By Andreas Thomas
Windhoek – A new wind of change is blowing across Africa, as governments on the continent seem to be waking up from their self-induced deep sleep and realising that they need to get a fair share of their enormous mineral wealth.
Almost all countries in Africa are richly endowed with mineral resources, including oil, but little benefits are accrued from this natural wealth.
Mining Africa observed that from West Africa to Southern Africa and everywhere in between, there “are massive quantities of natural resources contained within the continent’s interior.
Even though the world is fuelled by commodity consumption, there is so much natural wealth on the continent that a great deal of it is as yet unused - the deposits are so abundant that some of it has yet to be discovered”.
But throughout the years, these mineral resources have been exploited by, and are, benefiting outsiders instead of Africans themselves. Africa is endowed with diamonds, gold, oil, natural gas, uranium, platinum, copper, cobalt, iron, bauxite, silver, iron ore, aluminium, lithium, nickel, lead, titanium and bauxite.
In post-independence Africa, multinational companies from Europe, Asia and Americas are still wielding enormous control over mineral resources on the continent due to exploitative mining contracts.
In an effort to attract foreign direct investment, many African countries have made deals with multinational corporations to exploit mineral resources in their respective countries.
As a result, these governments ceded ownership of mineral deposits to mining companies through legislations and contracts that set low mining royalties, tax concessions and tax holidays for extractive companies.
These incentives are now haunting Africans, as they have nothing to show for it despite the mining sector generating super profits running into billions of dollars every year.
"The multinational companies hold enormous economic and political power in post-independence African countries," investigative journalist Tom Burgis wrote in his 2015 book, The Looting Machine.
Fortunately, African leaders are now waking up from this deep slumber and demanding a larger share of the mining profit.
They are now shredding the old mining contracts and regimes that put their vast mineral wealth in the hands of foreign miners.
They are pushing for new and fair mining codes with mining companies operating on the continent.
President Joseph Kabila of the Democratic Republic of Congo (DRC) on March 9, 2018, ruffled the feathers of big mining corporations when he signed into law a new mining code that increased royalties and taxes on strategic minerals – cobalt, copper and gold.
As a result, royalties on cobalt in the DRC have risen from two to 10 percent.
The new law has also raised tax on profits to 35 percent from 30 percent and a 50 percent windfall tax on super profits.
In addition, the new legislation that repealed the 2002 mining code has revoked the old regime that protected mining companies from changes to the country’s fiscal and customs regulations for a 10-year period.
“Under the new bill, miners in the DRC will no longer be protected under the existing mining code’s 10-year stabilisation regime and will instead be immediately subject to any increases in royalties and taxes,” according to a recent report by King & Wood Mallesons.
DRC’s Communication and Media, Lambert Mende Omalanga, recently told The Southern Times that the senate took a deliberate step to do away with exploitative mining contracts that favoured foreign mining companies.
Mende said the new mining code was not well received by big miners in the country.
Immediately after the senate passed the new law, mining companies exploiting gold, copper, zinc, iron, diamonds, cobalt and uranium in DRC such as Glecore, Randgold, Ivanhoe and China Molybdenum dispatched emissaries to Kinshasa to try and convince President Kabila not to promulgate the mining law.
“The law was passed by parliament and the senate and when the President had to promulgate it, then came attacks and a lot of pressure from these Western countries, even from China.
“They came here saying that ‘we need to see the president’, making even some threats on security issues and so on. The President received them, and told them that ‘look, there is a parliament in this country, and the laws are the true representative of our people. They have passed the law and I am going to sign the law. And if there is a problem with you paying what the new provision [demands], you will negotiate with the government, but me as the head of state of this country, I cannot change what has been decided by the parliament of this country’,” the minister narrated.
Since meeting President Kabila on March 7, mining companies have been engaging the government.
They have been pressing the government to soften its stance on the new taxes and royalties claiming that they will scare off investors.
They further want the DRC to reinstate Article 276 of the 2002 mining code that provided for 10 years stability clause.
“This period of stability resulted in over US$10 billion in direct investments by the mining industry which created over 20 000 full time jobs in the DRC,” they said in a joint statement issued by Randgold on March 15.
But DRC’s Mining Minister Martin Kabwelulu remains resolute and told the miners that the government will not compromise on what President Kabila has already signed into law.
Reuters quoted Minister Kabwelulu as saying, "We cannot change anything in the mining code" after meeting the miners in Kinshasa on Friday, March 23. "The taxation as laid out in the mining code is untouchable. It stays," he has said.
Mende said the new changes in the mining legislation were expected to net the government over US$3 billion per year in royalties and taxes.
Randgold Resources’ and AngloGold Ashanti’s Kibali mine, Glencore’s Mutanda Mine and Kamoto Copper Company, the Kamoa-Kakula mine, MMG’s Kinsevere mine and CMOC’s Tenke Fungurume mine represent more than 85 percent of the DRC’s copper, cobalt and gold production.
And to register their frustration, the mines have resigned from the FEC, the Congolese Chamber of Commerce, with immediate effect, claiming that the chamber does not adequately represent their interests.
According to King & Wood Mallesons, the changes to mining laws in the DRC mirror a trend across resource-rich African nations looking to better benefit from increases in the prices of their natural resources.
“In addition to the DRC, Tanzania and South Africa have also recently amended their mining laws with similar impacts on foreign investors.
The themes underpinning the changes are increased state and local ownership of mining projects, increased tax and royalties and mandating the inclusion of the local economy in the mining industry,” said the global law firm.
Tanzania's President John Magufuli has locked horns with big miners in his effort to reform what he termed “extremely generous” incentives to foreign mining companies.
Magufuli has promised to “stop at nothing to undo or reverse these exploitative mineral contracts”.
And to show his resolve, the Tanzanian government slapped London-listed Acacia Mining with a US$190 billion bill in revised taxes, interests and fines for operating illegally in the country and failure to disclose earnings in 15 years.
Canadian Barrick Gold that owns 63.9 percent stakes in Acacia has since buckled under pressure and struck a deal with the government to pay US$300 million in fines and give the government 16 percent shareholding in its gold mines.
According to Bloomberg, mining companies in Ivory Coast have called for talks with the government after it discontinued a tax exemption for industrial and commercial benefits.
This was after the government revoked exemption from a 35 percent tax on profits, a move it said was in line with international trends.
Media reports also indicated that Africa’s third biggest gold producer, Mali, is thinking of changing its current mining codes.
Malian Economy Minister Boubou Cisse was quoted as saying last week during a joint news conference with the International Monetary Fund that if compromises with mining companies are not achieved, government will be forced to unilaterally implement amendments to the mining code.
This statement seem to have rattled major players in the Malian mining sector that include B2Gold, Randgold, AngloGold Ashanti and Hummingbird Resources.
Under the current mining code, mining companies enjoy protection from changes in fiscal regime for 30 years.
Reacting to media reports, B2Gold said its Fekola Mine is subject to Mali’s Mining Code of 2012 for the duration of its operations and that subsequent amendments to the law are not applicable to it.
“As a result of these provisions, the company believes its interests in Fekola are protected and that any contemplated amendments in a new mining code will not apply to Fekola without B2Gold's agreement. No Malian government representative has informed any B2Gold representatives in Mali or elsewhere that the government does not agree with the Company's position,” the Canadian gold miner bragged in a statement issued on March 20, 2018.
In Southern Africa, Zambia has also moved to bring multinational corporation companies operating in the mining sector to order. Back in 2015, Zambia, one of the world leaders in copper production, increased underground mining royalties from 6 percent to 8 percent. It further raised taxes for open pit mining to 20 percent from 8 percent.
Last week, the Zambian Revenue Authority (ZRA) said it had uncovered a mining tax scam worth US$7.7 billion.
The tax authority accused Canadian copper miner, First Quantum Minerals, of failing to pay import duties in the country.
The tax authority wants the miner to pay US$2.1 billion in penalties and US$5.7 billion in interest in relation to US$540 million worth of mining equipment imported for its Sentinel mine.
ZRA said it has started a detailed audits on all mining companies for compliance in all applicable tax types in order to ensure all taxes due are collected.
“The planned audits will cover the statutory period of 6 years to start with.
However, if the findings will review a pattern of consistent, systematic, premeditated cheating (tax evasion), we shall criminalise the act and cover longer periods to achieve the intended objective.
“For this reason we are announcing the preliminary assessment of K76.5 billion (US$7.7 billion) issued to a prominent mining company for mis-classifying consumables and spare parts at importation for the last five years.
The said items were declared as mining machinery (which attract customs duty at zero percent) when in fact not.
The applicable duty rate for the items ranges from 15 to 25 percent,” the authority said in a statement.
With all these winds sweeping through Africa’s mining sector, Bloomberg summed it up it up by saying that “One by one, the biggest names in African mining are getting squeezed.
The tactics might be blunt, but the message is clear - the countries where they operate want a bigger share of the proceeds”.
The global news outlet observed in its March 22, 2018, report that “the collapse in commodities through 2015 hobbled some of Africa’s biggest resource economies, stunting growth and leaving budgets short.
Since then a recovery in prices has sent the continent’s biggest miners soaring, boosted profits and rewarded shareholders with bumper pay outs.
But a lack of returns to governments is drawing a backlash from Mali in the Sahara to Tanzania on the Indian Ocean”.