UNIVERSITY OF SUNDERLANDASSESSMENT COVER SHEET / FEEDBACK FORMBA (HONS) BUSINESS MANAGEMENT
Student Name: MPHEMBUZYO MKANDAWIRE
Student ID: 179107533
Module Code: SIM337
Module Name: CONTEMPORARY DEVELOPMENT
Hand in Date:
Due Date: 5.10.2018
Centre / College: INTEL COLLEGE
Assessment Title: PALADIN AFRICA LTD KAYELEKERA URANIUM MINE (MALAWI)
Learning Outcomes Assessed:
Feedback relating learning outcomes assessed and assessment criteria given to students:
Learning Outcomes Assessed:
Areas for Commendation:
Areas for Improvement:
Overall Mark (subject to ratification by the assessment board)
Students Signature: (you must sign this declaring that it is all your own work and all sources of information have been referenced) M.C MKANDAWIRE
Table of Contents
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This report critically analyses the mining industry (section B) and assess’ the impact of external business environmental factors and evaluates the position of Paladin limited. It begins with the analysis of the external factors, using the PESTEL framework as it critically evaluates the current position for Paladin limited. As paladin limited operates internationally, this report focuses on external factors faced in the kayelekera mine, Malawi.
PESTEL FACTORS ON PALADIN (AFRICA) LIMITED
The PESTEL analysis is a widely used tool in the contemporary development. The tool is used to analyse the external forces that the company might positively or negatively affect the company’s business CITATION Wal17 l 1033 (Walsh, 2017). Because there are a multitude of external factors that can either support or hinder growth of the mining company. These factors are as follows; political, economical, social, technology, legal and environmental. This framework can be useful to Paladin Africa limited kayelekera mine to improve its performance and ensure its long existence as a going concern.
This involves the government policies, attitudes to taxation, foreign trade and trading blocs. According to the Malawi mines and minerals act, the government has the right to 10% of the equity in any mining operation in the country, therefore in 2007 when the company was establishing itself in the country, paladin Africa limited signed an agreement with the Malawian government to acquire 15% under the terms of the mining development agreement CITATION Res07 l 1033 (Resource Contracts, 2007).
According to the CITATION Mal13 l 1033 (Mines, 2013) Malawi government is set to have committed itself to developing the mining sector, which is recognised as apriority in both the Growth and development strategy for the country. Therefore the president, set policies for Paladin Africa kayelekera mine to be transparent and accountable, as they operate in the country, its citizens are primary beneficiaries of the resources. CITATION Min13 l 1033 (Mining Weekly, 2013).
In addition, the political uncertainity in the country following the death of the president Dr Bingu Wamunthalika, lead new polls and the new politicians found out that the contract wasn’t published, and operations there were rumors that the old government and the company were doing some operations in the back door. This posed a threat to the image of kayelekera uranium mine.
The economic factors involve; inflation rate, savings rate, interest rate, foreign exchange rate, levels of unemployment and global commodity prices CITATION Cho15 l 1033 (Chow, 2015). The Kayelekera Mine makes a very substantial fiscal contribution to Malawi and opens up opportunities for employment and improvements to social infrastructure in the northern part of Malawi CITATION Cor10 l 1033 (Corporate Media, 2010). This by the end of the day benefits both paladin’s shareholders and the country it operates in. According to CITATION Cur13 l 1033 (Curtius, 2013) the company enjoys some tax incentives such as, no customs duty and VAT for machinery, plant and equipment. This benefits Paladin as they save some money for other operations.
Due to unforeseen changes in the economy and markets, paladin experienced a high price in uranium that it had to fall back and wait till the global commodity prices comes down. This affected the levels of employment in the company as it had to suspend its operations and a lot of people were left jobless in the process of waiting. This affected the business for paladin Africa limited kayelekera as it has a 13 year agreement with the Malawian government, and due to those high prices there is no more production taking place and the clock is ticking on the contract agreement.
These factors include demographics, religious beliefs, lifestyle, populations etc. These factors involve the ways in which changes in society affect the organisation CITATION PES16 l 1033 (PESTLE analysis, 2016). According to …….. paladin established a CSR advisory board in 2007 and it acts as an external sounding board on a range of corporate responsibility issues. This was in response to issues concerning poverty, water, climate change and growth. The company aimed to achieve a balance between the economic environment and social needs of the community and positively impact the entire community though this approach. Paladin believes that sustainability development also includes a responsibility to ensure that local people benefit directly from projects near their communities. Paladin shows us how it employed 585 strong workforces at kayelekera with further 212 long-term contractors. This gave an opportunity to paladin Africa as they transferred skills to the locals, by training them and working together towards the goal to extract the uranium and make profits, whilst also helping the community get jobs and supports themselves.
Evolving technology impacts on the productivity and business efficiency in the mining industry. However, companies find it difficult to determine whether to advance in technology as the benefits are sometimes not clear. For example kayelekera mine is an open pit mine where they extract uranium in form of U308 or Yellowcake. Because open cast mining offers more advantages than traditional deep shaft mining because it’s cost effective and fast, it also makes a safer mining environment to the employees because there is no risk of cave in or toxic gas CITATION Dan18 l 1033 (Danniels, 2018).
Unfortunately, if these new technological factors are ignored, it will give kayelekera mine’s competitors an opportunity to transform its mining company. Therefore paladin kayelekera should at least be alert of the new advanced methods in order to stay competitive in the industry. Kayelekera uranium mine uses diesel powered plant for its operations due to shortages of power in the country malawi which causes the company to experience high energy costs as the power company ESCOM from malawi, has difficulties in its transmission capacity CITATION The14 l 1033 (The Nation News , 2014) therefore this negatively affects paladin as kayelekera mine loses $215.6 million per year in production CITATION Reu12 l 1033 (Reuters, 2012).
Paladin is committed to ensure that effective environmental management is planned and undertaken for all of its operations. The approach to environmental management is guided by paladin’s environmental policy, which promotes high standards for environmental performance across its operations. The key points of the policy include; complying with applicable environmental legislation, identifying, assessing and managing environmental risks, preventing and mitigating pollution, communicating environmental responsibility to employees and contractor and effective consultation with stakeholders on environmental issues. CITATION Pal17 l 1033 (Paladin Energy Annual Report, 2017)
According to CITATION ASQ17 l 1033 (ASQ Global, 2017) within the paladin management system (EMS)standard, each operating site is required to develop and implement an EMS that is consistent with requirements of ISO 14001:2015. Therefore the implementation of the EMS at Kayelekera mine is continuing for the care and maintenance phase.
Another environmental factor for paladin Africa kayelekera mine is the energy. The company’s requirements on their operations are in form of fuel for vehicles and electricity generation. Therefore through the mine’s maintenance and care operations happening the company uses a diesel-fuel power plants and for their vehicles uses diesel and minor amounts of petrol. CITATION Pal17 l 1033 (Paladin Energy Annual Report, 2017)Another environmental factor is water, Paladin applies a standard for water use and water quality and its operations to ensure that there is efficient, safe and sustainable use of water and that water and resources and ecosystems around its sites are protected. The company practices RE-USE AND RECYCLE strategy of water in all its operations. CITATION Ang15 l 1033 (Angelakis, 2015) Kayelekera uranium mine implemented water management strategies and maintain whole of site water balances to ensure that the company’s objectives around water usage, to ensure that the company’s objectives around water usage, supply and resource protection are achieved. This positively affects kayelekera by having a positive outlook to their communities. This shows that the company uses eco-friendly mining.
In Malawi and worldwide they are laws to protect the rights of its citizens against any fraudulent act. These laws help make an environment of healthy competition in the country. Paladin kayelekera is seen to owe the Malawian Revenue Authorities $15.8 million tax regime and paid less than 1.5% of royalty rate for its first three years of operations in the agreement contract in 2007 CITATION Cur13 l 1033 (Curtius, 2013). Of course the mining company is wrong but also Malawi does not have clear and internationally standardized legal and institutional frameworks adequately regulating the mining industry. The existing law is outdated reflecting past thinking of one party state. The investment guidelines are inadequate and compounded by cumbersome procedure. Malawi lacks a predictable tax regime that is credible, transparent and consistent with the legislative framework. Instead cabinet orders are used to discretionary impose taxation regimes to FDIs on a case by case basis. This brings about a lot of inconsistencies and confusion creating an opportunity for corrupt MNCs to dodge paying the real value of tax.
The best solution for this is to revise the mining industry laws and regulations to avoid further scenarios like these and for the kayelekera mine to negotiate again with the government in terms of their contract and how can pay the revenues loses to continue to be in good hormone with the state and continue their operation.
ETHICS AND CORPORATE SOCIAL RESONSIBILITY
Corporate social responsibility (CSR) is a business approach that contributes to a sustainable development by delivering economic, social and environmental benefits for all stakeholders CITATION Fin18 l 1033 (Financial Times, 2018).
Paladin Africa limited adopted the CSR programs and practiced the spirit of giving back to the community, CSR is a strategy for most large corporations, and paladin kayelekera mine being the largest mine in the country in Malawi, the successful a company is, the more responsibility it has to set standards of ethical behaviour for its peers, competition and industry. CITATION Kay13 l 1033 (Kayelekera mine, 2013)Paladin’s purpose is to create value to its shareholders. To attain this goal the company recognised that environmental and social values are important components of corporate success. Because there stakeholders expect their company to be a good corporate citizen, with fair and beneficial business practices focused on operating to the highest standards; contributing to the growth and prosperity of Malawi where it operates in and responding positively to community needs.
Paladin’s approach to the corporate social responsibility (CSR) involves top-level support from directors and CEO’s; follow the principles in the corporate policy and procedures; the CSR programs for development; personnel dedicated to achieving CSR objectives and reporting in accordance with Global reporting initiative.
Paladin’s CSR program began in 2007 with
Paladin is a uranium production company based in Australia with projects in Australia and two mines in Africa (Namibia and Malawi). The Kayelekera mine is anopen cast uranium mine located in Karonga district in the northern part of Malawi. CITATION Pal07 l 1033 (Paladin Africa Limited, 2012) The mine is owned 100% by Paladin (Africa) Limited, a subsidiary of Paladin. A Mining Development Agreement was signed between the company and the Government in February 2007. A Mining Licence, covering 5,550 hectares, was granted in April 2007 for a period of fifteen years. Construction of Kayelekera began in June 2007 at a budgeted cost of $200 million, open pit mining commenced in June 2008, and the mine was officially opened in April 2009by the president of Malawi. Paladin issued 15% of equity in the mine to the Government under the terms of the Development Agreement. CITATION Cur13 l 1033 (Curtius, 2013)