World Bank: Malawi Mining Sector Key to Economic Growth Plans
According to the World Bank’s baseline scenario, the mining sector is expected to grow gradually from 2026 to 2033, with rapid growth starting in 2034 as all seven projects come online.
LILONGWE, Malawi—Malawi is betting on its mining industry as a cornerstone for economic transformation, according to a World Bank report released Thursday, writes Winston Mwale.
The "Malawi Economic Monitor," a regular analysis of the country's development landscape, identifies mining as a potential catalyst for GDP growth, foreign exchange generation, and employment opportunities.
"The mining sector presents a significant opportunity for Malawi's economic diversification," the report states while acknowledging various implementation challenges that need to be addressed.
The World Bank's assessment, published in January 2025, is part of its continued evaluation of Malawi's economic and structural development progress.
It aims to foster informed policymaking and robust debate regarding key challenges that Malawi faces as it strives to achieve inclusive and sustainable economic growth. This 20th edition of the Malawi Economic Monitor (MEM) was prepared by a team of economists, mining specialists, and consultants, with guidance from World Bank management.
The report is based on information current as of January 10, 2025.
The report notes that Malawi's economic recovery remains fragile due to slow implementation of macroeconomic adjustment reforms and a series of recent shocks.
The country's Gross Domestic Product (GDP) is expected to have grown by only 1.8 percent in 2024, marking the third straight year of declining GDP per capita. The El Niño-induced drought in early 2024 has also adversely affected agricultural output.
Given this context, the report emphasizes the importance of developing the mining sector as a way to diversify the economy and create new growth opportunities.
The report points out that Malawi is rich in energy transition minerals (ETM) which are in high demand as the world shifts toward renewable energy and electrification.
These minerals include graphite, titanium, uranium, and rare earth elements. The global shift toward net-zero emissions will be highly mineral-intensive, and Malawi possesses abundant mineral resources crucial for this transition.
As governments around the world move to decarbonize their energy systems, the demand for key minerals used in renewable energy technologies and electric vehicles is expected to rise sharply.
Minerals like lithium, cobalt, nickel, graphite, copper, rare earth elements, and manganese are essential for technologies such as solar panels, wind turbines, and batteries.
Economic Benefits
According to the report, developing the mining sector could significantly boost Malawi’s economy.
GDP Growth: The mining sector's contribution to GDP was 0.7 percent in 2023, and the government expects it to reach 10 percent by 2063.
Foreign Exchange: The mining sector could generate significant foreign exchange through exports. The report estimates that between 2026 and 2040, the sector could generate a total of $30 billion in exports. Under a best-case scenario, mining exports would total $43 billion over 2025-2040.
Job Creation: The mining sector has the potential to create high-paying jobs, improving the livelihoods of the local population. Mining development in rural areas can also support the growth of local communities by creating jobs and offering opportunities for small businesses.
Infrastructure Investment: Mining projects can anchor transformative investments in infrastructure, particularly in energy and transportation.
Spillover Effects: The sector can have spillover effects on other sectors, including capital investments and increased human capital.
Export Diversification: The mining sector will diversify exports away from traditional sources, such as tobacco.
"Malawi has a unique opportunity to leverage its mineral wealth to drive sustainable economic development," the report states.
Challenges
Despite this potential, the report highlights several challenges hindering the development of Malawi's mining sector:
Limited Government Experience: The government has limited experience administering large mining projects, requiring increased capacity to design, implement, and operate such ventures.
Regulatory Hurdles: Concerns around weak governance, lengthy permitting processes, and uncertain regulatory frameworks deter investors. The report notes that the average lead time from discovery to production for mining projects in Malawi is 27 years, compared to the global average of 18 years.
Inadequate Infrastructure: Poor road networks, limited rail connections, and an unreliable power supply increase operational costs and hinder project development.
Unrealistic Expectations: Outsized expectations for immediate socioeconomic benefits from mining can lead to frustration and disillusionment.
Price Volatility: Fluctuations in global metal prices create unpredictable revenue streams, complicating planning and budgeting.
Skills Deficit: There is a lack of specialized educational programs and experienced professionals in mining-related fields.
According to the report, “Outsized expectations for immediate socioeconomic benefits from mining often clash with the realities of complex operations, leading to frustration and disillusionment".
Recommendations
To address these challenges and support the mining sector's development, the report outlines key policy recommendations based on a "grow, protect, and benefit" approach.
Pillar 1: Grow:
Expedite Project Development: This involves accelerating the negotiation of mining development agreements (MDAs) and streamlining permitting processes. The report mentions that the longest delays occur during the MDA negotiation and signing stage.
Improve Government Capacity: The government should enhance its capacity in sectoral institutions to effectively monitor large-scale operations and manage MDAs, including staff training and the engagement of specialized transaction advisors.
Promote Investment: This includes developing comprehensive investment-promotion plans, de-risking the sector through robust geoscientific research, establishing transparent data-sharing arrangements, and creating efficient permitting processes.
Invest in Infrastructure: The report calls for investment in road networks, rail connections, and renewable energy systems to reduce operational costs and facilitate the sector's growth. The Mpatamanga Hydropower Storage Project is noted as a crucial investment for reliable power.
Pillar 2: Protect:
Environmental Monitoring: Adequate resources should be provided to the Malawi Environmental Protection Agency (MEPA) and Ministry of Mining to effectively monitor mining activities and enforce environmental regulations. All documents related to mine development should be made publicly available to increase transparency.
Occupational Health and Safety: Occupational health and safety (OHS) standards should be reviewed and updated to align with international best practices.
Stakeholder Engagement: Promoting stakeholder engagement through a functional platform for multi-stakeholder dialogue will improve communication and build trust.
Pillar 3: Benefit:
Revenue Maximization: The government should strengthen customs and tax administration to maximize revenue collection. This will involve providing targeted training for customs officers, modernising digital systems, and investing in infrastructure.
Workforce Development: The government should analyze skills gaps, establish specialized educational programs, and encourage apprenticeships and internships to build a skilled workforce.
Local Content Policies: Implementing policies that incentivize local hiring, procurement, and partnerships will ensure a broader distribution of economic benefits. Greater domestic value addition over time will expand job creation and diversify exports.
Revenue Stability: Measures should be introduced to insulate the budget from the cyclicality of mineral revenues and ensure the maintenance of adequate foreign-exchange reserves.
The report emphasizes that "the largest and most immediate benefit of mining development will be in the form of government revenues from taxes and equity dividends".
Mining Projects in the Pipeline
The report identifies eight ETM projects in the pipeline that have been evaluated as potentially economically viable. These include:
Kayelekera Uranium.
Kasiya Rutile.
Kangankunde Rare Earth Elements.
Kanyika Niobium.
Songwe Hills Rare Earth Elements.
Makanjira Heavy Sands.
Malingunde Graphite.
According to the World Bank’s baseline scenario, the mining sector is expected to grow gradually from 2026 to 2033, with rapid growth starting in 2034 as all seven projects come online.
It is projected that, between 2026 and 2040, the mining sector could generate a total of $30 billion in exports, with annual exports reaching $3 billion by 2034.
"Realizing Malawi’s significant medium-term growth potential and avoiding a further weakening of the economy will require urgent reforms" in the mining sector, the report states.
ETM Roadmap and Future Steps
The government, in partnership with the World Bank, has launched the Mining Sector Diagnostic Study and is formulating an ETM Roadmap, aligning with key regional and continental strategies.
This roadmap is designed to support the sustainable development of Malawi’s mining sector by improving geological data, strengthening sector governance, reducing barriers to private investment, and promoting local employment and skills development.
The report concludes that by addressing the challenges and prioritising the actions outlined, the government can create a modern framework for the mining sector that attracts investment, boosts revenue, and ensures the benefits are widely shared.
The report acknowledges that the findings, interpretations, and conclusions expressed do not necessarily reflect the views of the World Bank’s Executive Directors or the countries they represent.
The World Bank team welcomes feedback on the structure and content of the Malawi Economic Monitor.