By Aaron Ross
KINSHASA (Reuters) – The Democratic Republic of Congo’s focus on maximising short-term tax revenues risks squandering long-term mining prospects, the chief executive of one of its largest mining investors warned on Wednesday.
Speaking at a mining conference in Kinshasa, Mark Bristow, the CEO of gold miner Randgold Resources Ltd, criticised Congo’s Prime Minister Augustin Matata Ponyo for seeking quick tax revenue gains at the expense of the sustainable growth.
Congolese and international consultants are currently preparing recommendations for the government ahead of a revision of the country’s mining code, which was enacted in 2002.
“We heard a repeat of this just recently with the prime minister’s speech in parliament where he doesn’t seem to understand we have to build an industry before we can harvest,” Bristow said.
Matata Ponyo has been vocal about the need to increase the tax take from Congo’s mining sector. In March, he said he intended to almost double tax revenues from mining to 25 percent of the national budget by 2016, up from the current 14.5 percent.
Congo’s economy was long crippled by mismanagement, corruption and two decades of armed conflict in the country’s eastern borderlands. But investors are now rushing to cash in on largely undeveloped reserves of copper, gold, and cassiterite.
The economy is set to grow by 10.4 percent next year, the government said earlier this month, due in part to the expanding mining sector.
NEGOTIATIONS FALTER
Despite its mineral wealth, Bristow said that Congo needed an especially attractive mining code to compensate for its deficits in other areas. Scant geological information, a low skill base among its population and political instability all increase costs and investment risks, he said.
“This country can’t afford to make itself even less competitive than it is today,” he said, adding that the current code should be changed as little as possible.
“Maybe there’s a reason to tinker with parts of it, but to rewrite it would be, for my mind, an endeavour which has no measurable benefit to anyone.”
Negotiations over the revision have faltered because of disagreements about proposed increases in royalties. Miners and the government have also been at loggerheads over a proposed reduction in the length of stability clauses and a 40 percent windfall tax, according to analysts.
Randgold operates the Kibali gold mine in northeastern Congo, a joint venture with AngloGold Ashanti and state miner Sokimo that officials hope will mark a renaissance for gold mining in the country.
The mine poured its first gold last September and Randgold said in a statement this week that it expects to produce 650,000 ounces of gold per year over the next 10 years.
Mining minister Martin Kabwelulu told the conference Wednesday that gold production could reach 18 tonnes in 2014, up from just 100 kilograms in 2007.
