A 15-page report by London-based ActionAid has found the Dutch transfers and a special royalties deal – in which Malawi's mining minister agreed to drop the initial tax rate applied to the uranium mine from 5 per cent to 1.5 per cent – have cost the Malawi public $US43 million. In Africa's poorest nation, where per capita GDP is just $US226 a year and life expectancy 55, that money could provide the equivalent of 39,000 new teachers or 17,000 nurses, according to the aid group. Paladin Energy chief executive John Borshoff responded in a detailed five-page letter in which he does not challenge the facts underlying the report but blasts ActionAid for "overlooking inconvenient facts" about the uranium project and the sophistication of the Malawi government in negotiating the deals that led to the company's investment in the country. He also claimed the company established its Dutch hub – which has no staff – because it is "in the same time zone as Malawi". Paladin's tax-free transfers to the Netherlands were a combination of management fees and interest payments on loans initiated in Australia. The company loaded its African subsidiary up with huge debts, leaving the Kayelekera​ uranium mine in northern Malawi with an 80:20 debt to equity ratio – a financing structure known as "thin capitalisation".

The Dutch structure allowed Paladin to avoid paying a 15 per cent withholding tax to the Malawi government due to a tax treaty between Malawi and the Netherlands which expired in 2014, saving the company $US7.3 million. Paladin closed the mine in February 2014, citing a "sustained low uranium price". ActionAid has accused the company of "treaty shopping" and shortchanging the Malawi people. The country's nursing ranks have the equivalent of four nurses to every 100 in Australia, despite 10 per cent of Malawi's population being infected with HIV/AIDS. In his letter of response, Mr Borshoff said Paladin's $US620 million investment would never have progressed if the government had not provided royalty relief. Western Australia's iron ore industry was fostered by similar state relief to encourage foreign investment. "Respectfully, we regard the fundamental premise of your supposition that Malawi has foregone revenue as a result of the royalty rate applicable to KM [Kayelekera mine] to be flawed," he wrote. "If a 5 per cent royalty had applied, the project would not have proceeded. Such a royalty rate was an economic disincentive to investment and was recognised as such by the government of the day."

He said Malawi's Finance Minister, Goodall Gondwe​, is a highly respected economist and was a former director of the International Monetary Fund's Africa division and he was supported in negotiations by respected British economist Keith Hammond of British Ministry of Finance. The Dutch holding company had been established at a time when a number of other potential acquisitions were on the table but they did not proceed, Mr Borshoff said. "Incorporation in the Netherlands was preferred for a variety of reasons, including being in the same time zone as Malawi (both GMT+2), its proximity to key European and North America energy markets and customers and its favourable legal, fiscal and immigration regimes," he wrote.