Congo government urged to pass new mining code
Activists in the Democratic Republic of Congo are pressing the government to revive plans for a new mining code, claiming the country, which is Africa’s top copper producer, needs the higher revenues the revised legislation would generate.
Congo began reviewing the 2002 mining code in 2012 and last year it proposed hiking profit taxes to 35% from 30%, raising the state’s free share of new mining projects to 10% from 5% and royalties on copper and cobalt revenue to 3.5% from 2%.
However, the DRC dropped the planned changes last month as the move could have driven away investors at a time of historically low commodity prices and energy shortages that are driving down output in the country.
Difficult market conditions do not justify further delays, they claim.
The chamber of mines, an industry lobby group, welcomed the decision. The association had opposed revisions to the code because of the potential negative impact it could have on investment in mining.
Randgold Resources (LON:RRS) Chief Executive Officer, Mark Bristow, even said last year that the planned changes risked destroying the industry in Congo.
But a group of 42 Congolese non-governmental organizations (NGOs) that have taken part in negotiations with the government and mining sector over the new code said on Thursday that difficult market conditions did not justify further delays, Reuters reports.
“Not doing it now is prolonging the bleeding of revenues in the sector which are needed to support our young democracy,” they said in a statement quoted by Reuters.
Low copper prices have affected the country’s economy and driven some companies, such as Glencore (LON:GLEN), to suspend operations. As a result, copper production in DRC fell by 3% to 995,805 metric tons in 2015, the first drop in six years.
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3 Comments
deedub93
With Glencore stopping production at Katanga, together with low commodity prices and most miners having to repay loans taken up for start up, probably only Rangold are showing a profit, so 30% or 35% of profit makes no difference, it still equals nothing. Furthermore, all ex-pats have to pay 30% flat rate income tax in the DRC, which goes straight into government coffers.
The DRC government make their money with punative fines for mining companies, e.g., importing plant without having the correct paperwork in place carries a fine of 2 x the cost of the plant. Absolutely nuts.
NGO’s are usually a pain in the butt and generally a bunch of free-loaders, we all know that. Most mining companies do everything in powers to help local communities to such an extent they are more like charities than miners. Far more than any NGO has ever done or is likely to do. Any tightening of mining regulations will destroy the DRC’s mining industry.
If the NGO’s want to help perhaps they should encourage the government to invest in infrastructure, most miners maintain the national highways themselves to ensure uninterupted supplies. Just look at a neighbouring country like Rwanda, ravaged by war as was the DRC but with a benevolent dictator who has worked tirelessly to improve roads, schools and health services. Rwanda is now approaching the standards of a European country whilst the DRC goes backwards. What do the NGO’s do? Criticise the Rwandan government on human rights! To change the DRC, a change in thinking at the top is needed, not punative taxes for miners.
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TK
Deedub93, I am a Congolese national, I am very happy that people like you can see what is happening in our country as you said, tightening the mining industry actually is just a way for the government in place to make things more difficult for investor and make more money since they know that DRC is the new Eldorado and obviously investor will still come and will be willing to have a stake in the DRC by paying a lot.
Look at Rwanda, they are in the same situation as we are, people are criticizing Kagame of being a rough less president but at least is doing great for his own country, you can see the country going forward and evolving, the mining sector even power is still going forward, we are complaining that people are stealing our wealth. Happy that they are stealing it and putting it on a very good use, because we are not worthy of that wealth unfortunately.