Corruption and CSR in Malawi's Mining Sector

Monday, 6 January, 2014

A piece from Malawian paper, The Maravi Post, published over Christmas gave a great overview of the issues facing the Malawian mining industry. Corruption and illegal, artisanal or undeclared mining were the prime and predictable culprits, leading to massive losses in revenue for the people in one of the world’s poorest countries.

“The country is losing billions of kwacha through dubious and unchartered mining activities and related operations, mainly in central district of Ntcheu.” A report from Malawi Miners Task Force, sent to Malawi president Joyce Banda, indicted domestic companies Nyala Mines Ltd and Minnex Ltd for ‘secret mining deals’ and corrupt practices, presumably resembling the cronyism accusations that we’ve seen in 2013 a la Nigeria National Petroleum Corporation, BSGR and so on.

A glaring contradiction in reported mineral exports from different parties raised eyebrows from the task force: Nyala Mines reported to be exporting 60kg of Ruby a year, whilst the US Department of Interior announced it received 150kg of Ruby exports from Nyala per annum: the kind of data mismatch that led to the creation of EITI. Factoring in the price of Ruby (US$ 20,000 per carat), that's $9 billion of undeclared, un-taxed trade occurring: illicit flows.

Another point of criticism was the absence of any CSR from company operations, which angered local communities:

Residents of Karonga complained that Paladin Africa Limited, which is extracting Uranium at Kayelekera in the district, has failed to fulfill its corporate social responsibility (CSR) to the local population.

Adding:

Some civil society organizations (CSOs) also observed that miners were not helping the local people in the areas they are operating because there “is no law regarding corporate social responsibility.”

The CSOs argues that the provision of CSR laws would help the country develop as mining companies and other investors would help the communities in areas where they operate from through infrastructure development.

The report is another nail in the coffin of the ‘business as business only’ mining model, which believes the sole responsibility of a mining company is to get the mineral out of the ground, and pay its taxes: end of story. Noted economists like David Henderson rally against CSR as some kind of ‘fashionable’, presumably liberal conspiracy to hinder business innovation etc. etc.

Yet those who understand the realities of a mining operation would recognize CSR as being far from fashionable: mining in some of the poorest parts of the world, sometimes amongst exasperated, angry and often dispossessed communities, makes CSR a practical, common sense and business orientated decision. Taxes do not necessarily reach the local community of a mining operation, leaving the people most affected by the mine, with the least to gain from it. This is unfair, and CSR provides a space for companies to engage with communities, compensate for any grievances and avoid win-lose situations.

As the report shows, in places like Malawi, CSR is an important part of achieving a fair deal for communities affected by mining operations. We’ve spoken to mining employees who also say they want to work for a company that has a CSR programme: the message is clear, CSR is a civil boon, and if Henderson wants to insist otherwise, then he is merely rehashing the ignorance of an old paradigm, berating the public will like King Cnut commanding the tide to turn back.