed such a bad contract with little or no benefit to Malawi – and how could such an action be justified as being in the interest of Malawians? (ii) Secondly, which Fraud/ Corrupt company ever admitted to paying bribes or doing wrong? (See related document about Paladin’s activities / transparency record here: Radioactive Revenues)
  • Mathews Chikaonda and Hitesh Anadkat –  the K320 million corporate scam, in which investors lost money, and which was alleged to have been a case of insider trading. However, as most Malawians know, president Joyce Banda has a close relationship with the duo, and in one instance was pictured wearing attire with colours of FMB, the bank in which Anadkat is the Vice Chairman.  The scandal was reported on Nyasa Times on March 6, 2012, although interestingly, the story has since been deleted – reinforcing some of the things people on social media have been saying about Nyasa Times’ lack of impartiality. Luckily for those of us who know how to hack our way around the web,  a cached version (which we have downloaded in full) is still available on google (accessible via  this link), as can be seen below:

Chikaonda-Anadkat

  • Dr Kamuzu Banda’s estate – was it really all legally obtained? Don’t Malawians deserve to know? In the bbc article, the writer says a missing death certificate is the reason why overseas financial institutions will not release the information regarding his accounts. My question is this:  if there was genuine leadership in Malawi, wouldn’t it be in the interest of the country, for the government (or the appropriate authority / hospital) to request the issue of another replacement death certificate, to audit the source of Banda’s wealth??
  • Then there are alleged cases of corruption mentioned in links such as these , which names late Aleke Banda, Cassim Chilumpha, Bakili Muluzi, the current vice president Khumbo Kachali and the president herself.

Reading all these allegations, it makes one wonder, if there wasn’t an investigation at the time when the cases were reported, if no one was prosecuted, and there was no clear clarification / acquittal, what hope would there be today of ending graft in Malawi?

In almost every advanced country in the world, institutions such as Anticorruption bodies and the judiciary operate independently of the government. If an official or politician commits what is clearly a crime or is involved in some kind of shady conduct, the courts in collaboration with investigators and the media will often get to the bottom of the matter, irrespective of whether the politician / official belongs to the ruling party or some power bloc.

This fact alone is probably one of the best indicators of a healthy democracy.

But in most African countries, this kind of thing doesn’t happen. Rather, one’s liability to prosecution is influenced by how many friends they keep in high political office, the police , the judiciary and suchlike.

How then can our democracies in Africa progress if our institutions are not genuinely independent of the powers that be?

So, on top of all that pile of cases add Cashgate to the list with its many complex scandals (most recently see  here)…and it starts to become clear that the road to a functional democracy in Malawi, one with effective  institutions that operate independent of the government, will be a very long one…

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