Burkina Faso – Potential new mining law in Burkina Faso is putting investor confidence at risk.
This is according to ENSAfrica’s latest ‘Africa business in brief’ newsletter, which states that new political gatekeepers in Burkina Faso are raising contract and tax risks in mining and other sectors.
The transition government of Burkina Faso has ordered production at the Tambao manganese deposit to stop, according to a report by Bloomberg on 10 March.
The spokesperson for the Ministry of Mines and Energy clarified that the order to stop production does not mean licence revocation: instead, the government plans to carry out a review of mining contracts awarded by former president Blaise Compaoré, who was ousted from power in October 2014.
Colonel Boubacar Ba, shortly after his appointment as the minister of mines and energy in November, promised to review a number of unspecified gold and manganese contracts issued under Compaoré’s rule.
The review is likely to target contracts held by local investors aligned to the previous government and by mining subsidiaries, especially those that hold more than 10 research and/or exploration permits at one time. Even though the 2003 mining code allows for possession of multiple permits, a 2005 decree specifies that no more than 10 exploration licences can be held by an individual firm or subsidiary, whereas some mining firms hold close to 30 such permits.
An IHS source suggests that policy discussions are currently focused on an increase in the state’s equity share from 10% to at least 20%, introduction of a new capital gains tax of at least 20%, a reduction in the maximum period of exploration licences from 25 to 20 years, a clause to enforce import duties, and lastly, removal of some tax concessions during the exploration and exploitation phases.
New VAT exemptions are likely to be introduced during the preparatory phase and VAT exemptions during the exploration phase are likely to be maintained.
Alongside the mining sector, the transition government is reviewing privatised firms and those earmarked by the previous government for privatisation.
In December 2014, the construction firm SOCOGIB, privatised in the 1990s, was nationalised. In January, the transition government decided to remove the international airport of Ouagadougou from the privatisation list. It is likely that other public firms, including Société Nationale Burkinabè d’Electricité (SONABEL), earmarked for privatisation will be removed from the list.
Moreover, the government is also reviewing contracts in the telecoms and construction sectors including infrastructural projects, such as the USD$129 million project awarded in September 2014 for the construction of the northern road interchange in the capital, Ouagadougou.