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  • GDP, US$bn: 6.3
  • GDP per capita, US$: 350.3
  • Population, mn: 17.2
  • Inflation, CPI ave: 21.8
  • FX, LCY/US$: 713.1
  • Budget Balance, % of GDP: -5.6
  • Mining GVA, US$bn: 0.1
Regulatory Risk Rating
15
0
100
Score: 15
Critical Risk
The option to enter into agreements with the government in relation to Mineral Rights is not really an option at all but a necessity - investor beware!

Corruption Potential Index

Score: 0
Extremely High Corruption Potential

Corruption Risk Index

Score: 44
Moderate Corruption Risk

Regulatory Risk Rating

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Mining Overview Commentary plus sign

MALAWI - MINING REGULATIONS

GENERAL

Malawi, officially the Republic of Malawi, is a landlocked country situated in the southeast part of the African continent, bordered by Zambia to the northwest, Tanzania to the northeast and Mozambique to the west, south and east. Formerly known as Nyasaland, the country gained independence from the British in 1964 and has progressed from one-party rule, which came to an end in 1993, to become a democratic multi-party system.  

According to statistics from the World Bank, Malawi has one of the lowest GDP per capita rates in the world. The majority of the country’s 18 million plus population live in rural areas, with less than 5% based in the capital city, Lilongwe. Agriculture is at the heart of Malawi’s economy; the sector is responsible for around 80% of employment and 30% of GDP. The country is one of the largest producers of tobacco in the world; in 2015 tobacco accounted for 55% of all exports, at an estimated value of $702 million (USD). Other exported products include dried legumes, tea, sugar and cotton. The government of Malawi and various international organisations are focused on helping the country to diversify its economy as a whole, as well as diversifying the agriculture sector, which is highly susceptible to weather patterns.

Traditionally, mining has not been a large economic contributor in Malawi. However, in 2009 the Kayelekera uranium mine opened, which had a considerable impact on the country’s economy. Unfortunately, as a result of the crash in uranium prices, the project (85% owned by a subsidiary of Australian based Paladin Energy with a 15% equity interest issued to the Malawi government) is currently suspended and the mine has been under care and maintenance since 2014. Besides uranium, Malawi is known to have produced clay, cement, coal, gemstones, sulphuric acid, and lime (USGS). Mines in the country are primarily privately owned and there are several small-scale or artisanal mining operations focused on the production of gemstones.

Economic issues, high poverty rates, food security, education, corruption and a high level of HIV/AIDs are all serious challenges faced by the country at present.

PRINCIPAL LEGISLATION AND REGULATOR

The Mines and Minerals Act 1981 (MMA) and its accompanying regulations, provide the legal framework for the mining industry in Malawi. Also of relevance are the Mines and Mineral Policy of 2013, the Environmental Management Act 1996 (EMA), the Environmental Impact Assessment Guidelines (EIA Guidelines) and the National Environmental Policy 2004.

The Ministry of Natural Resources, Energy and Environment (Ministry) is the primary government authority. The Ministry is divided into various departments, including the Department of Mines, which handles all matters relating to the mining sector and the Department of Environmental Affairs, which manages environmental matters. The Minister of Natural Resources, Energy and Environment (Minster) is responsible for the administration of the MMA, including the granting of Mineral Rights. Under the terms of the MMA, the Minister may appoint a Commissioner for Mines and Minerals (Commissioner) as necessary for the administration of the law (Art. 5, MMA).

Property in, and control over, minerals in land in Malawi are vested in the President on behalf of the people of Malawi (Art. 2(1), MMA).

GRANTS AND FORMS OF MINERAL TITLE

Mineral Rights shall only be granted to individuals who are citizens of Malawi or who have been ordinarily resident in the country during the four-year period immediately preceding the application (Art. 13(a), MMA). Reconnaissance Licences (RL) and Exclusive Prospecting Licences (EPL) shall be granted to a body corporate providing it is: a company; a corporation incorporated in Malawi; or a corporation that is not incorporated in Malawi, which has the approval of the Minister (Art. 13(b), MMA). Mining Licences (ML) shall be granted to body corporates which are a company or a corporation incorporated in Malawi (Art. 13(c), MMA).

Mineral Rights are granted at the discretion of the Minister, subject to such terms and conditions as may be determined, and certain land restrictions apply (see Arts. 17-18, 20, 26(1), 30, 31 & 38, MMA). Applicants have 60 days from notice of grant to accept the Mineral Right (see Arts. 19, 28 & 30, MMA). On renewal, licence terms may be varied. The Minister, acting on behalf of the Republic, may enter into an agreement with any person in respect to the granting of Mineral Rights, the conditions attached to such rights and any other incidental matters (Art. 10, MMA).

The MMA provides for the following:

  • Reconnaissance Licence (RL): grants the holder the right to carry out reconnaissance operations in the licence area in respect of any mineral to which the RL relates; RL may also be granted on an exclusive basis for specified minerals (see Arts. 20(4) & 23(1), MMA). Applications for RL must include details of the applicant; a plan of the area; identify the minerals sought; and be accompanied by a statement on the applicant’s financial and technical resources, as well as a proposed work programme (Art. 16, MMA). RLs are granted for a period not exceeding 12 months (plus a preparation period if provided for), renewable on application for a period not exceeding 12 months (Arts. 20(3), 21(1) & 49, MMA). Applications for renewal must be submitted at least three months before the expiry of the licence and must be accompanied by a report on activities and a proposed work programme (Art. 49(2), MMA).

 

  • Exclusive Prospecting Licence (EPL): grants the holder the exclusive right to carry out prospecting operations in the area in respect of any mineral(s) to which the EPL relates (Art. 34, MMA). Applications for EPL must contain a variety of information, including: a statement of the applicant’s financial and technical resources; a work programme; and information on the employment and training of citizens (Art. 25, MMA). Applicants must also meet the criteria specified under Article 27(4), MMA. Where an EPL is granted to the holder of an RL the land shall no longer be subject to the applicant’s RL but no other RL shall be affected (Art. 22(2), MMA). EPL shall not be granted over mining or claim areas and no other EPL shall be granted for the same mineral(s) in the licence area (Art. 27(1)-(2), MMA). Only RL holders, which have been granted exclusive rights pursuant to Article 20(4), MMA, may obtain an EPL over the area for the mineral(s) covered by the RL (Art. 27(3), MMA). EPLs are granted for a period not exceeding three years (plus a preparation period if provided for), renewable twice on application, for periods not exceeding two years (Arts. 29(2), 32(1), & 50(3) – (5), MMA). A further extension may be granted by the Minister on public interest grounds (Art. 50(6), MMA). Applications for renewal must be submitted at least three months before the expiry of the licence and must be accompanied by a report on activities and a proposed work programme (Art. 50(2), MMA); land-shedding requirements shall also apply (Art. 50(1), MMA).

 

  • Mining Licence (ML): grants the holder the exclusive right to carry out prospecting and mining operations in the licence area (Art. 43(1), MMA). Both EPL holders and other persons may obtain a ML, though no ML shall be granted over an area covered by an EPL to anyone other than the EPL holder (Arts. 37(1) &39(2), MMA). On the granting of an ML, all EPL will cease to apply (Art. 33(2), MMA). EPL holders must have given notice to the Minister of a discovery in commercial quantities and submitted an application within two months of such notice (Art. 37(2), MMA). Applicants must provide (amongst other things): details of mineral deposits; a work programme; environmental information; a detailed forecast of capital investment, operating costs, revenues and financing information; and reports on the procurement of local goods and services, as well as on the employment and training of citizens (Art. 37(3), MMA). A feasibility study may also be required (Art. 38(3), MMA). Grounds upon which the Minister can refuse the application are specified (see Art. 39, MMA). MLs are granted for a period not exceeding 25 years or the estimated life of the mine – whichever is shorter (Art. 42, MMA). MLs are renewable on application for a period not exceeding 15 years (Art. 51(5), MMA). Applications for renewal must include a work programme as well as a statement on reserves, financing etc.; applications must be submitted at least 12 months before expiry of the existing term (Art. 51, MMA).

 

RL, EPL and ML may be transferred on approval by the Minister (Art. 60, MMA). Other rights provided for in the MMA include Non-Exclusive Prospecting Licences and Mineral Permits (see Part V, MMA).

DEVELOPMENT CONSIDERATIONS

As noted above, agreements relating to Mineral Rights may be entered into with the Minister (Art. 10, MMA).

EPL holders must commence operations within three months, carry out activities in accordance with the work programme and meet expenditure requirements (Art. 25(a)-(d), MMA). Work programmes must be submitted on an annual basis (Art. 30(1)(a), MMA). The Minister must be notified of discoveries of commercial value (Art. 35(c), MMA). EPL holders must employ and train citizens of Malawi in accordance with the proposals appended to the licence (Art. 35(e), MMA). EPL holders may make an application to the Minister to include ‘additional minerals’ in the terms of the licence (Art. 67, MMA).

Conditions, including those relating to work programmes, expenditure requirements and details on the processing and selling of minerals may be included in the ML terms (Art. 41(1)-(4), MMA). Applications may be made to the Minister to mine minerals other than those covered by the licence (Art. 43(2), MMA; see also Art. 67, MMA). Obligations on ML holders include: that they carry out mining operations in accordance with the work programme; that they employ and train citizens of Malawi in accordance with the proposals appended to the licence; and that they provide notice to the Minister when they begin to work for profit (Art. 44(1), MMA). Notices must be given to the Commissioner in relation to cessations, suspensions and curtailments of production; approval must be obtained and may be refused (Arts 46-47, MMA). Amendments and alterations to work programmes for both EPL and ML must be approved by the Minister (Art. 54(2), MMA).

Mineral Rights shall not be granted unless an environmental impact assessment (EIA) is conducted or the need for an EIA is waived by the Director of Environmental Affairs (Art. 26, EMA). EIA must be conducted in accordance with the terms of the EMA. Detailed guidance for the EIA process can be found in the EIA Guidelines (see also ‘Environmental Overview Commentary’). Public consultations must be held and the EIA Guidelines recommend that project proponents continue to consult with stakeholders throughout the project life cycle. Appeal rights are provided for.

Activities under Mineral Rights may not be carried out without the consent of the lawful occupier in respect to certain types of land (Art. 103, MMA). Consent may be given subject to certain terms and conditions and the need for consent may also be waived by the Minister. Compensation for damages may be agreed or determined by the Commissioner (Art. 105, MMA). Notice requirements apply to access (Art. 106, MMA). Land may be acquired at the discretion of the President (Art. 120, MMA).

Annual charges may be prescribed by the Minister (Art. 90, MMA). Royalty rates are outlined in the Mines and Minerals (Royalty) Regulations) and certain terms may also be included in the Mineral Right (note in particular the terms of Art. 31, MMA). Application fees and other charges may also apply (see Mines and Minerals (Miscellaneous Fees) Regulations). Dispute procedures are provided for under Part XI, MMA; see also Mines and Minerals (Disputes) Regulations.

ENVIRONMENTAL REGULATION

See Malawi- Environmental Overview Commentary.

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Environmental Overview Commentary plus sign

MALAWI - ENVIRONMENTAL REGULATIONS

GENERAL

Malawi is a landlocked country located in the southeast of the African continent, bordered by Zambia, Tanzania and Mozambique. With an area of 118,484km2 (24,404km2 of which is covered by water) and a population of over 18 million people, Malawi is one of the most densely populated countries in Africa.

Malawi’s landscape is marked by two main features – the Great Rift Valley, which runs from the north to the south of the country into Mozambique- and Lake Malawi, Africa’s third largest lake, which dominates the eastern border. The remaining land is varied, but made up primarily of a large plateau. Malawi has a sub-tropical climate, with hotter temperatures in the south and cooler temperatures in the northern and mountainous regions.

Malawi once boasted rich wildlife but the impact of illegal poaching and habitat destruction impacted greatly on the country’s animal population. That said, in recent years the government has increased conservation efforts and today Malawi is home to five national parks and four game reserves, several of which have run successful rehabilitation and reintroduction projects. Lake Malawi National Park was declared a UNESCO World Heritage Site in 1984 and is recognised as an important area for biological evolution. Lake Malawi itself is said to house around 1000 different species of fish, many of which are endemic and the lake’s cichlids are thought to be of equal scientific value to the finches of the Galapagos Islands. Elephants, rhinos, giraffes, zebras, buffalo, different varieties of primate, antelopes and hippos are amongst notable mammals. There are also numerous snake, insect and reptile species, and over 650 species of bird.

Common environmental challenges include deforestation, soil degradation from over-farming, water pollution, and siltation, which endangers the country’s fish.

PRINCIPAL LEGISLATION AND REGULATOR

Environmental matters, including environmental impact assessments (EIA), are regulated by the Environmental Management Act 2017 (EMA) which replaced the earlier 1996 law of the same title. The 2017 law appears to have removed the majority of the very few provisions which related to EIAs in the 1996 law. As such, most of the information in relation to EIAs are found only in government guidelines. It remains to be seen if the government will issue specific regulations or laws which specifically relate to EIAs. Other relevant legislation in relation to the mining industry includes the Mines and Minerals Act 1981 (MMA) and its accompanying regulations. The National Environmental Management Policy 2004 (NEMP) and the Environmental Impact Assessment Guidelines (EIA Guidelines) provide further guidance.

The EMA established the Environment Protection Agency (EPA) which is responsible for the co-ordination, monitoring and supervising of activities relating to the utilisation and management of the environment and natural resources, including the approval of the various environmental assessments provided for in the EMA (see Part III, EMA). The EPA is headed by the Director General (Director), who is responsible for the day-to-day management of the EPA (Art. 13, EMA). The EMA also makes frequent reference to the Minister, which we assume to be the Minister of Natural Resource, Energy and Environment (Minister). It is unclear from the EMA if the roles of the Minister are carried out by the Director.  The EPA is also tasked with overseeing lead agencies, advisory committees, District Environment Sub-Committees and Local Environment and Natural Resources Committees (Art. 20, EMA).

EIA PROCESS

Applications for Reconnaissance Licences (RL), Exclusive Prospecting Licences (EPL) and Mining Licences (ML), collectively known as Mineral Rights, must provide details of the impact of proposed works on the environment or any monument or relic in the licence area (Arts. 16(e), 25(e) & 37(h)(viii), MMA). In addition, the application for an ML must contain information on the residual effects on the environment caused by the mining operations and proposals for eliminating or controlling environmental impacts (Art. 37(h)(vi)-(viii), MMA). ML will not be granted where the proposed work programme fails to take proper account of environmental and safety factors (Art. 39(a)(i), MMA). The Minister shall take into account the need to conserve natural resources when reaching a decision on the granting of a Mineral Right and may, in the case of a ML, require that an EIA be carried out (Art. 94, MMA).

Under the terms of the EMA, the Minister has the power to specify, by notice in the Gazette, the types and sizes of projects which shall not be implemented unless an EIA is performed (Art. 31(1), EMA). Prescribed projects for which an EIA shall be considered mandatory are detailed under the EIA Guidelines. In relation to mining activities, all mining of minerals, expansions to mines and mining exploration and prospecting activities shall require an EIA, unless the Director issues a project specific exemption (s. A8, Appendix B, EIA Guidelines).

In the first instance, a screening process will be undertaken so as the need for an EIA may be determined. A Project Brief must be submitted to the Director and shall include: a description of the project; the activities that shall be undertaken to implement the project; the likely environmental impacts; the number of people to be employed; the areas of the environment likely to be effected; and any other information as required by the Director (Appendix C, C.1, EIA Guidelines). The Director shall refer the Project Brief to the Authority, which will determine the need for an EIA in line with the project screening criteria specified under the EIA Guidelines (see Ch. 2, 2.2.1 & Appendix D, EIA Guidelines). The bar is set relatively high by the screening criteria, which are also open to government discretion. The Authority shall make a recommendation to the Director on the appropriate course of action and the Director will then decide if an EIA is required. According to the EIA Guidelines, screening should ordinarily be completed within 15 days (Ch. 2, 2.2.1, EIA Guidelines). Where it is determined that an EIA is not required a written approval from the Authority must be obtained (Art. 31(2), EMA).

Where the Director determines that an EIA is required, the project proponent must retain an approved consultant to carry out the assessment and submit an EIA Report (Ch.2, 2.2.2 & Appendix F, EIA Guidelines). Terms of Reference (ToR) for the EIA shall be prepared and approved by the Director. According to the EIA Guidelines a review of the ToR should ordinarily be completed within 10 days (Ch. 2, 2.2.1, EIA Guidelines). Guidance on ToR, as well as model ToR, can be found in the EIA Guidelines (see Appendices E & F, EIA Guidelines). In summary, ToR shall include the following:

  • An introduction of the proponent and project;
  • A project proposal;
  • EIA requirements (including the particular environmental concerns to be addressed);
  • Details of environmental management;
  • Financial data;
  • Work Plan;
  • Staffing and co-ordination details (in particular the relationship between the EIA team and the engineering team);
  • Consultation requirements; and
  • EIA Report content.

 

(See also Appendix C, EIA Guidelines).

Based on the ToR, an EIA shall be carried out and an EIA Report produced. The content of the EIA Report must match the ToR and the following information should be included, namely:

  • A detailed project description;
  • An Environmental Management Plan;
  • Information on the environmental areas to be affected and measures for monitoring and assessing such affects;
  • Details of technologies to be used for the project;
  • Information and justification of the selected land area;
  • A detailed description of environmental impacts;
  • Measures for eliminating, reducing or mitigating environmental impacts;
  • Environmental impacts on neighbouring countries (if any);
  • Details of any gaps or deficiencies in the assessment; and
  • Methods used in completing the EIA.

 

Public consultations are a mandatory aspect of the process and should allow for input from all stakeholders who may be affected by the project (Art. 5(1), EMA; see also Appendix G, EIA Guidelines). An effective consultation programme shall employ various methods of consultation such as press conferences, notices, interviews, meetings and public hearings (see Appendix G & Figure G.1, EIA Guidelines). The extent of consultations will vary depending on the specific requirements and impacts of the relevant project. At minimum, proponents should place advertisements in national and project area newspapers, informing stakeholders when a Project Brief and EIA Report have been submitted and how such documents may be reviewed; contact details should also be provided (Section G.3, Appendix G, EIA Guidelines). Results of consultations must be contained within the EIA Report.

On completion, the EIA Report shall be submitted to the Director for review. At this stage the Director may decide to hold further public consultations, including public hearings. Reviews shall be completed by the Authority with the support of expert input where required. The EIA Report shall be evaluated in line with the criteria detailed under Appendix H of the EIA Guidelines. Generally speaking, the EIA Report should be able to assist: project proponents - in planning, designing and implementing projects in a way that minimises adverse environmental impacts; the government - in deciding whether or not a project should be approved and the terms and conditions of approval; and the public - in understanding the project, its impacts and the process of review (see Appendix H, EIA Guidelines for further details).

Following review, the Director shall issue a decision on the project. Further assessment may be required or revisions to the EIA report requested. According to the EIA Guidelines the first review of the EIA report should ordinarily be completed within 50 days; where subsequent drafts are required and submitted, reviews shall generally be completed within 25 days (Ch. 2, 2.2.1, EIA Guidelines). Licensing authorities may not issue licences for projects that require an EIA until the Director has issued an approval under the EMA (Art. 31(3), EMA).

The EMA established the Environmental Tribunal (ET) (Art. 107, EMA) which is responsible for considering appeals again decisions or actions of the Authority, lead agency, Director or inspectors (s. 107(1)(a), EMA).  and decision of the ET may be appealed to the High Court within 30 days (Art. 108(4), EMA).

Environmental audits may be carried out periodically (Art. 32, EMA). Projects shall be monitored and the Minister may, by notice in the Gazette, prescribe fees for such purposes (Arts. 33-34, EMA). Project proponents may also be required to submit environmental management plans to the Authority (s. 33(2), EMA). Terms relating to rehabilitation may be included in the terms and conditions of the Mineral Right (Art. 96, MMA). The Minister may require a security from a licence holder to ensure compliance with the terms of the MMA (Art. 91, MMA).

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