Following the enactment of the Democratic Republic of Congo’s (DRC) Revised Mining Code in 2018 the mining industry is further being impacted by the global drop in commodity prices impacting on miner’s profitability.
PwC assurance and advisory partner for Francophone Africa JEAN JACQUES MUKULA says that the DRC’s mining sector is consequently trying to reinvent itself in the face of both current and future challenges, writes CHANTELLE KOTZE.
“Now more than ever before, the DRC government has to reassure the mining sector on its ability to create a secure and stable investment and operating environment,” says Mukula, as this is the key to attract new entrants into the sector and to retain the companies already operating in the DRC.
In doing so, Mukula calls on both the government and mining companies to work together to improve their profitability.
PwC – who has been present in the DRC for nearly 45 years – has been assisting and supporting clients in interpreting and implementing these laws, as there are still many articles of the new Mining Code that have yet to be clarified between the tax administration and mining entities.
PwC also continues to provide guidance on some of the tax measures under the new Mining Code, such as capital gains tax, that still remain unclear.
“While the country’s tax administration gave some guidance in this regard, there are still ongoing issues being faced by mining companies. “We are convinced that such issues will be solved soon in order to prevent any discrepancies in the application of the law,” says Mukula.
Moreover, mining companies are still facing difficulties in collecting VAT reimbursements from the DRC government – another issue that has affected the ability of mining companies to do business in the DRC.
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While the DRC offers huge untapped and high-grade mineral resources, the adoption of the new Mining Code, lack of clarity on some of the laws within the Code laws and above all else – the uncertainty of future regulations – is detracting new investment and new entrants to the mining sector.
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“Apart from only a handful of projects that are being developed, including Ivanhoe Mines’ Kamoa-Kakula copper project and Power Metals Resources’ (formerly African Battery Metals) Kisinka copper-cobalt project, there are no significant new Greenfields projects taking place in the country – an indication that new entrants are hesitant to enter the country.
Through its Tax and Legal team, PwC is currently involved in few due diligence works for foreign investors looking to acquire mining rights or existing mining companies in the country. This is a positive indication that the DRC is still attracting foreign investors, although Mukula believes that the number of these potential deals is not a true reflection of the huge mining potential that the DRC holds.