Gabon issues new draft legislation on mining

A new mining code for Gabon is expected to be promulgated in the near future, following its approval by President Ali Bongo Ondimba in February 2015. Under preparation since 2011, it has had a convoluted history, and may yet be further revised. The new code, which replaces the mining law of 2000, seeks not only to provide a clear and attractive regulatory framework for investors but also to address new roles for the state. “The principal aim of the administration was to make the code as attractive as possible to foreign investors, who go wherever the conditions are the most appealing. For this you need strong sector governance,” said Maurice Ndziba, director-general of Geomining Services Pro. But while the global mining market has seen upheaval over the past three years, with major shifts in costs and revenues, the draft has been little changed.

Regulations

For Fabrice Nzé-Békalé, CEO of state-owned mining firm Société Equatoriale des Mines (SEM), the new code brings more clarity to sector regulations, most notably by separating the roles of mining-related state agencies between policy-making and regulation. “In the past, when there was a dispute between the ministry and an operator, the ministry ruled. There was an obvious conflict of interest,” he said. “Under the new code, an independent regulator will be set up to resolve such disputes.” The code also improves protection for foreign investors, setting out their rights and specific procedures for resolving disputes. Another focal point is environmental sustainability – an initial impact assessment is now required before any exploration work (other than surface exploration) is undertaken, and needs to be approved by both the Ministry of Environment and Ministry of Mining.

Local Support

In line with a broader shift in countries with large extractive industries, Gabon is looking to improve community relations and local buy-in. The draft code clarifies when and how much mining operators must invest in local communities, with specific allocations to be determined by a tripartite committee of representatives from the operator, local communities and the authorities. Also, some 1-5% of turnover must be transferred to two state-run funds, the Industrial Responsibility Fund and the Social Responsibility Fund.

Other provisions focus on ensuring local content. The code requires operators to ensure skills transfer through training programmes and internships; grants employment priority rights to local nationals whenever they have qualifications and experience equal to that of a foreign applicant; and mandates the use of local small and medium-sized enterprises for procurement and services, without setting fixed targets. All such details are to be agreed in the mining convention signed between operators and the Ministry of Mines. The portion of workers that must be local is governed by the Labour Law, which limits the use of non-nationals to 10% of the workforce for any given activity.

Taxes

Replacing the previous uniform royalty regime, the new code uses a sliding royalty rate that varies by the type of metal or mineral and the project’s complexity in terms of geology, location and associated infrastructure development. Royalties are imposed at 3-5% for on base metals, 5-8% for precious metals and 8-10% for precious stones. The flat corporate tax of 35% on net income remains unchanged, though under the new code producers will enjoy a five-year tax holiday, which can be extended for major projects. The changes will only apply to new production; existing operators retain the same tax conditions.

Exploration companies, meanwhile, are exempted from taxes, and all equipment imports are exempt from Customs fees. The new code also aims to speed up the process of securing exploration licences, which now need only be signed by the minister of mining, not the president. Under normal conditions, such licences will now be issued within one or two months, said Ndziba. “We favour the entry of as many exploration companies as possible, since out of every 1000 projects perhaps only a handful will result in actual production.”