Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has urged Treasury to consider creating a private sector-driven Mining Investment Fund to increase revenue generation and management. MCCCI argues that having such a fund with potential projects in rare earths, graphite and niobium could help provide seed capital, co-financing or guarantees for exploration and development, thereby reducing reliance on foreign direct investment alone. In an interview on Sunday, MCCCI chief executive officer Daisy Kambalame said the fund would capture royalties, taxes and equity stakes from new projects to build reserves for future generations, stabilise budgets during commodity price fluctuations and fund infrastructure needed for mining viability.
She said: “There has been an outcry that most times such fund is held by international organisations only. “If we were to deliberately create a policy that encourages pulling of such resources to finance that fund, we would be able to buy stock and ensure that benefits and returns are enjoyed by Malawi.” The call by the private sector lobby group comes months after Malawi committed to create a sovereign wealth fund, a State-owned investment fund that manage the country’s surplus revenue to generate economic benefits for its citizens, improve management of proceeds from mining, a sector identified as a catalyst towards achieving Malawi 2063 (MW2063), the country’s long-term development plan. It also comes as revelations show that long seen as a mandatory tool to attract foreign direct investments, mining tax incentives have lost their allure, according to the International Institute for Sustainable Development.
Published data from International Institute for Sustainable Development show that Malawi, where half of its citizens are poor, lost $15.6 million (about K27 billion) in six years between 2009 and 2014 because of a royalty reduction for a uranium miner. The royalty was reduced from five percent of sales to 1.5 percent of sales in the first three years and then three percent in the remaining years. In a written response yesterday, geo-science expert in minerals, mining and metals Ignitious Kamwanje said MCCCI’s proposal coincides with the planned creation of the Sovereign Wealth Fund since their functions are more less the same.
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“This fund is important because whatever the government collects in the form of royalties, taxes, rents and fees will be channelled into this account, thereby distributing the wealth to the nation through economic and infrastructure development,” he said. Chamber of Mines and Energy national coordinator Grain Malunga said the private sector-driven mining investment fund proposal was already recommended to the Ministry of Finance, Economic Planning and Decentralisation and that Malawi Development Corporation Trust is expected to be the investment vehicle. MW2063 has identified mining as the fastest route to achieve targets in the strategy’s First 10-Year Implementation Plan. Mining contributes roughly one percent to the country’s gross domestic product.
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