"Paladin responds to ActionAid report, concerns raised by NGO and media coverage in Malawi"

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 neighbouring 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.