Congo’s mining tax increase plan rattles investors – by Peter Jones (Reuters U.S. – March 26, 2014)

http://www.reuters.com/

GOMA, Democratic Republic of Congo, March 26 (Reuters) – D emocratic Republic of Congo aims to double tax revenues from minerals but investors warned that an overhaul of the mining code could remove incentives to invest there.

Prime Minister Augustin Matata Ponyo told a mining conference in the eastern city of Goma that the government intends to increase tax revenues from mining to 25 percent of the national budget by 2016, from 14.5 percent at present.

“Exploitation of natural resources is key to our ambition of becoming an emerging market country by 2030,” he said.

Congo produced a record 943,000 tons of copper last year, making it Africa’s largest producer and driving economic growth of 8.5 percent. Mismanagement, corruption and two decades of violence in eastern Congo have hampered development of other minerals, including diamonds, gold, cassiterite and coltan. Mining executives warned the government’s ongoing revision of the 2002 mining code risked deterring much-needed investment.

“We need a mining code that is sufficiently incentivising,” said Louis Watum, general manager of Randgold’s giant Kibali mine in Congo’s remote northeastern Orientale Province, which poured its first gold in September.

Investors needed to be compensated for infrastructure problems in Congo which drove returns on projects to below levels in neighbouring resource-rich countries, he said.

The government had hoped to unveil a new code at the mining conference. However, negotiations with the private sector have stalled over the government’s push to raise royalties on minerals like copper and shorten stability clauses guaranteeing no changes to tax terms on projects.

“Differences persist regarding tax, customs and foreign exchange,” said Simon Tuma-Waku, vice-president of the chamber of mines at the Federation of Congolese Businesses.

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