Malawi’s Mining Fiscal Regime – have we been consulted?

On Friday 27 May 2016, Hon. Goodall E. Gondwe, Minister of Finance, Economic Planning and Development, announced in his budget statement that Malawi’s “out of tune” mining fiscal regime, as he described it, will be updated. The Minister explained:

I shall be presenting to this House, Mr. Speaker, Sir, a bill that aims at providing clarity in the determination of taxable income, incentives and proposals to transfer the administration and
collection of royalty from the Ministry of Mines to the Malawi Revenue Authority. Further, the mining fiscal regime bill will also separate provisions for the taxation of mining projects even if the projects are owned by the same company, so that each project should pay its fair share of tax. […] The House may wish to note that the fiscal regime lays bare all tax incentives, details for claiming depreciation allowances, and determination of assessable income, thereby promoting transparency and accountability.

We welcome the initiative to make changes in the mining fiscal regime to improve Malawi’s ability to maximise tax collection from the mining sector that can be used to improve access to desperately needed quality social services including being able to train and employ more nurses, doctors and teachers. However, we are deeply concerned that most Malawians and civil society organisations working and experienced in the extractive industries, represented by the Natural Resources Justice Network and the Malawi chapter of Publish What You Pay (PWYP), as well as the National Tax Justice Platform, have not been consulted and participated in the review process of the Mining Fiscal Regime Bill included as amendments to the Taxation Act which is to be presented this sitting of parliament.

Throughout 2014 and 2015, the Government of Malawi held consultation meetings on the Mines and Minerals Bill but the fiscal regime was not publicly discussed. We understand that the review of the Mines and Minerals Act including the fiscal regime has been made possible by the World Bank through the Mining Governance and Growth Support Project2 which aims “to improve the efficiency, transparency and sustainability of mining sector management in Malawi”. USD 25 million has been borrowed by the Government of Malawi for this project. In addition, the Government has committed to transparency and accountability and has led the way in Malawi signing up to the Extractive Industries Transparency Initiative. Yet the move to table changes to laws without involvement of key stakeholders on the fiscal regime runs counter to Government’s commitment to transparency and accountability. This is unacceptable and not a sign of good faith.

Therefore we are requesting the Government:

1. Not to table the “mining fiscal regime bill” or amendments to the Taxation Act that relate to the fiscal regime for mineral production until consultations have been conducted.
2. To inform all consulted stakeholders on the Mines and Minerals Bill about the changes that were made following consultations in 2015 before the Bill was submitted to the Ministry of Justice and Constitutional Affairs.

It is also important to note that Malawi endorsed the African Union Africa Mining Vision in 2009 which is a watershed continental framework designed to ensure mineral resources contribute to development and structural transformation. It seeks to foster the transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio-economic development. Therefore Malawi
needs to ensure the Africa Mining Vision is realised.

As civil society organisations and citizens of this country committed to serving Malawians, we support and will offer our experience, insight and technical expertise to the Government in its intention to use our nonrenewable resources to develop Malawi in a sustainable way in line with the Africa Mining Vision. However, without transparency, clear communication and involvement of all stakeholders who are interested in or stand to be affected by mining, Malawians in this and future generations will be done a disservice by our Government.

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PWYP Malawi is run by the following organisations under the country’s only CSO network for the extractive industries, the Natural Resources Justice Network, which is made up of 33 organisations and founded in 2007.

The following organisations make up PWYP Malawi:
 ActionAid Malawi
 Catholic Commission for Justice and Peace (CCJP)
 Centre for Environmental Policy and Advocacy (CEPA)
 Centre for Human Rights and Rehabilitation (CHRR)
 Church & Society of Livingstonia Synod
 Civil Society Education Coalition (CSEC)
 Citizens for Justice (CFJ)
 Economics Association of Malawi (ECAMA)
 Foundation for Community Support Services (FOCUS)
 Institute for Policy Interaction (IPI)
 Institute for Policy Research and Social Empowerment
 Mabilabo Area Development Committee
 Malawi Economic and Justice Network (MEJN)
 Malawi Watch
 Media Institute of Southern Africa (MISA) – Malawi
 Norwegian Church Aid
 Oxfam Malawi
 Ufulu Wathu