Mining & Trade News

The Public Private Partnership Commission (PPPC) says commencement of the construction of the Mpatamanga Hydropower Plant, which was scheduled for this year, has been shifted to next year.

The project, which will see the injection of a total of 350MW into the national power grid will be constructed at Mpatamanga Gorge, along the Shire River.

It is being developed through a Public Private Partnership Model in which EGENCO will hold 30% shareholding on behalf of the Government of Malawi.

The other shareholders will be the World Bank’s International Finance Corporation to retain 30% and a strategic partner to hold 40% of the investment.

PPPC CEO Patrick Kabambe disclosed to Mining and Trade Review that the project will not start this year due to on-going negotiations with two international energy firms SN Power Invest of The Netherlands and Electricite De France SA of France which have so far submitted their final technical and financial proposals for assessment.

Kabambe said the two investors have merged to work as a consortium for the project anticipated to be finalized by 2025.

Kabambe said; “We are still under negotiations, the investors submitted their final offer on September 17,2021 and we have just finished evaluation of the proposal, the next step is to embark on negotiations on final details.”

“We understand that citizens’ key instrument is the analysis of whether these companies will be affordable enough to meet current power needs, of which it is noted that this project is worth investing considering the funds being spent in maintaining gensets.”

He also cited that once commissioned, Mpatamanga will double Malawi’s power generation capacity hence paving way for more investment opportunities in the country as major industrial operations have been failing to commence in Malawi due to power deficiency.

Kabambe said: “We have seen many industrial projects in various sectors including mining failing to rollout with some pulling out to other countries due to energy scantiness, but once this project is commissioned, we are optimistic such distresses will halt.”

“And with the coming in of the interconnector with the Southern Africa Power Pool, we stand solid chances of exporting excess power to other countries, equating to new revenue channels for Malawi.”

The project will also assist in meeting future power demand during both peak and off-peak periods, improve the performance of the existing power system due to inclusion of a storage reservoir to support peaking operation as well as significantly reduce the sediment inflow into the Kapichira reservoir, increasing power generation at the plant and prolonging the lifetime of the reservoir.

The total investment on the project is estimated to be approximately US$850-million and a comprehensive World Bank-financed feasibility study for the project was completed in 2018.

During the study, a UK-based global engineering, management, and development consultancy firm Mott MacDonald, Malawi-based C12 Consultants, and France-based biodiversity and ecosystem consultancy Biotope were engaged to carry out the environmental and social impact assessment (ESIA) for the project.

In an attempt to regulate and reduce inefficiencies in the energy sector, the Malawi Government has revealed plans to develop a Renewable Energy Act. The Act will also go a long way in creating a fertile ground for the participation of Independence Power Producers (IPPs) in the sector.

The current IPP Framework need some improvements to set an enabling environment for various actors in the sector, President Lazarus Chakwera told the gathering in Salima when he inaugurated the 60MW JCM Power plant, the first IPPs solar project to be connected to the national grid.

Chakwera added that the Act will also address red tape and other weak governance systems to guarantee private investment security in the sector.

“For serious developers like JCM Power, who have sourced financing support from the Dutch Development Bank and InfraCo Africa Limited, as well as a liquidity guarantee from the African Trade Insurance Agency, Malawi cannot afford to have governance systems that take eight years for a project like this to move from conception to completion,” he said.

Dismayed by the red tape in government, Chakwera noted that the decision to unbundle the concentration of energy functions in the Electricity Supply Corporation of Malawi (ESCOM) and create separate institutions in order to make the power market more efficient, left behind loose administrative processes that were not responsive to investors.

“More needs to be done to make the administrative processes within these new entities less susceptible to political interference and human error. In short, more needs to be done to make the administrative processes within these entities faster,” he said.

Following the unbundling of ESCOM, Energy Generation Company (EGENCO) took over the responsibility of generating power, ESCOM retained the responsibility for power distribution while Power Market Limited assumed the responsibility of purchasing power,

Chakwera further called on the Ministry of Energy to be professional in handling prospective investors in the energy market so that the country can meet the target of 1000MW in the next four years.

He further advised investors who secured Power Purchase Agreements but had not started implementing their projects to pull up their socks or face consequences. “Malawians have no patience for pretenders. We want serious people like JCM has shown themselves to be,” he said.

The President commended JMC Power for promoting a green future, which fits with the country’s desire for clean energy sources.

He said despite Malawi not being one of carbon emitters, there is a need to embark on more clean energy sources understanding that the country is not spared from negative impacts of climate change as a result of the emissions of nations in the global north.

Recently, Chakwera attended the Climate Conference in Scotland where he witnessed the launch of the Global Energy Alliance for People and Planet, whose aim is to promote universal access to clean and affordable energy.

According to Chakwera, the JCM solar power plant is a potent symbol of the country’s commitment to that agenda, a commitment to building a new Malawi of access to clean and affordable energy.

The Governments of Malawi and India have prequalified five Indian consulting firms to conduct consultancy services for construction of 30 Megawatts Solar Power Plant for Blantyre Water Board (BWB).

The project will be financed by the Government of India through a US$215.68-million extended Line of Credit (LOC) by Export – Import (EXIM) Bank of India for the implementation of drinking water supply schemes and other development projects in Malawi.

The listed companies include: Avant-Garde Systems and Controls Limited; Darashaw and Company Limited; NTPC Limited; TATA Consulting Engineers and; WAPCOS Limited.

According to a General Procurement Notice, the listed companies were examined and verified for both completeness of their submissions and adherence of their applications to the prequalification criteria that was prepared by the Malawi Government.

Reads the statement by Malawi Government, EXIM Bank and BWB: “Blantyre Water Board which is one of the implementing agencies for the LOC intends to apply a portion of the funds towards construction of an Independent Power Producer (IPP) for own use.”

“The Importance of constructing an IPP for the Board cannot be overemphasized. Firstly, the project shall reduce operational costs to sustainable levels that will allow the Board to continue supplying affordable services.”

“This shall consequently help in the improvement of BWB’s business profitability which will enable timely system maintenance of faults and subsequent investments in expansion of network to unserved areas and technological improvements.”

The consultancy services will involve preparation of a detailed feasibility study and designs for the project, as well as preparation of Detailed Project Report (DPR).

BWB has proposed December 23, 2021 as deadline for submission of bids by consultants, and January 17, 2022 as the commencement date of consultancy services for the IPP project.

The Reserve Bank of Malawi’s Monetary Policy Committee (MPC) has projected that the rise in fuel prices on the domestic market will trigger a corresponding increase in the rate of inflation in 2022.

It is anticipated that the fourth quarter of 2021 will see the inflation rate shoot to 8.9percent from 8.2percent as a result of the fuel price adjustment as well as the rise in maize prices, persistent disruptions to global supply chains among other factors.

According to a statement signed by MPC chairperson Dr. Wilson Banda, the inflation rate averaged 8.7 percent in the third quarter of 2021 against a projection of 8.8 percent and lower than the 9.1 percent recorded in 2021.

“The decrease is attributed to moderation of the food inflation rate as non-food inflation rate increased marginally. Specifically, food inflation rate averaged 10.3 percent in the third quarter of 2021 compared to 11.1 percent the second quarter of 2021,” the statement says

“On the other hand, non-food inflation rate averaged 7.2 percent in the third quarter of 2021, from 7.1 percent in the previous quarter,” Banda says in the statement adding that headline inflation rate is now projected to average 9.1 percent in 2021, representing an upward revision of 0.3 percentage points from the third quarter of 2021.

He also explained that Malawi’s economy is rearing from the developments in international oil prices as crude oil prices rose to an average of US$73.0 per barrel in the third quarter of 2021 from US$68.6 per barrel in the second quarter.

Banda noted that the increase was propelled by the growing demand for the commodity following an economic recovery in the northern hemisphere and the global energy crunch.

“Brent crude oil prices are anticipated to remain around the current levels for the remainder of 2021 but are expected to decline to an annual average of US$66 per barrel in anticipation that growth in production from OPEC+, U.S. tight oil, and other non-OPEC countries will outpace consumption,” says the statement Meanwhile, the MPC has maintained the Policy Rate at 12.0 percent while the Lombard rate is at 0.2 percent points above the Policy Rate. The Liquidity Reserve Requirement (LRR) ratio on both local currency and foreign currency deposits remain at 3.75 percent in a bid to minimize policy trade-off and to better manage inflationary pressures as well as to support economic recovery

The completion period for the implementation of the Malawi-Mozambique Interconnection project has been shifted from the initial 2022 deadline to October 2023, Alex Kaitane, the Senior Project Manager at Electricity Supply Commission (ESCOM) has told the press.

Kataine attributed the change to the Covid-19 pandemic, whose preventative restriction measures to contain the disease prohibited foreign travels that would have facilitated project revision meetings between the two countries. 

“During the preparatory stage, we used to conduct meetings to plan its implementation, but Covid-19 interrupted the process, a development which forced us to embrace virtual meeting, until this too, met its own challenges,” he said.

He explained that among other plans to sustain the project and ensure that it remains on track even when the coronavirus resurfaces, ESCOM intends to involve local contractors to implement it.

The aim of the Malawi-Mozambique Interconnection Project is to incorporate Malawi into the Southern African Power (SAPP) which provides a platform for trading of electricity within the SADC Member states.

“The project will address the country’s frequent power outages resulting from high demand for electricity as it will be importing 50 Megawatts (MW) from Mozambique to boost its supply,” said Kataine.

It is planned that 218 kilometers long power lines will be constructed from Mozambique to Malawi with 76 kilometers lined in Malawi and 142 kilometers in Mozambique.

The US$127 million has seen the World Bank committing US$15 million to the project while the European Union supports it with 20 million Euros. Malawi as a beneficiary country has contributed US$2.5 million.

Reports indicate that the feasibility study for the project as well as environmental impact Assessment including Resettlement Policy have all been completed while implementation contracts have also been awarded.

The Malawi Energy Regulatory Authority (MERA) says it has embarked on a campaign of promoting alternative sources of energy including Liquefied Petroleum Gas (LPG) and Biogas with an intention to scale up LPG usage in the country to 3% by 2023.

MERA Public Relations Officer Fitina Khonje told Mining & Trade Review that the regulatory body is promoting the alternative sources as they are tried and tested cleaner, convenient and environmentally friendly alternative sources of energy.

Khonje said the efforts are meant to discourage use of unsustainable and polluting sources of energy.

Khonje said: “We intend to stimulate LPG usage to 3% by 2023. We are noting growing interest in LPG and we know this target is achievable.

“When consumers appreciate and experience the positive attributes of gas and accessibility is enhanced, LPG will be an automatic choice just as it is in many countries.”

“MERA is not working in isolation on this drive. We are supporting the implementation of the Energy Policy and there is high government and other stakeholder interest to push up household and commercial usage of LPG.”

Khonje further said there is huge hope for the promotion of LPG to be successful following various efforts by both MERA and the government to ensure that LPG is affordable and accessible in the country.

She said apart from the introduction of zero rated value added tax on LPG since October 2019, MERA has reduced licence fees and technical regulations for LPG outlets.

According to Khonje, MERA believes that incentives being rendered to LPG operators can also be passed on to customers to encourage consumption.

Khonje said: “In addition to this, more operators in the LPG sector will push down prices through economies of scale and will lead to wider distribution networks and accessibility.”

“We have also relaxed licensing conditions in order to attract more players including gas importers and gas retailers.”

“We will be holding information sessions on Gas Retailing in few weeks’ time and we encourage those who are interested to register with MERA to attend.”

Khonje also disclosed that MERA is currently lobbying Government through the Ministry of Finance to consider removing duties and VAT on LPG accessories and appliances.

However, commenting on the safety handling and usage of gas, Khonje lamented safety risk perceptions to have contributed towards the low uptake of LPG in the country.

Khonje said MERA believes that increased consumer awareness coupled with regulatory monitoring and enforcement of standards will facilitate understanding and adoption of safe practices.

According to Khonje, MERA has a dedicated team to ensure LPG safety standards are being upheld.

She said MERA is also conducting routine inspections of all LPG outlets and that required corrections are followed up whereby LPG retailers are required to give safety trainings to first time users.

Khonje added that the regulatory body is also disseminating Information, Education and Communication (IEC) materials on safety and proper LPG usage.

Meanwhile, apart from the LPG and biogas, the regulator is receiving encouraging reports on the uptake of solar energy in the country.

Khonje however said, though the country’s adoption rate for solar energy is encouraging, there is still more to be done to create awareness on standards, encourage usage of MERA licensed installers and encourage increased usage at commercial and institutional level.

As part of their mandate, MERA is entitled to facilitate increased access to energy supplies; promotion of energy efficiency and energy savings; and promotion of consumer awareness and education on energy issues.

Malawi’s Parliamentary Committee on Natural Resources and Climate Change (NRCC) has expressed concerned on how Malawi Energy Regulatory Authority (MERA) has handled the fuel procurement process saying it could lead to fuel shortage.

MERA declined to approve National Oil Company of Malawi’s (NOCMA) 2021 to 2022 application to award contracts to suppliers of fuel by the names of Independent Petroleum Group (IPG) and Lake Oil Limited saying they were concerned with the premiums stipulated under NOCMA’s Delivered Duty Unpaid (DDU) which in MERA’s view were not competitive and not transparent.

But reporting to the General Assembly following consultative meetings it conducted with MERA, NOCMA and other stakeholders, NRCC committee Chairperson Werani Chilenga told the house that MERA’s action on the matter indicated that as regulators they intended to prolong procurement period.

Chilenga said: “The Committee, however, is concerned that MERA’s action shows that it wants to prolong the delays in the procurement process of fuel.”

“The Committee is, therefore, concerned that such acts are a recipe for a possible fuel crisis in the country which could translate that government has failed.”

“The Committee is therefore concerned that MERA and some officials who are benefiting in the current saga may stir problems for the government.”

Considering that the fuel procurement process has taken over eight months instead of four months, and based on the approvals from Public Procurement and Disposal of Assets (PPDA), Anti-Corruption Bureau (ACB), Government Contracting Unit and Ministry of Justice, Chilenga said the committee has recommended NOCMA to proceed with necessary administrative arrangements within the law to proceed with the procurement of fuel.

Understanding that Malawian Transporters have been suffering due to the brokerage system that is not supported by any law, the committee has also recommended that Malawian Transporters should be allowed and supported by oil companies to operate without the brokerage system.

Chilenga also said the committee has also directed MERA to be operating as a regulatory body and follow the law and not meddle in the procurement process.

“That due to the damage caused by MERA for the past eight months in delaying the fuel procurement process, the President should consider dissolving the MERA Board; and that the Anti-Corruption Bureau should investigate the claims already submitted by NOCMA on the November 6, 2020 as soon as possible,” Chilenga said.

On November 26th, 2020 NOCMA submitted to the Anti-Corruption Bureau reporting all authorities that had a hand to influence the fuel procurement process.

Meanwhile, 100 percent of NOCMA’s transport business under DDU is given to local transporters on Beira Route.

NOCMA’s 2021 arrangement which was supposed to be implemented in March, 2021, will see 87 percent of NOCMA business on transportation for Beiraand Dar es Salaam given to Malawian Transporters. The oil company uses DDU to ensure security of fuel supply in the country even when there is a financial challenge for the company as NOCMA still procures and only takes responsibility of the product at a later stage when the product is in its reserves.

UAE oil exploration firm Rak Gas LLC, which held exploration licenses for Blocks 4 and 5, has terminated its oil exploration activities in Malawi.

Rak Gas has become the last multinational oil search firm to pull out of Malawi following another Asian firm Pacific Oil and Gas (Block 6), South Africa’s Energy for Africa (Block 1), and recently Hamra Oil (Blocks 2 and 3).

Country Manager for Rak Gas Martin Kansichi Banda confirmed to Mining & Trade Review that just like Hamra Oil, Rak Gas has notified the Ministry of Mining that it is pulling out of Malawi because it is difficult to mobilise equipment and human resource for oil exploration in Malawi due to travel restrictions that countries are enforcing to fight the coronavirus (Covid-19) pandemic.

“Oil exploration programmes demand that we mobilise equipment and experts from overseas and this is difficult due to boarder restrictions countries are enforcing to fight Covid-19,” said Banda.

He said currently the Rak Gas Malawi office is settling all its taxation obligations to wind up activities with a clean book.

Commenting on the development, Chairperson for Natural Resources Justice Network (NRJN) Kossam Munthali said the relinquishment of the licenses by the oil and gas companies may not be related to Covid-19 but that as the country, Malawi is not ready in that direction in terms of issues to do with legislative environment.

Munthali said the country might be lacking direction in the oil and gas sector due to the legislative framework which is very outdated. 

He said: “You may recall; these are the same companies that signed Petroleum Sharing Agreements less than a week to elections in 2012 and as Civil Society Organizations (CSOs) we were very shocked in terms of timing.”

“So this have told us that what they wanted is unachievable. They are only sending a signal to say we were not ready as a country.”

“I also hope wherever they go they will not speak bad of this country. If they were frustrated, then the government needs to do some setting and see how we can move.”

Munthali stressed that the country requires serious investors that can express demonstrative investment to sustainably exploit the minerals for the benefit of Malawians and not only for their own selfish course.

He also in order to attract the right investors, Malawi needs proper legislative architecture which is conducive not only to investors but also the people of the country.

Munthali said: “Petroleum Exploration and Production Act that we are using today is so archaic and dirty and is not speaking to the current practices.”

“The 1983 paper is a long overdue, we just need to quickly to go back to the drawing board.”

“This should be a wakeup call to the government to expedite review of the legislative framework.”

He also said though the country might not have serious investors for oil and gas, the upstream petroleum industry still be there and still belong to the nation.

He said: “Let me also remind the government that they need to provide us with figures on how much these companies have been contributing to the government through Petroleum Training Funds.”

“We need to know how we have managed to utilize these funds.”

Munthali said the last time he checked the records the companies were paying US$50,000 per block every year to the Malawi Government.

Coordinator for Chamber of Mines and Energy Grain Malunga commented that though the oil and gas investors have closed offices in the country, Malawi is still holds prospects in the future of upstream petroleum.

Malunga also said when the Ministry of Mining grants relinquishment certificates to the companies, it will have an opportunity to re-demarcate the big blocks.

“New companies will come in under re-demarcated exploration blocks. Good for Malawi. The blocks were too big,” Malunga said.

Meanwhile, the Ministry of Mining is still in the process of assessing whether the companies have met all obligations with both the government and local communities to be granted cancellation certificate.

But Minister of Mining Rashid Gaffar told Mining & Trade Review in a recent interview that government has no intention to block the companies from relinquishing the licenses.

Despite the prevalence of the coronavirus (Covid-19) pandemic, Malawi’s publicly listed conglomerate Press Corporation Limited (PCL) says it has registered a profit of K38.22-billion largely buoyed by the energy and financial sectors.

In a summary of audited results for the year ended December 31, 2020, signed by Group CEO George Partridge and Chairman Randson Mwandiwa, the Group says the energy sector comprising ethanol producers PressCane and Ethco delivered excellent results registering 116% growth in its profit after tax.

It says: “The performance was driven by the improved margins following the agreement of a new pricing model with the Malawi Energy Regulatory Authority (MERA).”

“Results were further buoyed by an upside from the production of hand sanitizers, a new product line, in the wake of Covid-19 pandemic, supported by the availability of additional feedstock carried over from the previous year.”

In the financial sector, PCL subsidiary National Bank of Malawi delivered strong results with a 31% growth in its profit after tax. The results were driven by a 17% growth in non-interest income and a 27% and 6% growth in customer deposits and the loan book respectively.

‘’The Bank’s efforts to improve the quality of the loan book saw a 45% reduction in net impairment losses. Going forward, the focus is to reduce the level of Non-performing Loans to be within the bank’s risk appetite,’’ state Partridge and Mwandiwa.

However, poor performance of brewer Castel Malawi negatively affected the growth of the conglomerate with the Directors concluding that it would be in the best interest of the Group to divest PCL’s remaining 20% stake in the company.

“Negotiations to that effect have now been concluded at a price of USD12 million, and the proceeds will be realized in 2021,’’ reads the statement.

In the consumer goods segment, PCL’s subsidiary PTC also continued to make losses mainly due to working capital constraints which is also undermining the implementation of the revised strategic plan.

‘’The board is considering several strategic options to improve the wellbeing of the company by inviting other new investors into the group,’’ the statement reads.

On the macroeconomic outlook, the statement reads that with the presence of Covid-19 vaccines, Directors of PCL envisage improved economic prospects for 2021 with GDP growth of 3.5% projected up from the 0.6% achieved in 2020.

It says: “Management is confident of delivering planned results. The prevailing foreign currency shortages and the related impact on exchange rates, however, remain a major downside risk. The significant increase in public debt poses another major challenge to economic growth.”

‘’The Group continues to search for profitable investment in the power segment. Negotiations for a Power Purchase Agreement are underway. Leveraging on its position in the market, the Group is well positioned for continued growth.’’