Congo wants to nearly double tax revenues to 25 pct of budget
* Revising mining code to raise royalty tax
* Miners warn that changes to code could defer investment
* Infrastructure gap in Congo makes investment threshold higher
By Peter Jones
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 MatataPonyo 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.
LACK OF INFRASTRUCTURE
Randgold’sWatum said that, before undertaking a project, the company usually insists on reserves of 3 million ounces of gold ore, a 20 percent rate of return on investment, as well as political stability in the host country.
“Because of the challenges we face in Congo, reserves need to be at least 5 million ounces of gold,” he said. “Orientale Province is just not economically viable as a location due to its lack of infrastructure.”
Kibali has an estimated 11 million ounces of gold, he said.
Mining companies are drawn to invest mostly in Congo’s copper-rich southeastern province of Katanga, but even there they face an energy deficit of around 300 MW. Congo intends to build a huge 4,800 MW hydropower station at Inga on the Congo River but progress in finding a private partner has been slow.
Philippe Muteba, the director of Canadian gold company Banro’sTwangiza Mining project, said lack of reliable energy was also a problem in the eastern province of South Kivu.
“We are forced to purchase 1.2 million litres of gasoline each month to power a 4.5 megawatt generator,” Muteba said.
Banro is one of only two miners in Congo’s troubled North and South Kivu provinces. Canada’s Alphamin subsidiary Mining and Processing Congo (MPC) is exploring across five permits at the Bisié tin mine in North Kivu.
North Kivu was the setting of a 20-month long insurrection by the M23 rebel, which was finally quelled by Congolese forces in November thanks to the intervention of U.N. peacekeepers.
“Peace is a necessity to allow for business,” Ponyo said. “I want Congo to be a centre that diffuses peace and wealth.”
Ponyo’s office said in statement on Wednesday that a recent slump in copper prices, amid an economic slowdown in China, was a reminder of the need to diversify the economy. LME copper prices have lost about 10 percent this year, trading at $6,565 per tonne on Wednesday. (Editing by Daniel Flynn and William Hardy)