ATLANTA, Monday, June 22, 2015 (MaraviPost): Following the recent ActionAid Report which accused Paladin of taking advantage of the structure of the contracts it signed with the Malawi government, allowing the company to not pay the proper amount of taxes, The Maravi Post in an email exchange reached out to Greg Walker the Managing Director of PALADIN (AFRICA) LIMITED.
Responding to a question posed to him by the Maravi Post on how he feels the company has been treated by Malawi media, Mr. Walker said the following:
May I say at the outset that I have been somewhat disappointed in the past by the tenor of the Maravi Post’s coverage of matters relating to Paladin and the Kayelekera Mine (KM)? I hope that we may now see a more even-handed approach by the Maravi Post, which I would very much welcome. You should know that we value our relationships with the media, although in Malawi that does at times test one’s faith in human nature. I welcome direct contact and endeavor to respond as quickly as possible to any reasonable request from the media for information, as I hope this exchange will demonstrate.
Responding to a question by us to whether he felt the Malawi media including the Maravi Post was missing in its coverage about Paladin, Mr. Greg Walker responded as follows:
The answer is yes, I believe that Malawi is not well served by its local media, which serves up a seemingly constant barrage of criticism of those relatively few foreign companies who have chosen to invest in Malawi. The impression created is that the media would prefer to see no foreign investment in the country at all. I am not quite sure how one equates that point-of-view with the earnest desire of Malawians to see a better life for themselves and their children through participating in a growing economy. I note that you quote Lenin as the postscript to your e-mail, so perhaps you favor a different model of economic growth! Otherwise, I would hope that you do share the widely-held view that properly-applied foreign direct investment (FDI) is an essential component to economic growth for any country and particularly one such as Malawi, where poverty is so widespread and the need for economic growth is so real.
In any event, I believe it would be helpful if the media provided a more balanced perspective on the benefits arising from FDI. Malawi’s rating on Transparency International’s 2014 Corruption Perceptions Index has dropped even further, while the country’s ranking on the World Bank’s Ease of Doing Business Index remains disappointingly low, yet little or nothing is said about that situation. While this remains the case, together with the external perception that Malawi is indeed suspicious and hostile towards foreign investment, little is likely to change for the better.
ActionAid Report
Responding to the Report Mr Walker said the following:
With regard to the specific questions you asked, I am more than happy to share with you correspondence (two letters in each direction) between the Company and Action Aid UK. The NGO did not provide a draft copy of the report to the Company for comment prior to publication, but posed two specific questions in relation to royalty and tax matters in its letter of 08 June 2015, to which we replied on 12 June 2015, dealing comprehensively with both matters. You will note Action Aid UK’s comment: “We would like to be clear that we are not accusing Paladin of tax evasion or any other illegal activity. We are very clear in our research findings that the actions taken by Paladin are completely legal.”
With regard to the substance of the report, Paladin rejects the basis of Action Aid’s argument concerning tax loss as fundamentally unsound, as it assumes that Paladin’s US$620M investment, including the initial US$300M development of the Kayelekera Project, further capital expenditure and working capital funding, would have proceeded if a 5% royalty had been in place. This is a false assumption. Unless the royalty had been reduced to 3%, the Project would not have reached an economic threshold for investment and, as a consequence, simply would not have proceeded – an economic fact that was recognized by the government of the day in Malawi, but which NGOs prefer to ignore.
The royalty rate was reduced and, as a result, Malawi has enjoyed the economic benefits arising from this very significant investment. What is overlooked in Malawi and by Action Aid is that the average royalty rate in Africa at the time the Kayelekera Development Agreement was being negotiated was 3%, including neighboring SADC countries. Malawi’s current royalty rate of 5% is high and was and is a disincentive to investment. You will see that we have more to say on that subject in our response to Action Aid of 12 June 2015.
Benefits to Malawi
Responding to a question on benefits to Malawi and Malawians, Greg Walker said the Following:
Rather than foregoing US$43M in taxation revenue, as Action Aid erroneously assert, in the event that the Kayelekera Project had not gone ahead, the direct revenue loss to the Government of Malawi (GoM) in fact would have been US$48.6M, comprising US$10,479,717, which was the total amount paid in royalties by PAL to the GoM in the period 01 April 2009 to 30 April 2015 and US$38,170,424 in payroll tax, withholding tax and non-residence tax during the same period.
This amount of direct tax revenue does not take into account other important project benefits such as much needed foreign exchange earnings (US$560M) and the amount spent by Paladin (Africa) Limited with Malawian suppliers of goods and services to the Kayelekera Project (US$321M). None of these benefits to Malawi’s economy would have occurred if the Project had not proceeded.
NGO Criticisms
Yes, it is a fact that much NGO criticism focuses on alleged risks of uranium mining and are deliberately misleading and alarmist, which again is a great pity. An example is the statement issued by the so-called Natural Resources Justice Network (NRJN) last November which:
• Accused PAL of “discharging radioactive effluents into the river systems;”
• Claimed this would result in “escalated radiation exposure doses, primarily to the people of Karonga and most parts of Malawi in general” and
• Alleged that PAL was putting “the lives of millions of Malawians at risk.”
The Government of Malawi (GoM) subsequently issued two public announcements in regard to these and other NGO claims, on 10 January 2015 and 26 March 2015, respectively. The GoM said allegations that PAL had secretly begun discharging radioactive wastewater into the river system were false and that this had not occurred.
The GoM confirmed Paladin’s public statement that there was no pollution to the local river system. The GoM noted that: “World Health Organization (WHO) standards and guidelines for drinking water stipulate that uranium levels in drinking water should not exceed 0.03 gm/l. Water Analysis Results indicate that the water in the Sere River, both upstream and downstream have traces of uranium. However, the levels are within acceptable limits.
“For example, in North Rukuru River which is downstream of the mine, uranium levels were 0.027 mg/l, which is within the WHO standards for drinking water. It should be noted that the water in Sere River shows traces of uranium even up gradient of Kayelekera mine area mainly due to the parent rock of the area.”
PAL is releasing run-off water stocks at KM, as permitted under the terms of a discharge licence issued by the GoM on 22 October 2014. The Company is releasing only water treated to comply with licence criteria set by the GoM, including the WHO drinking water guideline for uranium content mentioned earlier. The GoM is monitoring Paladin’s compliance with the discharge criteria, which is being further checked through regular analysis of water samples by an independent laboratory in South Africa, with results being provided to the GoM. This process commenced only after an extensive public consultation process, which involved local communities and NGOs, who were invited to participate in the monitoring process.
With regard to radiation risks associated with uranium mining (which of course is currently suspended), Paladin follows an approved Radiation Management Plan at KM and provided appropriate Personal Protection Equipment (PPE) and relevant training to all its personnel who were engaged in mining and processing of uranium oxide at KM. All employees working in the open in the mining area are issued with PPE, including dust masks and safety glasses. Employee’s radiation exposure is monitored using Thermo-Luminescent Dosimeter (TLD) badges, which are unique to each employee. Each individual employee’s annual radiation exposure is monitored, measured and recorded. Paladin sends employees’ TLD badges to the National Centre for Radiation Science (NCRS) in New Zealand for analysis. NCRS is an internationally-recognized and independent testing authority. Personal results of NCRS analysis are provided to individual employees at KM on an annual basis.
Collated results are reported annually to Malawi’s Environmental Affairs Department (EAD). Results of KM’s Program demonstrate that the mean radiation dose to employees varied from 1.1 to 2.1 milliSieverts (mSv). This is well within the occupational exposure limits recommended by the International Commission for Radiological Protection (ICRP) and set by Malawi’s Atomic Energy Regulations, 2012, Schedule 2, which provides that the occupational exposure should not exceed:
• An effective dose of 20 mSv, averaged over a period of five consecutive calendar years, or
• An effective dose of 50 mSv in any single year.
To put that further into context, employees who were involved in uranium mining and processing at KM received lower radiation doses (above ambient or background radiation) than crew working for airlines around the world, who depending on circumstances receive between 2 and 5mSv per year.
Future in Malawi
Paladin is maintaining KM on Care & Maintenance (C&M) at a cost of some $US14M per year. During C&M, the Company is providing employment for some 220 Malawi national employees. The Company’s position in regard to restart of production at KM was set out in our public announcement of 27 May 2014. The announcement stated that Paladin is committed to maintaining the mine and its infrastructure at Kayelekera in good working order to facilitate a rapid resumption of production when market conditions make it possible to do so profitably. Production at this project can now be recommenced with minimal risk and within a short lead-time of about 9 months
