Mining code shifts across Africa

While Guinea and Sierra Leone are reviewing mining contracts, others are conducting revamps of their regulatory frameworks.

Changing mining codes on such a regular basis is worse than having high taxes

Some countries are working on ways to tax the profits made on the sale of mining titles by holding companies based in other countries.

Governments can lose huge amounts of money in capital gains tax when an offshore-listed miner sells a licence to another offshore-listed miner.

Changes to Cameroon’s mining code two years ago sought to address this, introducing a payment of a bonus where there is any transaction related to mining licences.

However, it is not clear how such a bonus payment would be enforced and whether it could breach double taxation avoidance agreements.

Other governments are also considering new models for mining deals akin to the production-sharing contracts (PSCs) common in the oil industry, but companies oppose the idea.

President Alassane Ouattara’s government proposed the introduction of PSCs in Côte d’Ivoire in 2012, but the industry rejected them, and a mining code change still looks far off.

Christophe Asselineau, who heads the African practice of Paris-based law firm Shearman & Sterling, says at least 18 African countries have published new mining codes since 2000.

He is critical of countries such as the Democratic Re- public of Congo, which has gone through a revision of its mining code every five years.

“Changing mining codes on such a regular basis is worse than having high taxes,” he says. ●

Tax to pay
Main minerals: Copper, diamonds, gold and cobalt.

Timetable: Changes to the DRC’s 2002 mining code, created with the help of the World Bank, are likely to be submitted to parliament in 2014.

Proposed changes: The government has spent the past year drawing up a new code that is worrying investors. The first proposals were for the state to get a 35% free stake in all new projects, up from the current 5%. In October, officials indicated that they were lowering the proposal to 15%. It also remains unclear how plans for a 5% shareholding for local communities will be managed. Other proposals include tax breaks for companies that use Congolese sub-contractors.


Main minerals: Coal, titanium, gold and rare earths.

Timetable: Kenya’s Mining Bill 2013, which would overhaul the Mining Act of 1940, is expected to come into force by December, according to cabinet secretary for mining Najib Balala.

Proposed changes: The bill proposes to impose a 10% free stake in mining projects for the government. The government had proposed a 35% local shareholding but has since abandoned that idea. The bill includes provisions for the sharing of royalties between the local community (5%), the county (20%) and the central government (75%). The bill restricts mining dealer licences to entities with at least 60% local shareholding. Miners are opposed to the proposed law. The issuance of new licences has been suspended in the meantime.


Main minerals: Platinum, gold and coal.

Timetable: A draft bill proposing a raft of changes to the 2002 Mineral and Petroleum Resources Development Act is set to be debated by parliament in early 2014.

Proposed changes: Proposals include a 20% free stake for the state in all new oil and gas ventures. The amendments would allow the mineral resources minister to declare minerals to be strategic resources. Those resources would then be subject to special rules, particularly concerning what percentage must be processed locally. Industry reaction was overwhelmingly negative, with miners Anglo American and BHP Billiton claiming the new rules could be unconstitutional and would increase uncertainty and deter investment. Trade unions backed measures to make beneficiation compulsory. The bill was due to pass through parliamentary committee stages in 2013, but was delayed because of further changes to the amendments.


Main minerals: Coal, bauxite.

Timetable: A much-delayed draft of a new mining law was due to go to parliament in mid-2013, but is now scheduled to be discussed in the next parliamentary session starting on 25 November.

Proposed changes: The government has stated that the new mining code will not change any royalties or taxes. Officials have indicated they may try to start taxing the transfer of licences, according to law firm Clifford Chance. The law also plans to extend mining concessions for locally owned companies from one year to five years in an effort to give a head start to Mozambican firms. Small-scale mining certificates for locals will also be extended from two years to five years.

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