The short to medium-term viewpoint of all commodity expenses and government tax modification initiatives will determine the future of the mining industry in Africa. These issues will define whether gold and coal miners thrive in nations like Ghana and Mozambique, and can truly influence the imminent growth of the sector.
The observation of Ghana as an investor-friendly mining destination may be challenged as the major tax improvements, which are either projected or legislated, lack the kind of transparency and conviction that mining investors need around the Ghanaian government’s backing of mining.
The tax burden
It is inevitable that when there is room to grow and develop within a country, there is also room to improve challenges. Some of the finance related challenges facing the mining industry are important issues for government and various establishments to consider. The full implications of Ghana’s tax restructuring have not been measured. Among these is the 10% increase in the corporate tax on mining corporations. A windfall tax, in line with increases in the gold price and global trends, could be another challenge. Power supply, the shortage of electrical power and the resulting substantial increases in the cost of power in recent years are additional issues to overcome.
Prospective changes in Mozambique
In the beginning of the year, Mozambique combined the ranks of countries suggesting and tabling alterations to mining law. Some of the changes and prospective amendments comprise:
- A proposal for government to take stakes in major strategic projects – a possibility not necessarily out of line with the reforms being introduced in other mineral-rich countries.
- Streamlining of the licensing process for exploration and mining. These should lower the industry’s barriers to entry. However, the new legislation would force companies to start production within two years of licensing. In contrast, existing legislation enable mining to start 15 years after a mining license is granted.
The draft new mining law proposes that business contracts involving rights and licenses for the country’s resources must be executed within the country. Observers expect the draft to submit to the Mozambican government before the second half of this year.
Mining companies in Ghana speak of needing a social license to operate, and must simultaneously confront significant pockets of illegal mining, while in Mozambique one of the most crucial challenges is a rail network equal to foreign demand for coal.
