Africa

Details

  • Industry: Financial Services, Industrial Markets, KPMG in Africa, Malawi
  • Type: Business and industry issue
  • Date: 5/25/2011

Mining surpassing agriculture: opportunities for investment in Malawi 

It has traditionally been believed that agriculture is the mainstay for the Malawian economy. However, mining is quickly surpassing it.

The traditional export crops of tobacco and tea are significant foreign exchange earners. The tobacco industry earns 60% of foreign currency, employs over 12% of the workforce and accounts for a quarter of tax earnings. In 2010, Malawi was the world’s biggest exporter of burley tobacco. However, the recent ongoing anti-smoking campaign will have a significant impact on the industry and the economy.

 

Malawi is also known for its tea production and is the number two African producer after Kenya. The country has annual production of about 50 million kilogrammes, yielding on average around US$60 million, at production level. However, tea production depends heavily on rainfall. A significant variation in rainfall would be catastrophic as it affects both the volume and cost of production.

 

Uranium at Kayerekerain Karonga

 

The discovery and subsequent mining of uranium at Kayerekera in Karonga in northern Malawi is a timely blessing. The mining carried out by Paradin Energy Limited (an Australian Company) is currently producing up to 4.6 million pounds of uranium per day, valued at US$333 000.

 

The mine has seen a sharp increase in its production. In 2009, it produced 253 616 pounds and in 2010 it produced 1.7 million pounds. In 2011, the forecast production is 2.6 million pounds. The mine is experiencing some challenges, which creates potential investment opportunities:

 

  • The mine is located in a place with inadequate infrastructure and no accommodation
  • It uses diesel electric generators for production, so there is a need for power and energy
  • The road network is poor and increases transportation and telecommunication charges.

 

Niobium mining at Kanyika in Mzimba

 

Globe Metals and Mining Limited (a South African company) was granted an exploration licence in 2006 and the results have proven to be bankable. Niobium is used mostly in alloys, the largest part in special steel such as in gas pipelines and jet engines, among others.

 

This mining could have huge economic benefits for Malawi in the long-term. The opportunities of parallel investment in infrastructure are no doubt attractive. Potential investment areas include a good road network, abundant power supply, good accommodation and improved telecommunications.

 

Coal mining in the north of Malawi

 

The country has around 22 billion tonnes of coal available in several areas. Recently, the Minister of Energy and Mining, Grain Malunga, hinted that it is time the country considered the use of alternative means of generating power to supplement hydro-power.

 

It is estimated that Malawi’s installed power capacity is at 282.5 MW against a demand of 344 MW, out of which 95% is supplied by hydroelectric power plants located on the Shire River. The remaining 5% is generated by a mini plant on the Wovwe River.

 

With the shortage of energy in the country, there is the potential to use the existing coal reserves to provide alternative power to Malawi.

 

Prospecting for iron ore

 

About 98% of iron ore is used to make steel. Deposits of iron ore were discovered during the 1950’s by a government Geologist. Malawians have been mining Mindale lump ore on a small scale since the 1960’s.

 

Britannia (Mw) Ltd has started prospecting at Mindale Hill under an Exclusive Prospecting Licence (EPL).

 

On completion of the prospecting, it is likely that a significant investment in infrastructure will be required to enable the project to take off. Malawi stands to benefit from an increase in economic activity and job creation.

 

Other opportunities

 

Other minerals that could potentially be prospected on include those such as:

 

  • Bauxite in the Mulanje Mountain
  • Kaolinic clays (suitable for production of ceramic wares) in Linthipe, Dedza district
  • Phosphate (used as phosphatic fertiliser) in Chingale Gypsum (used in the manufacture of drywall plaster board linings) occurring mostly in the Dowa and Lilongwe districts
  • Silica found in Mchinji and around Lake Chilwa.

 

It is clear that Malawi is gifted with rich mineral deposits. With an investment in mining, it will boost the level of production, increase access to markets and energy, and bolster economic activities, especially exports.

 

Mining can transform the economy and be a substitute for agriculture.