Our Comment on Airtel Shares Offer

The big financial news during the last days of 2019 has been the announcement by Airtel that it is offering  2.2 billion shares primarily to Malawians pegged MK12.69 per share. This will be listed on Malawi Stock Exchange (MSE) for individuals.

There are at least three arguments for attracting foreign investment. The first is that it brings in new capital. The second is that it will bring technology and the third is that will help open up foreign markets for the host country.  The Airtel deal fails in at least two of these. It does not bring in new capital. Instead, it is borrowing locally. Its services are necessarily not tradable so it will not be contributing to Malawi’s export and forex earnings. As for technological, the technologies it used are quite standard.

Unless a foreign company is bringing in new technology and expanding the country’s export there is really no reason for allowing the company to raise funds locally.  Allowing Airtel to borrow locally without insisting on the reciprocal augmentation of Malawi’s technological capacity or export simply leads to the crowding out of domestic enterprises.

Domestic entrepreneurs complain about the lack of credit. Airtel’s offer suggests that there are large sums of funds looking for outlets. We know that pension funds are sitting on more than two billion dollars.  The offer also confirms the indigenous capitalist's complaint that the stock market does not serve them.

What all this point towards is the need for the revival of national development institutions like MDC to lend to national capitalists or, through joint ventures, to acquire new technology and open up export markets. The Airtel deal is bad one. It is short-sighted and indicative of a complete lack of development strategy by the government.

Whatever happened to Kanyika Niobium Project?

Last year Global Metals mining licence in Kanyika was renewed..

In January 2019 there was the report that Globe Metals had finalised the  Kanyika Niobium Project feasibility study revision and was waiting for changes to the mining law and approval of its development plan Read here

According to the most recent company's quarterly, June report Read hear; the company is still waiting for feedback and the approval of its development plan.

How come it takes such a long time for the government to respond?

Comment On Rare Earth Mining in Balaka

For more than a decade a geologist, Michael Saner has held the rare earth mining to ransom.

 US$100-million from the Malawi Government for damages plus sunk costs, legal costs and interest. “ The matter dates back to 2000 when the ministry granted Saner the EPL for Kangankude Mine in Balaka. The EPL was issued on March 15, 2000, for an initial period of three years and it was renewable.

On November 25 2002, Saner submitted an application to renew his EPL of  Kangankunde Carbonatite located in Balaka District and in compliance with the Mines and Minerals Act, the application was submitted three months prior to the expiry date of the EPL but the ministry did not respond to Saner’s renewal application and no grounds were given.

The ministry only gave the reasons for non-renewal in May 2003 after inquiry and officers in the ministry told Saner that the EPL would be renewed but it was not.

However, the ministry issued the mining license to a close associate of Muluzi  Tony Patel, in May 2003 although Patel never held an EPL or engaged in mining. He was a furniture seller. . Three years later Patel sold the “rights” for US$4 million to Lynas Corporation Limited, an Australian publicly-listed company. Mr. Patel

In 2006, Saner obtained a court order which required that the EPL be renewed but it was not renewed, a development which made Saner unable to move to the exploitation phase which was the main objective of the EPL and in 2010, Saner obtained an injunction which prohibits the granting of a mineral license of Kangankunde to any other party other than him” (https://mwnation.com/court-awards-a-geologist-k69-5bn}/

Now we are informed that  ASX-listed Lindian Resources’ geologist Michael Saner has signed a consent order with the Malawi Ministry of Natural Resources and Environmental Affairs, bringing the company a step closer to acquiring up to 75% in the Kangankunde rare earth project, in Malawi.

This has huge implications for the rare earth industry. Given the previous experience, we insist on a transparent process. What exactly is the new agreement with Saner? Does this lay to rest his outrageous claim?

Our Comment

The recent data on foreign dirct investment (FDI) inflows is not good. First, it suggests that the significant increases have been driven by mining and the infrastructure related to it (Nacala rail road) (hence the volatility See Figire below. The country has not been able to attract investment in the vital manufacturing sector.

The Malawi Investment and Trade Centre (MITC), the agency in charge of attracting foreign investment has time and again confused any signs of interest with actual investment and has thus made outlandish claims about the effectiveness of its campaigns. Its claims have been contradicted by data from UNCTAD . This is undermining the credibility of the agency. Investors want one agency they can trust in navigating new territory.

A major mistake of the agency is its focus on transaction costs or on the World Bank "Doing Business" indicators when the real issue is production costs (cost of finance, transport costs, electricity). What investors would like to know are: the precise information on when the dry port at Liwonde will be completed, when exactly will Malawi connect to Mozambique power grid and when are the power plants announced by the government to be completed.  This kind of data would have been useful during the recent investment forum.
.

OUR COMMENT ON TEXTILE INDUSTRY

Recently the President inaugurated a major textile factory in Salami.  We should not, however, rest on our meagre laurels. We are very far from exploiting the full potential of Malawi as a textile exporter.

We can learn something from Ethiopia which has  set ambitious targets to create 140,000 new jobs in this sector, with export revenues reaching $1 billion by the end of 2020.

One lesson is the need for textile and apparel industrial parks. Salima can be the first such hub. The government has to provide the necessary complementary structures. This can be done by setting technical college on skills for the textile industry. The government should  build a full-fledged industrial zone around the new factory – providing roads, electricity, water and even fully dedicated  plug-and-play buildings .

One advantage Malawi has is that it is a cotton producer although in the last year the cotton production has declined sharply due to lack of consistent policy on credit and inputs for cotton production. Ingood years we have produced as much as 100 000 tons – twice as much as Ethiopia.

http://www.malawivoice.com/landmark-project-multibillion-textile-project-to-turn-malawi-into-major-exporter-mutharika/