Mining industry struggles to stay afloat as old challenges persist

The mining sector has been on the rise over the last couple of years, with huge exports and foreign investments being recorded to maintain the sector’s position as the second highest foreign income earner after tourism.Over th past two years, the country registered a sharp increase in investments in the mining sector, rising from $24m in 2011 to close to $70m in 2012.The story has, however, changed this year, with only $0.5m so far invested in the sector in the last six months, while it was the least export earner after coffee, tea and tourism in the same period.The development means that the government has a daunting task to attract investments of over $127m to achieve its annual target.Nevertheless, the mining industry is currently in a state of transition, according to the Ministry of Natural Resources. The sector has only recently transformed from a publicly-run to a private industry.This means that much as progress has been made, several constraints still persist.Whereas recent progress include the updating of the regulatory framework to keep pace with the speedy privatisation of mining sector through a new Mining Law, challenges on taxation, fluctuating prices and lack of local skilled labour continue to shackle the sector.Jean Malic Kalima, the president of the Rwanda Mining Association, concedes that much as the new law was passed, several mining companies still await long-term concession deals with the government. Investors do not also agree with the taxation policy stipulated in the law.“The law was passed, but investors are still waiting for long-term concessions, meaning that exploration and drilling activities are slow. “The miners also believe that the tax of 4 per cent is high. But the problem will be solved because we are in negotiations with the Ministry of Finance,” Kalima said in an interview.“In the end, mining companies need to make profits and more foreign investors need to be attracted. That is why we have to agree on the laws and on a reasonable tax regime,” he argued.According to the new law, mining companies will be subjected to a royalty tax rate fixed at 4 per cent of the norm value of basic metals and other minerals, 6 per cent of the norm value of gold and precious metals, and 6 per cent of the gross value of diamonds and other precious stones.Private players argue that incentives to investment are lacking, while the new taxes are an extra burden since they are already subjected to several other fees to district administrations, to geology and mines department and fees for tagging minerals.Looking at current statistics, where less than $1m has so far been invested in the sector, one is tempted to believe that the government has no way out other than look into more incentives to attract direct investments.“The government is aware of this and is working on major incentives, particularly the discovery of new mineral potential areas to ensure diversity,” said Vivian Kayitesi, the head of investment promotion at the Rwanda Development Board (RDB).“The government identified 21 new potential mining sites and has done detailed studies on four sites. It has also initiated an expression of interest for Bisesero Mines and is looking at an investment of about $25m,” Kayitesi explained.“Last week, the expression of interest was closed so we are waiting to see who will come in with proposals.”The new potential sites cover about 1,700 square kilometres rich in tin, coltan, wolfram and gold. They are located in Nyagatare, Kirehe, Nyamagabe and Muhanga districts.Kayitesi believes that despite not having achieved investment targets, there is still time to turn things around before the year ends.“Our target investment for this year in the mining sector is $128m. We have registered a few deals, including a local investment of about $250,000 in a small quarry and mining site, but we still have a lot of pending projects we hope to close this year,” Kayitesi said.The government finalised mining projects such as the New Bugarama, Gifurwe and Rwinkwavu. The pending projects include Rutongo Mines and Eurotrade, while negotiations for new concession licenses are ongoing for two others, Natural Resources Development and Musha Mines.RDB acknowledged that these deals will be concluded by the end of the year, which will greatly boost the sector and help it bounce back to full productivity.The government targets $407m (Rwf268.6b) in mineral exports by 2017.