Minister of Natural Resources, Energy and Mining, Honourable Bright Msaka, SC
Principal Secretary for Ministry of Energy Mining and Environment
Other Principal Secretaries and directors here present;
Members of Parliament, civil society and the faith community
The EU Head of Delegation, Marchel Gerrmann
Representatives of the donor community and Diplomatic Corps
Members of the Press;
Distinguished invited guests;
Ladies and Gentlemen.
Historically, Malawi has been known primarily as an agricultural country with little information on possible mineral wealth. The country could have continued with this status quo, or, attempted to challenge it by verifying if indeed there are minerals in this country which is surrounded by neighbors who have relatively thriving mining sectors. It therefore gives me great pleasure this morning, to witness this launch of the airborne geophysical survey data which confirms that Malawi has moved forward to explore her mineral resource more deeply. I understand this is just raw data. There will be another exercise to analyze it.
I would like to believe that several stakeholders that include investors, the public, and development partners have indeed been keenly waiting for this data. The public is widely aware of this exercise through the very intense mass media awareness campaign popularly known as kauniuni, which informed the general public of low flying aircraft that would be flying around the country doing the survey. It is my hope that the release of this data and its analysis will lead to informed next steps and actions.
At the World Bank, we are very proud to be associated with this grand step up in developing Malawi’s mining sector. This survey has been done under the Mining Governance and Growth Support Project co-financed by the World Bank and EU with a commitment of US$30 million. The project is aimed at helping Malawi overcome some of the challenges faced by its mining sector, mainly through improving efficiency, transparency and sustainability of the mining sector management. It is doing this in three ways firstly, to help the country manage mineral rights and operations, secondly, generate and manage mineral revenues; and thirdly promote the mining sector in general.
The survey data that we are launching today falls under promoting the mining sector. To date, Malawi has a very small mining sector and its geology remains relatively unknown. May I share just three factors that could be contributing to this situation:
- Lack of basic geological information for exploration companies to target their efforts;
- Policy and regulatory frameworks have not yet been aligned with international best practices; and
- Lack of infrastructure to support exploration and exploitation of mineral resources such as energy.
The completion of this comprehensive survey has therefore been a key achievement not only for the project but the country as a whole. The survey has identified interesting geological features that were not previously known. Features of this size and scale could be indicative of a number of minerals, but this would need to be further understood through detailed interpretation of the existing data and follow up geophysical and drilling campaigns. Should this bring positive results, the sector would help boost the economic growth that this country needs.
While we are all beginning to be excited by the availability of this data, it is important that we manage expectations from the outset. It should be understood that it takes a long time for an exploration target to become a mine. The normal lead time from identification of a deposit to the time it becomes a producing mine can be about 10 to 15 years. In this regard, we should consider the availability of this data as an extremely important initial step in a process that might take a little while to bear fruit.
Meanwhile Malawi will need to position itself to best take advantage of the sector as it evolves. For example, the skills needed for the sector will evolve over time. Given the long lead times to production, employment opportunities in the sector are initially most likely to be in geology and geophysics including drilling activities and support for exploration. In terms of goods and services, initial demand will likely be for drilling and exploration services, and later will transition to other types of inputs needed for production of minerals.
Mineral royalties can normally be collected from the first year of production but income based taxes will take more time to materialize as the large capital investments will be depreciated and reduce taxes payable.
This lead time also calls for common understanding of what is happening in this sector between the Government and the investors on one hand, and the public and civil society on the other. This means there must be transparency through timely sharing of information. In this respect, I would like to commend Government for its commitment to sign up to the Extractive Industries Transparency Initiative (EITI), the step it has taken to submit its application, appoint an EITI champion, establish a multi-stakeholder group, and isolate mining as the first area of focus for EITI. I would like to encourage Government to complete the EITI process along with the passing of the Communications Bill to strengthen public confidence in its mining transparency issues.
I would also like to add a note of caution on this exciting day. Finding mineral deposits is not always in itself a blessing-it can also be a curse. Experience has shown you need to have a national consensus and strong legislation on how to distribute and share the wealth generated from new discoveries. And plans for how to invest that wealth for the benefit of future generations. And it is much easier to develop that consensus and legal framework before discoveries are made, rather than after.
Countries that get this right from the outset tend to do well. Those that don’t can descend into conflict, with these natural resource windfalls igniting ethnic, regional or social faultlines or creating new ones. It can increase inequality-which is already very high in Malawi- if not well managed so that all citizens benefit. We have good examples and tragic lessons from other countries, many on this continent. Please do not let this happen to Malawi; joining the EITI, communicating often and transparently with the public, putting strong governance legislation in place, giving clear signals to investors—this is all crucially important. Malawi is starting on a good path with EITI membership and the intensive public communications campaign surrounding this survey. We would encourage Malawi to continue on this positive pathway so that it benefits from the experience of others and any newly discovered wealth will benefit all its citizens.
Honorable Minister, ladies and gentlemen, as the World Bank, we will continue to collaborate with Government and other Development Partners in this important sector, and it is our hope that a lot of members of the private sector and potential investors will show interest in this data and invest in further exploitation of these potential mineral resources. And that the Government will invest in a well-managed mining sector which could be transformational for this country.
I thank you.