Paladin rejects Action Aid Malawi report as ‘fundamentally unsound’

Uranium miner Paladin has rejected the susbstance of the report by Action Aid Malawi that states that Malawi government has lost out on more than US$43 million in tax to the Australian mining multinational , saying it is “fundamentally unsound”.

Paladin’s General Manager for Malawi, Greg Walker told Nyasa Times that Action Aid Malawi did not provide a draft copy of the report to the Company for comment prior to publication,.

But he said the NGO posed two specific questions in relation to royalty and tax matters in its letter of 08 June 2015, to which Paladin replied on 12 June 2015, dealing comprehensively with both matters.

According to the letters made available to Nyasa Times, Action Aid UK’s comment read: “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.”

Walker said Paladin rejects the basis of Action Aid’s argument concerning tax loss as fundamentally unsound, as it assumes that the miner’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,” said Walker to Nyasa Times.

“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 neighbouring SADC countries. Malawi’s current royalty rate of 5% is high and was and is a disincentive to investment.,” said Walker.

He stated that, 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 ) in fact would have been US$48.6M, comprising US$10,479,717, which was the total amount paid in royalties by Paladin to Malawi government 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 proceded, a fact ignored by Action Aid UK,” explained Walker.