Central Bank governor clash with investor

Malawi, currently suffering a bad economic spell with shortage of forex and fuel hitting the country, has been trying to establish the cause of its economic woes.

An explanation from Ligoya on the shortage of forex, when there is Paladin Africa Limited, which for the past two years now has selling uranium outside, is what pitted him into a war of words with the investor.

In a radio interview last week with a commercial radio station, Capital FM, Ligoya said Malawi rushed through the process of the Kayelekera uranium mining deal, such that the country has not benefited through foreign exchange inflows and profits from the venture.

The company in which Malawi government owns 15% has injected US$200 million capital cost into the project which is expected to generate between $150 million and $180 million a year, depending on the price of uranium.

During the construction phase, the project has created up to 1500 jobs and now has more than 200 permanent employees in the operations phase, besides the employment of contractors. Malawi now seems frustrated as it hoped by this time round the venture should have been the country's top export earner.

With such sentiments, Paladin Africa Limited has spurted venom on the central bank governor, saying RBM was part of the deal and therefore it cannot start saying that the deal was improperly signed.

The Australia-based Paladin Resources Limited has since issued a statement claiming that Ligoya's comments have caused concern in the international investment community in relation to the company's investment in Malawi.

Managing director of Paladin, John Borshoff said in a statement, issued on 28 November 2011, that Ligoya has since personally apologised for these comments, and has subsequently clarified his comments with the media.

Government brought in

Paladin has also raised the matter with the Malawian government and will further hold discussions with the appropriate ministries to reinforce the importance of adherence to the legally binding terms of the Development Stability Agreement (DSA) in ensuring the continuing operations of the Kayelekera Mine.

Borshoff says the DSA signed with Malawi, established the fiscal and regulatory framework for the company's investment in Malawi and guarantees a period of stability in recognition of the Kayelekera Mine's unique position as the first significant foreign investment in the country's resource sector.

Borshoff also revealed that it is in this DSA where there is a provision the Republic of Malawi's 15% equity stake in Paladin (Africa) Limited, the owner company of the Kayelekera Mine.

Although the media reported that Ligoya has apologised for his comments, RBM spokesperson, Ralph Tseka, says the governor only clarified to international media regarding the statement he made in the local press.

Conflicting statements

A statement issued on Tuesday, 29 November 2011 by the central bank, differed from what the governor had told local radio, as it said government did not goof on the uranium mine.

The statement acknowledged that RBM was part of the team that negotiated for the mine, and instead took the blame for what it said, ill advising government accordingly on the issue of Kayerekera mine.

The bank says, at that time, it was not correct for the central bank to agree to the arrangement that proceeds from export of uranium be deposited into an offshore account without RBM having any records of movements in that account.

"It is common knowledge in any country that proceeds of main exports are recorded as part of the foreign reserves of that country," says the bank, which says in order to correct the anomaly, it has now agreed with Paladin that the central bank will be a co-signatory to the offshore account as this will improve levels of accountability.

Tseka said RBM engaged Paladin on the issue of transparency on the export proceeds and the central bank successfully negotiated with them and this culminated in RBM being a co-signatory to their account."The idea is that RBM should be in the picture of the value of uranium exports,"

In another interview with Zodiak Broadcasting Station (ZBS), Ligoya said government is not against the Paladin Africa deal as may have been construed from the media reports, but that the central bank desired to have a more transparent deal with the miner. He said that as RBM, they would want to know how much Paladin Africa is making and how much is in their account.

"That's all what RBM is interested in not that we made a mistake to allow them to operate in Malawi as some media outlets reported. No, I was misquoted on that one," said Ligoya.

Paladin started exporting uranium, which goes through Zambia before departure for overseas using the Walvis Bay of Namibia in November 2009. Official figures have shown that at the time of the first export consignment, 34 600 pounds of tradable uranium by-product had so far been produced by June 2009 when it was commissioned and the country was expected to get US$1.7m based on the international market price which was US$52 per pound at that time.

Project expected to help Malawi

In 2007 Government of Malawi, which was still reviewing a draft Environmental Impact Assessment (EIA) for the uranium mining at Kayelekera in northern Malawi, acceded to the project amidst protest from other quarters. At that time Paladin Resources was holding a 100% interest in the Kayelekera project through its wholly owned Malawi registered subsidiary, Paladin (Africa).

Finance Minister at the time, Goodall Gondwe said the project was going to help Malawi's export revenue, which at that time it had remained stagnant since the 70's and as a result continued jeopardizing the country's long-term economic prospects.

"The export revenue has not increased significantly and has never at any time exceeded US$500 million," said Gondwe when he presented the supplementary budget review in the Malawi National Assembly in January 2007.

"However, with the prospects of uranium mining...Malawi's export revenue will increase by 50% earning the country US$280 million. This will bring very significant change to our economy," he said.

In September 2006, Ed Becker, Paladin's chief geologist told journalists in Lilongwe that the project was expected to produce about 1 000 tonnes of uranium oxide each year worth about K14 billion (US$100 million) at that time international market price. He claimed that it will be the second biggest industry in Malawi after tobacco.

Paladin Resources estimates that the Kayelekera deposit can support a 10-year mine life producing approximately 10 000 tons of uranium oxide.