Mining & Trade News

The Lilongwe City Council has expressed concern over illegal sand and quarry mining within the city, which is leading to environmental degradation.

The Council’s Director of Parks, Recreation, and Environment Allan Kwanjana in an interview advised construction companies and individuals working on building projects to desist from sourcing the materials from illegal miners.

“The public is hereby informed that carrying out of sand and stone mining activities within the City boundaries is a serious offence punishable by law,” Kwanjana said citing relevant sections in Environmental Management Act and Mines and Minerals Act.

Kwanjana warned the miners to stop the operations immediately saying failure to comply will result in prosecution and heavy penalties.

“The government, through the Council, is dedicated to safeguarding the environment and the well-being of its citizens,” he said.

Kwanjana said the Council is undertaking proactive measures against the situation including identifying mining sites, issuing prohibition notices, deploying enforcement teams, and continuous monitoring to ensure compliance.

He said: “However, challenges persist, with resistance from miners leading to confrontations and confiscation of tools. The City Council has designated areas where mining is permissible, but some operators defy regulations, prompting forceful eviction.”

“Currently we are doing this in a number of sites along Lingadzi and Lilongwe rivers. We end up confiscating their working tools and where possible apprehend the culprits and take them to Police for prosecution,” he said.

Kwanjana lamented that small-scale miners involved in the malpractice operate without oversight leading to uncontrolled sand and rock mining along riverbanks, streams, and dambo land, causing land degradation and posing threats to infrastructure such as roads and bridges.

He said attempts to form committees for a coordinated solution have faced setbacks, as key stakeholders like the Ministry of Lands and the Ministry of Mining have been hesitant to address the issue.

“The environmental impact is evident, with land rendered undevelopable, mosquito breeding grounds formed, river courses diverted, and public infrastructure endangered. Current efforts targeting miners have proven ineffective due to their widespread presence in the city,” he said.

Kwanjana, therefore, said the Council is contemplating a shift in strategy to target buyers and customers in restricted areas.

“The impounding of trucks transporting materials from these zones and leveraging existing legislation to impose penalties and fees are suggested measures to cover enforcement expenses,”Kwanjana said adding that the situation calls for urgent collaborative efforts to curb unsustainable mining practices and preserve Lilongwe’s environment for sustainable development.

However, small scale quarry miners plying their trade in the City told Mining & Trade Review that Government needs to give them licenses and identify appropriate areas where they should be doing their trade.

“We need to be empowered with loans to procure machines and compete with mechanized miners. It is sad that foreigners who have adequate capital including Chinese have dominated the industry putting us out of business,” said a female miner.

Stakeholders in the extractive sector have urged the Malawi Government to finalize the Mine Development Agreement (MDA) for Kayerekera Uranium Mine with tenement holder ASX-listed Lotus Resources following soaring of uranium prices on the global market.

Trading Economics reports that uranium prices were at $91 per pound in early January, holding the surge from late 2023 that took prices to 16-year highs amid strong demand and risks to supply.

Volatile fossil fuel prices and ambitious de-carbonization goals drove the US and 20 other countries to announce that their nuclear power will be tripled by 2050.

The large bets on nuclear energy are led by China, which is building 22 of 58 global reactors, while Japan restarted projects to increase nuclear power output, and a new reactor in Finland marked Europe’s first new facility in 16 years.

“The developments were met with increasing threats to supply. Western utilities continued to voluntarily shun Russian uranium imports due to its invasion of Ukraine, while US officials moved closer to outright banning imports from the world’s top producer of nuclear fuel. Additionally, supply was also pressured by the military coup in Niger and troubles in Canadian mines.”

Commenting on the development, Mining expert John Nkhoma asked both the Malawi Government and Lotus Resources to allow the project to resume with preliminary works including refurbishing the plant though the MDA is yet to be finalized.

Nkhoma, a seasoned geologist and MD for a leading consultancy group Chiwandama GeoConsultants, said he is optimistic that what have remained in the agreement are just few steps that can be finalized in few days.  

He said: “To tell you something, the prices are very succulent. From my perspective, I think preparatory works for mining resumption should commence even though discussions for the MDA are in progress.”

“After all I do not think there are many issues to look into. Maybe they can start warming up the equipment and hiring the company that will be doing mining like Paladin did last time.”

Lotus Resources reported recently that if the MDA is signed by December 2023 as promised by the Ministry of Mining, the company will be able to identify off-takers, secure finances, commence plant refurbishment this year and resume production in 2025.

In a separate interview, Coordinator for Chamber of Mines and Energy in Malawi Grain Malunga said the uranium price hike is advantageous to both Government and Lotus, hence the call to respond to few issues remained in the MDA.

“It is to the advantage of both Lotus and Government. There are few issues for Government to respond to and move on with MDA conclusion,” said Malunga.

Programs Coordinator for Natural Resources Justice Network (NRJN) Joy Chabwera concurred with Malunga but asked Lotus to ensure that they negotiate a fair deal with the Malawi Government to avoid mistakes made with the previous company.

“It is to the advantage of the government to conclude the MDA for Lotus but it is also important for the company to negotiate a fair deal for Malawi since the Paladin background,” Chabwera said.

The Ministry of Mining indicated recently that the outstanding issues for Lotus’s MDA include; loss carry forward from Paladin; waiver on interest on loans, non-resident tax and dividends; application on resource rent tax about to be concluded and; Lotus’s request of equity share to be at 10% and not at 15% as it was the case with Paladin.

In August 2022, Lotus Resources Limited released a Re-start Definitive Feasibility Study (DFS) that highlighted that Kayelekera ranks as one of the lowest capital costs uranium projects globally whilst also having the ability to quickly recommence production once a Final Investment Decision (FID) has been made.

The Kayelekera Uranium Project is the fourth largest uranium asset globally by historical annual production.

The mine, currently on care and maintenance, produced ~11MIbs U3O8 equivalent over five-years between 2009-2014 before the asset was shutdown to preserve its longevity due to a sustained low uranium prices in the aftermath of the Fukushima Nuclear Disaster which resulted in the closure of several nuclear power plants in Asia.

The Kayelekera deposit hosted a total mineral endowment of approximately 60Mlbs U3O8 equivalent when historical production (11Mlbs) and the current resource (46.3Mt at 500ppm U3O8 for 46.3Mlbs U3O8) are accounted for. 

The Company also owns the Livingstonia Uranium deposit (6.9Mt at 320 ppm U3O8) in Malawi. Combined Kayelekera and Livingstonia account for a total global Mineral Resource Estimate for the Company in Malawi to 49.4Mt at 475ppm U3O8 for 51.1Mlbs U3O8.

Kayelekera is a sandstone-hosted uranium deposit associated with the Permian Karoo sediments and is hosted by the Kayelekera member of the North Rukuru sediments of the Karoo. The mineralisation is associated with seven variably oxidised course-grained arkose units, separated by shales and chocolate-coloured mudstones.

Uranium mineralisation occurs as lenses primarily within the arkose units and, to a lesser extent, in the mudstone units. The lowest level of known mineralisation currently is at a depth of approximately 160m below surface. 

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Malawi Women in Mining (MAWIMA) and Women in Energy, Extractives and Mining (WEEM) have merged to form the Malawi Federation of Women and Youth in Mining (MFWYM), Mining & Trade Review has learnt.

Vice President of MAFWYM Ashley Simbeye Maleta said in an interview that the newly formed federation commences its operations this month.

Maleta said the Federation has been formed to fulfill the conditions set by the Southern African Development Community (Sadc) Women in Mining that require women in mining in a country to speak with one voice.

“MAFWYM has been formed so that MAWIMA and WEEMA should speak with one voice regarding issues of mining in Malawi. Though we have different strategic plans, we are all Malawian women and secondly we are in the same sector and it was just imperative that we have one body representing the country at any SADC fora or event,” she said.

Maleta, who was speaking on behalf of MAFWYM President Annie Kamanga, disclosed that the leadership of the new body comes from the merged associations and that there is balance of power though the new body is being treated as an independent registered institution.

“For its smooth growth, MAFWYM will incorporate cooperatives in the mining sector apart from individuals. Those looking for broader markets are free to join but there will be a fee. This will help in easy monitoring of the association and we are encouraging people who are self-driven and result oriented to join us,” said Maleta.

The vison for the new body is to create a platform for its members to achieve professional development and economic empowerment for accomplishments of entrepreneurial exploits, initiatives and development endeavours.

The new body also wants to forge a partnership with relevant stakeholders for women to achieve their optimal participation in the mining sector as well as increase women and youth representation in the mining industry as they help in the contribution of the SADC economic growth agenda.

“MAFWYM will help us speak with one voice in terms of identifying opportunities in a coordinated manner and facilitate integration, empowerment and success of African labourers and women and youth entrepreneurs in and around the mining sector,” reads a statement from MAFWYM.

It explains that the objectives of the new body include: provision of support, care and healing interventions to women and youth infected and affected by HIV/AIDS and to victims of gender based violence around mines through capacity building.

The body will also take a leading role in promoting and supporting the advancement of women in the mining sector, enhancing the entrepreneurial development of women and youth owned enterprises in mining as well as increasing members’ awareness of the legislative process and legislation relating to the mining industry.

The new body will also be involved in raising empowerment funds and funding for women and youth in the mining sector.

With just two weeks to go before the Investing in Africa annual mining indaba starts, Malawi’s Ministry of Mining is yet to solicit funds to attend the Indaba that takes place in Cape Town, South Africa.

This year’s indaba which will be held from February 5 to 8, 2024, aims to celebrate Mining Indaba’s 30th anniversary by taking a new direction and purpose under the theme of ‘Embracing the power of positive disruption: A bold new future for African mining.’

The indaba outlines the need for Africa’s mining industry to embrace a solution and a path towards positive change in order to become a meaningful global competitor as key minerals are required to drive a sustainable future for the planet.

For Malawi, the indaba serves as platform to market its mineral potential to potential mining investors around the global.

But in an interview, Public Relations Officer for the Ministry Tiwonge Kampondeni told Mining & Trade Review that the Ministry is still looking for funds to attend the event.

“We are expected to participate and at the moment we are looking for resources to enable us to attend the meeting this year,” said Kampondeni.

Last year, the Ministry failed to have a pavilion at the indaba similarly due to lack of financial resources.

Commenting on the development, National Coordinator for Natural Resources Justice Network (NRJN) Kennedy Rashid blamed the Ministry of Finance for not being serious in funding some of the priority sectors highlighted in Malawi 2063 economic agenda such as mining.

Rashid said the country has huge mineral potential that requires marketing and that the mining indaba is a huge opportunity to woe investors into the country.

He said: “The challenge we have is that the Ministry of Finance has not been serious in financing the priority sectors that are expected to generate revenue and transform the economy.”

“Our Ministry of Finance, to be honest, has never stepped up to support the sector as other countries in the region have been doing.”

“The expectation that the private sector is going to develop the country is good but also the regulation and development of the sector require investment.”

“Attending international conferences like the mining indaba to at least market the country is what we need for companies out there to know what we have.”

Rashid said the Ministry is supposed to have a pavilion with all the Information, Education and Communication Materials (IEC Materials) on Malawi’s minerals sector.

He said: “We need to be serious with the sector and the Ministry of Mining should not be lacking resources to attend important events.”

“The lack of resources in the Ministry only shows that our government is not serious about mining,” said Rashid.

Apart from solid mineral potential, Malawi has petroleum and gas blocks that are vacant up to date that require to be marketed to investors.

Despite the absence of a government pavilion at the Indaba, multinational exploration companies working in Malawi such as Lindian Resources, Mkango Resources, Sovereign Metals and Lotus Resources always attend the Investing in Africa Mining Indaba.

Minister of Mining Monica Chang’anamuno has expressed concern over the spread of fake news about mining on social media.

”My ministry is concerned with the tendency by some unpatriotic people who are spreading false information especially through social media. We sometimes spend a lot of resources to investigate these unsubstantiated reports only to discover at the end of the day that they are lies,” Chang’anamuno said when she opened the Artisanal and Small-scale Mining Indaba in Lilongwe.

She urged media practitioners to report facts to avoid confusing the populace as well as investors.

“Sometimes we read reports in the media which are lacking and not fully investigated. We love you media practitioners as partners in development but whenever you are not sure about a subject, please seek clarification from my Ministry,” she said.

Chang’anamuno said if well nurtured and fully utilized to its maximum potential, the mining sector can ably compete with agriculture in contributing to the economy.

“Even the President His Excellency Dr Lazarus Chakwera is following with very keen interest developments in the mining sector and we know as a Ministry we have his total support,” she said.

First Principal Secretary in the Ministry Joseph Mkandawire in an interview expressed concern that the Ministry at one point hired a helicopter from Malawi Defence Force (MDF) to check illegal mining activities in Vwaza Game Reserve as reported on social media only to find out that the pictures being circulated were from one of the countries in West Africa.

“We spent millions to pay for fuel for the helicopter and even MDF personnel only to hit a blank wall. This malpractice of spreading false information must stop because sometimes it brings unnecessary fear to investors,” said Mkandawire.

Dr Charles Kankuzi, a lecturer at the University of Malawi, in his contribution during deliberations also touched on the issue of false information and misrepresentation of facts in mining sector.

He urged government and all stakeholders in the mining industry to take a leading role in information dissemination if the vice is to be nipped in the bud.

Former Minister of Mining Grain Malunga, who also graced the event, while commending the media for their role in developing mining said mining being a technical subject, there was need for specialization to avoid creating unnecessary tension through misreporting.  

Mining expert and former Minister of Mining Grain Malunga has called on government to promote recycling of scrap metals locally other than allowing people to export the metal.

Malunga observed in an interview that the exported scrap metals are the ones used to make iron bars and other metal components which the country purchases at a very higher price.

“We need to put things in order and see where we can generate more money and even jobs. By exporting the metals we are killing ourselves twice. You sell the metals cheaply and buy iron bars at a very exorbitant price. I think we can do better on this since we are not producers of iron materials,” said Malunga.

When put to him that government has been trying its best to put in place a ban on scrap metal exports, Malunga said the bans do not yield anything because they are always temporary

“The authorities must treat this issue with the utmost seriousness it deserves. We do not need temporary bans because it leads to the buyers circumventing the system and continuing trading in metals for copper, iron and aluminium production,” said Malunga.

When contacted for comment, Trade and Industry Minister Sosten Gwengwe disclosed that there are new procedures on the issue which government put in place but he could not divulge a lot as he was not in office.

“Let us talk after the holidays, but there are new procedures in place,” said Gwengwe.

Meanwhile, the emergence of scrap metal buyers on the local market is said to be one of the reasons some car breakers are now leaving the business as they are unable to compete with scrap metal exporters on the market

The scrap metal buyers are targeting old or accident damaged vehicles for breaking and then exporting the parts for recycling in China.

When car breakers purchase an old or accident damaged vehicle they dismantle the car and sell part by part while scrap metal buyers just sell the whole car in one piece for chiseling before exporting.

Mining and Trade Review investigations indicate that the trade of buying damaged or old vehicles is now even being done by foreigners with more money a thing which has automatically lead to soaring prices.

Lilongwe based veteran car breaker John Nkisi of MJ Multitraders   claimed that the growing demand for scrap metal in countries such as China, has distorted car breaking business.

 “We used to buy old or accident damaged vehicles at low prices but the story is different. If we identify a vehicle to buy we are outbid by scrap metal buyers. In the end some car breakers are closing shop due to stiff competition,” said Nkisi.

As a way of survival Nkisi is now diversifying his business by investing in agriculture because he claims that the future of car breaking is gloomy.

“It could have been good if more investors were allowed into mining of precious metals used to make aluminium and steel. By doing this the country could be getting enough forex while creating sustainable jobs instead of exporting metals bought on the market cheaply,” Nkisi said.

 Nkisi also urged his fellow car breakers to look into the issue of forming an association seriously so that they can be speaking with one voice.

“An association for car breakers will help us speak with one voice and easily lobby with authorities on how they can protect us. We are of the view that businesses which can be done by Malawians must be left in the hands of Malawians.

An association can help them have a strong voice for lobbying and dealing with issues including that of foreigners dominating the trade and export of metals with ease.

“If we sell car components bit by bit, we can make a lot of money because these scrap metal buyers get the stuff cheaply. Imagine a kilogramme going at K200, and when processed into bars we pay as high K6000 per kilogramme, this is sad,” said Nkisi.

Mining Solutions Africa says it is pursuing strategic measures aimed at fostering growth and collaboration within Malawi’s mining sector.

Director Fredric Josiya says in an interview the Group, which operates as either contractors or sub-contractors specializing in mining engineering, will in 2024 expand its portfolio in areas such as mine designing and blasting with an ambitious vision to start own mining operations.

“We are mining engineers, and our current projects involve diverse aspects of the mining process, from design to execution. Our next step is to have our own tenements, allowing us to engage in actual mining operations,” he says.

As part of its growth strategy, Mining Solutions Africa has established a branch in Mozambique, expressing keen interest in expanding their operations beyond Malawi’s borders.

Josiya urged the Malawi government to invest in mining sector through allocation of adequate funds in the budget for exploration projects, specifically targeting gold and lithium.

He said the government would profit from the investment by selling exploration results to potential investors.

Reflecting on the current state of the industry, Josiya acknowledged the challenges faced in 2023.

He said; “It has not been a good year for us, as construction activities have been passive. However, we have observed a quiet resumption of construction works by the government in the last quarter, which is a positive sign, considering they are the main buyers of our focal jobs.”

Mining Solutions Africa is currently engaged in preliminary prospecting in various areas, with a particular interest in gold and gemstones.

Josiya outlined the company’s approach, stating, “After the preliminary results are out, we intend to engage government entities to process various licenses for robust explorations.”

Discussing mining financing and economics in Malawi, Josiya expressed concern about the lack of expertise in key offices.

He said; “As a country, we are not doing very well in mining finances and economics. We have just received two cohorts of professional mining engineers in our tertiary education institutions, and we lack experts in key offices, including lending institutions.”

Josiya highlighted the significance of having professionals with robust knowledge in mining issues in key positions, both in government and lending institutions.

He said: “These professionals are crucial for scrutinizing possible mining projects and facilitating their financing, similar to the situation in our neighboring countries.”

“For Mining to develop in Malawi, there is a need for the government to invest more in exploration works, with the help of well-versed professionals who can take charge of vital areas including budget allocations.”

Artisanal and Small-scale Miners (ASMs) have identified a gold mining site in Milepa, Chiradzulu district which is attracting scores of miners, and local and foreign gold buyers.

One of the Miners Misheck Galaja confirmed in an interview with Mining &Trade Review that the ASMs are purchasing or renting land from smallholder farmers in the area for gold panning purposes.

Galaja said they are selling the gold grains, which he said are of good quality, to middlemen who have markets abroad or in turn sell to Export Development Fund (EDF) in Mangochi, because EDF officers are yet to come to the site to buy gold.

“We are selling to these buyers because we are looking for a ready market as we are in need of money for survival. We do not have money and time to take the gold to as far Machinga or Mangochi where EDF officers are buying gold,” he said.

Galaja said the ASMs started mining at the site in November, and they continue to land on good quality gold particles.

However, Galaja expressed concern over poor sanitation at the site due to shortage of clean water and toilets.

“We are at a high risk of contracting diseases such as cholera as we do not have toilets as well as potable water to drink, we just use the bushes as toilets putting ourselves at a high risk,” he said.

Galaja called on government to assist the ASMs at the site by ensuring that they are licensed and trained in sustainable mining practices.

Malawi has a number of ASM hotspots including Makanjira in Mangochi, Tukombo in Nkhata Bay, Bua River area in Kasungu, Machinga, Balaka, Neno, Nsanje and Matapira in Lilongwe.

Besides poor sanitation, other issues at the sites include child labour, alcoholism, marriage breakages and pupils dropping out of school to indulge in mining activities. 

Mineral resource revenues are special because they are finite, volatile and if they are large enough, they can easily impact other industries and paralyse them. They also generate large economic rents and are location-specific, which can lead to conflicts over their control in other areas. As a result, they may need to be managed and distributed differently from other types of government revenue.  There are various techniques that governments can employ to respond to the special challenges of natural resource revenues in a country like Malawi. These among others include;

• state-owned enterprises.
•  subnational jurisdictions.
• distributing revenues to natural resource funds.
• the national budget, or directly to citizens in the form of cash. Each of these institutions requires a unique management strategy.

Natural Resource Revenue

Many countries do not see their expected returns of social and economic development when they discover mineral resources. This challenge is in part linked to how the countries manage the natural resource revenues, or the money received by the government because of the extraction or sale of natural resources. The reader must understand that mineral resources are unique and to understand the uniqueness there are characteristics that make them to be in such a state and belong to a special way  as compared to other natural resources for a country. Below are some of the selected few  properties that make mineral resources uniquely identified;

1. Mineral Resources are volatile.

 Prices of natural resources like minerals, fluctuate with respect to market forces. When government revenues are tied to natural resources, their revenues will fluctuate accordingly. In this case,volatility is amplified by  production cycles of mining and unexpected stoppages. This makes the mine planning or the countrys development planning difficult and may lead to company’s/countries go into debt when revenues decline in order to maintain the same standard of living as before the downturn. Volatility can create problems because it means public expenditure becomes less effective than it was before so countries must try to put in place mechanisms that can minimise this kind of risk because the end result to this  is poor investment decisions and higher probability of debt crises.

2. Mineral Resources are Non Renewable ( Finite).

Each mining project cycle has a life span called the Life of Mine(LOM) upon reaching the Goodbye Cut. This is usually so many years but mostly less than 50 . While new technology or exploration generates new discoveries, ultimately mineral resources are finite because they cannot be renewed once and for all. Some countries have experienced large economic booms during their peak production phase of the mineral resources both in areas of operation and the country as a whole but ultimately, only to fall into poverty as soon as the resources are fully exhausted. An example in Malawi is the mining town of Karonga from Kayelekera Uranium Mine  in the north where there was an economic boom but later phased out slowly due to its temporary closure (under Care and Maintenance) and also the phosphate exploited and entirely depleted in the tiny Island of Nauru in Oceania.

3. Mineral Resources can damage other industries.

When mineral resources are discovered, they can represent a large percentage of the country’s GDP and government revenues. If the economy does not have the absorptive capacity to make efficient use of these revenues, the result can be inflation or exchange rate appreciation. This increases the cost of domestically produced goods in foreign markets, especially manufactured goods, harming exporters. Also, the large revenues in the private sector often attract skilled workers to extractive industries like mining. When the number of skilled workers in a country is small, this can make it more difficult for other sectors to find expertise. Together these trends can make it more difficult for other industries to successfully operate and can make a country more dependant on natural resources like minerals. Together, these effects are often referred to as Dutch disease. In other words, Dutch disease leads to accumulation of wealth from resources like minerals and the consumption that comes from that wealth leads to a demand for a lot of non-traded goods and this pulls resources away from other internationally traded goods that would be competitive.

Politically a Dutch Disease is a highly valued resource that acts as a natural rent which is just as income that is free. It’s a massive wealth that can sometimes lead to internal conflicts of a country.

4. Mineral resources can be large and geographically concentrated.

Mining revenues can be enormous relative to the size of an economy, yet, as a capital-intensive rather than labour-intensive industry, they tend to employ only a very small portion of the population. This is often misaligned with the expectations of the communities that surround the extraction point. Furthermore, the profits can be captured by a selected few or be exported to foreign investors. This can cause frustration and unnecessary expectations among locals, leading to conflict, especially in the region where the mines are located. The large amount of profits from a single source is vulnerable to state capture or government mismanagement unless oversight mechanisms are in place.

Some selected institution for management and distribution of revenue in mineral resources

Revenue distribution refers to the manner in which a government allocates, or distributes, natural resource revenues to different levels of government, institutions, or directly to citizens. Some of the decisions of where to allocate revenues are fundamentally political. Economic efficiency criteria consider questions of the absorptive capacity of different levels of government, whether individual citizens have access to the ability to save transfers, and how costs differ over different locations or sectors. Combining the economics with the political analysis can be challenging, particularly when trying to respond to the special qualities of natural resource revenues realised from extractive sector like mining. For instance, allocating an appropriate percentage of revenues, determined by an economic formula, to a long-term savings fund can help mitigate Dutch disease and improve national spending efficiency, though it can also starve the government of much-needed development financing. Allocating some revenues to subnational governments may also improve local service delivery. However in allocating resource revenues directly to citizens, it may reduce poverty and improve natural resource revenue accountability. Therefore governments, with input from citizens, must decide how to manage risks and opportunities in the sector. Allocation of revenues is only part of a bigger picture and mining related/natural resource revenue institutions should have established procedures or principles to plan, organize staff and control their operations. These activities are referred to as revenue management, as opposed to revenue distribution, which simply refers to the allocation of revenues. Some key institutions that manage resource revenues are:

(a) Natural resource funds.

Governments can establish special extra budgetary funds—outside the regular budget process—to manage natural resource revenues such as from mining of a mineral resource. When these funds are used to invest at least partly in foreign assets, they are referred to as sovereign wealth funds or natural resource funds. Ideally, the government dictates how much to deposit and withdraw from these funds by fiscal rules. Sometimes governments that are dictatorial ones, manage these natural resource funds willy nilly without clear rules or objectives.

How successful are natural resource funds

• When they  are established with clear objectives
•  Strong fiscal and investment rules
•  Division of responsibilities between actors.
•  Sufficient disclosure for proper oversight.

(b) State-owned enterprises

 State-owned enterprises are companies that are more than 50 percent owned and operated by the government. In mining, state owned enterprises can play an important role in revenue management, as natural resource revenues often pass through them on their way to the budget, or there are large budget allocations of mineral revenue to these. Countries often find them attractive, as  national mining companies can generate revenues for the state and serve other functions, such as training domestic workers and improving sector control e.g. Botswana. However, there is a risk that State Owned Enterprises can act as a drain on government finances or become a financial risk and thus they can divert scarce government revenues away from public investments in other sectors. They are also responsible for non-fiscal expenditures that can be an inefficient use of public resources, such as Corporate Social Responsibility (CSR) projects. If a government clearly establishes the fiscal relationship between these state owned enterprises  and the budget, it can work better to avoid  problems.