68759 THE WORLD BANK Assessment of the Central African Republic Mining Sector November 2008 TABLE OF CONTENTS 1 Introduction and presentation of the project....................................................... 1 1.1 Framework of the study and background ................................................................. 1 1.2 Objectives ............................................................................................................... 1 1.3 Methodology............................................................................................................ 2 1.4 Constraints .............................................................................................................. 4 1.5 Historical background .............................................................................................. 4 1.6 Current situation ...................................................................................................... 6 1.7 Geology ................................................................................................................... 8 2 Institutional Structure ......................................................................................... 13 2.1 The structure of the Ministry of Mines, Energy and Hydraulics .............................. 15 2.2 The structure of the General Mining Directorate .................................................... 15 2.3 The role of the Regional Mining Directorates ......................................................... 17 2.4 Anti-Fraud and Mine Inspection ............................................................................. 17 2.4.1 The Company of Brigades for the Control of Mines, Energy and Hydraulics (The Mining Brigade) ............................................................................................. 17 2.4.2 The Directorate for Information and the Suppression of Fraud .............................. 18 2.5 Structures in charge of the management of mining resources ............................... 18 2.6 The management of the allocation of mining licences and permits ........................ 19 2.7 Personnel and equipment...................................................................................... 20 2.8 Proposals to improve management ....................................................................... 21 2.8.1 Creation of the Directorate for Geology ................................................................. 21 2.8.2 Restructuration of the General Mining Directorate ................................................. 21 2.8.3 Creation of the Regional Mining Inspectorates ...................................................... 21 2.8.4 Creation of a Mining Cadastre ............................................................................... 22 2.8.5 Creation of an Office for Precious Minerals ........................................................... 22 2.8.6 Creating a Centre for the promotion of the mining sector....................................... 23 2.8.7 Institutionalising mining security ............................................................................ 24 2.9 Final observations and recommendations ............................................................. 24 3 The Central African Republic artisanal mining sector ...................................... 26 3.1 Artisanal mining policy ........................................................................................... 26 3.2 Institutional capacity for the artisanal and small scale mining sector...................... 32 3.3 The Central African Republic artisanal mining sector ............................................ 38 3.3.1 Miners’ organisation .............................................................................................. 38 3.3.2 Land tenure ........................................................................................................... 44 3.3.3 Gender mainstreaming .......................................................................................... 44 3.3.4 Child labour ........................................................................................................... 46 3.3.5 Mining and processing methods ............................................................................ 49 3.3.6 Training and outreach ........................................................................................... 51 3.3.7 Health and safety .................................................................................................. 54 3.3.8 Community health ................................................................................................. 56 3.3.9 Environmental impact ............................................................................................ 57 3.3.10 Social impact ......................................................................................................... 60 3.3.11 Fair mineral markets, and access to finance and credit ......................................... 62 3.3.12 Artisanal mining development................................................................................ 66 4 The legal framework of the mining sector ......................................................... 68 4.1 Legal framework for large-scale mining activities................................................... 68 4.2 Legal framework of artisanal and small-scale mining activities .............................. 86 4.3 Competitive position and recommendations for reform of the mining sector fiscal system .......................................................................................................... 94 4.4 Mining conventions and bonuses .......................................................................... 95 4.4.1 Mining conventions ................................................................................................ 95 4.4.2 Bonuses ................................................................................................................ 96 4.4.3 Recommendations ................................................................................................ 98 5 Diamond marketing chain governance ............................................................ 100 5.1 Analysis of the marketing chain of diamonds ....................................................... 100 5.1.1 The actors of the diamond marketing chain ......................................................... 101 5.1.2 The financing of the actors of the diamond marketing chain ................................ 109 5.1.3 The legal and institutional framework of the diamond marketing chain ................ 111 5.1.4 BECDOR ............................................................................................................. 113 5.1.5 Fraud................................................................................................................... 117 5.1.6 The Kimberley Process ....................................................................................... 121 5.1.7 Gold .................................................................................................................... 129 5.1.8 The organisational and structural constraints ...................................................... 132 5.1.9 Conclusions......................................................................................................... 133 5.2 The impact of the mining sector on the public finances of the Central African Republic (data collection and reconciliation of revenues) .................................... 136 5.2.1 Generalities ......................................................................................................... 136 5.2.2 Financing the rural authorities through taxes on natural resources ...................... 138 5.2.3 Diamonds produced by ASM operators ............................................................... 139 5.2.4 Diamonds mined by industrial operators .............................................................. 141 5.2.5 Evaluation of mining derived income – 2006 ....................................................... 142 5.2.6 Categorisation of State revenues ........................................................................ 148 5.2.7 Categorisation of State expenses ........................................................................ 149 5.2.8 Data reconciliation (public and private sources) .................................................. 149 5.2.9 Distribution of mining revenue among the various operators in the industry ........ 157 5.2.10 Fraud................................................................................................................... 159 5.2.11 Conclusions and recommendations ..................................................................... 161 LIST OF BOXES Box 1 Extractives Industries Transparency Initiative in the CAR...................................... 8 Box 2 Public and Semi-Public Services – The role of the Administration and of Public Establishments.................................................................................................... 14 Box 3 The role of ministerial cabinets and general directorates ..................................... 14 Box 4 Key Findings of the Ministry of Mines, Energy and Hydraulics Institutional Audit . 35 Box 5 Exploration campaigns in the CAR ...................................................................... 36 Box 6 List of geological maps and data related to minerals in the CAR held by the French Bureau de Recherches Géologiques et Minières. ................. 37 Box 7 Worst Forms of Child Labour Convention, 1999 .................................................. 48 Box 8 Improving Mining & Processing Techniques/Technology .................................... 52 Box 9 Best Practice Recommendations for Environmental Management in the ASM Sector in Africa.................................................................................................... 59 Box 10 Examples of Access to Credit & Finance in Africa ............................................... 65 Box 11 The Enhanced Heavily Indebted Poor Countries (HIPC) Initiative in the CAR ..... 66 Box 12 Variation of the average price per carat............................................................. 159 LIST OF TABLES Table 1 Noted areas of current ASM activity in the CAR ................................................ 28 Table 2 Bonuses - State of play as of December 2007 .................................................. 97 Table 3 Expenses made towards ASM, funded by bonuses .......................................... 98 Table 4 Evolution of the price of diamonds from the artisan to the Buying Office ......... 104 Table 5 CAR - Official diamond exports 2005-2007 ..................................................... 106 Table 6 Identification sheet of authorised mining companies in CAR ........................... 108 Table 7 BECDOR market price list for rough diamonds ............................................... 115 Table 8 Structure of the taxes on diamond exports ...................................................... 116 Table 9 Gaps between the exports declared by the Secretariat of the KP in CAR and the destination country countries .......................................................................... 124 Table 10 Disparities in the nomenclature of the Customs codes .................................... 125 Table 11 Development of production from 2003 to 2006................................................ 126 Table 12 CAR Kimberley Process certificates (2003) .................................................... 126 Table 13 CAR Kimberley Process certificates (2004) .................................................... 127 Table 14 CAR Kimberley Process certificates (2005) .................................................... 127 Table 15 CAR Kimberley Process certificates (2006) .................................................... 128 Table 16 Average export prices of exports from the CAR and imports into the countries of destination ...................................................................................................... 128 Table 17 Structure of taxes on the exportation of gold ................................................... 131 Table 18 List of Buying Offices ...................................................................................... 140 Table 19 Statistics of Production of Mining Companies, and Total Production ............... 142 Table 20 Statistics of Production of Buying Offices (2006)............................................. 146 Table 21 Statistics of Exportation of Buying Offices (2006) ............................................ 147 Table 22 Categorisation of State revenues .................................................................... 148 Table 23 Categorisation of State expenses ................................................................... 149 Table 24 Comparison of the information given by the public sector with the information from the fiscal archives of the Buying Offices .................................................. 150 Table 25 1 Data supplied by Buying Office N° ................................................................ 152 Table 26 2 Data supplied by Buying Office N° ................................................................ 153 LIST OF ANNEXES Annexe N° 1 Competitive Position and Recommendations for Reform of the CAR Mining Sector Fiscal System, by Professor James Otto Annex N° 2 Environmentally Protected Areas and Gold and Diamond Deposits in the Central African Republic Annex N° 3 Historic of diamond production since the origin Annex N° 4 Audit Report on the sources of revenues of the Ministry of Mines, Energy and Hydraulics, first trimester 2007 Rapport d’audit des sources de recettes du ministère des mines, de l’énergie et de l’hydraulique, 1er trimestre 2007 Annex N° 5 Audit Report on the engagement bonuses of mining conventions, transfer of share of capital and their use for the 2004-2006 period, December 31, 2007 Rapport d’audit des bonus de signatures des conventions minières, des transferts de parts de capitaux propres et leur utilisation pour la période 2004 à 2006, 31 décembre 2007 Annex N°6 Documents collected LIST OF ACRONYMS ASM Artisanal and Small Scale Mining BECDOR Bureau d’Évaluation et de Contrôle de Diamant et Or Office for the evaluation and control of diamonds and gold BRGM Bureau de Recherches Géologiques et Minières CAR Central African Republic CASDOR Caisse d’Avance Spéciale sur le Diamant et Or CASM Community and Small Scale Mining CEEAC Communauté économique des États de l’Afrique Centrale Economic Community of Central African States CEMAC Communauté Économique et Monétaire de l' Afrique Centrale Central African States Economic Community CNRST Committee on National Resources, Science and Technology DETR Effective Tax Rate DFID Department For International Development DR Congo Democratic Republic of the Congo DS Droit de Sortie Exit Tax EITI Extractive Industry Transparency Initiative ETR Effective Tax Rate EU European Union F CFA Franc Communauté Financière Africaine FPM Fond de Promotion Minière Mining Promotion Fund GoCAR Government of the Central African Republic H&S Health and Safety HIPC Heavily Indebted Poor Countries HIV/AIDS Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome ILO International Labour Organisation IMF Impôt Minimum Forfaitaire Fixed Minimum Tax IRR Internal Rate of Return KP Kimberly Process KPCS Kimberly Process Certification Scheme LSM Large Scale Mining MIGA Multilateral Investment Guarantee Agency MMEH Ministry of Mines, Energy and Hydraulics NEPAD New Partnership for Africa’s Development NGO Non-Governmental Organisation NPV Net Present Value PDSM Projet de Développement du Secteur Minier Mining Sector Development Project PRSP Poverty Reduction Strategy Paper REIF Redevance Équipement Informatique et Finance Tax on computer equipment and finance RIDT Redevance Informatique Douane Trésor Computer processing fee Custom and Treasury SADC Southern African Development Community SME/SMI Small and Medium Enterprises/ Small and Medium Industry SPPK Secrétariat Permanent du Processus de Kimberley Permanent Secretariat of the Kimberley Process STI/STD Sexually Transmitted Infection/Sexually Transmitted Disease TSD Taxe Spéciale sur Diamant Special Diamond Tax UEMOA Union Économique et Monétaire Ouest Africaine West African Economic and Monetary Union UNCMCA Union Nationale des Coopératives Minières Centrafricaines National Union of Central African Mining Cooperatives UNCTAD United Nations Conference on Trade and Development UNDESA United Nations Department for Economic and Social Affairs UNDP United Nations Development Program UNECA United Nations Economic Commission for Africa UNEP United Nations Environment Program UNIDO United Nations Industrial Development Organisation USD United States Dollars VAT Value Added Tax WSSD World Summit on Sustainable Development Foreword This report has been produced by collating and editing reports from the following: - Wardell Armstrong LLP, for the analysis of the artisanal mining sector (including institutional capacity and legal framework), and for the analysis of mining conventions; - Jean Carrier, of Stikeman Elliott LLP, for the analysis of the large scale mining sector legal framework; - Professor James Otto, for the analysis of the large-scale mining sector fiscal framework; - Léon Boksenbojm, for the analysis of the diamond marketing chain governance (including the analysis of the application of the Kimberley Process Certification Scheme in the Central African Republic, and the evaluation of fraud); - Jean-Eudes Teya, of Xiane Consult International, for the analysis of the impact of the mining sector on public finances; - Lancéi Traoré, for the analysis of the institutional structure in charge of the management of the mining sector. These reports were written either in English or French, and while many efforts have been applied to make the overall report uniform, some discrepancies may still remain. Such discrepancies may result from the fact that a great deal of information has been collected orally during meetings held with various stakeholders of the Central African Republic mining sector, and reflect the different ways the sector may be interpreted and subsequently comprehended and studied. Executive summary The mining sector is an important source of revenues for the Central African Republic, and the mineral wealth of the country presents good potential in alluvial diamonds, gold and uranium. The mining sector already provides significant employment opportunities through the artisanal and small-scale subsector, and could become a significant source of community development and economic growth. Between 1995 and 2005, the Central African Republic mining sector participated significantly to the moderate resurgence of the country’s gross domestic product. In2004 and 2005 revenues from diamond exports amounted to 40% of the country’s overall export earnings. While the greater part of the Central African mining sector is currently constituted of artisanal and small-scale activities, two large scale investors (Axmin/Aurafrique and Uramin/Areva) are now operating in the Central African Republic. The capacity of the Government to manage the mining sector is limited however, and the governance of the sector has been considered weak. In order to put in place enabling conditions for the profitable development of the mining sector, the Government of the Central African Republic has joined the Kimberley Process Certification Scheme for rough diamonds, and has recently initiated the process defined by the Extractive Industries Transparency Initiative. In support of the Government’s reform programs in public finances management, governance of the mining sector and promotion of private investments, this report provides baseline information on the Central African mining sector, so as to enable the Government to improve its governance and competitiveness. In particular, this report presents recommendations as to the strengthening of the diamond traceability and valuation, and the application of the principles governing the Kimberley Process Certification Scheme. In order to inform the planned amendment of the Mining Code and the subsequent drafting of a standard investment agreement form, an analysis of the Mining Code is presented, with a particular emphasis on the procedure governing the attribution management and the security of mining titles. The report also presents an analysis of the mining sector fiscal framework as well as of the management of revenues levied from it. Recommendations to enhance the business environment, improve the management of mining assets, reduce fiscal leakages, and help prioritise the allocation of resources are presented. Finally, the Central African artisanal and small-scale mining sector has the potential for providing a sustainable livelihood to artisanal miners. This report presents recommendations in order to assist the promotion of socially and environmentally responsible artisanal mining practices, formulates advice as to the formalisation of the artisanal mining sector as well as its organisation into cooperatives. Relevant best-practices, which could be adopted in CAR, to improve the working and living conditions of artisanal miners, as well as their communities are identified. The World Bank Assessment of the Central African Republic Mining Sector 1 Introduction and presentation of the project 1.1 Framework of the study and background The mining sector is an important source of revenue for the Central African Republic (CAR). The country has substantial geological potential, and high commodity prices have led to heightened mineral exploration, with large scale gold, diamond and uranium projects nearing production phase. Current mining activity however, is predominately made up of artisanal mines producing diamonds and gold. Artisanal mining provides a rural livelihood to many thousands of Central Africans, and through the removal of various constraints the sector could transform itself into a source of growth and poverty reduction for the country. The CAR government (GoCAR) requested World Bank assistance to undertake a comprehensive analysis of the mining sector in order to identify these constraints, and to formulate recommendations for reforms, including improving governance and the investment climate in the sector, expanding the socioeconomic and financial impacts, and promoting the development of the large scale mining industry. This analysis is to serve as a reference point for dialogue between the GoCAR, donors, and other actors involved in the mining sector. 1.2 Objectives The general objective of the project is to undertake a comprehensive analysis of the mining sector in the CAR, with a view to identifying relevant actions for reforms designed to promote and organise artisanal mining operations as an instrument for poverty reduction. The project also aims to encourage the creation and development of small, medium and large scale mining enterprises capable of transforming the mining sector into an even more important source of growth, increasing State revenues, and having a generally positive impact on the national economy. The specific objectives of the project are to: - Assess the artisanal mining subsector; - Assess the flow of diamonds and capital from mining to export, including the end- markets and actors involved for current mining activity; - Assess diamond fraud; - Analyse the legal, regulatory and institutional framework, including the functioning of key entities such as the Cadastre, BECDOR (the Office for the Evaluation and Control of Diamonds and Gold – Bureau d’Evaluation et de Contrôle de Diamant et Or), and the enforcement of existing legislation; - Compare the value of diamonds exported from the CAR to the value of diamonds purporting to be arriving from the CAR in Antwerp and Dubai; OS00899/J01 1 November 2008 The World Bank Assessment of the Central African Republic Mining Sector - Examine the potential existence of price transfers; - Assess collection and reconciliation of declared revenues from BECDOR, and payments made in the various recipient public institutions with payments made in the Buying Offices (Bureaux d’achat); - Assess collection and reconciliation of payments and material revenues from formal enterprises involved in exploration. 1.3 Methodology The approach adopted to undertake the assessment of the mining sector in the CAR involved a combination of data collection from in-country visits (including the CAR, Antwerp and Dubai), as well as UK, Canada, and USA based secondary desk studies. In an attempt to collect the necessary information on the constraints, challenges and opportunities of the mining sector and the diamond marketing chain in the CAR, qualitative and, where possible, quantitative (both factual and estimates) data collection approaches were used. The objective of eliciting quantitative data was essential in determining such issues as the magnitude of artisanal mining and revealing demographic characteristics and poverty levels. Qualitative data was sought to determine those aspects of the mining sector which were not directly amenable to quantification, but which did determine or influence its continued existence, its isolation from the formal sector or its integration into the rural economy. These included, social processes and relations, views and perceptions of the members of artisanal mining communities, ministries, government institutions, non-governmental organisations, cooperatives and other relevant Central African stakeholders. Since it was not possible to study all key locations where artisanal mining activities were taking place - due to time, budgetary and security constraints - specific sites were selected for this study. The study concentrated on key sites in the south west of the country, and the diamond concessions at Boda. These artisanal mining sites were selected deliberately after consultation with the World Bank, and the Ministry of Mines, Energy and Hydraulics (Ministère des Mines, de l’Energie et de l’Hydraulique, subsequently referred to as the Ministry of Mines) because they were considered to be representative of artisanal mining in the CAR, and were deemed to be sufficiently safe to visit. In undertaking this study, various categories of respondents were needed to provide different information and viewpoints regarding the causes, constraints, challenges, characteristics, working conditions and consequences of the Central African artisanal mining sector. OS00899/J01 2 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Data collation methods adopted for this assessment included: - A thorough literature review of published documents on the CAR mining sector; - Direct observation through site visits to both gold and diamond artisanal mining sites, and detailed discussions with representatives from all echelons of the artisanal mining communities. - Key informant meetings with: • Government officials from the Ministry of Mines, the Direction Générale des Mines (General Mining Directorate), and other cogent Ministries including the Ministries of Social Affairs, Health, and Education; • Rural Préfecture and Sub-Préfecture level administrations; • Other cogent governmental institutions and State organs including the BECDOR, and representatives from the University of Bangui; • Private sector mining and exploration companies; • Non-governmental organisations; • Artisanal miners and artisanal mining communities. - Artisanal mining community meetings were used to gauge the level of understanding of the communities and thereby determine the potential for future collaboration. The meetings also sought to identify past and/or existing artisanal mining interventions/projects to avoid duplication and to ensure that the proposed project either complements or supplements such projects; - Miners’ interviews (often through an interpreter to speak in Sango) on the artisanal mining sites with both individuals and in groups were led according to a semi- structured interview technique and open discussions to discuss reasons and problems of working in the mines and their desires and future aspirations; - Focus group discussions (including women) were used to observe and/or discuss with communities and artisanal miners themselves (again through an interpreter in Sango) to help examine the real needs of the artisanal miners, the problems they have, their views, their aspirations for themselves and their children, any potential barriers to interventions, and the solutions the miners and entire community itself would really like to see. The artisanal site visits were considered as particularly important as they had the objective of gauging the level of approval, understanding and commitment from the Sub-Préfecture authorities, community leaders, artisanal mining communities, and other relevant stakeholders. It is vital to emphasise that real sustainability of the artisanal mining sector will only be achieved with full community acceptance, support, buy-in and cooperation from the outset of the project. OS00899/J01 3 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 1.4 Constraints Since this project began in November 2007, there have been two (excluding the initial fact- finding scoping mission) trips to the CAR in December 2007 and January 2008. The visits focused on the capital Bangui and field visits to some accessible artisanal mining sites. Regrettably, the second trip coincided with the resignation of the Government of Prime Minister Elie Doté1 and severely affected the ability of the mobilised team to complete some key tasks including additional field visits. During the team’s visit, the security situation remained precarious and the team was advised by the country’s World Bank representation and the United Nation Security Unit to remain in Bangui and at times to remain confined indoors (therefore, a scheduled field-trip to an artisanal mining area had to be cancelled). This unforeseen event impacted on the overall progress of this project, as public sector data collection has been painfully slow and at times restricted. During its week-long stay in the CAR, the team could only meet members of the resigning government, and the circumstances were not the most favourable. Interviews with civil servants were rendered more difficult too, in the face of the socially and politically tense context and the strike within the various administrations. The collecting of data from the administration (tax and public finances issues) has been particularly difficult and unsuccessful, members of the administration being reluctant to collaborate in the face of the uncertainty of their position. Due to the impossibility to return to the CAR for budget reasons, attempts have been made to remotely extract data, with a reasonable success though with considerable delay, which limited the amount of time available to spend on data analysis. 1.5 Historical background The CAR is a landlocked country in Central Africa bordered by Chad in the North, Sudan in the East, the Republic of the Congo and the Democratic Republic of the Congo in the South, and Cameroon in the West. Most of the CAR consists of Sudano-Guinean savannas but it also includes a Sahelo-Sudanese zone in the North and an equatorial forest zone in the South. Two thirds of the country lie in the basin of the Oubangi River, which flows south into the Congo River, while the remaining third lies in the basin of the Chari River, which flows north into Lake Chad. Between 1000 BC and 1000 AD, Adamawa-Eastern people from what is now Cameroon, heading towards Sudan, settled in CAR territory. During the same period, a number of Bantu-speaking people settled in the South-West, and various Central-Sudanese people 1 On Friday 18 January, President François Bozizé accepted the resignation of the Prime Minister and Head of the Government Elie Doté. The Government had been battling with striking workers syndicates, demanding the payment of many months’ worth of salary arrears. The team arrived in Bangui on the very same day. OS00899/J01 4 November 2008 The World Bank Assessment of the Central African Republic Mining Sector settled along the Oubangi River. By 500 BC metalworking started to become commonplace, the knowledge spreading from across the Sahara. Between the 16th and 19th centuries, the region was subject to a devastating slave trade. In the early 19th century, the Baya people, fleeing from the Fulani of Cameroon, arrived in the region, and later in the century the Banda people, seeking refuge from the Arab slave traders in Sudan also arrived in the region. At this time French expeditions from the Congo occupied the area under treaties with local chiefs, however in the 1880s, the French colonised the region, and organised it as the territory of Ubangi-Chari. In 1910 it was incorporated within the Federation of French Equatorial Africa (Fédération de l’Afrique Équatoriale Française), with economic development dominated by European concessionaires. Indigenous people suffered abuse under this organisation, and several violent protests were staged between 1928 and 1930. In 1946 the territory was first represented in the French National Assembly, controlled by its own elected legislature, and in 1960 the colony became fully independent and known as the CAR. This was followed by three decades of non-democratic rule. President David Dacko’s Government was charged with corruption six years later and army Chief Colonel Jean Bédel Bokassa seized power, abolished the constitution and enforced an authoritarian regime. In 1976, a new constitution was issued and the Colonel was crowned Emperor Bokassa I. Bokassa was eventually overthrown by a French backed coup led by the former President Dacko, who resumed power in 1981. Six months later, army commander General André Kolingba deposed Dacko in another coup, and headed a six year term by popular referendum. The first ‘fair’ democratic elections were held in 1993, with Ange-Félix Patassé elected President. Patassé’s Presidency was plagued by unrest within the military during the mid nineties. A truce was agreed in 1997, and French military forces predominantly withdrew from the country. French backed General François Bozizé overthrew Patassé in 2003, won a democratic election in May 2005 and remains in power today. President Bozizé has provided a stable background for recent investment in the mining industry. In January 2008 however, civil servants striking over months of unpaid wages forced the Government to resign2. A new Prime Minister was rapidly nominated3 and a new Government was ushered in4, still under the control of President Bozizé. The post-holder of the Minister of Mines remained unchanged. 2 18/01/2008. 3 22/01/2008. 4 28/01/2008. OS00899/J01 5 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Gold was discovered in the CAR in 1912, and following this, some initial geological descriptions were recorded, maps were drawn, and diamonds were subsequently discovered in 1914. The first mineral prospection was undertaken in the late twenties and thirties by the French Equatorial Company of Mines (Compagnie Équatoriale des Mines), who covered large areas in search of gold, particularly in the central and eastern regions. In 1929, the industrial exploitation of gold began at Roandji in central Ubangi-Chari, and the presence of diamond-bearing alluvial deposits was established in the west of the country, between Bossangoa and Nola. Similar diamond-bearing alluvial deposits were subsequently discovered in the central eastern area of the country in 1943. In the decade between 1935 and 1945 diamond production grew rapidly, mined by eight foreign companies, most of whom were making efforts to mechanise production through loans offered by the USA under the Marshall Plan. The gold industry performed strongly until the early fifties, peaking with production of 907kg in 1934. Production however tailed off due a low gold price (US$1/g) impacting on profitability, and subsequently many companies turned to diamonds of which over two million carats were produced up to 19605. Shortly after 1958, when the CAR became independent, systematic geological exploration ceased before the entire country was covered. Since then, there have been no major geological surveys, and any geological exploration has concentrated on specific known targets. In 1961, Central Africans gained the exclusive right to mine, and gradually the foreign companies withdrew, prompting the gold production to fall to 2kg per year. Initially, most of this was exported illegally, but in 1961 the first official Buying Offices were set up as a regulatory measure. The market price for gold increased and an artisanal gold promotion programme was set up. By the mid eighties the declared production of gold was over 200kg per year, and it is estimated that between 1929 and 1995, 14.8 tonnes of gold were produced in the CAR. Diamond production was governed sufficiently for the four Buying Offices to record combined exports of 328,404 carats in 1963, compared with only 73,782 carats from the mining companies, and in the period between 1929 and 1995 15.7 million carats of diamonds were produced6. 1.6 Current situation Today in the CAR, the mining sector consists almost exclusively of the artisanal exploitation of diamonds and gold. It is estimated that about 10% of the CAR population is engaged in artisanal mining activities7. This range of estimates is not uncommon when compared to 5 From The Mineral Sector of the Central African Republic, An Introduction, 1995, report prepared for the Ministry of Energy and Mineral Resources, Bangui, CAR, by Crowe Schaffalitzky & Associates Limited, Dublin, Ireland, financed under IDA Credit 1971-CA (World Bank). 6 From The Mineral Sector of the Central African Republic, An Introduction, id. 7 For a discussion on the number of artisanal miners and mine labourers in the CAR, see section 3. OS00899/J01 6 November 2008 The World Bank Assessment of the Central African Republic Mining Sector other African Artisanal and Small Scale Mining (ASM) sectors and the wide range bears testimony to the lack of readily available accurate and reliable data due to the informal, clandestine and often seasonal nature of the sector. In June 2008, there were eight Buying Offices licensed for exportation in the CAR8 and between 400,000 and 500,000 carats are officially exported every year through the legal channels. Since the stabilisation of the Government and the introduction of the Kimberly Process Certification Scheme (KPCS) in 2003 diamond exports started to increase. ASM activity occurs predominately in the West and the Central East of the CAR and, although remote, these areas have many artisanal mining communities. Recently Large Scale Mining (LSM) exploration drilling operations have commenced in the CAR, and many of these are in close proximity to existing ASM sites. In the past there have been a few incidences of sudden ‘rushes’ as a result of a large diamond or gold deposit being found. During such migrations large numbers of people have congregated around these newly discovered mineral deposits occasionally resulting in conflict with local communities. In addition, it is possible that when a ‘booming’ economy develops around a ‘rush’ type mining activity, localised inflation brought about by the newly acquired higher purchasing power of those involved in mining activities can pose difficulties to those who are not involved in the sector. This can introduce new social problems resulting in antagonism within some communities and sometimes between different ethnic groups and nationalities. In addition, there can be congestion and increased pressure on local services (such as water supply and health provision) which are already scarce in many remote rural areas of the CAR. From a livelihoods perspective, labouring in an artisanal mine often provides the only means of obtaining an income for many poor Central Africans in remote rural areas who have few non-agricultural livelihood alternatives. The ASM sector does have the potential to economically empower disadvantaged and vulnerable groups and has a significant contribution to the 2008-2010 CAR Poverty Reduction Strategy Paper (PRSP). On a local level ASM labouring can provide a means of survival and ‘decent’ work for the miners and stimulate demand for locally produced goods, services and various types of infrastructure. 8 However, a series of Decrees adopted on October 3, 2008, have retrieved the authorization of seven of the eight operating Buying Offices, on the basis that they did not respect articles 70 and 103 of the Code Minier, which create the obligation for Buying Offices to export their production monthly, and to invest 250 million F CFA (~500,000 US$) in real estate within three years. OS00899/J01 7 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Box 1- Extractives Industries Transparency Initiative in the CAR At the Government’s request, the CAR is currently undergoing an appraisal by the Extractives Industries Transparency Initiative (EITI) Commission as a precursor to becoming a signatory. The following requirements must be implemented for the application to be successful: - A formal application to the Extractives Industries Transparency Initiative International Secretariat based in Oslo, Norway; - The implementation of a formal national structure to manage the Extractives Industries Transparency Initiative process at the highest level (involving the Prime Minister and the Minister of Mines); - A scoping study to identify essential details within the mining sector; - A work plan to organise the divulgence of information - from both public and private institutions; - A demonstration of how transparency will be enforced at all levels – Centralised (Ministry of Mines), Decentralised (Regional Directorates), and in the field (artisanal mine sites). Source: Verbal interview with Extractives Industries Transparency Initiative representative, in Bangui, 2008 In addition, if a mutually conducive environment was created for the formalisation of the ASM sector the export of high value mineral commodities could make a significant contribution to foreign exchange earnings and tax revenues for the State and help reinforce and contribute to the objectives of the Extractive Industries Transparency Initiative to which the CAR is currently undergoing an appraisal as a precursor to becoming a signatory (see Box 1). 1.7 Geology The first geological descriptions and maps of the CAR (then known as Ubangi-Chari) were developed in 1913, as part of a French project to map the Federation of French Equatorial Africa. The most complete source of information concerning Central African geology is the systematic cartography undertaken between 1945 and 1955 by the French geological survey, the Bureau de Recherches Géologiques et Minières (BRGM), precursing the publication of the 1:500,000 geological map of the country. There are three significant geological units: - horizontal sandstones in the regions of High Sangha and Mouka-Ndélé; - ancient sedimentary sequences incorporating occasional zones of metamorphism in the regions of Fourouboula and Pama; - crystalline base with zones of cystalloblastic deposits. The CAR is founded upon the Old African Shield; a Precambrian base which covers approximately three-quarters of the territory. The remaining quarter is covered by a younger sedimentary formation. There are two distinct significant units: - the lower, base complex; - the terminal Precambrian unit. OS00899/J01 8 November 2008 The World Bank Assessment of the Central African Republic Mining Sector The base complex dates from the Archaean era, and includes the oldest and most widespread rocks in Central Africa. The dominant formations are compound gneisses, migmatic granites, granulites, dolerites, amphibolites, mica schists, charnockites, and micaceous quartz. It is within these entities that large greenstone belts are located (Bandas to Bambari, Boufoyo to Dékoa, and Bogoin to Damara). The central area of the country is dominated by micaceous sandstones and schists, and there are also crystalline facies represented in particular by the granites. The terminal Precambrian belt is located in the South, incorporating Bangui and M’baïki, and forms an island like formation surrounding Low-Kotto. The belt flattens into a broad arc to link the Kembe, Bakouma and Zemio regions in the East, and can also be found around Nola in the far south-west of the CAR. There are three distinct units within the terminal Precambrian belt: - the lower formation, incorporating quarzites and sericitic schists; - the intermediate formation, characterised by the prevalence of limestone and schists; - the upper formation, represented by sandy, calcaro-dolomitic limestones and quartzitic elements. The Precambrian base is often intersected by disparate magmatic rocks such as granites and dolerites. The overlying formations occupy approximately a quarter of the Central African territory, without taking into account alluvial and elluvial deposits in the North and East (the south- eastern section of the Chadian basin) and in the South-West and East (the Congolese basin). Towards the south of the country, overlying formations consisting of quartzitic sandstone, pelitic and slightly metamorphic carbonates are preserved on the northern margin of the craton. These formations are frequently intersected by doleritic intrusions from the Proterozoic era and create an unconformity at the base of the unit. These series are known as Moyen-Chinko, Morkia, Kosho, Fouroumbala, Kouki, Nola, Bangui-Mbaïki, Ouakini and Coumbal. The upper Palaeozoic unit constitutes a vast Mesozoic sandstone plateau (fluvio-lacustrine formations represented by the Carnot Berbérati sandstones in the South-West and the Mouka Ouadda sandstones in the East), of sub-horizontal beds which unevenly cover the Precambrian base and the local fluvio-glacial formations, which are dominated by mudstones and tillites. Superficial continental deposits of Cenozoic age, and Quarternary formations predominately of clay-sand origin have also developed on the Chadian border. OS00899/J01 9 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Geological map of the Central African Republic Source: Patrick Rolin, 1995 OS00899/J01 10 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Diamonds and gold are exploited alluvially in former riverbeds which cross the Mesozoic sandstones (fluvio-lacustrine formations) of Moukka in the East and Berbérati in the West; and it is thought that the origin of Central African diamonds is from volcanic deposits within these sandstones. In general, there is often a high diamond content where the former Tertiary riverbed intersects the conglomerate levels in the Carnot region. The bed horizons within the Carnot formation are essentially represented by the intersecting, graded conglomerates of the coarse facies found throughout the series, and the glacial flame structures which are also present can be pregnant with localised diamond deposits due to the clay-sediment bed-rock which has captured the denser minerals. In the CAR, diamonds are found in both primary and secondary placer deposits, and placer deposit diamond beds have varied morphologies; they can be found in sharply defined active bedded units, some of which have been subject to reworking by erosion and weathering processes, or in morphological features on river banks such as tidal flats, flagstones, small river canyons, pans and bank terraces. Other, more recent exploration projects have been undertaken by De Beers in the northern extension of the Congo craton (known as the Mbomou craton) to investigate the presence of primary diamond deposits, i.e. kimberlite pipes. Interestingly, diamonds from a separate origin can be found in alluvial beds 10km from the Carnot formation. They could have been washed downstream, but as suggested by the lack of erosion on their surface, there could be another as yet undiscovered source nearby. Gold exploitation is currently principally concentrated in superficial alluvial deposits in the CAR. However the solid geology of the CAR consists primarily of metamorphic and intrusive crystalline formations, with important greenstone belts which meet in the East and West of the country. AXMIN/Aurafrique and Goldiam, two LSM companies currently undertaking exploration activities in the CAR, are researching greenstone belts at Banda (near Bambari) and Bogoin (near Damara) for primary gold deposits for industrial production. OS00899/J01 11 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Gold and Diamond deposits in the Central African Republic Source: Wardell-Armstrong LLP, 2008 OS00899/J01 12 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 2 Institutional Structure9 Despite some revisions, the Code Minier has, since its revision in 2004, been regreattbly more a compilation of regulatory provisions introduced by successive Governments (ruling, decree, decision, etc.), and the majority of these laws have not been applied or enforced effectively. However, the GoCAR has invested significant time trying to develop this sector, as can be evidenced by the following: - A study of the diamond industry in the Central African Republic undertaken by Robertson & Associates in 1984; - The development of a programme of geographical levees and cartography in the framework of the National Mining Plan 1986-1990; - The holding of the Governmental Conclave on the mining sector in Central Africa (Bangui, April 2000); - A meeting of the Etats Généraux of the mining sector in Bangui, July 2003. These latter Etats Généraux, which aimed to expand the creation of the sector’s wealth, identified the main problems hindering its development as being institutional, financial and social, and then went on to define the strategic objectives and major recommendations likely to improve the income of the State and the operators, and to contribute to reducing poverty. The following were suggested amongst the recommendations: - Promote research and studies to improve knowledge and render geological and mining data more reliable to enable better quality information to be provided to potential investors; - Better management of resources (both those allocated to the sector, and those levied from the sector), respect of the law, respect of the principles of equity and free competition, and finally encouragement of CAR citizens to take a greater part in production and commercial activities; - Promote appropriate and sustainable technical, financial and material support for mining operators and local populations, and guarantee that the State, the mining companies and the purchase offices are all respecting their obligations and fulfilling their roles; - Fight fraud in the mining sector in all its forms. The Code Minier was revised in 2004 in an attempt to conform to international standards and to take into account the various recommendations from the Etats Généraux. It must be noted that a World Bank sectoral review recommended that it be reviewed by mining law specialists so that international standards could be incorporated in order to enhance the 9 This chapter has been written by Lancei Traoré, Mining Engineer, Guinea; and edited by Wardell Armstrong. OS00899/J01 13 November 2008 The World Bank Assessment of the Central African Republic Mining Sector overall investment attractiveness for mining companies. It was further advised that mining taxation needed to be stabilised in the medium or long term and that Finance Laws should not introduce annual changes to it. Box 2 - Public and Semi-Public Services - The role of the Administration and of Public Establishments One of the essential conditions to the successful adoption of best practices in the management of the mining sector is the quality of the general regulations organising State intervention, as well as its correct application by decision-makers and executives. Certain regulations, such as in Guinea and in Madagascar, have distinguished Public Services from Semi-Public Services. While public services are run by the Administration (centralised or decentralised), semi-public services may be run by Public Establishments. - Public Establishments with an Administrative nature (Etablissement Public à caractère Administratif) are subject to public law, like the Administration. - Public Establishments with an Industrial and Commercial Nature (Etablissement Public à caractère Industriel ou Commercial) are subject to private common law and commercial law, contrary to the Administration. A law determines under which conditions such establishments may be created and operated. The GoCAR could be encouraged to create Public Establishment of an Industrial and Commercial Nature specifically for the mining sector, which would be subject to private common law and commercial law. Box 3 - The role of ministerial cabinets and general directorates The modalities of operation of the administration may form another constraint on the development of many African countries. Frequently, decisions are taken with little regard to procedures or responsibilities, either deliberately or because roles are confused. It has been noted, in the CAR as well as in other African countries, that the distinction between the roles of the Ministerial Cabinet and those of the Directorates General are not always understood or respected. - The Cabinet is an instrument, at the Ministry’s disposal, to implement policies resulting from government programmes, to manage internal operations as well as external relations, and to support it in its technical task of coordinating sectors under its authority or supervision. Cabinet members are chosen by the Minister and can be changed during changes in the government. - The General Directorates are responsible for regulating and controlling the activities in their sectors in accordance with relevant provisions in sectoral laws and codes and in general regulations of the Public Administration. Thus, they ensure the permanence of the State. They employ civil servants who can only be changed for professional reasons. It may be considered that Counsellors may have been given too great a role in business management, to the detriment of those who have to apply regulations and manage the consequences of bad contracts. Moreover, unscheduled movements of managers at the head of public administrations are frequently incurred by changes in Government. OS00899/J01 14 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 2.1 The structure of the Ministry of Mines, Energy and Hydraulics Decree 04.364 of December 8, 2004 on the organisation and modalities of the operation of the Ministry of Mines, Energy and Hydraulics, has been adopted following the Etats Généraux held in July 2003, and following the sectoral review undertaken by the World Bank. This decree takes into account many recommendations issued by the Etats Généraux and by the World Bank sectoral review. In this decree, the CAR is acting innovatively by creating the position of Cabinet Director instead of the Secretary-General and Head of Cabinet in the previous structure. The new Cabinet Director brings together political responsibilities as well as responsibility for technical coordination. 2.2 The structure of the General Mining Directorate The fact that three distinct directorates compose the General Mining Directorate is rather atypical for African mining jurisdictions, even if the activities for which they are responsible remain conventional. It is likely, that this situation has probably resulted from the fact that, despite the predominance of artisanal mining in the Central African mining sector, its monitoring and control have been previously organised outside the General Mining Directorate. Therefore, the General Mining Directorate has been mandated the responsibility solely for secondary management activities regarding commercialisation and supporting mining production (including artisanal production) alongside the Directorate for Programming, Study and Research (more often called a ‘Directorate for Geology’). In addition to this, responsibilities pertaining to mining inspection, which are more typically one of the main activities of a General Mining Directorate, are not attributed to it. Instead, this inspection is carried out concurrently by the Compagnie des Brigades de Contrôle Energétique, Minier et Hydraulique (known as the Brigades Minières – Mining Brigades) and by the Directorate for Information and Suppression of Fraud. Moreover, it would appear that the statutes of certain public mining structures do not match their importance and their complexity. For instance, both BECDOR and the Mining Register (the current Conservatoire des Titres Miniers) have mandates which if performed effectively should meet the challenges of modern mining sector institutional management. Both of them should be resourced public institutions, with appropriate equipment and technical expertise, although acting with an administrative nature, as they are agents acting on behalf of the Public Treasury, and thereby should have the means to act autonomously. OS00899/J01 15 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Ministère de l’Energie, des Mines et de l’Hydraulique Ministry of Energy, Mines and Hydraulics (MoM) Compagnie des Brigades de Contrôle Energétique, Minier et Hydraulique Mining Brigades Cabinet Cabinet Direction Générale des Mines General Mining Directorate (DGM) Direction de la Commercialisation, de Direction de la Programmation, des Direction d’Appui à la Production l’Industrie et du Fichier Minier Direction Régionale des Mines Etudes et de la Recherche Minière Directorate for Regional Mining Directorate Directorate for Programming, Study Directorate for the Support of Mining Commercialisation, Industry and (DRM) and Research Production Mining Register (DPER) (DAPM) (DCIFM) Service du Conservatoire, du North West – Bouar Service de Suivi, du Contrôle et de Domaine Minier et Techniques Service des Techniques l’Evaluation de l’Investissement Minières Industrielles Monitoring, Control and Evaluation Cadastre, Mining Estate and Industrial Techniques Service of Investment Service Mining Techniques Services South West – Berbérati Service d’Appui Service de la Recherche, de la Service de la Commercialisation et Technique, Matériel et de Prospection et du Laboratoire du Fichier Minier Vulgarisation Research, Prospection and Commercialisation and Mining North East – Bria Technical and Material Support Laboratory Service Register Service and Dispersion Service Service de la BECDOR South East - Bangassou Documentation, Dessin et Bureau d’Evaluation et de Contrôle Service de la Protection de Cartographie de Diamant et Or l’Environnement Documentation, Design, and Office for the Evaluation and Environmental Protection Service Cartography Service Control of Diamonds and Gold Structure of the Central African Republic Administration in Charge of Mines OS00899/J01 16 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 2.3 The role of the Regional Mining Directorates The Regional Mining Directorates are responsible for the decentralised aspects of all the functions attributed to the General Mining Directorate, in each of the four mining regions (North West / Bouar; South West / Berbérati; North East / Bria; South East / Bangassou). It would appear that these functions are mostly those pertaining to mining inspection. This is why the Etats Généraux recommended that the Brigades Minières should be attached to, and placed under the authority of, the Regional Mining Directorates. In theory the Regional Mining Directorates, should be able to facilitate communication and interaction between regional and local authorities on one hand, and mining activities and programmes on the other. They should be able to accommodate, implement, and manage all tasks delegated from the Ministry of Mines. 2.4 Anti-Fraud and Mine Inspection In the CAR the two critical tasks of mine inspection and the fight against fraud have been partially combined. The mine inspectorate, which aims to ensure the correct application of the provisions of the Code Minier, is an exclusive prerogative of the central and decentralised administration requiring an understanding of the legislation and its application in the field especially with respect to safety, environmental management, etc. Conversely the fight against fraud requires different skills, particularly knowledge of the legal framework and mineral valuation, combined with policing, forensic accounting, and investigatory skills. Both responsibilities are part of the prerogative of the Ministry of Mines, which has the mission to promote, develop and protect the mineral resources of the country. 2.4.1 The Company of Brigades for the Control of Mines, Energy and Hydraulics (The Mining Brigade) The company was created by the Presidential Instruction 015/83/CS/PR.CMRN dated August 23, 1983, and its leadership, organisation and modalities of operation are organised in accordance with Inter-ministerial Ruling 86.001 of January 21, 1986. The Brigades Minières comprise personnel from the Gendarmerie (the army) and the National Police. It is led by a Commander who is an officer from the Gendarmerie and who supervises the various sections sub-divided into eleven Brigades and two branches. The task mandated to the Brigades Minières, is to oversee the application of the legal and regulatory framework governing the sector, and to fight fraud. Regarding administrative responsibility and hierarchical relations, those in the Brigades Minières are considered army personnel and therefore placed under the authority of the Ministry of Defence and Public OS00899/J01 17 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Safety. Only this Ministry can pronounce sanctions and issue decisions regarding these agents, even though they are carrying out sensitive actions in the field in a sector as specific as the mining sector. However, the commander of the Brigades Minières reports to his hierarchy without the obligation to report to the Ministry of Mines. Regrettably, the Decree of December 2004 concerning the organisation and operation of the Ministry of Mines, adopted following the meeting of the Etats Généraux, did not adhere to the issued recommendations which clearly stated that the Brigades Minières should be placed under the authority of the Ministry of Mines. 2.4.2 The Directorate for Information and the Suppression of Fraud The mandate of the Directorate for Information and Suppression of Fraud10 is to collate information regarding fraud in each of the sectors within the Ministry of Mines and to propose measures to suppress it duplicating much of the mandate of the Brigades Minières This Directorate seems to have been created to somehow counterbalance the fact that the Brigades Minières are not controlled by the Ministry of Mines. This national Directorate actually has specific departments for many other non-mining sectors, however, the challenges regarding information and suppression of fraud differ so greatly from one sector to another that it may present a problem to coordinate them under one general national Directorate. Perhaps it would be more effective to link each specialised department to the administration in charge of that sector. For the mining sector, the Directorate has been attributed the same missions than the Brigades Minières. However, the Directorate is far less visible in the field, where the Brigades Minières are mostly present. It would appear that the Directorate’s active jurisdiction is restricted to Bangui and to the international airport. 2.5 Structures in charge of the management of mining resources The Directorate for Programming, Study and Research (Direction de la Programmation, des Etudes et de la Recherche), which is responsible for managing the country’s mining assets, is housed in a small building in PK 1011. The building houses rooms allocated to the geological laboratories, cartography and the administrative office for the registrar. With the exception of the area occupied by the registrar, it would appear that the rooms have not be 10 Direction de l’Information et de la Répression des Fraudes. 11 Only the Registrar present in the building at the time of the visit in January 2008. OS00899/J01 18 November 2008 The World Bank Assessment of the Central African Republic Mining Sector actively used, perhaps not since the research work led by the mining company Aurafrique (some years previously). Based only on a preliminary assessment, it would appear that this Directorate has insufficient personnel and is under-resourced to respond to its allocated mandate and routines tasks and objectives12. The available equipment is rather rudimentary (currently a paper based cadastre register, antiquated non-computerised filing systems, etc.) in relation to standards of more modern mining jurisdictions, although there are some proprietary computer management programmes with satellite links that helps fulfil some of the Directorate’s requirements. It is apparent that the Registrar is aware of developments in the areas needed to help him more efficiently and effectively fulfil the mandate of his/her Directorate. The registrar works alone without an assistant, which probably reflects the current low priority attached to the Mining Register. Conservation procedures are defined in the Code Minier (articles 13 to 17) and in its Application Text (articles 5 and 6). In accordance with this article 5, Decree 04.364 of December 8, 2004, concerning the organisation and running of the Ministry of Mines, did not detail the duties of the Registrar. It should be noted that the mining register for artisanal exploitation, which is managed by the Compagnie des Brigades Minières, is not connected to the register of mining licences and permits. This is a shortfall which will hopefully be overcome in the future through more comprehensive and cadastral management. 2.6 The management of the allocation of mining licences and permits It would appear that neither the Registrar nor the General Mining Director carry clear critical cadastral responsibilities for examining applications and allocating mining licences and rights. The Etats Généraux du Secteur Minier noted that certain responsibilities, initially attributed to the General Mining Directorate, have been transferred to the Ministry of Mines. Based on an initial assesment, it would also appear that the allocation of mining licences and rights process does not usually include an assessment of the technical and financial capacity and the credibility of applicants. This was reinforced following an inspection carried out by the preparatory commission of the Etats Généraux, when it was discovered that out of 12 research permit holders, only 3 were in order. Similarly, out of 24 holders of individual mining licences, only 4 were complying with their legal and regulatory obligations. 12 From the personnel list made available during the January 2008 visit, only six engineers and one geologist work there with only junior support staff. OS00899/J01 19 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 2.7 Personnel and equipment The staff of the administration in charge of the mining sector are generally educated and trained, and eager to undertake their official duties. The majority of personnel in the technical departments of the General Mining Directorate have received basic geoscience training (Mining Engineers or Geologists). However, the Etats Généraux du Secteur Minier have estimated that the number of experienced managers in the department remains very low in certain sectors: technical directorates, mining inspection, geological research, management of artisanal exploitation, etc. Notwithstanding the apparent enthusiasm and motivation of the Ministry of Mines staff, who are committed to assisting with the formalisation and regulation of the mining sector, it will be vital that all the Directorates and units are adequately resourced. Without such resources and sufficient skills the Ministry of Mines staff will be unable to competently undertake their statutory duties or implement and monitor policies, programmes and action plans for the promotion and development of the sector. Under-resourcing has been the main problem of many other public mining institutions where a shortage of equipment and financial resources has greatly reduced the institutional efficiency and performance of such units to comply with their duties and be responsible and accountable for compliance with laws, regulations, policies, and procedures. A thorough assessment of the various needs of the public mining institutions, in terms of training and equipment, will be necessary for the restructuring of management and the programming of activities in the sector. This institutional audit should also comprise structured interviews with existing personnel. Redeployment of personnel would help optimising the resources in staff, training or retraining, and may help determine shortfalls and areas where additional staff are needed. This redeployment should benefit Regional Mining Directorates, which are clearly understaffed in comparison to the tasks they are currently responsible for, even more so if they are given greater responsibilities within the reviewed and improved framework of artisanal mining. The possible restructuring of BECDOR and the Mining Register may not translate into the recruitement of additional civil servants, if these institutions are given autonomous budgets which would allow them to recruit contractual staff. Improvements in management procedures and methods will require specific modern equipment and appropriate technology. Particular attention should be paid to logictics capacity, given the geography of mining activities and the under-equipment of the country, from a transport infrastructure point of view. OS00899/J01 20 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 2.8 Proposals to improve management The drafting of a new mining policy and restructuration and capacity building of the institutional framework should take the following challenges into account: - Mobilisation of multilateral and bilateral aid and assistance by mainstreaming pro- poor mining development into national poverty reduction strategies; - Better management, development and empowerment of the artisanal mining sector; - Promoting responsible private sector investment; - Sustainable local and regional development. 2.8.1 Creation of the Directorate for Geology The Directorate would be responsible for applying the GoCAR’s policy in the area of geology, including formulation of geological maps, collation of geological information and the identification and general assessment of the country’s mineral potential. 2.8.2 Restructuration of the General Mining Directorate The Directorate is responsible for applying the GoCAR’s policy in the mining sector, and of the regulatory framework particularly the provisions of the Code Minier. The Directorate would comprise four services: - Service for the Control of Mining Activities - Service for Quarries and Small Scale Mining - Service for the Protection of the Environment - Service for the Coordination of the Mining Police (possibly) 2.8.3 Creation of the Regional Mining Inspectorates The Inspectorates are responsible for overseeing the application on the ground of all activities and programmes established by the Ministry of Mines and the General Mining Directorate, and are also responsible for organising the management of the mining activities led at the regional and local level by relevant decentralised authorities. It is envisaged that the Regional Mining Inspectorate would operate through the local zonal offices (as happens in many other mining jurisdictions) established in areas of intense mining activity. OS00899/J01 21 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 2.8.4 Creation of a Mining Cadastre Created as a department to support the Directorate General for Mines, the Mining Cadastre could be transformed into a Public Institution with an Administrative Nature (Etablissement Public à Caractère Administratif) or with a more industrially or commercially focussed mandate when justified by the intensity of mining activities. Under the authority of a Director, the aim of the Mining Register would be to manage mining licences and permits, from the initial application until the expiry of their validity period. In this regard, acting as a ‘one-stop shop’, the institution would be particularly responsible for typical cadastral duties including: - Receiving, registering, appraising and sending to authorities for a decision, applications for grants and for mining rights renewals; - Registering and issuing the granted rights; - If necessary, marking out perimeters on land for mining rights; - Accepting Environmental Impact Assessments, and other environmental or social permitting requirements, and forwarding them to the competent authorities, register and issue licences to applicants; - Recover mining and environmental administration costs and ensure they are valued separately in accordance with the provisions in mining and environmental regulations; - Register payments, note delays in payments or non-payments and send proposals regarding the withdrawal of mining rights for non-payment; - Make all appropriate information available to the public regarding the Mining Register; regarding mining rights and procedures to be followed to acquire mining permits. 2.8.5 Creation of an Office for Precious Minerals Again possibly created in the form of a Public Institution with an Administrative Nature, an Office for Precious Minerals could be made responsible for managing artisanal exploitation and commercialisation of diamonds, gold and other precious minerals and also monitoring production and export of the same minerals by industrial companies (e.g. as has been undertaken in countries like Ghana and more recently Sierra Leone). The Office, integrating BECDOR, could be given financial autonomy by levying a share of the Export Tax allocated to a special allocation treasury account managed by the accounts agent of the Office. The Office for Precious Minerals would be run by a General Director, and assisted by: - An accounting agency responsible for: • Liquidation of the tax on exports and various fees; • Breakdown of funds received from claimants; • Keeping the Office’s accounts. OS00899/J01 22 November 2008 The World Bank Assessment of the Central African Republic Mining Sector - A Brigade for the fight against precious minerals fraud or an anti-fraud Brigade - An administrative assistant responsible for: • The management of the financial resource of the General Directorate; • The relations with the public. The Office for Precious Minerals could comprise four services: - Service for managing artisanal exploitation and collection, in charge of: • Geological targeting and assessment; • Artisanal mining license management; • Production recording and registration; • Assistance to and monitoring of exploitation. - National Service for the valuation of diamonds (instead of BECDOR), in charge of: • Diamond assessment; • Enrolment of the export tax; • Certification on the Kimberley Process; • Export formalities. - Gold Laboratory, in charge of: • Assaying and certification of gold; • Enrolment of the export tax; • Export formalities. - Security Services, in charge of: • Surveillance and security of premises; • Company responsible for mining security of precious materials. 2.8.6 Creating a Centre for the promotion of the mining sector A national Centre for the promotion of the mining sector could reinforce the achievements of the former International Bangui Exchange Centre (Bourse) and improve control and professionalism of the network. Such a Centre could bring together the various management and marketing activities, service provisions and other facilities. Such a centre, set up as a private limited liability company, could be able to host and accommodate: - Gold and diamond buying offices in specially equipped rooms with adequate equipment; - Administrative services such as customs, diamond expertise and gold assay; - Services responsible for the fight against fraud; - Security services responsible for the security of persons and goods, as well as the security of transfers of funds and valuables; - Training rooms, with adequate equipment; - Jewellery and diamond cutting shops as well as small jewellery manufacturing workshops. OS00899/J01 23 November 2008 The World Bank Assessment of the Central African Republic Mining Sector It is possible that such a Centre could also have regional offices set up in the same towns as the Regional Mining Directorates, where collector and Buying Offices personnel could carry out their activities. 2.8.7 Institutionalising mining security The Etats Généraux du Secteur Minier have recommended that a Mining Police be created in the medium term and that the organisation and operation of the Compagnie des Brigades Minières be reviewed by placing it under the responsibility of the Ministry of Mines. In the CAR, the tasks attributed to the Compagnie des Brigades Minières are to oversee the enforcement of the mining sector legal and regulatory framework and to fight fraud. The task of overseeing the application of mining regulations must be performed by the mining administration; however, only agents from the National Police have the legal ability to fight fraud. For instance in Guinea, Mining Security is understood to encompass the protection of mining rights, assets and persons in view of assessing mining resources in accordance with mining regulations. Guinea also has an Anti-Fraud Brigade for Precious minerals materials. In essence mining security should encompass: - The protection against any violation of mining rights and licences and other property rights of persons and companies involved in mining research and exploitation; - Seeking, ascertaining and pursuing any breach of mining regulations; - Seeking, ascertaining and pursuing fraud in the commercialisation of precious mineral substances - The protection against theft of any nature, of raw materials, supplies and products on supply and transport circuits; - The protection of mining infrastructures and installations against vandalism and sabotage; - Maintaining public order in mining exploitation. 2.9 Final observations and recommendations In the CAR, the structure of the mining sector management is marked by the preponderance of the artisanal mining subsector. Only the Compagnie des Brigades Minières is physically deployed in the field yet it does not report to the Ministry of Mines. Therefore, the worrying reality is that the control and monitoring of the sector is not actually or effectively covered by either the General Mining Directorate or the Ministry of Mines, despite the existence of the Directorate for Information and Suppression of Fraud. OS00899/J01 24 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Assessing the number and qualification of agents in an administration such as the CAR General Mining Directorate must be made carefully. Government instability and its constant movements of personnel have resulted in skills being dispersed outside decision-making and executive posts. The development and systematic use of standard mining contracts will be an improvement, providing transparency in the management of mining assets. It is hoped that the potential future development of the industrial large-scale mining sector will revitalise the Ministry of Mines and make the Mining Register more dynamic, providing an opportunity to modernise the unit’s equipment and improve its overall functionality. It is advised that the following experiences, in other African countries, may be of interest for the CAR: - Madagascar, for the model of the Mineral Resources Governance Project; - Burkina Faso, for its similarity in structural constraints and its pragmatic approach to institutional issues; - Côte d’Ivoire, for the simplicity of its organisational flow chart; - Ghana and Tanzania, for their recognised progress towards good governance. OS00899/J01 25 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 3 The Central African Republic artisanal mining sector13 3.1 Artisanal mining policy The strategy opens a new era for a vigorous, fresh Although the current mining sector is economic start, based upon agriculture, mining and largely informal, the GoCAR has wisely forestry – opportunities which are abundant in the country. identified the formalised development of the mining sector as important for Source: CAR Poverty Reduction Strategy Paper national economic growth. However, September 2007 the various documents bearing the CAR’s policy for the mining sector do not address artisanal mining in a direct and comprehensive manner and do not put enough emphasis on the quantitative and potentially qualitative importance of ASM as the foremost component of the overall mining sector (98% of CAR mining sector is ASM). Those documents generally prefer to make repetitive hopeful references to the expected development of the industrialised large scale mining sector. However, the few endeavours to acknowledge the existence of the ASM sector are encouraging, and it would appear that the General Mining Director (Directeur Général des Mines) needs direct and specific assistance rather than encouragement to facilitate the sustainable development of ASM in the CAR. Such development should help to ensure the optimal exploitation of small diamondiferous and auriferous mineral deposits and to enable the ASM sector to make a positive contribution to the national, regional and local economies. In 2003, the GoCAR arranged a national consultation (Etats Généraux du Secteur Minier) which identified many of the main problems impeding the sustainable development of the mining sector (institutional, financial, social, etc.). Some recommendations were issued, aiming at improving state and operator revenues, and contributing to poverty reduction. However, the Etats Généraux, though well-meaning, failed to make a reliable diagnosis of the ASM sector, and were therefore not able to produce relevant recommendations for the improved formalisation, management and empowerment of the sector. With respect to ASM, the first step towards a sound Central African mining policy is the recognition and clear definition of the sector, and the acknowledgment that artisanal mining is already being practiced on a sizable scale in CAR. It has been usually stated that there are approximately 80,00014 artisanal miners and mine labourers in the CAR, and the GoCAR currently estimates that the ASM sector provides around 100,000 jobs, with 1,000 artisanal miners officially registered as such. However, current estimations are now echoing the 13 This chapter has been written by Wardell-Armstrong. 14 According to the General Mining Director in Bangui, January 2008 OS00899/J01 26 November 2008 The World Bank Assessment of the Central African Republic Mining Sector number of 300,000 to 400,000 people involved in ASM activities15, whether as a main all- year-round or seasonal activity. Considering the population of the CAR is more than 4.2 million16, approximately 10% of the country is believed to be engaged in artisanal mining related activities as a rural livelihood, this is particularly in the diamondiferous and auriferous areas in the West, and the diamondiferous central East. Although an estimated three quarters of the artisanal mining population are Central African, there are many migrant workers, predominantly from other regions in the CAR, but also from neighbouring countries such as Sudan, Chad, Cameroon and the Democratic Republic of the Congo, and even from farther afield such as Mali and Senegal. The scale of these statistics indicates that the artisanal mining sector has little respect for legislation, and illegal activity is in fact growing in many mining areas. It is estimated that there are several hundred artisanal mining sites in the CAR, and at the largest sites up to 2,000 people can work, although the average is between 1,000 and 1,500. There are also many sites upon which 200 to 300 people work, however the majority of sites are small and employ much smaller groups of miners. About 90% of the people employed on artisanal mining concessions are labourers actively involved in mining, with the remaining 10% undertaking peripheral services such as providing food. In addition to exposing the precariousness of the artisanal miners conditions of living, this gives an idea of the evident shortfall in mining revenues lost to the State’s income. The informal mining situation has been swelled by the influx of internally displaced people (estimated at 197,000 in 200817), refugees from neighbouring countries (estimated at 7,535 in 2008). In addition as a result of the ongoing unrest in neighbouring Darfur many hundreds of thousands of people are being displaced in the north of the country and may possibly travel south to the large diamond concessions to make enough money to survive. Also in the far west of the country there are many miners and labourers from Cameroon, Chad and Congo who tend to work in areas nearest to the border with their home country. The number of people seeking to work in the informal mining sector in the CAR is not likely to decrease over the next ten years, a view based largely on the current national population growth (1.5% according to the United Nations Development Programme, (UNDP), continued under- performance of the national economy with respect to the rural populace, and the expectation that alternative livelihoods will not be able to meet job creation demands resulting in continued rural under-employment. Given that the CAR is ranked 171 (out of 177) on the 2007/2008 UNDP Human Development Index, it is not surprising that poverty is the overriding driver that forces many people to seek a livelihood in ASM. Many rural people face dwindling livelihood choices in an 15 According to various members of the Central African Mining Administration, met in Bangui in January 2008. 16 The general census of population and housing 2003 established the population at 3,900,000, and the current population estimation for 2007 is 4,216,666. 17 From The Great Lakes Pact and the rights of displaced people, A guide for civil society, The Internal Displacement Monitoring Centre (Geneva) and The International Refugee Rights Initiative (New York and Kampala), September 2008. OS00899/J01 27 November 2008 The World Bank Assessment of the Central African Republic Mining Sector increasingly marginal environment and hence ASM is becoming the only real option. To those not familiar with the hardships and realties of ASM, the lure of winning ‘valuable rocks’ from their lands and rising above subsistence levels is very appealing. Therefore, many desperate rural people flock to ASM sites, particularly in diamondiferous areas, to seek their fortune. Unfortunately, the vast majority of artisanal miners continue to live in abject poverty. Most also become trapped either through debt-bondage to their financers (known as collecteurs – collectors), or because they have travelled far and abandoned their farms. This means they have no means to return to their previous livelihoods or seek an alternative source of income. The concept of saving is not widespread and many successful ASM miners spend their earnings immediately either by travelling far to try and get a better price, or simply on non-essential temporary ‘luxury’ items. Table 1- Noted areas of current ASM activity in the CAR Mineral Location Area Gold Sosso-Polipo South West Moboma South west of Bangui Bogoin-Toropvo 130km north of Bangui Gaga-Yaloké Centre West Pouloubou Irdéré Close to the Cameroon border, west of Carnot Bozoum North West Bambari Centre Diamonds Carnot Berbérati West Nola Boda Mouka-Ouadda East and North East Bria-Ouadda Centre East It is vital to recognise that ASM The lower poverty rate in Region 5 (Haute-Kotto Bamingui- activities are largely poverty-driven, Bangoran and Vakaga, the most sparsely populated in the and thus to link the strategies for country) is because the area is a mining zone, enabling people to earn a living, however modest. development of the sector to those for poverty alleviation. On this point, Source: CAR Poverty Reduction Strategy Paper (PRSP) GoCAR’s policy is contradictory. The September 2007 CAR Poverty Reduction Strategy Paper acknowledges the abundant mineral resources of the country, and appreciates the fact that mining areas have a lower poverty rate than other regions. However, it fails to recognise that ASM is the main factor in wealth creation in those regions, and prefers focussing on the announced foreign investments in large scale mining operations. The fact that the GoCAR neglects the potentiality of the ASM sector’s contribution to sustainable livelihoods, poverty alleviation and community driven development means that it fails to recognise as a priority the ASM sector formalisation. As part of this formalisation, the sector needs to be OS00899/J01 28 November 2008 The World Bank Assessment of the Central African Republic Mining Sector mainstreamed within national development strategies18 to help channel development funds towards vulnerable rural ASM communities. After recognising the existence and scale of ASM, it is important that policy instruments aim at regularising and improving ASM, and recognise the constraints to development faced by the sector. This point is crucial for the elaboration of a modern and efficient mining policy, and must be done in a participatory manner (stakeholders include miners, government institutions, local communities, Non Governmental Organisations (NGOs), members of the private sector, and international development agencies). It is vital that any future mining policy is truly sympathetic to the realities, constraints and challenges of the ASM sector and that key social issues are clearly enunciated. It should be remembered that through direct employment, family dependency and community service provision (multiplier effects) the ASM sector undoubtedly has an influence on a far greater number of nationals than any potential formal large-scale sector. Key policy issues related to ASM activities and likely to have beneficial impact on the population need to be addressed in priority. These include gender discrimination and child labour, health issues for both mining and local communities, environmental management and health and safety. The illiteracy rate in mining areas is the highest in the country (68.2%), this is especially the case for women (70%), and the schooling rate is also lower than the national average (25%). Mining areas also have the lowest rates of access to health care (47%), clean drinking water (26%) and sanitation (5%). Women are particularly vulnerable in mining areas, prone to sexually transmitted infections and diseases as well as HIV/AIDS: between 11% and 15% of women are infected, compared to 2% to 6% of men, with a national rate of 6.8%19. However, the GoCAR does not currenly formally recognise in any policy document the gender- differentiated impacts that artisanal mining activities have on people, both directly and indirectly. A sustainable mining policy should bring to the forefront issues related to women’s participation in mining. Raising the miners’ and the public’s awareness of those issues, could be achieved through information and education campaigns. The establishment of women miners’ organisations could ensure more visibility and empowerment for those women, and help target specific support measures so as to encourage and facilitate the employment and involvement of women in mining development, including as potential investors, or to provide viable alternatives (see section 3.3.3 on Gender Mainstreaming). Additionally, the policy should provide for means of enforcement of regulation against child labour, promoting education for children in mining area (particularly for girls) and supporting productivity enhancement programmes which would reduce the need to employ children for those tasks which can be easily mechanised (see section 3.3.4 on Child Labour). 18 Only a few African nations have so far achieved such mainstreaming, but notable exceptions include Guinea, Sierra Leone, Ethiopia and Zambia 19 Source : Development Partner Consultation for the Central African Republic, Brussels, June 2007. OS00899/J01 29 November 2008 The World Bank Assessment of the Central African Republic Mining Sector The CAR Poverty Reduction Strategy Paper does not provide for any strategy for the environmental management of the ASM sector, nor for any health and safety policy plan, which are two of the key constraints faced during ASM activities. Some important regions of the CAR are densely mined areas, with high concentration of artisanal miners and mine labourers. In those regions, enforceable environmental standards must be established and regularly monitored. Environmentally sound technologies should be demonstrated, and their utilisation encouraged. Environmental information should be provided, in French and in Sango, through leaflets and the media, in support of training operations in environmental management. In those information campaigns, it is crucial to emphasise the link between certain ASM practices, the deterioration of the environment, and the consequences directly borne by both ASM and local communities. Although advancements in health and safety have improved in the large scale mining sector, the same is not true for the ASM sector. An ambitious ASM policy should acknowledge this, but also endeavour to establish health and safety regulation and preventive measures for accidents and other hazards, and incorporate the provision of social infrastructure and hygiene facilities in community development plans in highly concentrated mining areas. In both the environmental and health and safety sectors, the GoCAR should seek to encourage other stakeholders’ involvement to build partnerships aiming at improving awareness and management, organising financial guarantees and enforcing standards. Additionally, the GoCAR should establish proper authority structures to facilitate the enforcement of environmental and health and safety regulations through the inspection of mining sites. In addition to the above, a sound mining policy should promote the shift from public to private sector-led development.. This has been well acknowledged by the GoCAR, which expects that the reform of the mining sector will lead to more involvement and confidence from the private sector, improving the business climate. Accordingly, the Poverty Reduction Strategy Paper calls for the development of small and medium enterprises and industries in order to stimulate mining output, create employment and improve living conditions, the rationale being that such structures do not require substantial investment. However, and paradoxically, the Poverty Reduction Strategy Paper does not make the link between the need to develop small scale business activities and the need to formalise, organise and develop the ASM sector. Even more significantly, the Poverty Reduction Strategy Paper calls for the creation of an environment ‘conducive to mining operations by small and medium enterprises and industries and large mining companies’, without making reference to the ASM sector. OS00899/J01 30 November 2008 The World Bank Assessment of the Central African Republic Mining Sector It is recommended that ASM should not be marginalised or treated as a minor side-issue, as has unfortunately been the case within many other African mining jurisdictions. Attempting to simply ‘ring fence’ the sector into policed ASM reservations and attempt to subject the sector to inappropriate and unenforceable control measures is not a recommended strategy and will only serve as a temporary and superficial solution. In the view of the potential development of large scae mining activities on the Central African territory, the GoCAR should set a policy which could capitalise on the input brought by such developments, as well as take proactive actions in order to prevent ASM and large scale mining conflicts and promote mutual benefit collaboration. Such strategies should reflect a non-discriminatory approach to development between large- and small-scale mining. Actions could include ensuring fairness by conferring ownership of mineral rights on a ‘first come, first served’ basis, and the upgrading of ASM activities through transfer of technology from large scale mining towards ASM by promoting partnerships between miners and large-scale investors. It is worth remembering that the ASM ‘problem’ has been exacerbated as many African countries have adopted the policy of the currently perceived most attractive mining jurisdictions (based on the level of mining and exploration foreign direct investment) and have been advised to make only minor changes to suit the political, cultural, geographical and economic peculiarities of their country. To their detriment, such jurisdictions have subsequently realised the errors of their past view of their domestic ASM sector and are now keen to vigorously review and enhance the ASM component of their national policy and legislation. The ultimate goal of any future specific ASM policy and subsequent assistance interventions should be to help the GoCAR create strategies for the ASM sector that promote a more positive working relationship and where GoCAR policy and action were not only seen as reactive but rather proactive, affirmative and supportive of the sector. There will be a need to focus on the means to allow the sector to align itself with the principles of sustainable development and mitigate the threats to the social, economic and biophysical systems throughout the CAR. This may necessitate national multi-stakeholder workshops to raise the profile of ASM, sensitise and build partnerships with local Préfecture/Sous-Préfecture administrative structures, local and traditional leaders, security forces, gendarmerie, police, customs and revenue authorities, the banking sector and the existing industrialised mining/exploration sector to raise the general level of awareness of all the ASM issues. It is recommended that the drafting of any ASM policy utilises and builds on the existing plethora of ASM specific policy20 and declarations. In particular, heed should be taken of existing 20 Also concluding statements from key fora and meetings including the Durban Declaration (Special Conference of African Energy & Mining Minister 1997), Ouagadougou African Mining (MIGA 2000), SADC Mining Protocol (Article 7), SADC Mining Sector Strategic Plan, UEMOA Joint Mining Policy (2000), ECA (Committee on National Resources & Science & Technology OS00899/J01 31 November 2008 The World Bank Assessment of the Central African Republic Mining Sector generic ASM policy and declarations, especially the United Nations Department of Economic and Social Affairs Harare Guidelines (1993) and the more recent United Nations Department of Economic and Social Affairs/ United Nations Economic Commission for Africa Yaoundé Declaration (2002). In addition, it would be prudent to collaborate and consult with the Communities & Small Scale Mining (CASM21) Africa Network. 3.2 Institutional capacity for the artisanal and small scale mining sector Despite donor interest in this sector for over three decades and the numerous international fora, conferences and meetings, the truth, albeit unfortunate, is that many African governments, including the CAR, have been unsure as to what their long-term goals were for the ASM sector. In the past the GoCAR appeared to be caught between the shorter-term national economic benefits that can be gained from encouraging foreign large-scale mining and the idealised vision of having a formalised, mainly local, traditional ASM sector. In the past the GoCAR has neglected the sector thereby allowing the negative social and environmental impacts to be aggravated. Moreover, the lack of real decentralisation of the CAR’s political institutions and administrative services has been an additional handicap. The CAR inherited the French colonial legacy of a centralised structure. Since 1995 and the adoption of the new Constitution, four levels of decentralised institutions have been created: five regions, 16 Prefectures (Préfectures), 71 Sub-prefectures (Sous-Préfectures) and the Communes (174 cities, 9,000 villages). However, this first step towards local democracy and an administration closer to the citizens has not been followed by tangible results. The public structures have remained extremely centralised in the capital city of Bangui, for many reasons: - There is some political tension and a certain degree of mistrust between the capital city of Bangui (where the political and financial powers are concentrated) and the various regions where the authority of the current administration may be challenged, due to the political unrest in many parts of the country; - The administration organisational and structural chart (e.g. structure of the Ministry of Mines) is often redundant and not adequate; - The local communities have no elected representatives, and there is no funding available to truly empower decentralised structures; CNRST 2001), NEPAD, WSSD Implementation Plan (Chapter on sustainable development for Africa), and the African Mining Partnership. 21 The Communities & Small Scale Mining CASM network seeks to improve coordination between miners, communities, donors, governments, NGOs, mining companies and other stakeholders. CASM is a multi-donor initiative whose secretariat is housed in the World Bank in Washington and is currently chaired by the UK’s Department for International Development (DFID) OS00899/J01 32 November 2008 The World Bank Assessment of the Central African Republic Mining Sector - The recruitment of trained professionals for the decentralised administrative structures is very difficult. As a consequence, there is no local democracy and no local administrative services. For the successful formalisation, organisation and management of ASM activities, a decentralised approach is crucial. This would also facilitate a better knowledge of the sector, and create a basis for a better day-to-day field management of ASM activities. Many claim that the GoCAR’s past unclear and changing stance toward the indigenous ASM sector, coupled with a lack of real motivation from the ASM miners themselves, has severely stifled the development and formalisation of the sector. If the GoCAR is serious about developing the mining sector of the country, it must be ready to undertake a radical reform of the ASM sector by tackling all of the relevant issues. In the CAR the Ministry of Mines, Energy and Hydraulics is responsible for the ASM sector through the General Mining Directorate (Direction Générale des Mines) and the four Regional Mining Directorates (Direction Régionale des Mines). At present there is no definitive and separate unit responsible for ASM although there are numerous staff whose duties also involve ASM. The current procedure to obtain an artisanal mining permit procedure is complex. Applications must be sent to the General Mining Directorate which transmits it to the relevant Regional Mining Directorate. Applications for special mining permits (which are exclusively available to cooperatives) must be sent to the Regional Mining Directorate. Despite these allocations of duties, the Regional Mining Directorates is largely responsible for the controlling activities. Therefore, given the significance and complexity of the ASM sector it may be advantageous to create a specific ASM unit within the Ministry of Mines. The actual mandate and role of such a unit would have to be carefully and collectively determined and thereafter delicately managed to avoid duplication of efforts or political altercations between general and regional authorities. The unit would also have to ensure that it fully collaborated with both General and Regional Mining Directorates through sustained lines of communication. Such a concept has been reasonably successful in many countries including Ghana, Sierra Leone, Zambia and Tanzania. Despite the apparent enthusiasm and motivation of the Ministry of Mines staff, who are committed to assisting with the formalisation and regulation of the ASM sector, it will be vital that such an ASM unit is adequately resourced. Without such resources and sufficient skills the staff will be unable to competently undertake their statutory duties or implement and monitor policies, programmes and action plans for the formalisation and development of the ASM sector. Under-resourcing has been the main problem of many other national ASM units where a shortage of equipment and financial resources has greatly OS00899/J01 33 November 2008 The World Bank Assessment of the Central African Republic Mining Sector reduced the institutional efficiency and performance of such units to comply with their duties and be responsible and accountable for compliance with laws, regulations, policies, and procedures relevant to the ASM sector. The Ministry of Mines, though its apparent motivation to assist with the formalisation and regulation of the ASM sector, in reality lacks the resources and sufficient skills to competently undertake its statutory duties or propose, formulate, implement and monitor policies, programmes and action plans for the formalisation and development of the ASM sector. The GoCAR is cognisant of the institutional shortfalls and has also acknowledged that such a reform will also rely on restructuring, strengthening the capacity of, and increasing the resources of the Ministry of Mines and the Public Mining Institutions (especially the four Regional Mining Directorates, the various technical/support services and the Brigade Minière) to ensure that they can effectively undertake their statutory functions, enforce appropriate legislation and properly monitor the ASM sector. The future restructuring and resourcing of the Public Mining Institutions should also be based on the expected internal and external demand for the institutional services needed by the ASM beneficiaries. In order to understand the strengths and weaknesses of the Ministry of Mines, with respect to ASM, a brief institutional audit was undertaken that sought to examine the current organisational deficiencies influencing the performance of the Ministry of Mines, and to identify the advantages of the organisation and where it needs to be strengthened or changed. The institutional audit sought to briefly assess: - A critical examination of the mandate of all Public Mining Institutions, especially the Regional Mining Directorates and the technical/support services dealing with ASM, to determine how a separate ‘ASM Unit’ could be established; - The qualifications, experience and motivation of the staff; an evaluation of ASM relevant staffing levels and identification of their influence on the performance of the Public Mining Institutions; - The training needs of the staff to accomplish their duties relevant to the ASM sector and identification of the recommended scope for future training and awareness (e.g., gender) programmes; - The availability of equipment, financial resources and adequate office facilities and the influences of the current shortcomings on the institutional efficiency and quality of the current and future services/products for the ASM sector; - The performance of the units in complying with their duties, and identification of responsibility and accountability for compliance with laws, regulations, policies, procedures, and definitions of functions relevant to the ASM sector. Also determine OS00899/J01 34 November 2008 The World Bank Assessment of the Central African Republic Mining Sector how the regulatory duties and proposed extension services (see section 3.3.6) could be competently divorced; - The work procedures, their efficiency in time and use of resources and their influence on the quality of the services and products. Box 4 - Key Findings of the Ministry of Mines, Energy and Hydraulics Institutional Audit - Most Ministry of Mines staff have had no ASM specific training; - There are no dedicated staff or sub-department to monitor, regulate or provide assistance specifically to the ASM sector; - Ministry of Mines staff are not able to travel to field sites to monitor ASM activities as often as they would like (or need) and are therefore not fully sensitised or aware of the real (non-technical) challenges and opportunities of the sector; - There is a reasonable level of awareness about many of the key issues and problems that constrain the ASM sector and also some very commendable ideas and suggestions on means to improve and assist the sector; - There appears to be a lack of consistent and effective communication between the Ministry of Mines staff in the General Mining Directorate and the staff of the Regional Mining Directorates and technical/support services with respect to ASM; - There is minimal communication with other cogent ministries who have overlapping mandates with regard to community development and basic social services/infrastructure, and environmental issues (there is only one entity which gather representatives of various Ministries: the Technical Commission in charge of the control of environmental and social impact assessment studies – Commission technique chargée du contrôle des études d’impact environnemental et social); - Available equipment and resources to allow Ministry of Mines staff to work effectively on ASM issues are minimal; - Communication and experience sharing with other African nations with a comparable ASM sector is minimal. The findings of this study (see box above) should be communicated to the relevant stakeholders through interactive workshops to highlight strengths, weaknesses, inconsistencies, and a means to improve the institutional arrangements relevant to the ASM sector. It is clear that there will be a need to retrain and sensitise the Ministry of Mines and Directorates staff tasked with assisting and developing the ASM sector as many are unaware of the realities and constraints of the sector and sometimes even offer inappropriate technical advice. However, it should be emphasised that this is a consequence of a lack of regular field exposure to ASM and a reliance on desk based studies rather than a deliberate oversight or neglect. In particular field staff must learn that their job also requires them to listen and respect the miners and their communities and help identify incentives that will aid formalisation. In particular, they must also be sensitised to understanding and helping to overcome the gender-differentiated roles and constraints of the sector. It is critical that the relationship between the Ministry of Mines staff, General and Regional Directorates staff, the OS00899/J01 35 November 2008 The World Bank Assessment of the Central African Republic Mining Sector license holders and actual miners is clearly examined and understood. Ministry of Mines and Directorates staff must be encouraged to work with, rather than against, the ASM community and gain their trust in order to meet the GoCAR’s desire to formalise and regulate the sector. They must also be firmly discouraged from any propensity to become despotic ‘tax collectors’ creating private fiefdoms on their designated sites, as has been the case in many other African countries with decentralised mining offices. Most artisanal miners have minimal geological knowledge and rely on past experience, instinct and superstition to locate and pursue the mineralised orebody. This can perpetuate haphazard and dangerous mining, incredibly high dilution and very low recovery situations leading to high grading and the possible sterilisation of highly economic deposits. Therefore, the Cadastre must also be encouraged to ensure that all relevant geological information is made publicly available. The Cadastre (in full collaboration with the General and Regional Mining Directorates staff) should be given a mandate to analyse all existing data and attempt to delineate and define the nation’s mineral potential suitable for ASM exploitation and not just concentrate on attracting large scale mining companies. There has been little new prospecting in the CAR since independence in 1960, before the country had been completely mapped. It is believed that many geological maps of the CAR were taken to France after 1960. The Cadastre is currently in a preliminary discussion trying to get those maps repatriated from the Bureau de Recherches Géologiques et Minières based in Orléans, France. This could help improve the geological data on CAR’s mineral resources, and could constitute the first step towards the elaboration of a complete, detailed and geographically accurate database of the CAR’s mineral resources. Box 5 - Exploration campaigns in the CAR 1913, first geological descriptions and maps, led by the French Equatorial Africa’s administration. 1920-1930, the French Compagnie Equatoriale des Mines covered large areas, especially in the centre and east of the country, in search of gold. 1933-1954, the French Service des Mines de l’Afrique Equatoriale undertook a variety of mapping and prospecting missions in CAR. 1947-1963, the French Commissariat à l’Energie Atomique prospected for nuclear raw material (discovery of the Bakouma uranium deposit). 1950-1957, the French Bureau Minier de la France de l’Outre-Mer conducted several missions in CAR, assisting some of the local French-owned gold-mining companies. 1958-1961, the Institut Equatorial de Recherches et d’Etudes Geologiques et Minières replaced the French Bureau Minier. End of the period of systematic regional geological exploration, before the country had been completely covered. Source : Une introduction au secteur minier de la République Centrafricaine, document prepared for the CAR Ministry of Energy and Mineral Resources, by Crowe Schaffalitzky & Associates, Dublin, Ireland, financed under IDA Credit 1971-CA (World Bank). OS00899/J01 36 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Once this task has been completed, the Cadastre must be charged with the responsibility of determining appropriate means to disseminate all relevant geological information especially to the ASM sector. The proper delineation and definition of resources suitable for ASM would have numerous advantages including the potential to reduce demographic migration and rush-type situations, to facilitate the development of organised ASM community settlements and maximise the potential for longer term sustainability of intervention projects. Box 6 - List of geological maps and data related to minerals in the CAR held by the French Bureau de Recherches Géologiques et Minières. - Geology: • Synthesis maps (1:1 million and 1:1.5 million) • Detailed maps (1:200 – one map, 1:500 – 17 maps) with missing areas in the North, East and West - Hydrogeology: synthesis map (1:1.5 million) - Mineral Orebodies: synthesis map (1:1 million) - Geophysics: synthesis map (1:1 million) - Pedology: • Synthesis map (1:1 million) • Detailed maps (1:200 – 51 maps, 1:100 – 2 maps, 1:50 – 18 maps). Country almost covered by those maps. Other documents: Benchmark document for the CAR for geology and pedology : J. Mestraud (1982) Géologie et ressources minérales de la République Centrafricaine : état des connaissance à fin 1963. 60, Mémoire BRGM n° 1986, including the 1:1.5 million geological map. A cooperation program between the Cadastre and the French Bureau de Recherches Géologiques et Minières aiming at reconstituting the geological documentation on the CAR’s mineral resources on paper- and electronically- based support could be considered. Such projects have been successfully led in Guinea- Conakry, Niger and Gabon. Source : BRGM, Orléans, France At present the entire responsibility for the ASM sector resides with the Ministry of Mines. However, given the cross-cutting nature of many of the issues that constrain the ASM sector it will be vital to foster coherent and systematic engagement and cross-sectoral understanding between the Ministry of Mines and other cogent ministries. Therefore, the interaction and overlapping mandates of numerous cogent ministries and departments (e.g. Ministries and Directorates in charge of Labour and Social Affairs, Health, Education, Agriculture and Rural Development, Women’s Affairs, Finance and Economic Development, Trade and Industry, the Environment, etc.) need to be fully mapped as one of the first Ministry of Mines tasks. It will be necessary to provide information and undertake appropriate awareness campaigns to these cogent and relevant public institutions with a national and regional reach. Such institutions should be made fully aware of the incessant problems within the ASM sector and encouraged to mobilise their resources to help co-ordinate the sustainable development of ASM communities as part of their future action plans. Likewise OS00899/J01 37 November 2008 The World Bank Assessment of the Central African Republic Mining Sector there should be an emphasis on facilitating a more proactive local (especially in the prefectures of Mambéré-Kadéï (Berbérati), Nana-Mambéré (Bouar), Sangha-Mbaéré (Nola) and Haute-Kotto (Bria)) administrative involvement in ASM development efforts especially the critically needed social infrastructure for many ASM areas. Such key institutional stakeholders then need to be consulted to facilitate the formation of sustainable inter- ministerial government links and lines of communication with the Ministry of Mines prior to embarking on any ASM intervention projects. The proposed formation of a consolidated and sustainable system for ASM community development will require a critical reinforcement of the specific capacities, commitments and institutional alliances among both national and regional institutions and the ASM communities. This may also necessitate the formation and resourcing of an inter-institutional National Artisanal Mining Committee which must be made accountable and charged with specific objectives and measurable targets to help develop, formalise and empower the ASM sector. The proposed committee should be made responsible for the development of a multi- dimensional framework (institutional, legal, technical, social, economic, and environmental) that adopts a holistic approach in order to develop and increase the human, financial, physical and social capital available to the sector and help integrate it into the formal rural economy. The committee will also have to take into account the likely divergent interests of the various stakeholders and consider all aspects of ASM including poverty alleviation, community development, legalisation, formalisation, taxation, policy formation, geological data, technical advice, training, extension services, health and safety, access to finance, fair mineral trading, environmental protection, gender mainstreaming, child labour, site security, community health, education, alternative livelihoods, etc. One of the first tasks of this committee will be the co-identification and co-definition of the roles and responsibilities of all the members (cogent state organs and other stakeholders). It would be prudent to ensure that all roles and responsibilities were defined through direct consultation with the actual state organs rather than being defined in their absence and then ‘imposed’. Such a participatory approach should help ensure that all stakeholders take ownership of the process from the outset, guarantee full ‘buy-in’ and thereby accept accountability. 3.3 The Central African Republic artisanal mining sector 3.3.1 Miners’ organisation In the CAR the organisation of artisanal miners differs between the legal and the more numerous unregistered and clandestine activities. Given that artisanal mining is considered a traditional and often family-based livelihood, frequently carried out in remote areas of the OS00899/J01 38 November 2008 The World Bank Assessment of the Central African Republic Mining Sector overnmental country, it has proved difficult to regulate or extend governmental control over the informal overnment numerous sector. Alongside the government institutions, there are numerous other players that , influence artisanal mining activity including village elders, collectors, and religious chiefs. Organisation of formal ASM activities In the CAR, artisanal miners officially registered as such are often not the people who actually do the physical mining work. These Central African Artisanal Miners are more small business similar to petits patrons or small-business owners, managing and watching over their employees while they carry out the digging and washing operations. These employees are known as ouvriers des chantiers miniers (labourers, diggers or washers), and are essentially ‘second class’ artisanal miners in the CAR. In the CAR, legally registered artisanal mining sites are organised into a basic structure. At bourers the bottom level are labourers who undertake the basic digging using hand tools in order to OS00899/J01 39 November 2008 The World Bank Assessment of the Central African Republic Mining Sector break up the ground and reach the mineral. They often work in gangs (each consisting of five to ten workers) and are engaged to help carry out the various mining activities, e.g. digging, carrying, washing, and panning. The labourers work for the chef de chantier who is a registered artisanal miner, and who often owns the land and controls the mining operations being undertaken within it. An artisanal miner becomes a chef de chantier by locating an orebody, or by inheriting the operation from his father. All diamonds and gold found within the concession must be taken to the chef de chantier who will record the amount in the cahier de production22, and give the labourer a previously agreed percentage of the sale. The share received by the labourer may vary, but is commonly up to 50% of the value of the find, and then the labourer is often bound to pay up to another 30% of the value to his pre- financer or investor The exact payment does depend on the type of mineral and the nature of the work being undertaken by the labourer23. The artisanal miners will sell the gold and diamonds from their concession to one of several collectors in the local community, who will often visit the mining concessions on a daily basis at a set time for this purpose. Collectors buy gold and diamonds at a rate far below the market value, and then sell them on to the licensed Buying Offices which are generally located in the larger towns. From here, the gold and diamonds are passed on to BECDOR in Bangui, and then exported. Alternatively, a group of ten or more artisanal miners or chefs de chantier can form a cooperative24. By undertaking this additional registration process, including the submission of a dossier to the Directorate for Commercialisation, Industry, and Mining Register (Direction de la Commercialisation, de l’Industrie et du Fichier Minier, part of the General Mining Directorate in Bangui) and a fee of 150,000 F CFA (~US$ 330), the artisanal miners can work together, pool their resources, and share their profits resulting in a more reliable income. As a registered cooperative it is theoretically possible to obtain prefinancing from investors, and negotiate the sale price for diamonds or gold to this investor; however no real evidence of this was seen in practice. Cooperatives come under the management of the Directorate for the Support of Mining Production (Direction d’Appui à la Production Minière), who help with financing and materials. The other benefit of being in a Cooperative is the ability to export diamonds directly, through BECDOR, bypassing collectors and Buying Offices middlemen and paying a lower tax rate. However, this route is only possible with an export value worth over 40,000,000 F CFA (~US$ 90,000), a highly unlikely amount to be produced from artisanal mines which in reality acts as an impassable barrier to the entire 22 The Cahiers de Production (Production Notebooks) are bought from the Administration of Mines (Fichier Minier) in Bangui, or the Brigade Minière outside Bangui, by the artisanal miner. The artisanal miner must record his/her findings in this notebook, which will be used by the Brigade Minière and the Administration of Mines to control and trace the whereabouts of the mining product throughout the marketing chain. 23 According to an interview with three chefs de chantier in Boda. 24 C.f. infra Legal Framework of artisanal and small-scale mining activities. OS00899/J01 40 November 2008 The World Bank Assessment of the Central African Republic Mining Sector process. If the value of the minerals is less than this figure, then the diamonds or gold must be sold to either a collector or a Buying Office and passed through the marketing chain in the usual way. Registration as a mine labourer costs 2,000 F CFA (~US$ 4) for the year, and is payable at the local office of the Brigade Minière, who will provide a license. The process involves filling in a numbered registration card, and the name, number and address of the artisanal miner being forwarded to the Directorate for Commercialisation, Industry and Mining Register. These registration cards must be carried at all times when working on a mining concession, as the Brigade Minière undertake inspections and failure to produce can result in the confiscation of all minerals and tools. According to various sources in the field, only approximately 20% of mine labourers in the CAR are in possession of a license, as a result of the lack of real benefits and lack of enforcement. To register as an artisanal miner, an annual fee of 35,050 F CFA (~US$ 80) must be paid at the local Brigade Minière office. It is not uncommon for artisanal miners applying for a license to require a literate person to fill in the card for them. The GoCAR attempts to extend control over the mining sector through the Directorate for the Support of Mining Production, and more specifically through the subdivision covering the dispersion of technical and material support. The Brigade Minière is responsible for policing the mining sector in the CAR. The Brigade personnel come from the Gendarmes (army) and Police, and are engaged with preventing fraud in the diamond and gold mining and marketing chains, and preventing and resolving conflicts on mining concessions. As with many organisations in the CAR, the Brigade Minière personnel are operating with many constraints. They have no official training in geology, mineral identification or diamond valuing, coming directly from police operations, and although they insist they recognise diamonds when they see them, this is hardly an ideal situation. The decentralised regional offices, located within the main mining communities, are invariably understaffed (employing just one or two people), have no equipment such as radios to communicate with each other or with any of the local mining concessions, and only have access to motorbikes often with insufficient fuel. If a conflict needs resolving on a mining concession, for example in Boda in the South-West, , then one of the parties involved must borrow a car from a volunteer in the community, drive to the Brigade Minière and collect one of the officials to bring them to the location of the conflict. Such logistical problem prevents routine verification that miners working on concessions are legally registered. Obviously this is a highly ineffective arrangement for an organisation that is supposed to be keeping watch over all mining and trading in these mining concessions. The Brigade Minière personnel are entitled to confiscate any gold or diamonds from unlicensed artisanal miners and any minerals deemed to be smuggled or from an illicit OS00899/J01 41 November 2008 The World Bank Assessment of the Central African Republic Mining Sector source. The confiscated diamonds and gold are rarely returned to the artisanal miner even if they are found to be legitimate. The seized goods risk being ‘lost’ on the way to Bangui for a verification process which takes place every couple of years. After this time, the Brigade Minière apparently often claims that the artisanal miner can no longer be found. In truth, artisanal miners understandably become disillusioned with the legal registration process resulting in the confiscation of the minerals that support their livelihoods, and switch to working illegally. It is alleged in the field that any miner, legal or not, who is trying to sell a diamond greater than five carats is often put under a lot of pressure from corrupt officials who would like to confiscate the stone under false pretences for their own personal gain. It is also alleged that many artisanal miners avoid registering at all because to do so would involve giving their name and address to the Brigade Minière, and that would facilitate the confiscation of their valuable gold or diamonds if it became unofficially known that they chanced upon a significant quantity. The selling of these undeclared minerals through illicit channels is the starting point of fraud in the mining sector in the CAR, and therefore it is alleged that the Brigade Minière are completely counterproductive. Organisation of informal ASM activities Within the much larger informal sector there is less clear division of labour and profits. Instead, most miners and labourers simply tend to organise themselves into gangs with an appointed gang leader/foreman or simple family based groups (particularly if the mining concession is proximal to a reasonably large community base). In both the formal and informal ASM sectors there are a number of employment-related issues that must be addressed so as to make the employment more meaningful to certain key actors, particularly women. Some issues highlighted include the following: - The employment relations within the sector are substantially informal and ‘casual’. The sector does not offer any form of social protection for employees and does not comply with statutory obligations relating to social security, taxes, insurance, compensation, hours of work, and the health and safety of employees. The female labourers are often exploited and work largely to enrich the predominantly male licence holders, buyers, sponsors, etc. - The bargaining power of artisanal miners/labourers within the sector is generally weak, largely because they do not have a competent voice, through a democratic cooperative, to engage in negotiations with employers; - Although mine labourers can earn more than some in the rural areas, the incomes of workers (carriers, crushers and washers) within the sector are low when taking into account the physically taxing, arduous and dangerous character of the work they undertake. OS00899/J01 42 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Although deemed by some as a socialist concept, the general global consensus is that the formation of miners’ organisations, cooperatives or associations can help to provide a single ‘voice’ that can assist the miners and labourers in conducting pricing or workplace negotiations, mobilising assistance programmes, conducting awareness campaigns amongst its members and organising security and mine-site related activities. The formation of truly emancipated, democratic and empowered miners organisations in the CAR would also support the monitoring and administration of the subsector, as well as enforcement of the legislation whilst facilitating the dialogue and interaction between the General Mining Directorate (and associated units) and the miners. It is advised that the General Mining Directorate investigates the appropriateness, and subsequently tries to facilitate and foster the development of democratic miners’ organisations. Many Central African mining entrepreneurs will probably be sceptical and somewhat reticent about the formation of such organisations and prefer not to empower their workers and labourers. These people may feel distinctly threatened by the formation and empowerment of such organisations who could then theoretically simply by-pass them and market their mineral produce more directly. Of equal importance are the invisible, but highly influential, power relationships within the government and Préfecture administrations; between the indigenes and migrants, between the license holders and the miners/labourers and through local business networks, which could undermine the formation of miner’s cooperatives. It is likely that such relationships are exceedingly complex and characterised by varying degrees of mutual resentment, mistrust, antagonism, intimidation, extortion, oppression, threats and increasing conflict. Despite these problems, most of the mineral markets in the CAR could certainly benefit from a streamlining of the commodity chain to reduce the number of collectors who allegedly seek to maximise their share of the profits, perpetuating the subsistence life of those who produce the actual mineral wealth. Therefore, any encouragement or promotion through the General Mining Directorate to organise the creation of cooperatives must fully take in to account the peculiar cultural, traditional (it may also be more appropriate to advocate family or community based cooperatives and in some areas women specific organisations) and situational circumstances in the various areas of the CAR and attempt to highlight the benefits of pooling resources. The General Mining Directorate promotion process should also acknowledge issues of indigenous ethnicity, gender, illiteracy, lack of unity, loyalty, conflict, administrative skills, and available resources whilst ensuring that the motives of potential members to join any cooperative are not fraudulent or self-seeking. Cognisance should also be given to the lessons from the analysis of failed ASM cooperatives in other countries. These invariably seem to be dominated by the culpability being placed on a ‘lack of management’ and the fact that cooperatives develop a political character of their own, with various struggles for OS00899/J01 43 November 2008 The World Bank Assessment of the Central African Republic Mining Sector leadership (increasingly between indigenes and migrants) and difficulties in decision making on crucial questions. 3.3.2 Land tenure Land tenure in artisanal mining communities is always a contentious issue in Africa. In the CAR the surface land surrounding villages is owned by individual families from the communities, and passed down through a matrimonial process in the case of death. It is considered that the land from a depth of approximately two metres25 below the surface is owned by the State, and therefore any minerals contained within are also the State’s property. This fact appears to be widely understood by artisanal mining communities in the CAR and this is enforced in the field by the Brigade Minière. It is increasingly apparent, however, that on diamond mining concessions surrounding Berbérati (and probably in other localities too) in the west of the country the artisanal miners are illegally removing the diamonds from ground they consider to be owned by their ancestors, and are then fraudulently exporting these diamonds over nearby borders. Obviously this practice is going have a detrimental effect on the implementation of the Kimberly Process Certification Scheme and the Extractives Industry Transparency Initiative in the CAR. 3.3.3 Gender mainstreaming Over time, women’s involvement in ASM activities has tended to increase, particularly in Africa (45 - 50% of all ASM workers in Africa are women), and they are also involved in ancillary mine site activities resulting from the prevalence of family based activity in rural Africa. In the CAR, women’s involvement varies, but is reported to be higher in some traditional village-based orpaillage26 areas such as Boda. In many instances, women and girls are compelled to undertake the poorly paid ancillary labour including manual transport, ore crushing, sorting and in particular washing. For instance in many sites, women’s low status means that they are only permitted to treat the tailings from the abandoned operations or from the primary processing and panning by men. In other sites they only work for part of the day to enhance the earnings of their husbands. In general, for those women who are forced to work long and arduous hours, they receive far less pay than their male counterparts whilst also being expected to fulfil all their primary care giving roles and undertake their traditional domestic duties of fetching firewood, collecting water, cooking, cleaning. 25 According to sources in the field. 26 Artisanal gold mining. OS00899/J01 44 November 2008 The World Bank Assessment of the Central African Republic Mining Sector The fact that woman are often limited to engaging in lower status and lower paid labour activities stems from cultural perceptions and traditional beliefs of appropriate work for men and women. Moreover, women have much more difficulty than men engaging in formalised artisanal mining. They have no patrimony, no land, and therefore no access to credit to buy tools, this is especially the case in the rural areas. It is more difficult for them to obtain the artisanal miner’s card and mining permits, as their endeavours are generally faced with incomprehension and often hostility, such initiatives are frequently dismissed as frivolous and seldom carried forward. Women can find it more difficult to get financial, legal, or technical support to gain ownership of land, and many rural women still face traditional and religious obstacles (illiteracy, insufficient technical knowledge, oppressive gender relationships, patriarchal views, social taboos and family responsibilities) in asserting their formal rights and discrimination under customary laws further contributes to the feminisation of poverty in rural areas. Therefore it may be prudent to try and determine whether promoting and assisting with the formation of specific women’s ASM cooperatives, for example, may be of benefit to helping understand and overcome the issues and challenges of women’s multiple roles in ASM communities. In intensively mined areas some women are gathering in associations (though often informal) to support one another and help channelling small-scale funding such as micro-credits. In Boda, such an association exists, bringing together more than 30 women. A delegate was sent to Bangui to participate in a meeting aimed at establishing a Women’s Mutuelle for Savings and Credit. It is estimated that a dozen of such associations exist. On many artisanal mining concessions in the CAR, there are numerous collateral activities that employ women and young girls. The main activities that attract this group include selling locally produced goods (e.g. women petty traders selling food, beverages, firewood, etc.) and working/serving in bars and restaurants. In fact, it has been reported that many young girls migrate to ASM sites from afar (including other countries especially Sudan, Chad, Cameroon and the Democratic Republic of the Congo) in the hope of making some money in the apparently ‘booming’ ASM settlements. They usually arrive on site with the expectation of working in the local market or bars or just petty trading, but unfortunately many young women find it difficult to sustain and survive through such activities and their hosts or peers often encourage, or even force them to seek extra cash through sex work. It should be noted that this is not always the case however; reports in the field indicate that there are mining concessions in the CAR which are run by female artisanal miners and employ women exclusively. The nomadic nature of many miners in some areas of the CAR also has a direct and damaging effect on the traditional extended family structure, and women’s role in particular. OS00899/J01 45 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Traditionally the extended family is a very important, with a strong social security institution taking care of orphans, the elderly and widows. However, this crucial structure often disintegrates when members participate in ASM, particularly when the male miners have to travel far from home and are away for indefinite periods of time. The remaining female- headed households have to cope without their husbands for long periods and live in hope that they will send money back or return soon. Often such households’ struggle and the children are forced to work. In addition, some of the occurrences of child labour in ASM in the CAR can be attributed to the fact that women in some mining areas are forced to bring their children along to work (it is common to see babies/infants strapped to their mothers back). Such situations lead to arguments that it is the women’s involvement in ASM activities that is to blame for child labour and that it is therefore not desirable to have women in ASM. However, it is the lack of child-care provision for the children (especially for widowed women), as well as the limited opportunities women have to make alternative arrangements, that is to blame for the presence of some children on ASM sites. Past ASM assistance efforts in other countries have made a major oversight in not recognising the gender-specific nature of development. By assuming that ‘what is good for men is good for their families’, most ASM programmes have been orientated towards the tasks, interests and needs of men. Future reviews of the ASM legislation and policy must focus more sharply on removing the many engrained gender based constraints and incorporate ways to give women more power in their communities and their households. This can be done through the enactment of gender-neutral legalisation (e.g. Zimbabwe, Namibia and Ghana) and in accordance with the International Labour Organisation Convention on the Elimination of All Forms of Discrimination against Women (C45). Women are critical to community stability, cohesiveness and morale, and act as primary agents in facilitating change. Therefore empowering women within ASM communities in the CAR will have a greater impact on alleviating rural poverty and supporting the development of strong and resilient communities, as they are more likely to spend the money on family needs compared to their male counterparts who in general tend to be rather frivolous and irresponsible with their incomes. 3.3.4 Child labour Child labour is prevalent in many gold and diamond ASM operations in the CAR. A combination of economic decline, poor education, poverty, rural remoteness, a large informal working sector, poor governance, disease and HIV/AIDS (reported as high as 25% in some artisanal mining communities) has created conditions that are rife for the exploitation of child labour together with a worrying increase in orphanhood. Likewise the ease of opportunity to exploit children, the growing proportion of the young population, and the fact that child work is often considered part of the socialisation process by many rural peoples has resulted in a OS00899/J01 46 November 2008 The World Bank Assessment of the Central African Republic Mining Sector high prevalence of child labour in rural CAR. Worryingly this issue is seemingly neglected by most reports on the sector. A general lack of labour law enforcement and investment in the social infrastructure in many rural areas has resulted in child labour being common practice in the ASM sector in the CAR. In general children work in the mines to help their parents, and to supplement the family income in order to provide basic goods simply to survive and their contribution is highly valued by their families. As education is not free, many children are forced to either drop out of school or work part time in the mines to help support their family needs or pay for the educational fees. Some children and adolescents are simply lured by the prospect of becoming rich while others are encouraged by their parents to help contribute to the family earnings. Child Labour in the ASM sector of the CAR is considered a result of: - Worsening poverty in rural areas (according to the Profil de Pauvreté en Milieu Rural, UNDP, 2003); - The illegality and informal nature of the ASM sector; - Past Government apathy and lack of capacity and resources to police sector and enforce labour legislation; - The lack of empowered miners associations/ASM unions, organised community- based organisations or sector specific; - The disintegration of the traditional extended family and significant gender inequality; - The growing proportion of children and rising number of orphans (including AIDS orphans); - The remoteness and isolation of many mining areas; - The reliance on traditional family-based orpaillage activity; - Increasing numbers of Sudanese refugees, economic migrants and internally displaced people from villages in the north of the country, being forced to relocate as a result of the ongoing instability in Darfur; - Traditional and/or religious discriminating attitudes toward girls and their educational needs; - The lack of opportunities or incentives to go to school or continue with education in mining areas; - The lack of post primary education, few job prospects, regular employment or livelihood choices in rural areas; - A lack of improved ASM performance and access to fair mineral markets. It is commonplace for families to accompany the men seeking out a livelihood in artisanal mining in the CAR, particularly if the relocation is thought to be a permanent one. In such circumstances the children immediately suffer; they lose many of their basic rights, the vital stability and routine of village life that is critical in their infancy, they lose touch with their OS00899/J01 47 November 2008 The World Bank Assessment of the Central African Republic Mining Sector extended family and friends, lose concepts of normal social conventions and moral stability, lose opportunities for an education, and even the opportunities to play safely. Once on site, continual poverty and lack of earnings soon forces the entire family to seek work in the mining operations. Even the most caring parents are painfully forced to plead mine ‘owners’ and fellow miners to allow their children to undertake some work in order to earn some payment and contribute to the meagre family income. The unrelenting poverty that plagues the ASM sector, combined with the lack of viable alternative livelihoods, destroys the strongest of family values and principals and compels parents and children to remain on the sites and endlessly work in the mines just to survive from day to day. Box 7 - Worst Forms of Child Labour Convention, 1999 Article 3 - For the purposes of this Convention, the term the worst forms of child labour comprises: - all forms of slavery or practices similar to slavery, such as the sale and trafficking of children, debt bondage and serfdom and forced or compulsory labour, including forced or compulsory recruitment of children for use in armed conflict; - the use, procuring or offering of a child for prostitution, for the production of pornography or for pornographic performances; - the use, procuring or offering of a child for illicit activities, in particular for the production and trafficking of drugs as defined in the relevant international treaties; - work which, by its nature or the circumstances in which it is carried out, is likely to harm the health, safety or morals of children. Source: International Labour Office At present there is no detailed data on child labour in the ASM sector of the CAR. It is also unclear whether there is greater incidence of boys rather than girls working directly in mines. Therefore, it would be a valuable exercise to specifically study the issue of child labour in ASM to help determine what aspects of the mining operation are the children involved with; how many hours they work per day; the hazards they are exposed to; how they are remunerated if at all; whether they manage to find alternative employment; auxiliary work (including sex work); and the means of recruitment (‘voluntary’; family or community relationships/understandings or ‘forced’; with the children working as conscripted or bonded labour). Without such knowledge it would be ill-advised to try to formulate any child labour elimination projects. However, based on experiences from other African ASM sectors it would be prudent to ensure that any intervention did not solely concentrate on child labour in isolation, be too academic, insufficiently researched, or inadequately resourced. The General Mining Directorate must appreciate that there is certainly no quick fix solution to the complex child labour problem in ASM in the CAR. However it is likely that better governance could result in greater relative success in child labour interventions, and reduction solutions must be OS00899/J01 48 November 2008 The World Bank Assessment of the Central African Republic Mining Sector integrated into a holistic approach to assist the ASM sector that considers all the constraints, issues and challenges. 3.3.5 Mining and processing methods In the CAR, both gold and diamonds often occur in the same areas, particularly in the south- west of the country. The minerals both occur in alluvial gravel beds, which vary between half a metre and one metre in thickness. In some of these regions it is theoretically possible to mine both gold and diamonds from the same gravels, however as the mineral processing technology is insufficient to do this successfully the artisanal miners tend to forgo one to concentrate on the other. The depth of overburden varies depending on the individual location, however in the south-west of the country the artisanal miners generally have to remove about five metres of sterile material, and in the central-east of the country it can be as little as two metres (around Bria), or as much as seven metres. The prospection method for new mineralised gravel beds is exceedingly basic; consisting of driving a steel pole into the ground until the gravel horizon is located. Following this, sufficient overburden must be removed so a small sample of gravel can be removed and assayed. The assay process simply involves panning a bucket of ore (for gold) or sieving/hand jigging (for diamonds) at random, if any gold or diamonds are found then mining will commence. Sources indicate that the alluvial gravels tend to harbour a meagre distribution of diamonds. If nothing is found then the process will be repeated at a nearby location. Mining of the alluvial gravel is undertaken by groups of artisanal miners who initially remove the overburden, which can be at depths between one and seven metres. Following this, which often happens in stages similar to open cast strip mining (the over burden is removed in strips and used to backfill the previously mined strip), the auriferous or diamondiferous gravels are piled into heaps approximately two metres cubed. In some cases the pits are stepped in terraces (benches) to ensure stability but more often they are unbenched, and even undercut. Water ingress can be a problem with this type of mining and dewatering is either undertaken manually using buckets or very occasionally with the use of a diesel pump which makes the operation more costly. By mining only in the dry season and cultivating agriculture during the wet season this can predominantly be avoided. The ore excavated from these pits is usually carried in head pans to suitable locations for processing. The methods employed for processing the gravel to recover minerals differs for diamonds and gold. When mining diamonds a rudimentary hand jigging process is adopted; the gravels are poured into small metal buckets perforated with large holes, and this colander-like tool collects the larger rocks, whilst the small particles escape through the holes and are collected in a square mesh sieve, approximately 50 centimetres square. The small particles are then washed in water (using a swirling motion) to let the smallest particles of earth and OS00899/J01 49 November 2008 The World Bank Assessment of the Central African Republic Mining Sector gravel wash away. When there is a single layer remaining in the sieve, this is taken to dry land and examined in minute detail to find the diamonds. The most obvious shortcoming of this method is that any diamonds smaller than the size of the mesh will be lost. According to reports, there is an artisanal mining concession near Bria where mechanised jigs are employed to process the gravel more efficiently with a larger grain size. The method engaged for recovering gold from the alluvial gravel is similar to that for recovering diamonds. After manually crushing the auriferous gravels, one method is to pan the gravels to concentrate the denser gold particles, using increasingly smaller diameter basins until the gold can be collected from the bottom. The second method seen in the field is to mix the crushed gravel particles with water to form a ‘sludge’, which is then very primitively sluiced. This sluicing process entails progressively adding water to the gold- bearing ‘sludge’ at the top of an inclined wooden chute (such as a section of disused dug-out canoe or pirogue), and the denser gold particles collect nearer the top of the chute, whilst the tailings are washed down to the bottom. To be even remotely effective this process must be repeated several times. Visual evidence in the field indicates that no form of horizontal riffles or strips of carpet were used in the wooden chute to recover the gold particles from the flow, and some wooden chutes seen even had patches of sheet metal fixed onto the flow surface with the intention of slowing the flow, but which in reality would trap the gold particles underneath, rendering it completely inaccessible. In ASM activity in the CAR, concepts such as mine planning and grade control are non- existent or at best rudimentary and the hand tools (shovels, picks, hammers, axes, chisels, metal bars, or spearheaded digging tools), hand equipment (calabashes, sieves and sluices) and techniques used by the artisanal labourers are very simple (often because they also have to be mobile) and often inappropriate. Levels of mechanisation in mining are minimal and the techniques, tools and equipment adopted for routine unit operations in the various mines (rock breaking, ore/waste handling, hoisting, ventilation, and drainage) are usually inadequate and labour intensive, necessitating the miners working long and arduous hours in hazardous conditions. Examples of typical practices common to most artisanal mining sites in CAR include: - Manual pre-stripping of only minimal overburden to expose the orebody; - Very rudimentary grade control by random sampling. The sample is then manually crushed, sieved in the case of diamonds, or panned in the case of gold; - Open pits are sometimes not benched, berm undercutting is common and bench face scaling is never practised; - Deep pit excavations are not protected or fenced and access is unsafe; - Hoisting from deep open pits is often undertaken using headpans carried either by individuals or through a ‘human-chain’ of miners passing headpans from one to another; OS00899/J01 50 November 2008 The World Bank Assessment of the Central African Republic Mining Sector - Artisanal miners can spend many hours in cramped and hazardous conditions whilst undertaking hard manual labour; - Water inflow and mine dewatering is a big problem, and miners are mostly reliant on manual methods for dewatering with limited access to diesel pumps; - Ore is usually manually crushed on site, and transported to nearby water pools to pan/hand jig for the precious minerals. Although it is often claimed that the current ASM methods are archaic and crude, it should be remembered that throughout the many centuries of artisanal mining in Central Africa the indigenous artisanal miners have been innovative, having developed their own tools and technology and have been far from static or backward. However, technological issues associated with informal ASM activity are still cited amongst the main constraints that limit the sector from attaining its full economic and wealth generation potential. 3.3.6 Training and outreach The informal nature of artisanal mining combined with a lack of knowledge and funds to improve mining methods and techniques or acquire appropriate equipment, forces many artisanal miners and labourers to adopt inefficient mining techniques. In addition, the artisanal miners have had no training, they have minimal geological understanding and rely on past experience, instinct and superstition to locate and pursue the mineralised orebody. Such conditions thereby perpetuate haphazard and dangerous mining, incredibly high dilution and very low recovery (probably as low as 10-40% when using simple sieving or wooden sluices) leading to high grading and possible resource wastage through sterilisation of economic deposits. Advice and training on improved mining methods, practices and techniques is a key area that the General Mining Directorate should more proactively endeavour to promote. When discussing areas of concern and their main desires, many artisanal miners and labourers cited a lack of means, equipment and technology as their key problem. It is because of this apparent demand, and because of the past orientation of many development interventions, that technological improvement and ‘best practice’ adoption has been, for some intervening agencies in neighbouring countries (e.g. United Nations Development Program, European Union, United Nations Industrial Development Organisation) viewed as the key for improving artisanal mining for both environmental protection and increased productivity. Beside these two objectives, the selection of appropriate ‘best practice’ techniques and technology should also be based on a variety of other practical aspects and criteria such as the full acceptance by the miners, the local structural geology and orebody characteristics (especially reserves in order to justify and sustain an ASM community), the specific mineralogical characteristics, health and safety, financial gain, affordability, the ease OS00899/J01 51 November 2008 The World Bank Assessment of the Central African Republic Mining Sector of use, and the availability of necessary equipment and materials all within the specific Central African context. Direct assistance to help miners improve productivity is often a useful incentive to convince miners to legalise and work within a more formal and regulated regime. Box 8 - Improving Mining & Processing Techniques/Technology - Remember that technical problems require technical solutions, but an integral multi-disciplined approach is required for implementation. - Remember that there are NO ‘one-size-fits-all’ generic technical solutions. - Evaluate shortcomings and inefficiencies in current mining and processing techniques for diamonds and gold. - Accept that it will be best to first adapt and improve existing traditional methods before attempting to introduce new and alien techniques or technology. Technology development is more likely to be sustained if built upon the labourers’ and miners’ strengths, inherent skills and knowledge. - Through a participatory and consultative approach identify and provide the labourers and miners with improved and safer ‘best practice’ means of production that helps raise their productivity, increase the mineral recovery and lead to self-sufficiency. - Ensure the selection of any new ‘best practice’ techniques and technology creates a ‘win-win’ situation and be based on various practical aspects and criteria such as the full acceptance by the miners (overcoming social barriers), be fully accessible, inexpensive to operate, easy to duplicate, use and maintain, utilise readily available local resources, and it must generate obvious financial benefits through more efficient and expedient recovery. - Recognise that any alternative techniques and technology must be easy to demonstrate in terms of a more efficient and lucrative operation rather than relying on arguments based on long-term health and/or environmental implications. - Acknowledge that it may be prudent to adopt a strategy where the miners and labourers must pay/contribute to access the technical assistance – based on the argument that ‘It cost me, I use it and I take care of it’. - Make sure any proposed strategies are not arrogant or patronising and always value and respect the knowledge of the miners and labourers. Likewise ensure due consideration to the potential ‘social barriers’, cultural diversity, level of knowledge and expertise, and varied perceptions of individuals. - Make sure all technical interventions are adapted and tested in conjunction with the miners and labourers in a step-wise manner, are accompanied with suitable levels of education and training, and also provided with sufficient supervision and prolonged monitoring. - Ensure all proposed solutions are replicable without external aid and devise a suitable dissemination strategy to maximise duplication. However, field experience has shown that the key benefits to the miners and labourers of any ‘best practice’ technology must be easy to demonstrate in terms of a more efficient and lucrative operation rather than rely on arguments based on long-term health and environmental implications. Therefore in order to gain acceptance and be adopted any new or alternative technology must be fully accessible, inexpensive to operate, easy to duplicate, use and maintain, utilise readily available local resources and must generate obvious financial benefits from the start through more efficient and expedient mineral recovery. OS00899/J01 52 November 2008 The World Bank Assessment of the Central African Republic Mining Sector It is plausible that in certain areas of the CAR there may be some ‘social’ barriers that have to be overcome before acceptance and adoption of new technology, as there is often a traditional affinity to the reliance on some preferred equipment and techniques. Miners and labourers can be very sceptical and loath to adopt any different methods or technologies regardless of who is advocating their use. This is especially true of the imposition of technology through solutions perceived to be developed behind closed doors in a ‘Western’ non-African environment. Any future General Mining Directorate strategy for the introduction of new or improved technology, whether in joint venture with a major donor organisation, private sector company, or on their own, must not be arrogant or patronising, but should ensure due consideration to the cultural diversity, level of knowledge and expertise, and varied perceptions of individuals in the ASM communities. Therefore respect and understanding for the varying degrees of permanence, local knowledge, adaptability to new methods, and other issues (including ethnicity, culture, gender, age, poverty, motives, etc.) will be given before selecting an optimum alternative technique or specifying different equipment. Indeed, experience from Latin America has shown that the widespread adoption of alternative technologies may take several years. Also because ASM miners and labourers may have a history of being suspicious of outsiders, they are a particularly difficult group to persuade to try new technology unless a mutual trust and understanding can be built and maintained. Any future training and technology transfer interventions through the General Mining Directorate should aim to build on experiences of the attempted (but very restricted due to limited resources) training schemes that they have apparently implemented in the past though the Technical and Material Support and Dispersion Service (Service d’Appui Technique, Matériel et de Vulgarisation27). Given the fact that many in the artisanal mining sector use inappropriate technology or have limited access to, or knowledge of, geology or mining, there is also a likely need to provide accessible, free (or affordable) multi-disciplined advice, training services and products to miners. Such training services will need to be delivered in appropriate locations (either with static or roving training centres) and at appropriate times of the day (when the miners/labourers have finished work). Such proposed training extension services need to act as a ‘one-stop-shop’ in terms of outreach to the miners, labourers and their communities (with access to rights and entitlements) and should have a duty to advise on ‘good practice’ in accordance with the national labour (i.e., child labour and gender mainstreaming), environmental and health and safety policy and guidelines for artisanal mining. Training should include an understanding of basic geology, mining and processing (appropriate locally fabricated technology), sustainable environmental management and health and safety guidelines, legislation, access to credit and profitable marketing, mineral pricing and stone evaluation, business, bookkeeping and management skills and community health/issues. The linking of the training of different aspects of artisanal mining and small enterprise business management will be essential to allow the artisanal mining sector to thrive and rise 27 According to staff at the General Mining Directorate. OS00899/J01 53 November 2008 The World Bank Assessment of the Central African Republic Mining Sector above mere subsistence levels. In theory, these training centres could also act as a conduit for more general education including general water management, agro-pastoral training, healthcare and HIV/AIDS awareness for the wider community. All proposed training methods should be appropriately promoted and structured to ensure the level of detail and methods of instruction match the targeted educational level and technological capacities of the miners and labourers. All advice and assistance services should therefore take account of the cultural background, gender issues, geographical isolation, capabilities and the working environment of artisanal mining communities in each locality. Advice should be clearly worded in an appropriate local language (Sango), or illustrated considering potential issues of illiteracy, and be relevant to the local conditions and culture. Indeed it will be important that the literacy standards of the artisanal miners and labourers are not assumed to ensure that information dissemination is aimed at those with the lowest literacy levels. For this reason minimum written information and maximum use of ‘pictograms’ may be important in the dissemination and uptake of some critical messages. All potential methods of communication and appropriate media should be investigated and tested; such as leaflets, posters, videos, local radio broadcasts, theatrical role-plays, meetings with community leaders, community-based organisations, mutual assistance associations, local non-governmental organisations, artisanal miners’ communities, group leaders, village elders/traditional rulers, and so forth. 3.3.7 Health and safety For a number of reasons, the health and safety risks to which the artisanal miners and especially labourers are exposed to can be significantly greater than for large-scale mining (statistics on accidents and fatalities in the ASM sector were not available as most accidents go unreported). Most obviously, the informal and unregulated nature of ASM in CAR means that it operates beyond the scope of legislation or enforcement of health and safety guidelines. Although the majority of miners and labourers are hard working and courageous, they are simultaneously often reckless and are particularly vulnerable to exposure to dust, effects of noise and vibration, shaft/stope/bench collapses and rock falls, poor ventilation, over exertion, inadequate work space and inappropriate equipment. If such conditions are common then they will undoubtedly result in respiratory infections, asthenia, arthropathy and various wounds, dermatological, muscular and orthopaedic ailments, and sight problems. Often the miners, especially the young labourers, are not aware of all the risks they are taking and even simple safety items including basic personnel protection equipment such as boots, gloves, safety glasses, etc. represent an eccentric and costly investment with no immediate return. Moreover, it is common for miners and even labourers to introduce OS00899/J01 54 November 2008 The World Bank Assessment of the Central African Republic Mining Sector maladapted mining methods and inappropriate or more ‘mechanised’ equipment or techniques without the complementary safety measures, and often these individuals are not aware of the increased risks they are running. Fortunately, it is consistently maintained by officials that the use of mercury is currently not an issue in the CAR, and indeed no evidence of this activity was unearthed on field visits to the various gold concessions. Mercury is used for the amalgamation and concentration of gold, and the inhalation of methyl-mercury by artisanal miners is a major risk to their own health, that of others, and results in consequential bio-accumulation within their local ecosystem (which is often the activity of greatest concern for many including the United Nations Industrial Development Organisation and the United Nations Environment Program). Numerous studies in other countries have categorically shown that miners who use mercury have elevated levels of mercury in their blood, hair and urine. It is questionable however, how long the absence of mercury in CAR will continue given its high level of use in other countries in West and Central Africa where mercury is readily available and reasonably inexpensive. It would be prudent for the General Mining Directorate to be aware that the inappropriate use of mercury often arises due to a lack of knowledge of the amalgamation and smelting process. However, an astute proactive task that the General Mining Directorate should consider, already implemented in countries like Ghana, Tanzania, Sudan, Burkina Faso and Zimbabwe, would be to alert people to the danger to themselves, their families, and the environment. If mercury use does penetrate into the CAR then the General Mining Directorate will need to encourage artisanal miners to adopt mercury pollution abatement techniques including the use of simple methods to capture the mercury vapour through retorts or through the adoption of enhanced comminution, more efficient gravimetric concentration or improved amalgamation techniques. Specific legislation addressing the issues on health and safety for the ASM sector are rare, and the CAR has health and safety covered under the Code Minier which addresses the entire mining sector (Article 50 of the Code Minier – the permit owner is responsible for health and safety on site). This is inappropriate for artisanal mining concessions, and gives no indication on health and safety requirements and good practices (Article 78 of the Code Minier merely makes reference to ‘good practice and diligence’ according to ‘current legislation’). It is worth noting that a few countries in Africa that have attempted to formulate ASM specific health and safety guidelines include the new Mineral and Mining Policy of South Africa and the 1971 Mining Regulations of Zambia. Unfortunately, despite the best intentions many Governments have been largely unsuccessful at being able to raise standards immediately simply through legislation and enforcement. A more realistic approach that should be promoted by the General Mining Directorate needs to centre around sensitisation and increasing awareness (especially to women miners) of the risks and to demonstrate less OS00899/J01 55 November 2008 The World Bank Assessment of the Central African Republic Mining Sector dangerous alternatives that are appropriate to local circumstances, and that allow mining communities to make better-informed choices. Cognisance should be given to the fact that exaggerated safety requirements will tend to discourage miners, leading them to simply ignore and label all safety advice as utopian. The General Mining Directorate must ensure that all regulations and guidelines need to be formulated through a consultative approach including discussions with the actual artisanal miners. 3.3.8 Community health The unhealthy environment most often extends beyond the actual mining sites. Those engaged in ASM in the CAR are already some of the poorest and most vulnerable (it must also be recognised that the health of women and men is differentially impacted by ASM) people and are therefore likely to have inadequate sanitation, with little access to clean water or basic health care. These problems can be even worse where migrant miners and labourers converge around a freshly discovered ‘rush’ area and settled in unorganised ‘shanty type’ camps. Remote and temporary settlements often do not have proper public health or sanitation facilities. In addition to harbouring diseases related to poor sanitation, they are usually breeding grounds for alcoholism (a strong distilled natural liquor is the most common drink), narcotics (predominately cannabis) and substance abuse, prostitution and other forms of social character erosion particularly amongst the young male workers. The problems related to prostitution and sexually-transmitted diseases including HIV/AIDS are exacerbated by a lack of education on modes of transmission and prevention, leading to a higher than average prevalence (local sources suggest 25%) of HIV/AIDS in many artisanal mining sites in the CAR compared to the national prevalence of 15%. Widowing is common stemming from marriages between young women and older men who die before them, and there are a high number AIDS orphans in artisanal mining communities who suffer in particular from the malnutrition and kwashiorkor resulting from people predominately concentrating their energies on mining. Elderly people are also particularly vulnerable. Common ailments found amongst artisanal mining communities in the CAR, directly attributable to the mining activity, include respiratory problems, wounds, hernias and broken limbs. Other health threats include malaria spread by mosquitoes breeding in water filled pits left by the miners in the rainy season. Local sources note that dysentery, diarrhoea, tuberculosis, and other parasitic and infectious diseases are also rampant in such informal and remote ASM camps. Sanitation facilitates are often nonexistent, intensifying the spread of diseases related to poor hygiene. Children in these communities are particularly at risk and diseases such as dysentery, diarrhoea, malaria and other parasitic infections are particularly common. Although there are no formal quantitative or qualitative studies on the health of ASM communities in the CAR the influx of migrant miners and labourers certainly puts a strain on the limited resources of the local health facilities which usually consist of the OS00899/J01 56 November 2008 The World Bank Assessment of the Central African Republic Mining Sector odd hospital and small health centres, most without any qualified medical staff. In Boda for example, there is one doctor and one midwife covering 25,000 people. The use of traditional medicines is widespread (it has been reported that, in the African continent, traditional medicine is used by 80% of the population for primary healthcare). Western medicines purchased in pharmacies are used, but they are very expensive (often the most expensive items available to buy in the communities, along with manufactured goods) and there may be sometimes a certain distrust of doctors. Recognition needs to be paid that traditional medicine is believed in, not by ignorance but because it has been an established part of many communities for thousands of years and in many places exists alongside western or modern medicine. They mostly consist of specific roots and plant which can be harvested for free from the surrounding forests as required. If the medical doctor is unable to heal a patient, they are frequently referred on to the traditional community medicine man. 3.3.9 Environmental impact In the CAR as in many other countries with sizeable artisanal mining sectors, the environmental destructiveness is the single most visible aspect of ASM. However, as with many other African countries a lack of awareness, particularly of the less visible or long-term environmental impacts of activities, combined with a lack of information about affordable methods to reduce impacts and a lack of obvious incentives to change, all contribute to the significant environmental problems within the ASM sector of the CAR. Since most of the ASM operations in the CAR for the miners are subsistence activities, miners and labourers are forced to focus more on immediate concerns rather than the long- term consequences of their activities. This is compounded by the fact that in the past the General Mining Directorate or the Ministry of Environment has lacked the capacity to effectively monitor or control these informal activities that occur in remote and sometimes inaccessible locations. In the CAR, almost 10% of the country’s surface is protected on an environmental basis28. Areas most intensively mined generally do not overlap with environmentally protected land. However, the fact that artisanal miners do not use geological maps but mostly trust their instinct and past experience, means that areas perceived to have mineral potential do overlap with environmental assets. This is a key issue that the General Mining Directorate and Ministry of Environment needs to jointly evaluate. 28 More than 61,000 km² are protected for environmental reasons, the country’s surface being close to 622,000 km². Source: Convention on Biological Diversity website http://www.biodiv.be. OS00899/J01 57 November 2008 The World Bank Assessment of the Central African Republic Mining Sector It should be emphasised that poverty alleviation is intimately linked with environmental management. In the CAR these links include the enormous burden of disease that affects the rural populace through pollution of water and air, and their dependence on natural resources and ecosystem services which, when degraded, can undermine their very livelihoods. Art. 32 of the Environmental Code: The exploration and exploitation of mines and quarries resources shall be done in an ecologically rational manner, taking into account the environmental considerations provided by the current legislation and in the applications texts of this code. Art. 69 of the Code Minier: […] any type of mining operations shall be forbidden at a minimum distance of 200 metres near […] national parks, wildlife reserves, nature reserves, biosphere reserve […]. Art. 70 of the Code Minier: Protected areas of any size can be established within exploration or mining sites for the purpose of protecting (…] water supply points […] national parks, special reserves, sanctuaries, wildlife reserves; classified forests or around any location in respect of which environmental protection is deemed necessary […] Probably the most significant environmental impact of artisanal mining in the CAR is land degradation. In many areas it is common for prospective ASM sites to be stripped bare of vegetation and topsoil and the excavated pits are left uncovered and abandoned, which in turn renders the land unsuitable for any other purpose. In addition many ASM operations often undertake the processing near water sources, rivers or ponds resulting in siltation and destruction of aquatic environments. However, one consolation is that the majority of environmental impacts appear to be confined to the close proximity of the ASM workings and as a result, the impacts of individual operations are of a limited scale and should be reversible. Nevertheless, the cumulative effects of these mining activities may be less apparent, and should be borne in mind. The regenerative capability of the natural vegetation of the environments where the ASM operations occur needs also to be considered and the effects on biodiversity need to be fully investigated. OS00899/J01 58 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Box 9 - Best Practice Recommendations for Environmental Management in the ASM Sector in Africa - Regulations should be specific to ASM operations Environmental (and H&S) legislation should establish control over the distribution and trading of dangerous chemicals. - Legislation should allow users to be known and hence can be easily monitored for compliance and assistance. - Legislation should allow data on the amount of chemicals entering the country, amount used and other relevant information to be accessed. - Legislation should increase the use of safe methods and reduction in health and environmental negative impacts. - Establishment of locally enforced security systems which allows miners to watch each other’s mining practices to ensure that set environmental and safety standards are adhered to. - Establishment of regulations that contribute to improved working relations between miners, authorities and their organisation. Source: United Nations Economic Commission for Africa The ASM sector in the CAR needs to comply with the requirements for minimising the numerous negative environmental impacts attributable to its unregulated activity. By their very nature, many ASM workings are informal and increased legislation will be ineffective in their regulation. Better enforcement of existing legislation is one approach that could limit or curtail operations. Therefore, the General Mining Directorate needs to develop appropriate, easily understood and enforceable legislation that will draw the ASM sector into national programmes for environmental management and protection. The General Mining Directorate must ensure that simple environmental management guidelines are developed in order to encourage artisanal miners and labourers to adopt working methods that are appropriate to the Central African sector in terms of efficiency, standards, minimisation of negative environmental impacts and restoration. Such best practices may include: - A simplified environmental impact assessment for the ASM sector: prior to the commencement of mining in an area that may have been environmentally damaged, the licence holder must request an inspection of the area to confirm the environmental disturbance. Else, this area will be considered to be in a satisfactory condition, as a reference in case of later environmental damages; - Vegetation clearing cannot be undertaken within 20 metres from any stream or river bank; - To ensure that the mined areas are rehabilitated as mining proceeds, no new development can be undertaken without backfilling the abandoned previous working. And to ensure the funding of such provision, a certain percentage of the revenue obtained by the commercialisation of the extracted mineral shall be received by the supplier as ‘environmental rehabilitation charge’. This fee can also be transferred to a ’land reclamation fund’. OS00899/J01 59 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 3.3.10 Social impact The population of the CAR is very young, with 49% under 18 and only 4% over 60. This suggests a high potential from growth and development provided that the young are sufficiently educated and in good health. The population is gradually drifting away from the countryside; a result of the lack of jobs, declining agriculture and deficient social infrastructure. Bangui currently contains 16% of the national population and is expanding in a fairly chaotic manner resulting in many unresolved housing, sanitation and environmental issues. In some areas of the CAR, rural livelihoods are no longer valued or perceived as sustainable, leading to gradual migration to the cities. The degradation of some of these rural livelihoods and increased levels of poverty has forced an increasing number of rural families to rely on basic coping strategies to secure an alternative off-farm source of income in other sectors, including artisanal mining. In the CAR some miners and labourers, and often their families, are highly mobile and flock to the mineral rich areas in the desperate hope of escaping poverty and accumulating wealth, and unfortunately many care little for conventional social behaviour or traditional values. According to some past research, few members of such artisanal mining communities possess any real natural, financial or physical capital or tangible assets and even the social and human capital of the community is most often weak. Many citizens, especially in rural areas, are suffering under the combined weight of hunger, lack of electricity and water, a decrepit communications infrastructure and absence of health and education services. It would be informative to ascertain whether the migration of people causes increased pressure on such local services which are already scarce in many remote rural areas. In other countries local people conclude that they have seen few lasting benefits; most of the profits will have disappeared while the legacy of social and environmental damage persists. Artisanal mining communities in the CAR draws many migrants, both nationals from other regions and from nearby countries. In Boda in the South-West, for example, the national migrants include the Gbanou, Gbaya, Mandja, Bofi, Mbororo, Bandas, Ngbaka, and the Ali. Immigrants also come to work on the mining concessions from nearby Sudan, Cameroon, Chad, and also from more distant countries like Mali and Senegal. This migration is an enduring fixture of artisanal mining communities in the CAR, especially when new concessions open and migrants flood in to make money. There are two types of migrants; those who bring their families and settle in the community, and those who come alone with the express interest of making as much money as possible in a relatively short time before returning to their homelands. The latter arrangement unfortunately results in increased fraud and smuggling, and also prevents any investment in these local, impoverished communities. OS00899/J01 60 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Often marriages are encouraged between immigrants and Central African citizens because this increases the likelihood of internal reinvestment, and also by becoming Central African they are then eligible to legalise and register for an artisanal mining license. In the CAR it is also common for the man to spend many days or even weeks at a time on mining concessions, leaving their families to struggle as best they can; a situation which unsurprisingly leads to tensions and increasing divorce rates. The general consensus in the field is that the GoCAR needs a more appropriate, enforceable immigration policy which favours CAR nationals. When large numbers of migrants arrive at a new concession, conflict with local communities can occur. It is common in many of these mining communities in the CAR that when a ‘booming’ economy develops around a remote ‘rush’ type artisanal mining activity, localised inflation brought about by the erroneously perceived high purchasing power of those involved in the artisanal mining sector often poses extreme difficulties to those who are not involved in mining. In other counties in Africa this sometimes provokes violence and introduces new social problems resulting in antagonism within some communities, and sometimes between different ethnic groups and nationalities. This has not been confirmed in the CAR so far, and reassurance is given by sources in the field that the different national and tribal groups coexist harmoniously. It is, however, recognised that the higher cost and lower availability of basic foodstuffs in such areas can result in under nourishment and malnutrition (and related conditions) for many and is especially common amongst the vulnerable groups like women and children. Given that many artisanal mine sites in the CAR are in remote rural areas, often far from established villages, most people who flock to the area usually believe they will only be resident for a short time and once they make fortune, substantial amount of money they will return to their village. Therefore most miners and labourers care little for conventional social behaviour, traditional values or, because of a short-term view, establishing a planned village with intricate housing, drainage or sanitation facilities. In addition the speed and scale of the development of some ASM sites means basic social infrastructure such as road access, water, health or educational facilities are often non-existent, leading to a multitude of social and health problems. Due to this transient nature and belief that their presence on site is temporary many nomadic miners and labourers may ignore their traditional or religious values which they would have respected and meticulously upheld in their home villages; a situation which results in the erosion of the social code or values including high levels of alcoholism, narcotics and substance abuse and prostitution. This is particularly the case amongst the young male migrant labourers who in turn can influence the local adolescents. On the mining sites, young people (defined in the field as being between 18 and 35) consist of 70% of the population. Many children of a school age do not have any formal education, instead accompanying their parents to work either on the mining concessions, in the fields, OS00899/J01 61 November 2008 The World Bank Assessment of the Central African Republic Mining Sector or carrying out other occupations which can provide them with nourishment. In mining areas there are very poor schooling levels particularly for 12 to 15 years-olds. In the Boda commune, for example, there are 31 official schools and also various other smaller education facilities in the surrounding villages. Over 6,350 children attend these schools, which is approximately 25% of the schoolable population, and around 5,000 children will complete the year; the rest dropping out to seek work. Two thirds of the children at school are boys; girls are held back by parents who do not deem it necessary for them to learn ‘book skills’ or formal education. Schooling a child costs annually 3,000 F CFA (~US$ 6) for insurance and 500 F CFA (~US$ 1) to cover the fees. In the unofficial schools in the smaller villages the parents must also pay for a teacher between them. Families in artisanal mining communities in the CAR often have problems affording the fees, another reason why children are pulled out of school and taken to work. According to a school teacher in Boda, pupils at school are told about the dangers of working on the mining concessions, and very basic health and safety information is suggested to them. Agriculture is impacted by artisanal mining activities in the CAR. Men often cultivate coffee which is predominately exported to the Sudan, whereas the women tend to cultivate subsistence crops to sustain their families such as banana, manioc, grain, and cacao. The equipment is archaic, and there has been no influx of modern technology from Bangui or anywhere else. The soil is, however, very fertile. Fulani communities rear cattle; however as a result of rebel road blocks they moved their herds to Cameroon and Chad several years ago. They are starting to return to the CAR now, lured by the rich pastures. Game, including monkey, gazelle, boar and antelope, is hunted for meat, and chickens are also reared in the communities. The agricultural season is between January and April, during the rainy season, and between May and December the communities concentrate on mining. Immigrant artisanal miners often ignore these social requirements and this can initiate conflicts over land. In some areas farms have been abandoned and diamond mining has become the year- round priority leading to potential food insecurity and rapidly increasing prices of basic foodstuffs in the rural mining areas. Based on such findings it may prove beneficial to implement supplementary agricultural assistance projects that assist with improved arable/pastoral farming and animal husbandry in some ASM communities. 3.3.11 Fair mineral markets, and access to finance and credit ASM in the CAR is confined to exploitation of high value minerals, notably gold and diamonds that are generally for export. Such minerals are particularly attractive as they have the advantage of being relatively simple to extract, refine, and transport. Informality and illegality of the ASM sector in the CAR also extends to the marketing of these precious mineral products that are easily smuggled through the nation’s porous borders (especially to Cameroon) and serve as an exportable hard currency equivalent. The lack of a local and fully liberalised market in the CAR is probably one of the greatest constraints to achieving OS00899/J01 62 November 2008 The World Bank Assessment of the Central African Republic Mining Sector real and tangible development of this sub-sector. The proliferation of parallel and illegal markets and the covert and fraudulent nature of some diamond ‘transactions’ is testimony that there are problems with the existing mineral marketing arrangement. This situation is exacerbated by the fact that many gold and diamond ASM sites are located in remote areas, and it is often far easier to trade in a neighbouring country than to travel all the way to Bangui. Ancestral ethnic links facilitate cross-border trade and barter, and not surprisingly gold, and increasingly diamonds, are a favoured exchange commodity. It is important to remember that illicit marketing in many other countries is primarily the result of inadequate government policies when ‘official’ prices are too low, taxes too high, or due to the traditional strong ties (debt bondage) established by collectors through the prefinancing of ASM operations. The lack of true liberalisation, formal protection and proper acknowledgement by the Central African authorities for the informal ASM activities increases the risk that the artisanal miners will be exploited by collectors and other intermediaries and they rarely get fair prices. It also encourages capital flight, fraud, criminality and smuggling in the commodities chain. It would also be naïve to believe that mineral smuggling can be eliminated completely, however, through the implementation of appropriate liberal macro-economic policies (i.e., monetary, fiscal, and trade), and marketing incentives at the micro, meso and macro levels, gold and diamond smuggling can be reduced. Within the gold sector it is believed that not all smuggling in the CAR is the result of malicious practices. Miners will always seek the most convenient and profitable prospect, whether within the CAR or outside. For example in many areas in the West of the country, a far better price, with no tax liability, can be realised in neighbouring Cameroon and gold and diamonds continuously leak across the border. Income is discontinuous for most miners in the CAR, therefore in order to ensure a regular cash flow from small amounts of production; mining communities in the ASM sector typically have to sell their products as quickly as they can. Combined with a lack of real ‘voice’ or bargaining power, they usually get a low price. This exploitation is even more acute for women whose unequal status often means that they are usually compelled to carry out poorly paid work. Those working further along the commodity chain, such as the many traders, collectors, and other intermediaries, the greater share of the profits. This inequitable distribution of the profits is one of the major obstacles to achieving poverty reduction in the ASM communities throughout the CAR. OS00899/J01 63 November 2008 The World Bank Assessment of the Central African Republic Mining Sector There are a number of possible ways in which the profits retained by mining ASM communities could be increased in CAR through specific interventions including: - The establishment of official buying centres (and diamond bourses) in remote mining areas where miners receive a fair price (i.e., the margin does not exceed an appropriate percentage). However, it is important that the financial requirements and fees for these establishment are not excessive. - A more open system of licensed buyers/vendors who visit mining areas and buy small amounts of mine output. If there were sufficient licensed agents, competition between them should prevent the purchase price from being so low that it leads to widespread black market transactions. - Links with the growing ‘fair and community trade’ movement in industrialised countries. - Increasing the awareness within the ASM sector regarding methods of adding value to mineral commodities by establishing appropriate processing industries (including lapidary and jewellery manufacture). The liberalisation of the domestic mineral markets through simplification of the licensing procedures for private mineral dealers should steer most collectors through legal channels. Therefore the processing of mineral marketing licenses and monitoring of the trade activities should be undertaken by relevant departments regulated from the headquarters in the General Mining Directorate (this is the how the marketing systems in both Ghana and Tanzania operate). Such a system would also greatly facilitate the collection of revenue and data. Any proposed Central African marketing scheme must also discourage monopoly organisations from controlling mineral markets and pricing of commodities, as well as foster competition among private sector collectors and sellers to ensure that ASM communities have a number of options for disposal of their output and are not trapped by ‘predatory’ sponsors. Financial empowerment of the ASM sector is a prerequisite for the success of the overall development of the sector in the CAR. The majority of artisanal miners in the CAR would like to step up to higher levels of productivity and output by mechanising more of their activities and developing new reserves and would likely cite financial assistance as their greatest need. But few are able to gain the necessary capital. Therefore it may be worth examining whether local banks are conversant with the concept of realistic micro credit/finance for the ASM sector or the specifics of mining project finance for even the small-medium scale semi-mechanised mine operators. Verbal reports claim that the lack of appropriate pre-financing mechanisms or appropriate micro-credit has resulted in many Central African miners having to resort to seeking credit from the multitude of OS00899/J01 64 November 2008 The World Bank Assessment of the Central African Republic Mining Sector ‘predatory’ sponsors and collectors that plague such informal sectors and are thereby trapped to endlessly work for these sponsors in a debt-bondage situation. The General Mining Directorate recognise the need for micro-credit to be extended to ASM communities, and such micro-credit should also target women’s groups and off-mine alternative livelihoods in an attempt to diversify the economic base of the ASM communities and help them become more resilient and sustainable. Women’s micro finance groups have been set up in artisanal mining communities in the CAR, and representatives teach women about micro finance, investment, and money management. These initiatives are genuinely beneficial as it is recognised that the financial empowerment of women is a major step for successful local development initiatives. Many countries in Africa have attempted to initiate some form of credit scheme for ASM with varying degrees of success particularly with regard to loan repayment. The reasons why the establishment of a sustainable revolving loan scheme has proved elusive in many cases is still unknown, although inadequate debt servicing, unrealistic interest rates, selecting the wrong partners and high administration and set-up costs are all major culprits. Box 10 - Examples of Access to Credit & Finance in Africa Some interesting examples collated by the United Nations Economic Commission for Africa that may provide valuable lessons for future Central African financing schemes include: - Loan-based financial schemes; - Zimbabwe – Government supported loan schemes including loans to purchase and/or develop mines, emergency loans and the Mining Industry Loan Fund specifically for the ASM sector; - Mozambique – Fundo de Fomento established by the Government to help small-scale miners gain access to finance; - South Africa – financing by the National Steering Committee of Service Providers; - Equity based financial schemes; - Zambia – the Mwaca Amethyst Project supported by HIFAB International to form a Swedish-Zambian JV company; - Zambia – equity sharing on the zinc tailings recovery project at Sable Zinc Kabwe Inc.; - Hire/purchase schemes; - Zimbabwe – an equipment hire/purchasing scheme implemented by the Government; - Co-operation with LSM; - South Africa – the Dumpco Trust diamond tailing retreatment project sought an interest free loan form De Beers and the National Union of Mineworkers; - Buyer credit schemes; - Tanzania – the Meremeta gold buying scheme established to provide marketing assistance to the artisanal miners. Source: United Nations Economic Commission for Africa OS00899/J01 65 November 2008 The World Bank Assessment of the Central African Republic Mining Sector A variety of financing mechanisms could be investigated in consultation with all the stakeholders including some form of soft loan guarantees, grants, micro-credit schemes, micro-savings second hand equipment purchasing and/or equipment leasing and hire. The overall objective must be to establish a long-term, transparent, fair and sustainable financing scheme, which ensures adequate debt servicing based on firm business terms and results in long term sustainability of the scheme. The proposed schemes must also ensure they target the actual miners/labourers (and especially women miners) through empowering cooperatives that break the existing debt-bondage links, rather than the collectors for example. However, any future schemes must be simple to administer and easy to monitor and take into account the special needs of the ASM sector, as well as problems with exchange rate fluctuations, and the current exorbitant bank interest rates. 3.3.12 Artisanal mining development In the past, most ad hoc efforts and assistance programmes have endeavoured to solve one aspect of the ASM sector alone and ignored others. Whilst being well meaning, these one- dimensional projects have provided little more than superficial gains and little long-lasting impact. Indeed, many projects have suffered from a lack of resources, competent management, political will, result-oriented and time-bound actions and monitoring. Over the last few decades various approaches have been employed in order to ‘deal’ with the ASM sector and these have been closely associated with the viewpoint and agenda of the implementing donor agency. Box 11 - The Enhanced Heavily Indebted Poor Countries (HIPC) Initiative in the CAR The HPIC initiative, set up in 1996 by the World Bank, is a financial operation which is designed to reduce the levels of Third World Dept to a manageable level. The aim of the programme is to help any country with debt worth more than one-and-a-half times their annual export revenues and the debt repayments are instead channelled into sustainable development initiatives. Currently about 41 countries have either Qualified for, are Eligible or Potentially Eligible and May Wish to Receive HIPC Initiative Assistance, but about ten do not meet the World Bank conditions. The CAR has completed the first stage of the requirements, and is currently an Interim Country, between Decision and Completion Point. However to be relieved of its roughly US$ 643.5 million of foreign debt one of the prerequisites is to align the mining sector with the procedures governing the Kimberly Process Certification Scheme (KPCS), and to ensure a transparent mineral market chain from mining to export. The development of the artisanal mining sector is critical to achieve this goal. Many ASM development opponents are quick to draw attention to the fact that the ASM sector is littered with examples of unsustainable interventions, with projects having failed for a large number of reasons. Mostly, however, they have failed because of the approach taken in designing and implementing the project rather than the type of project per se. Many of the OS00899/J01 66 November 2008 The World Bank Assessment of the Central African Republic Mining Sector project interventions that have aimed at improving only one aspect of the ASM problem have failed because the needs and concerns of miners were not understood or the interests of ASM was secondary to those of the government, mining company, donor or outside ‘experts’, who conceived and managed these interventions. Therefore, it is imperative that any interventions adopt a broader multi-dimensional approach, be locally-owned and driven, informed on robust research data, be strategically linked to other key policy initiatives and sectors (in order to avoid duplication of efforts and maximise efficient use of donor funding) and also builds on existing capacity. Trying to solve the symptoms of ASM in isolation from the other issues and challenges that plague the entire ASM sector will likely result in only temporary and cursory success. The ASM issue must be tackled nationally. In order to be truly sustainable, there must be a clear objective to foster and encourage local stakeholder buy-in and ownership, and ensure all stakeholders identify and provide incentives for the continuation of any proposed assistance scheme whilst appealing to the self-interest of the artisanal miners, labourers and their communities. It will also be vital that the nomadic nature of the sector is fully considered and incentives to encourage settlement or reduce migration may also have to be examined. It should be emphasised that the problems of ASM will continue and not be resolved if future community development interventions ignore the root causes and simply seek to solve the multitude of symptoms of ASM that concern the GoCAR, or future large scale mining operators and will likely result in only superficial gains. There is a genuine and urgent need to take into account the existing socio-economic system and consider how ASM can best contribute to poverty alleviation and sustainable development through integration into pragmatic community driven development plans. Development interventions must find better and more affirmative ways of integrating artisanal miners into the rest of the Central African economy and encouraging ASM communities to invest their revenues in other forms of economic activity as well as in communal services. It must be emphasised that the realistic development of the ASM sector implies the recognition of the complexity of social, gender, cultural and economic issues at its roots. Likewise the ultimate success of any formalisation programme will also heavily depend on the sustained political will of the GoCAR and the large scale industrialised mining sector. OS00899/J01 67 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 4 The legal framework of the mining sector 4.1 Legal framework for large-scale mining activities29 Executive Summary This report analyses the provisions of the CAR Code Minier and its Décret d’application (Application Decree), in the context of large scale mining activities (LSM). This report therefore focuses on the provisions concerning mining titles. Some aspects of the Code Minier are up-to-date and reflect international practices. For example : - Foreign individuals and companies can undertake and lead mining activities; - The procedure according to which mining titles are granted is clearly established; - The time scale for such granting is reasonable; - The perimeter of exploration permits is granted according to the ore body. However, the Code Minier and its Texte d’application contain loopholes and deficiencies in their form, their content and their organisation. Such shortcomings impair the competitiveness of the CAR, in comparison with other similar countries. It would be relevant to review the Code Minier and the Application Decree in their entireties, so as to establish, reinforce and precise various elements, especially the following: - Reinforcing the right to remain in tenure; - Prioritising the right of access to the land for purpose of developing mineral resources; - Designing a procedure of appeal to organise the granting and renewal of mining titles; - Designing a procedure of conflict resolution; - Enhancing the definition of the rights conferred to mining titles holders. More specifically, the following elements should be either revised or modified: - Clear identification of the authority having competence over the analysis, reception and approbation of a mining title; - Identification of the criteria against which the competence, technical capacity and financial resources required for obtaining a mining title are evaluated; - Identification of and precisions on the level of discretionary power retained by the Minister in charge of Mines, especially with respect to granting mining titles; - Concerning the granting of mining titles, review the notion of ‘caution’ (guarantee) which is to be paid; - Establish standards concerning the level of confidentiality which is applied to any piece of documentation communicated to the State; - Identification of the various conditional provisions which may be included in the mining permits; - Clarification of practices related to the creation of protected areas; - Determination of the conditions governing the relationship between mining title holders and land-owners; - Determination of the time scale set for the processing of a demand of approbation of mining title transfer; - Identification of the rights and obligations related to fiduciary/trust accounts, and off shore accounts; - Elaboration of clear dispositions concerning the employment of local and foreign workforce; - Regulation of transfer-pricing issues; - Identification of the terms and conditions governing the commercialisation of mining products, so as to ensure that mining companies can obtain the best prices; - Adoption of dispositions concerning the importation and exportation by mining companies of materials, for research and mining purposes; - Adoption of dispositions concerning the storage and transport of materials on Central African territory; - Identification and elaboration of local communities development issues; - Clarification on obligations linked to environmental rehabilitation, and to the associated financial guaranty. 29 This section has been written by Jean Carrier, Legal Specialist (Mining Sector, Environment and Energy) of Stikeman Elliott LLP. OS00899/J01 68 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Sommaire exécutif Ce rapport porte sur l’analyse du Code Minier et de son Décret d’application dans le contexte d’activités minières de grande envergure et par conséquent sur les dispositions ayant un impact sur les titres miniers. Certains aspects du Code Minier sont d’actualité et reflètent la pratique internationale. Par exemple, les personnes et sociétés étrangères peuvent entreprendre et conduire des activités minières, la procédure d’attribution des titres miniers est clairement établie, les délais d’attribution sont raisonnables et le territoire d’un permis d’exploration est accordé en fonction du gisement. Toutefois, le Code Minier est son Décret d’application comportent d’importantes lacunes au niveau de la forme, du contenu et de l’organisation. De telles lacunes minent la compétitivité de la RCA vis-à-vis d’autres États comparables. Il y aurait lieu de revoir dans son ensemble le Code Minier et son Décret afin d’établir, de renforcer et de préciser divers éléments, notamment les éléments suivants : renforcer le droit de maintien dans les lieux; prioriser l’accès au territoire pour développer les ressources minérales; prévoir une procédure d’appel qui encadrerait l’attribution et le renouvellement des titres miniers; prévoir une procédure de règlement des différends; mieux définir les droit conférés au titulaire de titre minier. De manière plus spécifique, les éléments suivants devraient également faire l’objet d’une révision ou modification selon le cas : identifier clairement les autorités responsables de l’analyse, de la réception et de l’approbation d’un titre minier; identifier les critères ayant trait à la compétence, la capacité technique et les ressources financières nécessaires à l’obtention d’un titre minier; identifier et préciser le pouvoir discrétionnaire du Ministre en charge des Mines ainsi que son étendue quant à l’attribution des titres miniers; dans le cadre de l’attribution d’un titre minier, revoir la notion de caution qui doit être versée; établir des normes quant à la confidentialité de toute documentation transmise à l’État; identifier quels types de conditions peuvent être incluses dans les permis d’exploitation; clarifier les pratiques liées à l’établissement de zones protégées; établir les conditions relatives aux relations entre un titulaire de titre minier et un propriétaire foncier; identifier les délais prévus dans le traitement d’une demande d’approbation d’une transaction sur un titre minier; identifier les droits et obligations liés aux comptes en fiducie et aux comptes «off-shore»; élaborer des dispositions claires quant à l’emploi de la main d’œuvre locale et étrangère; prévoir une réglementation sur la question de transfert de prix; identifier les termes et conditions de vente du produit minier afin d’assurer aux sociétés minières les meilleurs prix possibles pour la vente; élaborer des dispositions quant à l’importation et l’exportation de matériaux dans le cadre de la recherche et de l’exploitation par les sociétés minières; élaborer des dispositions quant à l’entreposage et au transport des matériaux sur le territoire de la RCA; identifier et élaborer la question de développement des communautés locales; et OS00899/J01 69 November 2008 The World Bank Assessment of the Central African Republic Mining Sector clarifier les obligations liées à la réhabilitation environnementale et la garantie financière associée. Introduction Toute législation minière résulte nécessairement d’un compromis entre divers intérêts divergents. Ainsi, une législation minière typique est le résultat d’un équilibre entre les intérêts d’au moins quatre groupes dont les objectifs sont souvent conflictuels; les mineurs, ceux qui cherchent à explorer et développer les ressources minérales; les propriétaires des ressources minérales; le propriétaire du terrain sous lequel se trouvent les substances; et l’État qui représente les intérêts publics. On ne peut aussi ignorer les intérêts des communautés locales et ceux de la communauté internationale. De plus, il arrive souvent qu’au sein d’un même groupe, on trouve des objectifs conflictuels. Par exemple, les ministères chargés des mines, de l’environnement et des revenus ont des objectifs réglementaires très différents. Aussi, les priorités de ces groupes aux intérêts divergents sont susceptibles d’évoluer avec le temps. C’est pourquoi la direction que prendra un État quant à l’évolution règlementaire de son secteur minier lui est propre et demeure susceptible de changer avec ses besoins. Le préalable à toute bonne législation minière est une Politique Minière Nationale. Idéalement, cette Politique aura été le résultat d’un consensus au sein de divers ministères ayant un intérêt lié au développement des ressources minérales de l’État. La législation minière sera par la suite l’outil principal qui aura transformé cette Politique Minière en application règlementaire. L’analyse qui suit porte sur l’Ordonnance No 04-001 Portant Code Minier de la République Centrafricaine (ci-après « Code Minier ») et sur le Décret No 04-183 Fixant les Conditions d’Application de l’Ordonnance No 04-001 Portant Code Minier de la République Centrafricaine (ci-après « Décret ») dans le contexte d’activités minières de grande envergure. L’objectif de ce rapport étant de poser un diagnostic sur le Code Minier et son Décret en ce qui a trait aux activités minières de grande envergure, notre analyse portera sur les dispositions de cette Ordonnance et de son Décret ayant un impact sur les titres miniers seulement. Commentaires Généraux Le Code Minier et son Décret datent de 2004 et sont donc relativement récents. Sur certains aspects, notamment sur certains points touchant les titres miniers, le Code Minier reflète la pratique internationale. Ainsi, le Code Minier permet aux personnes et sociétés étrangères OS00899/J01 70 November 2008 The World Bank Assessment of the Central African Republic Mining Sector d’entreprendre ou de conduire des activités minières en République Centrafricaine (« RCA ») sans obliger une association ou incorporation locale. Les délais d’attribution d’un titre minier sont clairement établis et paraissent raisonnables. Point important pour tout investisseur, le territoire d’un permis d’exploration est accordé en fonction du gisement. En général, les lois minières incluant les Codes Miniers établissent les pouvoirs, les types de permis ainsi que les droits et obligations; leur réglementation quant à elle, adresse les questions de procédures, de divulgation et de rapport, et de mise en application. Même si certains aspects du Code Minier sont d’actualité et reflètent la pratique internationale, ce dernier comporte d’importantes lacunes tant au niveau de sa forme et son contenu que dans son organisation. Il en est de même de son Décret d’application. À titre d’exemple, les droits conférés aux permis de recherche et au permis d’exploitation ne sont pas regroupés sous un même chapitre du Code Minier mais se retrouvent à divers articles du Code Minier. Dans certains cas, le Code Minier réfère au texte d’application pour connaître les modalités sans que de telles modalités n’aient été élaborées au Décret. En voici quelques exemples : - Article 10 sur la caution; - Article 13 sur les fonctions, devoirs et obligations du conservateur; - Article 19 sur les modalités des délais pour les demandes d’attribution d’un titre minier; - Article 30 sur les sanctions en cas de violation du Code Minier ou de manquement grave aux conditions d’un titre minier; - Article 72 sur l’indemnisation ou paiement des taxes ou redevances. D’autres dispositions incorporent de nouvelles notions sans préciser davantage les modalités d’application ou renvoient sans plus à la législation en vigueur. En voici quelques exemples : - Article 56 sur la procédure d’enquête publique dans le cadre d’un permis d’exploitation; - Article 70 sur la juste indemnité à payer en cas de classement en zone protégée; - Article 71 sur le règlement d’un litige opposant le titulaire d’un titre minier au propriétaire du sol; - Article 78 sur les règles de sécurité et de santé publique; - Article 93 sur les exonérations des droits de douane. Par ailleurs, tout ce qui touche au développement/exploitation/commercialisation par une société minière semble vouloir faire l’objet d’une convention minière entre l’État et la société minière. Les dispositions prévues au Code Minier et au Décret concernent surtout l’exploitation artisanale et ne sont pas adaptées pour répondre aux besoins liés aux activités minières de grande envergure. OS00899/J01 71 November 2008 The World Bank Assessment of the Central African Republic Mining Sector De façon générale, le Code Minier et son Décret ne démontrent pas la priorité conférée, le cas échéant, au développement des ressources minières de l’État. Les droits conférés au titulaire de titres miniers n’établissent pas clairement une application préférentielle au territoire concerné. Le Code Minier nous paraît non pas comme un outil de développement pour l’exploitation minière de grande envergure, mais comme un outil visant à règlementer l’exploitation artisanale des pierres, métaux précieux et semi-précieux. Les dispositions visant les bureaux et centres d’achat, atelier de transformation, tailleries, bijouteries et fonderies ne sauraient s’appliquer de façon viable à des opérations minières de grande envergure. Dans son ensemble, le Code Minier contient certains éléments jugés importants par les sociétés minières pour attirer l’investissement. Des éléments tels le régime fiscal et douanier, la procédure d’octroi et la durée des titres miniers en sont des exemples. Toutefois, de tels éléments à eux seuls ne sont pas suffisants pour rendre le secteur minier de la RCA compétitif vis-à-vis d’autres États comparables. Il y aurait lieu d’établir, de renforcir et de préciser entre autres, les éléments suivants : le droit au maintien dans les lieux une fois le titre minier obtenu; prioriser l’accès au territoire pour le développement des ressources minérales; prévoir une procédure simple d’appel en cas de refus d’attribution ou de renouvellement d’un titre minier; prévoir une procédure simple de règlement des différends; préciser, clarifier et regrouper sous un même chapitre les droits conférés au titulaire de titre minier. Plusieurs autres éléments discutés dans les commentaires spécifiques ci-après devraient aussi être corrigés ou mis en place selon le cas. Ainsi, une révision complète du Code Minier et du Décret qui tiendrait compte de ces différents éléments serait souhaitable si la RCA désire accroître la compétitivité de son secteur minier. Il revient à l’État d’élaborer une Politique Minière Nationale claire qui établit la priorité à donner à l’exploitation de ses ressources minérales sur son territoire. Afin de mettre en œuvre une telle Politique, le Code Minier devrait être revu dans son ensemble pour y reprendre les objectifs recherchés et les priorités conférées au secteur minier dans le développement économique et social du pays. Actuellement, le Code Miner ne priorise aucunement les activités minières par rapport aux autres champs d’activités économiques. Par conséquent, le risque de conflit entre diverses législations applicables paraît évident pour tout investisseur qui désire entreprendre des activités minières. Ceci et certains autres facteurs liés notamment au régime fiscal et douanier discuté séparément, incitera donc tout investisseur à demander un régime particulier dérogatoire au droit commun qui lui sera applicable par convention. Conditions d’accès aux titres miniers En vertu du Code Minier, les titres miniers suivants sont accessibles aux investisseurs étrangers: OS00899/J01 72 November 2008 The World Bank Assessment of the Central African Republic Mining Sector - Le permis de reconnaissance; - Le permis de recherche; et - Le permis d’exploitation. Les autorisations et permis suivants ne sont accessibles qu’aux personnes de nationalité centrafricaine : - L’autorisation de prospection; - L’autorisation d’exploitation artisanale; et - Le permis spécial d’exploration (accessible qu’aux coopératives minières agrées). Le Décret (Articles 7 et 10) prévoit le type d’information à transmettre au Ministère chargé des mines pour toutes les demandes de titres miniers et réfère à la fiche annexée au Décret. Puisque cette fiche n’est pas jointe au Décret, nous ne pouvons nous prononcer sur son contenu. Les informations relatives à l’identité du destinataire de la demande de permis et l’endroit où doit être déposé la demande sont clairement établis au Décret (Article 7). Commentaires : Ceci permet donc au demandeur de bien saisir la procédure à suivre et de connaître au préalable les informations qui seront requises pour l’obtention des permis. Toutefois, les sommes devant être versées à titre de droits requis pour l’obtention des permis ne sont pas identifiées. Il y aurait lieu de référer au texte de loi qui établit de tels droits. Dans le cadre d’une demande d’attribution ou de renouvellement de permis de recherche, le demandeur doit entre autre fournir un programme d’échelonnement des travaux pendant la période de validité du permis et un engagement écrit d’exécuter les travaux prévus dans le programme (Article 25(2)(b) et (e) du Décret). Selon le Code Minier (Articles 38 et 39), la demande d’attribution ou de renouvellement du permis de recherche doit être adressée à l’Administration des Mines (ce terme n’est pas défini) et le permis de recherche est attribué par décret sur proposition du Ministre. Selon le Décret, la demande d’attribution ou de renouvellement de permis de recherche doit être déposée auprès du conservateur et adressée au Ministre en charge des Mines. Commentaires : De façon générale, aux fins d’identifier clairement les autorités responsables de l’analyse, de la réception et de l’approbation d’un titre minier, les références dans le Code Minier aux autorités responsables devraient concorder avec celles retrouvées au Décret. Quant à savoir qui peut demander un titre minier, le Code Minier (Article 5) précise que les personnes physiques ou morales de toute nationalité peuvent entreprendre ou conduire une activité minière après avoir obtenu un titre minier. Sont toutefois exclues les personnes physiques non solvables ainsi que les personnes morales en état de faillite, de liquidation ou de règlement judiciaire. OS00899/J01 73 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Commentaires : Il n’y a aucune restriction quant à la capacité ou la compétence d’une personne physique, ni quant aux compétences et capacités d’une personne morale. Il serait souhaitable que des critères ayant trait à la compétence, la capacité technique et les ressources financières adéquates soient prévus au Code Minier et précisés au Décret pour l’obtention de titres miniers. Le Décret (Article 25(2)) se contente d’indiquer que parmi les pièces requises, le demandeur d’un permis de recherche doit fournir une indication des ressources financières disponibles pour entreprendre les travaux. De plus, il devrait être clairement précisé que les personnes mineures ne peuvent détenir de titres miniers. Le Code Minier (Articles 18 à 21) établit la procédure à suivre et énumère la documentation requise ainsi que l’information nécessaire pour l’attribution ou le renouvellement des titres miniers. Il réfère aussi aux modalités fixées par les textes d’application. Commentaires : La procédure établie au Code Minier laisse peu de place à la discrétion de la part de l’Administration dans l’attribution des titres miniers. Cependant, le Décret (Article 41) permet au Ministre en charge des Mines de demander des informations complémentaires ou d’exiger des amendements, sans plus de précision. Il y aurait lieu de préciser ce pouvoir discrétionnaire, ainsi que son étendue de façon à restreindre son application. Le Code Minier (Article 10) prévoit l’obligation de constituer une caution comme condition d’attribution d’un permis de recherche ou d’exploitation et réfère au Décret pour en connaître les modalités. Commentaires : Le Décret ne prévoit aucune modalité de caution. Il y aurait lieu de préciser de quel type de caution il s’agit, le but recherché par cette caution, et le montant requis. Il est à noter que la plupart des États qui avaient introduit ces types de garantie de performance dans leur législation minière les ont maintenant éliminés. Il est en effet préférable pour l’État d’avoir recours à des dispositions pénales et à la menace d’une suspension des permis miniers pour assurer le respect des obligations qui incombent à une société minière. Les garanties financières peuvent être perçues comme un droit à payer à l’État par les sociétés minières pour ne pas respecter leurs obligations. Le Code Minier (Article 21) prévoit les délais imposés à l’administration pour traiter les demandes de titres miniers. Il est aussi prévu que le titre minier est réputé accordé s’il n’est pas traité dans les délais fixés. Commentaires : Ces délais sont raisonnables, d’autant plus que lors du dépôt de la demande, il est d’ores et déjà déterminé par le conservateur si le terrain visé est disponible. Toutefois, l’autorité qui approuve ou refuse la demande n’est pas toujours clairement OS00899/J01 74 November 2008 The World Bank Assessment of the Central African Republic Mining Sector identifiée. Finalement, le droit d’appel en cas de refus d’émettre un titre minier n’est pas clairement énoncé. Une procédure administrative à cette fin devrait être prévue, notamment pour le permis de recherche et le permis d’exploitation. Droits et obligations des titres miniers En vertu de l’Article 39 du Code Minier, le permis de recherche confère à son titulaire le droit d’exercer les activités prévues au titre (minier). Pour connaître toutefois l’étendue de tels droits, il faut référer au Décret (Article 27), lequel confirme le droit d’entrer et d’occuper la superficie du permis; d’extraire, d’enlever et de disposer des rochers, de la terre, du sol ou substance minérale; de prendre et utiliser l’eau pour ses besoins sous réserve des lois en vigueur. L’Article 72 du Code Minier quant à lui, précise que l’occupation du sol donne droit à l’indemnisation au propriétaire foncier et que cette occupation donne droit de couper le bois et d’utiliser les chutes d’eau à l’intérieur du périmètre du titre minier. Commentaires : Il y aurait lieu de réconcilier ces différents articles de manière à ce que les droits conférés soient regroupés en un seul article et qu’on précise les restrictions applicables en vertu d’autres législations le cas échéant. Il est primordial pour le titulaire d’un titre minier que ses droits soient clairement établis et que l’exercice de tels droits ne dépende pas de l’application de d’autres législations L’Article 59 du Code Minier prévoit que les droits et obligations du permis d’exploitation sont fixés par Décret. Le Décret (Article 40) prévoit le droit d’entrer et d’occuper le terrain, d’y extraire les minéraux et mener des opérations et entreprendre des travaux; construire une usine, traiter toutes les substances et ériger toutes autres structures nécessaires pour les haldes et barrages de résidus; enlever et prendre les rochers, la terre et les minéraux; prendre et utiliser l’eau sous réserve des lois en vigueur; et mener toute autre action appropriée. Commentaires : Il y aurait lieu de réconcilier les droit conférés à l’Article 40 du Décret avec ceux énumérés à l’Article 72 du Code Minier dans un seul article. Il est primordial pour le titulaire d’un titre minier que ses droits soient clairement établis et que l’exercice de tels droits ne dépende pas de l’application de d’autres législations. Le titulaire du permis de recherche doit remettre différents rapports (rapport de travaux initial, rapports trimestriels et rapport annuel) au Ministre en charge des Mines et à la Direction générale des mines, afin de conserver son titre valide (Code Minier (Article 42) et Décret (Article 29)). Le Code Minier (Article 130) indique que les renseignements et OS00899/J01 75 November 2008 The World Bank Assessment of the Central African Republic Mining Sector documents sur le sous-sol et les substances minérales communiqués à l’Administration des Mines peuvent, à la demande de leurs auteurs être déclarés confidentiels. Commentaires : L’investisseur est préoccupé par la confidentialité attribuée aux rapports qu’il transmet à l’État tout au long de la période de recherche. La notion de confidentialité, telle qu’établie par le Code Minier, n’est pas automatique mais relève plutôt d’une demande spécifique faite par le titulaire du titre minier. Il y aurait lieu d’établir des normes quant à la confidentialité de toute documentation transmise à l’État dans le cadre du permis de reconnaissance, du permis de recherche et du permis d’exploitation afin de rassurer les investisseurs. Le Code Minier ne prévoit aucune obligation pour le titulaire d’un permis d’exploitation de transmettre des rapports aux autorités chargées des mines. Par ailleurs, le Code Minier (Article 57) prévoit que le permis d’exploitation peut faire l’objet de conditions. Commentaires : Il est dans l’intérêt de l’État que certaines informations telle que celles sur la production mensuelle et la valeur soient déclarées pour fins de détermination des taxes, redevances etc. Il en est de même en ce qui concerne le niveau d’emploi et les accidents. Néanmoins, l’État devrait pouvoir garantir la confidentialité des informations sensibles fournies par les sociétés minières. Finalement, le Code Minier devrait prévoir quels types de conditions peuvent être incluses dans le permis d’exploitation. Le pouvoir conféré à l’autorité d’imposer toute condition spéciale et unique à tout demandeur de permis d’exploitation est vu négativement par tout investisseur puisqu’il ne peut prévoir avec certitude les conditions d’application. De plus, l’utilité d’un tel pouvoir est remise en question. Le Code Minier (Article 70) prévoit qu’une juste indemnité sera versée au titulaire d’un titre minier ayant subi un préjudice du fait de l’établissement d’une zone de protection. Commentaires : Le Décret ne discute aucunement d’une telle indemnité. Il y aurait lieu de déterminer par qui et en vertu de quoi une telle indemnité est établie. Les pratiques liées à l’établissement de zones protégées laissent entendre que priorité n’est pas donnée à l’exploitation minière en RCA. Le Code Minier et le Décret sont très vagues quant au contexte entourant l’attribution de telles zones protégées. De telles mesures peuvent décourager un investisseur étranger. Le Code Minier (Article 71) prévoit que tout litige opposant le titulaire d’un titre minier au propriétaire du sol sera réglé en vertu des lois en vigueur. De plus, le Code Minier (Article 72) indique que tout titulaire de titre minier ne peut accéder ou occuper la zone sur laquelle porte son titre minier que s’il a conclu un accord avec le propriétaire foncier quant aux modalités de l’indemnisation et que cet accord ait été enregistré. OS00899/J01 76 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Commentaires : Le Code Minier n’accorde pas clairement la priorité au titulaire d’un titre minier après avoir accordé une juste indemnité. Il n’y a aucune disposition prévue quant à la résolution de litige entre un titulaire de titre minier et un propriétaire foncier dans le Décret. Il y aurait lieu de déterminer en vertu de quelles lois, par qui et comment se déroulera la résolution d’un litige entre un titulaire de titre minier et un propriétaire foncier. De plus, il y aurait lieu de préciser à quel registre et par quelle autorité sera enregistré tout accord conclu entre un propriétaire foncier et un titulaire de titre minier. En vertu du Code Minier (Articles 42 et 43) et du Décret (Article 28), des dépenses minimales sont exigées annuellement dans le cadre de la recherche de substances. Et dans le cadre d’un renouvellement de permis, le titulaire du permis de recherche doit renoncer à une superficie comprenant au moins la moitié du périmètre détenu pendant la durée antérieure. Lorsqu’un périmètre de recherche a été réduit à moins de 62km2, le titulaire ne doit plus faire d’autres renonciations. Commentaires : Les dépenses minimales correspondant aux activités indiquées dans le programme des travaux ne doivent pas être inférieures à 100,000 F CFA/km2 par année. Pendant la validité du permis de recherche, ces dépenses approuvées augmentent de 50% chaque année. Cette mesure correspond aux pratiques internationales. Les phases de développement et d’exploitation d’une mine sont très peu détaillées dans le Code Minier et dans le Décret. Il n’y a pas de disposition claire quant aux délais de construction, permis requis auprès de divers paliers du gouvernement, approvisionnement local, durée de la période de développement, production commerciale, rapports, construction d’infrastructures. Commentaires : Les dispositions du Code Minier et du Décret visent surtout l’exploitation artisanale. Tout ce qui touche au développement/exploitation par une société minière semble vouloir faire l’objet d’une convention minière entre l’État et la société minière. Le Code Minier devrait être plus spécifique sur ces sujets. Durée et stabilité du terme En vertu du Code Minier - Le permis de reconnaissance est valable pour 1 an, renouvelable une seule fois pour la même période de temps30; 30 À l’Article 86 du Code Minier, il est indiqué que le permis de reconnaissance est renouvelable deux fois contrairement à ce qui est indiqué à l’Article 37 du même Code Minier. Il y aurait lieu de déterminer si le permis de reconnaissance est effectivement renouvelable une seule fois ou deux fois. OS00899/J01 77 November 2008 The World Bank Assessment of the Central African Republic Mining Sector - Le permis de recherche est valable pour 3 ans, renouvelable deux fois pour la même période de temps; et - La validité du permis d’exploitation est pour une durée égale à la vie de la mine, mais ne peut dépasser 25 ans pour une première période, renouvelable sur demande du titulaire pour des périodes n’excédant pas 10 ans. Commentaires : Ces délais sont raisonnables et correspondent à la pratique internationale. Tout titre minier peut être annulé en cas de violation au Code Minier ou de manquement grave aux conditions du titre minier (Article 30 Code Minier). Le Décret prévoit qu’avant l’annulation, le Directeur Général des Mines doit mettre en demeure le titulaire de remédier au manquement dans un délai de trente (30) jours. Le Ministre peut procéder à l’annulation du titre si aucune raison valable n’est donnée par le titulaire justifiant son manquement. L’annulation entraîne la perte des droits conférés par le titre à compter de la date de l’enregistrement de la décision. Cependant, le titulaire du titre objet du retrait demeure tenu de tout engagement qui en résulte (tel que décrit à l’Article 17 du Décret). Commentaires : Ce que peut constituer une raison valable n’est pas précisé au Code Minier ni au Décret. De plus, aucune procédure d’appel d’une décision entourant l’extinction d’un titre minier ou dans le cadre d’une violation d’une disposition ou d’un manquement aux conditions du titre minier n’est prévue au Code Minier ou au Décret. Il y aurait lieu d’élaborer une procédure d’appel d’une décision qui annule un titre minier. Il n’y a pas de dispositions au Code Minier ni au Décret sur les modalités de règlement d’un différend entre demandeurs pour un même périmètre minier. Quel demandeur a priorité et quelle autorité est responsable de trancher lors d’une telle situation, n’est pas prévu. De plus, il n’y a aucune disposition portant sur la résolution de conflit pour l’usage d’un terrain visé par un titre minier. Commentaires : Il y aurait lieu d’établir une procédure claire ainsi que de déterminer quelle est l’autorité responsable quant à la résolution de différends impliquant un permis de recherche ou un permis d’exploitation. En vertu de l’Article 22 du Code Minier, tout droit portant sur le permis de recherche ou le permis d’exploitation peut donner lieu à toute forme de transaction, notamment, la cession, la transmission, le nantissement, l’hypothèque, etc. Les titres miniers peuvent également faire l’objet de saisie. En vertu de l’Article 15 du Décret, toute transaction doit être approuvée par le Ministre en charge des mines sur rapport du Directeur général des mines. OS00899/J01 78 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Commentaires : Le Code Minier (Article 23) prévoit que toute transaction sur un droit relatif à un titre minier ne peut prendre effet qu’après que les conditions d’admissibilité prévues aux textes d’application soient remplies. Le Décret énumère une série de quatre conditions qui semblent raisonnables. Cependant, l’approbation d’une transaction sur un titre minier est sujette à la préparation d’un rapport par le Directeur Général des Mines sur la base duquel sera approuvée la transaction par le Ministre en charge des Mines. La rapidité avec laquelle un transfert (transaction sur un titre minier) sera effectué dépend en grande partie du pouvoir discrétionnaire qu’exercera la personne en charge d’examiner le dossier (dans le cas présent, le Directeur Général des Mines). Il y aurait lieu de prévoir des délais dans le traitement d’une demande d’approbation d’une transaction sur un titre minier. Enfin, bien que le Code renvoie au Décret en ce qui concerne les conditions de saisie, le Décret reste muet sur ce point. Il y aurait lieu d’établir clairement dans quelles circonstances une saisie peut être effectuée sur un titre minier. Taux de change Le Code Minier (Article 95) confirme le droit pour toute personne physique ou morale non résidente de transférer librement les revenus de toute nature provenant des capitaux investis ou le montant des capitaux investis en cas de cessation d’activité. Sous réserve du respect des lois et règlements régissant les opérations bancaires de change en vigueur en RCA, ce droit inclus la liberté de transférer hors de la RCA les fonds relatifs aux paiements pour fournitures et prestations. Commentaires : Cette garantie devrait aussi s’appliquer au personnel étranger, résidant en RCA, employé par les sociétés minières étrangères, sous réserve d’acquitter leurs impôts et autres taxes applicables. Répartition des bénéfices et dividendes Le Code Minier (Article 91) discute très sommairement du régime fiscal applicable aux bénéfices en phase de recherche. Commentaires : Le Code Minier devrait contenir l’ensemble du régime fiscal et douanier applicable aux sociétés minières de grande envergure et éviter de référer à d’autres législations. Le contenu du régime fiscal et douanier applicable en vertu du Code Minier fera l’objet de discussions dans l’analyse de Monsieur James Otto. De façon générale, un régime fiscal minier reflétant une politique minière favorable au développement des ressources minières d’un État ne devrait pas taxer les bénéfices additionnels, devrait éviter les exonérations sur les bénéfices au stade de recherche (il est exceptionnel que des bénéfices OS00899/J01 79 November 2008 The World Bank Assessment of the Central African Republic Mining Sector soient déclarés en phase de recherche), et devrait rester compétitif au niveau de l’impôt applicable aux bénéfices. La participation obligatoire de l’État au capital action d’une société minière devrait être évitée puisqu’il n’est pas du rôle de l’État d’exploiter des mines. Finalement, l’État devrait pouvoir garantir le rapatriement des bénéfices et dividendes des sociétés minières étrangères sans restriction, une fois les impôts acquittés. Comptes en fiducie et comptes « off-shore » Le Code Minier et son Décret sont muets quant aux droits et obligations reliés aux comptes en fiducie et aux comptes « off-shore ». Commentaires : Toute société minière étrangère doit pouvoir établir des comptes bancaires en RCA et à l’étranger et convertir librement des valeurs en devises étrangères. Ceci lui est nécessaire pour payer ses fournisseurs étrangers et pour le service de la dette. De telles dispositions devraient être précisées au Code Minier. Normes comptables Le Code Minier (Article 94) prévoit que la comptabilité des sociétés minières doit être conforme au plan comptable en vigueur en RCA. Commentaires : En vertu du droit OHADA applicable à la RCA, le régime applicable serait celui établi en vertu de l’Acte uniforme relatif à l’organisation et l’harmonisation de la comptabilité des entreprises. Main d’œuvre locale et étrangère Le Code Minier reste silencieux quant à tout ce qui entoure l’embauche de main d’œuvre locale et la présence de main d’œuvre étrangère en zone minière. Le Décret (Article 90) prévoit que l’entrée et le séjour de ressortissants étrangers tels que des assistants techniques résidant dans la zone minière ou en mission est permis en RCA. Commentaires : Il y aurait lieu d’élaborer des dispositions claires quant à l’emploi du personnel dans le cadre d’activités minières par des investisseurs étrangers. Par exemple, le Code Minier devrait prévoir les conditions liées à la préférence d’embauche de la main d’œuvre locale et de cadres centrafricains ainsi que l’emploi du personnel expatrié détenant une spécialité, des compétences ou des connaissances particulières. En ce qui a trait à l’emploi de personnel expatrié, le Code Minier devrait préciser le type d’emplois pouvant être OS00899/J01 80 November 2008 The World Bank Assessment of the Central African Republic Mining Sector comblé par le personnel expatrié et élaborer quant à l’attribution des autorisations requises pour un séjour en RCA, incluant les visas d’entrée et de sortie, les permis de travail ou tout autre permis requis par la loi applicable ainsi que les mesures fiscales applicables au personnel expatrié. Il y aurait également lieu de spécifier à quelle loi la société minière doit se conformer à l’égard des normes de travail. États financiers Le Code Minier et son Décret sont muets en ce qui concerne les états financiers des entreprises minières. Commentaires : Il est alors présumé que c’est le droit commun qui s’applique, en l’occurrence le droit OHADA. Transfert de prix Le Code Minier et son Décret sont muets sur la question du transfert de prix. Commentaires : La fixation de prix préoccupe tous les gouvernements puisqu’une telle pratique est susceptible d’affecter les calculs fiscaux et réduire les revenus de l’État. Cette pratique peut affecter à la fois le paiement de redevances et les impôts sur le revenu. Les États se préoccupent particulièrement des prix rapportés comme étant payés aux sociétés minières pour la production vendue et plus particulièrement quand la production est vendue à une société affiliée à un prix inférieur au prix qui serait offert à une société ou à une partie non-affiliée. Une réglementation fiscale devrait être rédigée et adoptée et devrait contenir entre autres, un langage général empêchant la fixation de prix; des exigences quant aux ventes et achats par le détenteur d’un permis d’exploitation pour que de telles ventes ou achats soient effectués de manière concurrentielle; une définition de ce qui constitue une présomption que de telles ventes, achats ou coûts n’ont pas été effectués de manière concurrentielle; la manière par laquelle le Ministre pourra ajuster ou rejeter certains coûts à des fins d’imposition; des amendes ou toute autre disposition nécessaire afin d’éviter cette pratique. Garanties financières Le Code Minier (Article 10) prévoit que toute attribution d’un permis de recherche ou d’exploitation est subordonnée à la constitution d’une caution dont le montant et les modalités sont fixés par les textes d’application du Code Minier. Le Décret est silencieux quant à la caution qui doit être versée par tout investisseur dans le cadre d’une attribution de OS00899/J01 81 November 2008 The World Bank Assessment of the Central African Republic Mining Sector permis de recherche ou d’exploitation. Il y aurait lieu de préciser de quel type de caution il s’agit, le but recherché par cette caution, et le montant requis. Commentaires : Il est important de noter qu’il n’est plus de pratique internationale d’exiger une garantie financière (incluant une caution) pour garantir l’exécution des obligations liées à un titre minier. Il est à noter que la plupart des États qui avaient introduit ces types de garantie de performance dans leur législation minière, les ont maintenant éliminés. L’État devrait plutôt avoir recours à des dispositions pénales qui devraient être prévues au Code Minier afin de s’assurer du respect des obligations liées aux titres miniers. Commercialisation du produit Le Code Minier (Article 37) prévoit l’établissement d’un plan relatif à la commercialisation des produits comprenant les points de vente, le prix et une indication quant à la faisabilité économique ainsi que le calendrier prévu. Commentaires : Un des objectifs recherchés par l’État devrait être de maximiser l’exploitation de ses substances minérales par les sociétés minières. De plus, l’État devrait se préoccuper des termes et conditions des ventes du produit minier afin de s’assurer que les sociétés minières obtiennent les meilleurs prix possibles pour la vente de tel produit et ce, de manière à maximiser les bénéfices de ces sociétés. C’est en effet en maximisant les bénéfices des sociétés minières que les recettes de l’État vont s’accroître. En conséquence, les éléments suivants quant à la vente du produit minier et aux conditions de transfert de prix entre sociétés affiliées devraient être prévus au Code Minier : prévoir un engagement des sociétés minières à se départir du produit minier au prix du marché le plus élevé commercialement atteignable et de négocier des termes et conditions de vente comparables à ceux du marché international; prévoir que toute vente de produit minier à une société affiliée devrait être conclue à des prix basés sur des ventes similaires conclues entre parties non affiliées et aux mêmes conditions d’escompte et de commission prévalant sur les marchés internationaux; prévoir l’obligation de notifier préalablement l’État de toute vente de produits miniers d’une société minière à une société affiliée; prévoir un mécanisme de vérification des ventes du produit minier, un mécanisme d’ajustement, ainsi qu’une procédure de contestation, ceci afin d’éviter une réduction des revenus des sociétés minières et par conséquent les revenus potentiels pour l’État. OS00899/J01 82 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Importation et exportation À l’exception des dispositions fiscales et douanières (Article 90 du Code Minier pour le permis de recherche et Article 92 du Code Minier pour le permis d’exploitation) le Code Minier et son Décret sont silencieux sur la question d’importation et d’exportation. Commentaires : Pour les fins de recherche et d’exploitation, les sociétés minières requièrent divers matériaux, équipements et services qui ne devraient pas faire l’objet de restrictions d’importation et d’exportation, plus particulièrement si de tels matériaux, équipements et services ne sont pas disponibles en RCA. De plus, ces sociétés devraient aussi pouvoir exporter des spécimens ou échantillons dans le cadre du permis de recherche. Quant aux dispositions fiscales et douanières du Code Minier, elles devraient permettre une plus grande flexibilité dans la détermination de matériaux, équipements et services requis en phase de recherche, de développement et d’exploitation reliée aux opérations minières de grande envergure. Afin de faciliter l’importation et l’exportation de matériaux et équipements, les parties devraient avoir recours à une liste minière détaillée qui deviendrait ainsi assujettie au régime d’allègement fiscal et douanier applicable. Entreposage et transport des matériaux (bruts/traités/finis) Les seules références faites à l’égard de transport ou d’entreposage de matériaux se trouvent à l’Article 45 du Décret sur les titres de carrières et à l’Article 79 du Code Minier concernant les règles de sécurité et de santé publique applicables au transport et à l’entreposage de substances minérales et dangereuses. Pour ces dernières, le texte réfère sans plus à la réglementation en vigueur. Commentaires : Le Code Minier devrait prévoir le droit de tout détenteur d’un titre minier d’entreposer et de transporter sur le territoire de la RCA tous les matériaux nécessaires à ses activités minières sans autorisation particulière. De plus, le détenteur d’un permis d’exploitation devrait posséder le droit d’entreposer et de transporter tout produit minier sans autorisation particulière. Développement des communautés locales Le Code Minier et son Décret sont muets sur la question de développement des communautés locales, à l’exception de l’Article 87 du Code Minier qui prévoit qu’un pourcentage des redevances superficiaires doit être versé à la collectivité locale. OS00899/J01 83 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Commentaires : La plupart des nouvelles législations minières visent à promouvoir le développement régional et requièrent des sociétés minières qu’elles négocient directement avec les communautés locales concernées une convention de développement des communautés locales. Aux fins de l’élaboration d’une convention de développement des communautés locales ou de dispositions au Code Minier, il est important d’identifier clairement les communautés locales visées (proximité immédiate du périmètre définit au permis d’exploitation) et les obligations de la société minière à l’égard de ces dernières. De telles obligations peuvent comprendre par exemple, des engagements de nature économique ou sociale ou l’implantation d’activités ou de ressources (médicales, scolaires, etc.). Dans le cas où, la société est incapable de déterminer quelle communauté répond au critère de communauté locale, il y aurait lieu de prévoir un mécanisme permettant de la déterminer. Protection de l’environnement et garanties financières La demande d’application pour l’obtention d’un permis d’exploitation prévoit la préparation d’une étude de faisabilité comprenant la réalisation d’une étude d’impact sur l’environnement et d’un programme de protection et de gestion de l’environnement, incluant un schéma de réhabilitation des sites exploités (Article 83 du Code Minier et Articles 37, 52 et 54 du Décret). La demande de permis d’exploitation et les études y afférent doivent être soumises au Ministre en charge des mines et déposées auprès du conservateur. En vertu de l’Article 41(3) du Décret, les propositions de l’étude de faisabilité acceptées et approuvées par le Ministre en charge des mines deviennent définitives. Commentaires : De façon générale, tout ce qui concerne la protection de l’environnement dans le Code Minier et dans le Décret semble être adapté à ce que l’on observe présentement dans la pratique internationale. Le Décret (Article 52) indique que la forme et le contenu de l’étude d’impact environnemental sont réglés par le Ministère en charge de l’environnement en commun accord avec le Ministère en charge des mines. En vertu du Décret (Article 54), un plan de gestion de l’environnement pour la période de construction, de développement, d’exploitation et de fermeture du site devra être approuvé par l’Administration de l’environnement. Une fois approuvé, le plan de gestion environnementale deviendra une condition d’attribution d’un permis d’exploitation. En vertu du Décret (Article 58), la société minière a l’obligation d’ouvrir un compte à terme de réhabilitation de l’environnement dans une banque reconnue par l’Administration (le Décret ne spécifie pas quelle autorité est concernée, i.e. Administration de l’Environnement ou Administration des Mines). OS00899/J01 84 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Commentaires : Il y a nécessité pour la société minière de conclure une convention dans le cadre des obligations liées à la réhabilitation environnementale, notamment, l’obligation d’ouvrir un compte à terme de réhabilitation dont les modalités doivent être détaillées dans ladite convention. Les dispositions du Code Minier et du Décret ne sont pas assez détaillées pour que la société minière soit au fait de ses droits et obligations sur la question de réhabilitation environnementale. Le Code Minier devrait être plus flexible quant aux types de garantie financière acceptable pour assurer la réhabilitation de l’environnement. Par exemple, la garantie financière pourrait prendre l’une ou plusieurs des formes suivantes : compte de mise en main tierce, certificat de dépôt, lettre de crédit irrévocable, garantie de bonne exécution, assurances, compte en fiducie, garantie offerte par un tiers ayant les actifs nécessaires ou tout autre moyen similaire autre qu’une provision comptable. OS00899/J01 85 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 4.2 Legal framework of artisanal and small-scale mining activities31 After CAR became independent in 1960, a new set of legislation was adopted, including a . Code Minier, strongly inspired by the French Code Minier (Code Minier, Law N° 61/208, April 11, 1961). A further new Code Minier, adopted in 1979 under the rule of the then- . emperor former President Bokassa (Imperial Ordinance N° 79/016, February 6, 1979), was short-lived, and the 1961 Code Minier remained applicable until 2004. During the 90s, the GoCAR identified the need to adopt a new Code Minier, in order to better regulate and monitor mining activities on its territory, especially diamond mining, and to promote transparency. With the technical and financial support of the World Bank the latest Code . Minier was published in 2004 (Ordinance N° 04/001, February 1, 2004), and shortly afterwards it’s Application Text (Decree N° 04/183, June 15, 2004)32. These two texts . constitute the basis of CAR’s legal framework of ASM. However, it is unclear whether specific regulations such as the 1983 Ordinance regulating gold and diamonds exploitation are still relevant.33 The GoCAR must try to develop strong incentives It is evident that the largely informal nature for these miners and labourers to participate in the of ASM has kept it apart from the formal ASM sector and answer the fundamental mainstream of economic development, and question "What’s in it for me…?� has to this date prevented it from becoming a recognised economic activity. The inability to effectively monitor and control the ASM sector has further been detrimental to the national economy and mineral resources of CAR. The ASM sector has particularly not been able to fully contribute to government revenue, nor has it been able to attract investment. Notwithstanding the need to improve revenue transparency and governance, it is imperative that the focus of any ASM legal reform should be to alleviate poverty by providing financial betterment and empowerment to artisanal miners, labourers and their communities, and thereby fostering the full integration of ASM into the formal rural economy. The artisanal miners and labourers must also act within a conducive legal and regulatory framework, with due regard to health, safety and the environment. It would be a considerable incentive for artisanal miners and labourers to see others who have benefited financially from working within the legislation, and who have been aided by the GoCAR to do so. Such obvious and 31 This section has been written by Wardell Armstrong. 32 The Code and its Application Text are the Civil Law equivalent of the Common Law Act and its Regulations. The CAR Code Minier has been published by “Ordonnance No. 04/2001 du 1er février 2004, portant Code Minier de la République Centrafricaine� and the Application Text by “Décret No. 04/183 du 15 juin 2004, fixant les conditions d’application de l’ordonnance No. 04/2001 du 1er février 2004, portant Code Minier de la République Centrafricaine“. 33 Ordonnance No. 83.024 du 15 mars 1983 fixant les conditions de possession et de détention et réglementant l’exploitation et le commerce de l’or et des diamants bruts. OS00899/J01 86 November 2008 The World Bank Assessment of the Central African Republic Mining Sector visible improvements should then act as a catalyst to other miners and labourers who will also wish to improve their financial position. For many artisanal miners and labourers Artisanal mining: any mining activity consisting in the extraction and concentration of mineral substances registering simply to obtain a piece of paper through the use of manual and slightly mechanised is a bureaucratic and expensive process, methods and processes. costly in both time and money and offering limited if any advantages. This attitude Artisanal miner: person of Central African nationality conducting mining operations on his own behalf implies that they see more disadvantages using manual or slightly mechanised methods and (including increased taxation) from working processes. within the formal sector, or see little difference between being legal or illegal. Article 1, v and xix of CAR Code Minier Indeed many miners and labourers may prefer to remain informal, as this gives them access to the most convenient buying agents and maintains flexibility in shifting from one mining site to another. The Minister of Mines, Energy and Hydraulics (Ministère des Mines, de l’Énergie et de l’Hydraulique), hereafter referred to as Ministry of Mines, must convince them otherwise, and interventions may need to adopt a deliberate emphasis on pragmatic and enforceable guidelines that consider the multitude of cross-sectoral issues rather than pure mining legalisation and its dogmatic enforced control. Incidentally, there is also an urgent need to use the Ministry of Mines as a vehicle to convince the GoCAR to commit to assisting with other problems like access to water on mining sites, or facilitate linkages with mineral buyers and private sector mining companies in order to encourage the sector to formalise. Based on an assessment of the CAR Code Minier and its Application Text some of the positive aspects of the current CAR Mining legislation with respect to ASM include: - The limitation of artisanal mining activities to CAR nationals34, which helps support the development of the local industry and poverty alleviation. - ASM exploration and exploitation activities are separated and registered through the issuing of a reconnaissance authorisation (autorisation de prospection)35 and of an artisanal mining authorisation (autorisation d’exploitation artisanale)36 respectively and there is a clear statement entitling the holder to convert from exploration to exploitation.37 - ASM authorisation can undergo any type of transaction (inter alia cession, transfer, security, hypothecation, pledge and farm out/in) pursuant to the terms and conditions 34 Article 1 v of the Code Minier, and Article 31 of the Application Text. 35 Article 35 of the Code Minier. 36 Articles 47 to 51 of the Code Minier. 37 Article 47 al. 1 and al. 2 of the Code Minier. OS00899/J01 87 November 2008 The World Bank Assessment of the Central African Republic Mining Sector in the Application Text.38 Reconnaissance authorisation cannot.39 The ability to transfer and mortgage mineral rights is significant because it increases liquidity and provides a virtual financial backup for artisanal miners to fund project development. However, this could as well encourage speculation on mineral titles. - ASM authorisations shall be recorded in a Register of mineral titles40, although the format and location of this Register needs to be clearly stated. - Article 12 of the Code Minier reaffirms the need to comply with international treaties on child labour, and Article 153 provides for severe sanctions (fine and imprisonment). - There is a clear time-bound statement (30 days) to register for a demarcated ASM authorisation within a reconnaissance authorisation, after an artisanal exploitation perimeter has been marked off41. - The clause allowing only one renewal for a reconnaissance authorisation42 is ideal and should deter unnecessary retention, although the tenure validity should possibly be increased to two years. Registered mining cooperative: authorised The Code Minier introduces the concept of group of at least ten registered artisanal special mining permit43 (permis spécial miners forming an association so as to d’exploitation) to encourage the formation of enable them to benefit from mineral permits cooperatives within rural communities, and the named special mining permits. exclusions of buyers-collectors, public sector Article 1, xv of CAR Code Minier employees and mining company employees/shareholders is commendable. However, the Code does not offer many details on this new permit. Ten or more registered artisanal miners gather to establish a cooperative. Such cooperative benefits from an exploitation permit valid for two years, renewable as long as mining activities are being pursued44. The special mining permit is very similar to the artisanal promotion permit which pre-existed the new Code Minier45. It is however very unclear whether the special mining permit replaces the artisanal promotion permit. The Code Minier does not provide for any information on this point. The main difference between them is that the special mining permit 38 Article 22 of the Code Minier, and articles 15 and 16 of the Application Text. 39 Article 20 of the Application Text. 40 Article 13 al. 1 of the Code Minier. 41 Article 47 al. 2 of the Code Minier 42 Article 35, al. 6 of the Code Minier 43 Article 52 to 54 of the Code Minier 44 Article 54 of the Code Minier 45 Ordonnance n° 83.024 du 15 mars 1983 fixant les conditions de possession et de détention et réglementant l’exploitation et le commerce de l’or et des diamants bruts, Article 12 s. OS00899/J01 88 November 2008 The World Bank Assessment of the Central African Republic Mining Sector authorises the artisanal miners to directly export their production46 and at a lower tax-rate than the mining companies, which is meant to be the major incentive for artisanal miners to organise cooperatives. The Code Minier and its Application Text do not provide for many details on the special mining permit. The surface of the exploitation area, for example, is not specified. As a reminder, and in the absence of detailed provisions in the Code Minier, the artisanal promotion permit is granted for an area of 25 hectares (250,000 m2) and a single cooperative cannot own more than five permits at a time (for a total surface of 125 hectares). The attribution of a special mining permit for cooperatives appears to be an innovative idea. However, in reality, the situation is more complex. A cooperative – as set up according to the provisions of the Code Minier – is more similar to a small company than to a real cooperative. This is due to the fact that the actual mining job is done by the ‘labourers’47 who are mine workers, and not registered artisanal miners. The registered artisanal miners who constituted the cooperative have a role similar to the one of financiers, or heads of business/concession who supervise the work. This difference in status and allocated tasks translates into a difference in remuneration. A mine manager makes on average US$ 280 per month compared to US$ 50 per month given to labourers. Women and labourers are irregularly paid allowances for their work48. Another drawback is the fact that the cooperative can export its production only when it reaches the value of 40 million F CFA (~US$ 90,000)49. This threshold is too high. This may cause security issues on the mining sites, when a lot of minerals (gold and diamonds) are been kept to accumulate. This can place the cooperatives in a difficult dilemma, and has already caused one of them to knowingly overestimate the value of the minerals (diamonds) they wanted to offer for exportation, so as to reach the 40 million F CFA threshold. Since the Tax Administration taxes the highest figure (between the estimation of value before export, and the actual revenue of the exportation) as a basis for taxation, the cooperatives gains little benefit for such an operation, and could even lose money. Also, people – and especially foreign dealers – hoping to be able to export minerals from CAR could take advantage of this system and help finance the creation of cooperatives to fraudulently benefit from the cheaper exportation tax rate. 46 Article 126 of the Code Minier. 47 Those mine workers, or “diggers�, who are not “artisanal miners� as defined by CAR legislation, are known in CAR as “Nagbata�. 48 Source: Communities and Small-Scale Mining: an Integrated review for development planning, CASM/Jenniger J. Hinton, citing R. Pelon The PASAD Experience, Projet d’appui au secteur artisanal du diamant en RCA 1996-1998, Presentation at the 3rd CASM Annual General Meeting, Colombo, Sri-Lanka, Oct. 2004. 49 Article 83 of the Application text OS00899/J01 89 November 2008 The World Bank Assessment of the Central African Republic Mining Sector As previously described, although the CAR Code Minier includes some clear statements on ASM there is limited substantive provision for community led ASM development. In addition, the Code Minier makes constant references to complementary regulations (textes d’application) that seek to further regulate the sector. However, examination of the Code and the available accompanying regulations reveals that many references in the Code Minier point to regulations which have not yet been adopted, and the existing regulations, despite being well meaning, are largely unworkable and unenforceable. The legal framework appears to focus on reactive and punitive measures and fails to identify the real needs of artisanal miners and to recognise the socio-economic importance of the ASM sector in CAR. Despite the best intentions of the GoCAR, it is estimated that about 85% to 90% of the artisanal miners and labourers operate illegally. This stance must be changed and ASM development encouraged to generate rural employment and reduce poverty, whilst protecting the rights of indigenous peoples and other vulnerable groups like women and children. The enactment of a rational, workable, comprehensive, gender sensitive, appropriate and enforceable legal framework should be the first step to formalising the sector in the CAR into a more sustainable activity. Recommendations Future legislative revisions must be designed to regulate the ASM sector in a manner that ensures transparency, open competition, and continuity of service. The objective of the new legislation should be to provide a fast and streamlined process for the acquisition of ASM Authorisations and Permits, improve security of tenure, provide reasonable tenure periods and ensure mineral rights are transferable and renewable. It is imperative that the legislation is truly sympathetic to the realities, constraints and challenges of the ASM sector in the CAR and such issues are clearly enunciated. Inappropriate and unenforceable control measures will only translate into temporary and superficial solution. It would be prudent to ensure that any new ASM specific legislation or regulations adopts provisions that are in accordance with the currently accepted ‘best practice’ for ASM development that should hopefully contribute to formalising and empowering the ASM sector in CAR. In addition, any new legislation should be developed and fully reviewed through a participatory and consultative approach. Lastly, the controversial issue of whether to adopt such excessive sanctions (detailed in Title IX Chapter 2 of the Code Minier) against ASM infractions needs to be carefully considered and the disadvantages and advantages need to be carefully judged. OS00899/J01 90 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Based on the current global consensus for the need for more sympathetic pro-poor ASM legislation, there are numerous provisions that should be considered within any new or amended Code Minier and associated regulations. Inaccessible and stringent legislation without empathy for the reality of ASM livelihoods in CAR will be counterproductive. Therefore, any proposed legal framework and its enforcement must be appropriate to the realities and specifics of the CAR ASM sector and the capacity of the staff to manage and physically enforce such legislation. In accordance with current ASM ‘best practice’, key issues that should be considered to help formulate a conducive and workable legal and regulatory framework include: - Artisanal or subsistence mining and small-scale (semi-mechanised) mining must be clearly defined and differentiated. Definition of artisanal mining may vary, but it is imperative to have a clear understanding of what one refers to as ‘artisanal mining’. In CAR, this distinction is particularly relevant, due to the fact that the GoCAR is trying to organise artisanal miners into cooperatives, which appear to be more built on the model of a small company than a real cooperative. - Authorisation process of artisanal mining must be transparent and non-discretionary. The non-requirement for ASM authorisation licensees to prove possession of financial resources, technical competence, professional skills or experience is fundamental50. - The right to exploit a particular deposit through ASM must be provided for, with clear rules as to the access and use of mineral and land ownership rights (especially with respect to women). - The ‘first come-first served’ principle must be adopted through a transparent and rapid process. - ASM concession size and tenure period must be sufficient to facilitate finance raising. • The concession size for artisanal mining authorisation was set in the Code Minier as no larger than 500m x 500m (25 ha)51, but this has been diminished in the application text, which provides for a concession size no larger than 100m x 100m (1 ha)52. While the first number is within the range set as ‘best practice’, and would allow artisanal miners to develop efficient mining projects, the second one is definitively not. Moreover, the shape of the 50 See Article 31 of the Application Text, which does not comply with best practices on this point. 51 Article 47 of the Code Minier. 52 Article 12 (2) and article 32 of the Application Text. OS00899/J01 91 November 2008 The World Bank Assessment of the Central African Republic Mining Sector concession is defined on the basis of surface features (a square or a rectangle) without regard to the configuration of the mineral deposit underground. • The duration of tenure for artisanal mining rights in CAR is of three years, renewable twice for a period of two years53. This is longer than in most other African countries, but still too short to ensure attraction of prospective investors and developers. A positive change in the legislation would therefore be to authorise perpetual renewals as long as artisanal mining activities are being pursued on the site. - The necessary elements for a modern mining cadastral system suitable for ASM must be codified. - The registry office must be reinforced so as to ensure it is independent and fully decentralised (ensure that licenses are issued in timely, transparent, non- discretionary and non-discriminatory manner). Though geographical and administrative data must be centrally directed so as to ensure that no two perimeters are overlapping, the access and modifications made to the Registry must be able to be made regionally, in every prefecture. This requires good and fluid communication between the regional offices and the central office, through computer based- management and the internet. - Full gender equality should be ensured and child labour on minesites eliminated. Child labour is prohibited by Article 12 of the Code Minier, but there no provision in the mining legislation for any measures to be taken in favour of gender equality and women empowerment. - The formation of voluntary and truly democratic ASM association and cooperatives (family or community based) should be encouraged. - Severe environmental and health and safety effects of uncontrolled ASM should be mitigated through the adoption of an appropriate and realistic level of environmental management and workplace health and safety. - Designate specific areas for ASM that facilitates easier management and enforcement of regulations. The practice of setting aside areas to be used specifically for artisanal mining purposes and using artisanal methods of prospecting and mining can enhance the development of the sector. The designated area can be divided into numbered blocks, and a map published for public information. A local administrative authority should be in charge of allocating the blocks to eligible persons and ensure 53 Article 49 of the Code Minier OS00899/J01 92 November 2008 The World Bank Assessment of the Central African Republic Mining Sector that a reasonable part of the land is allocated to people belonging to the local communities. The mining legislation currently indicates that special mining permits (for cooperatives) can be attributed on “rural community’s areas�54. However, no legal provision is given to neither define nor locate such areas. - The rights of indigenous peoples and communities should be protected by the law. In CAR, some communities are indigenous, such as the Batwa or the Ba’Aka.55 This must be taken into account while updating the legal framework of ASM. ‘Best practices’ have identified the possibility of informal legal licensing, allowing the exploitation of certain mineral by specific groups of the population (generally indigenous people and local landowners), so long as they exploit those minerals for their own direct use and not for commercial purposes. This informal licensing is done through provisions in the legislation, and does not entail issuing written documents. 54 Article 52 of the Code Minier 55 Often referred to as Pygmies OS00899/J01 93 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 4.3 Competitive position and recommendations for reform of the mining sector fiscal system This section, written by Professor James Otto, has been prepared as an independent report, and is presented under Annex N° 1 OS00899/J01 94 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 4.4 Mining conventions and bonuses56 4.4.1 Mining conventions The provisions governing the right to mine the ores present in the Central African soil are contained in the Mining Code and its Application Text. Large scale mining activities benefit the State’s Treasury through the payment by the mining company of various rights, taxes and royalties, according to fiscal provisions found in the Mining Law and in the Finance Bill (Loi de Finances). This constitutes a traditional approach to taxation of mining activities. However, the mining legislation contains loopholes and the Finance Bill is amended and adopted annually. Therefore, fiscal provisions applying to mining activities cannot be perceived as ensuring stability for mining companies wishing to invest in the CAR. After the 2004 revision of the Mining Code, several mining companies came forward and applied for research permits in order to mine Central African ores (mostly diamonds and gold, but also uranium and copper). The GoCAR subsequently sought to further organise the management of mining permits by entering into bilateral agreements with mining companies. These bilateral agreements, known as ‘mining conventions’ (“convention de développement minier� or “convention minière�), are allowed in the CAR under article 9 of the Mining Code. The GoCAR insists on these bilateral agreements being kept confidential, though no legal provision formally prohibits the communication of their content. Only a ‘convention framework’ (‘modèle de convention minière’) was made available for this study. The mining convention seems to offer a comprehensive set of provisions organising all aspects of the mining company’s activities in the CAR, as well as the systematic management of mining permits and titles. Such provisions are consistently made with reference to the various applicable legal texts (specifically, or generically as an ensemble). Despite this, the practice of systematically using individual mining conventions to regulate individual situations has the effect of creating many parallel legal corpus potentially derogatory to the generally applicable legal framework organised by the various Codes, Laws, and regulations. The additional circumstance that such agreements are being kept confidential at the GoCAR’s request renders this practice subject to suspicion, and is not well received by the mining companies and the various international stakeholders. Under these circumstances, the practice of regulating LSM with a bilateral agreement indicates a certain lack of transparency and its continuing use is therefore not desirable. 56 This section has been written by Wardell Armstrong. OS00899/J01 95 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Moreover, it is doubtful whether the Ministry of Mines has the capacity to effectively withstand the strain on its resources (financial, personnel and material) caused by this practice. Mining conventions require negotiations (during which the State is to be represented by qualified and experienced individuals – especially mining, legal, fiscal, and financial experts) and management (the Ministry of Mines should provide for numerously adequate and qualified personnel able to serve as focal point, to accurately and efficiently monitor the application of the convention throughout its duration). 4.4.2 Bonuses In addition to the traditional fiscal levies, the GoCAR sought to further benefit from large scale mining activities led on its territory by introducing, through a specific provision in the mining convention, the requirement of ‘engagement bonus’. These bonuses are being set up as a type of royalty paid to the State through the Minister of Mines. Overleaf is the list of the bonuses paid by the various companies applying for a mining permit since 2005. OS00899/J01 96 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Table 2- Bonuses – State of play as of December 2007, Report n°039/MFB/DIR-CAB/CAB/IGF/C 31 December 2007 57 Remains Company Ore Overall amount Amount paid to be paid F CFA US $ F CFA US $ F CFA US $ De Beers Diamonds 1,500,000,000 3,591,775 754,694,972 1,807,130 745,305,028 1,788,293 Uramin Uranium 1,000,000,000 2,394,517 1,000,000,000 2,394,517 0 0 Pangea Diamonds 375,000,000 897,944 321,317,883 769,401 53,682,117 128,805 Pan Africa Diamonds 350,000,000 838,081 93,098,457 222,926 256,901,543 616,412 Étoile diamant Diamonds 500,000,000 1,197,258 146,845,115 352,342 353,124,885 847,291 CAD LTD Diamonds 625,000,000 1,496,573 75,000,000 179,956 550,000,000 1,319,676 Nobles Minerals 350,000,000 838,081 50,000,000 119,971 300,000,000 719,823 Int. Mining Group Diamonds 75,000,000 179,956 K-Mines 40,000,000 95,780.7 40,000,000 95,976.4 0 0 Good Speed 30,000,000 71,835.5 30,000,000 71,982.3 0 0 Sodemines Diamonds 800,000,000 1,915,613 0 0 800,000,000 1,919,528 Groupe Perrière 300,000,000 718,355 0 0 300,000,000 719,823 Tamija Diamonds 250,000,000 598,629 0 0 250,000,000 599,853 (trans. to Carmines) Total 6,120,000,000 14,654,442 2,585,986,427 6,204,843 3,534,013,573 8,479,549 57 Rapport d’audit des bonus de signatures des conventions minières, des transferts de parts de capitaux propres et leur utilisation pour la période 2004 à 2006, Rapport n°039/MFB/DIR- CAB/CAB/IGF/C 31 Décembre 2007, Auteurs MM. Mahamat Kamoun and Dominique Youane, Ministère des Finances et du Budget, Direction de Cabinet, Inspection Générale des Finances, République Centrafricaine. OS00899/J01 97 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Between 2006 and 2007, 19 companies have obtained a mining permit, 13 of which have signed a mining convention including provisions for a bonus. These bonuses amount to more than 6.1 billion F CFA (~ US$ 14.6 million). However, a moratorium on the payment (full or partial) was awarded in 9 cases out of 13. Seven of these 9 mining companies still have to pay more than 50% of the overall total due. It seems that there is no objective basis nor scale for the determination of the sums being required as bonuses. About 2.6 billion have been recovered so far (~ US$ 6.3 million), most of which have been spent through unbudgeted expenses. The expenses made directly towards the support of the ASM and funded by bonuses represent at best 6.41% of all expenses funded by bonuses (see table below). Most of these expenses were made towards the administrative running of the National Union of Central African Mining Cooperatives (Union Nationale des Coopératives Minières Centrafricaines), and not the direct support of artisanal mining communities or extension services. Table 3 - Expenses made towards ASM, funded by bonuses as reported in the audit report from the CAR General Inspectorate of Finance report n°039/MFB/DIR- CAB/CAB/IGF/C 31 December 2007 Expenses F CFA US $ Direct Construction of the National Union of Central African Mining 25,261,105 60,404 Cooperatives (UNCMCA) building Mission in support to mining cooperatives 4,055,000 9,696 56 motopumps for mining cooperatives 28,000,000 66,953 Support to the UNCMCA 100,000,000 239,120 Contribution to the General Assembly of the UNCMCA 8,271,865 19,779 Total Direct 165,587,970 395,954 % of cumulative bonuses 2.70% % of received bonuses 6.40% % of all expenses 6,41% Indirect Construction of the Jewellers Association building 40,000,000 95,648 Machines and materials for the Jewellers Association 20,000,000 47,824 Grand total 225,587,970 539,426 % of cumulative bonuses 3,68% % of received bonuses 8,72% % of all expenses 8,73% 4.4.3 Recommendations - To establish and publish the rules governing the determination of the amount of bonuses, so as to ensure transparency; OS00899/J01 98 November 2008 The World Bank Assessment of the Central African Republic Mining Sector - To establish and publish the rules governing the determination of the expenses funded by bonuses, so as to ensure that all expenses are budgeted; - To stop managing the revenues issued from bonuses through a different channel than other revenues (i.e. transferring the management to the Régie des avances et recettes within the Ministry of Mines). OS00899/J01 99 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 5 Diamond marketing chain governance 5.1 Analysis of the marketing chain of diamonds58 Diamonds were discovered in the CAR in 1914, but it was not until 1927 that many mining companies became actively interested in these diamond deposits. Central African diamond production was first recorded in 1931 in Carnot and Bria, yielding 500 and 1,000 carats respectively that year. Due to the nature of Central African diamond deposits, artisanal exploitation has spread throughout the country and since independence has become a vital source of revenue for the country and specifically rural regions. The production of diamonds, mostly carried out by artisanal miners and labourers, is estimated as providing employment to between 300,000 and 400,000 individuals, mostly in the informal sector59. Over the last few years controlled production has turned over around 500,000 carats per year. Almost all of the official production is exported by the Buying Offices and the cooperatives. There have been some attempts at modern industrial production but it has not yielded the results expected. The most significant reasons for this appear to be a perceived lack of security, the geological nature of the deposits, the lack of transport infrastructure, the conditions for obtaining a research permit and the constraints associated with these contracts. The formal Central African diamond industry is comprised of Buying Offices, the collectors, artisanal miners and diamond labourers. However another formal channel for the industry exists in the form of artisanal miner cooperatives. In this system, a cooperative accumulates diamonds from its mining operations and sells them to collectors, the Buying Offices, or even exports them directly if the value of their diamonds exceeds 40 million F CFA (~ 90,000 US$). At first glance, the Central African diamond marketing industry seems relatively simple, and appears to generate large sums for operators; however on closer examination it becomes apparent that the majority of operators, especially at the level of the artisanal miners, do not make financial gains proportionate to the risk and efforts that they clearly subject themselves to. 58 This section has been written by Léon Boksenbojm; and edited by Wardell Armstrong. 59 For a discussion on the number of artisanal miners and mine labourers, see section 3. OS00899/J01 100 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 5.1.1 The actors of the diamond marketing chain The artisanal miners and the mining concessions60 Generally, the artisanal miners consider that they own the small plots of land which they work, but this is not always the case. Regardless of formal ownership rights, they require some form of financial backing to hire labourers. Once these elements are in place, the management of the extraction and washing operations brings a higher share of any money generated from the sale of the diamonds. If the artisanal miner is the mine owner, they may share the profits equally between their labourers. If the minesite is rented, 10% goes to the land-owner, 45% to the artisanal miner acting as chef de chantier and 45% to the labourers. It is common for the work agreements between the miner and their labourers to be concluded verbally, rather than any official or formal written documents bearing the signatures of the interested parties. As in most mining jurisdictions the current legislation does not mention such informal processes and fails to identify any minimum salary or the labour obligations towards the labourers. The agreements are rarely questioned as artisanal miners generally hire from a loyal pool of local labour, meaning their workforce is often made up of close relations, village neighbours, or local inhabitants of the sites being worked. The mine owners, who are usually experienced semi-professionals, who are aware of the prices of rough diamonds, with the exception of the special or complicated stones; and if they do not get a fair price it is generally due to a previously agreed system of pre-payment. Transactions are not driven by common laws of supply and demand as generally the artisanal miners are pre-paid by the diamond collectors or the Buying Offices. This pre- payment scheme if not ideal for the artisanal miners, and sometimes they do not recognise it as a loan they will have to pay back. Yet they do recognise that they have a ‘contractual’ obligation to sell all their merchandise to one specific financier who has already explicitly deducted all or part of his stake when he originally negotiated the price of the diamonds. Despite these drawbacks mine owners and artisanal miners seem entrenched in this cycle of financial dependence. If an artisanal miner or mine owner happens to strike upon a diamondiferous pocket or an extremely large stone generating large sums of money, the funds are often not managed responsibly. Earnings from diamond mining are often perceived as ‘the money of the devil’ and must be spent quickly and often frivolously. The Central African legislation requires the artisanal miners to record their production in production journals, sold for this purpose by the Administration. Within these journals the mine operator records the name of the artisanal miner, permit number, receipt of payment, the name of the mining site, date and weight of any finds, the number of diamonds extracted, to whom the diamonds were sold and at what prices, as well as the number of the purchase note issued by the buyer when acquiring the diamond or diamonds. This system, which is 60 See also section 3. OS00899/J01 101 November 2008 The World Bank Assessment of the Central African Republic Mining Sector required by the Kimberley Process (KP) regrettably, does exhibit several flaws. The first of these is due to the alleged (unverified) abusive practices of the Brigade Minière, whose agents sometimes claim ‘their share’ once they discover in the journals that an artisanal miner has extracted a large stone. In order to avoid paying this informal tax, the artisanal miners often fail to record such finds. The artisanal mining cooperatives61 With a view to improving working conditions and obtaining better remuneration for the labour of artisanal miners, the Central African Government decided that the promotion of cooperatives, it could offer more technical assistance and economic advantages to the artisanal miners. Since 1961 a series of initiatives have been attempted to promote cooperatives: - In 1984, financial and material aid was put at the disposal of cooperatives by the Buying Offices and the collectors. - In 1994, the State made the decision to boost the cooperatives and provided them with means of production and financial aid to a total of 100 million F CFA (~ 200,000 US$). Roughly half of this was levied from the mining promotion fund. - Since 2004, the new mining code has allowed cooperatives to export their production directly, provided that their produce exceeds 40 million F CFA (~ 80,000 US$). Despite these interventions, none of the cooperatives can claim that it has succeeded in developing a sustainable and successful business, or that it can generate sustainable profits. In the past, few artisanal miners organised themselves in line with this model, however more recently there appears to be an increasing interest in forming cooperatives. This previous lack of interest could perhaps be explained by the failures of the Administration and the National Union of Central African Mining Cooperatives to generate financial backing. Unfortunately, these new cooperatives do not seem to have learnt the lessons from the failures of their predecessors, and similar mistakes continue to be made: - The lack of a preliminary study of the nature of the deposits; - The lack of a common motivation. In order to establish a cooperative, a minimum of ten artisanal miners is needed with each artisan contributing at least 15 labourers, however the diverse set of interests and objectives means that a diffused focus hinders production; - The lack of cohesion among the artisanal miners means it is more difficult for the cooperative to find funding; - Poor management of profits generated; 61 See also section 3. OS00899/J01 102 November 2008 The World Bank Assessment of the Central African Republic Mining Sector - Lack of knowledge of the foreign diamond markets. Under certain conditions and within a well defined legal framework, these cooperatives could become long term drivers of development for artisanal miners and for the mining communities. The current legal framework allows the mining cooperatives to export their own diamonds. This places them in direct competition with the Buying Offices. However as opposed to the mining cooperatives the Buying Offices must obtain a permit, pay for an annual licence and pay a significant bond which is deducted annually until it is exhausted. In addition, the cooperatives pay (de facto) 3% less taxes than the Buying Offices, for the same value of diamonds exported. At the moment, given the fairly limited number of cooperatives, they do not have a great deal of impact on the local diamond industry or on State revenue, but this could change if their numbers were to grow significantly. From a commercial point of view, the cooperatives could present challenges for the overall formalised management of the Central African diamond market as their work is often unpredictable and difficult for the authorities to control, and in general their sources of finance are unknown. It should also be pointed out that in the past, the Buying Offices experienced many difficulties because of the system of pre-financing of these cooperatives and apparent ‘loss’ of significant sums of money. The collecting agents The collecting agents have become the key players in the formal Central African diamond industry. Their only annual fee paid to the State is in the form of a licence (1,009,500 F CFA ~ 2,000 US$) that permits them to work throughout the country. In 2007 there were 316 collecting agents who fulfilled their obligation to pay this licence fee. In principle, as their name indicates, they are the intermediaries between the artisanal miners and the Buying Offices, but in practice they have created an internal commercial network. Often the small collector overseeing the mining site sells to another collector, who in turn sells to a bigger collector who ‘prepares’ a sizeable lot for sale to a Buying Office or to another collector. This proliferation of intermediaries in the value chain increases the price of the diamonds and sometimes renders them unsalable to the local Buying Offices. Generally, collectors ‘insure’ the artisanal miners through indebtedness by pre-financing and providing the food and tools necessary to accomplish the production work. Frequently the collecting agents will be present on the mining sites to follow the progress of the work or have an agent to represent them. The majority of the profit margin of the diamond industry is captured at this intermediate collector level. Some of the bigger collectors are financially independent, with an allegedly larger turnover than the Buying Offices, and compete with them whilst paying the State the OS00899/J01 103 November 2008 The World Bank Assessment of the Central African Republic Mining Sector marginal licence fee. Most of the national production passes through the hands of the collectors, and if a restructuring of the system is to be considered, it must be recognised that they form a central part of the artisanal diamond production marketing system. The frequent trips undertaken by collecting agents between the production zones and Bangui require precautionary measures to avoid road bandits which present a very real risk in certain parts of the country. The prices of diamonds on the local market, quoted in the table below, were reported to the consultant during the interviews which took place with the industry operators. The indicative price presented in this table concerns ‘select’ quality. Table 4 - Evolution of the price of diamonds from the artisan to the Buying Office Price at the site Price in the cities Price at the Price on the near the site Buying Office world market Weight (Cts) F CFA US$ F CFA US$ F CFA US$ F CFA US$ 0,20 7,000 ~14 10,000 ~20 12,000 ~24 15,000 ~30 0,50 25-30,000 ~50-60 35-40,000 ~70-80 40-45,000 ~80-89 50,000 ~99 1,00 120,000 ~237 150-160,000 ~296-316 180,000 ~356 220,000 ~435 The Buying Offices The role held by the Buying Office in the Central African diamond industry is multifaceted and includes obligations, constraints and prerogatives. They are considered by many to be the dominant players in the industry due to their financial ‘clout’ and professionalism (in the majority of cases); because of this they are required by the Authorities to comply with several legal and financial requirements. The following is a non-exhaustive list of their obligations, some of which remain very difficult to fulfil: - To have a minimum company capital of 50 million F CFA (~100,000 US$) upon the establishment of an office; - To deposit to the Public Revenue Department the sum of 50 million F CFA (~100,000 US$) in the form of a bond (this sum is to be reduced by 10 million F CFA to the benefit of the State until it has been exhausted ~20,000 US$); - To have property investment to a value of at least 250 million F CFA (~500,000 US$); - To pay for the professional licence each year to the value of 18 million F CFA (~36,000 US$); - To pay per buying centre operating locally (branches operating near the productive areas) an annual licence of 3,540,000 F CFA (~ 7,000 US$); OS00899/J01 104 November 2008 The World Bank Assessment of the Central African Republic Mining Sector - To pay for the licences for each buyer of the office : 1 million F CFA for Central African citizens (~2,000 US$) and 3 million for foreigners (~6,000 US$); - Contribute to professional training and retraining of the local management regarding sorting, grading and assessment and marketing of the diamonds; - To achieve a monthly turnover of 1 million US$ in the first two years of their business subsequently 2 million US$ turnover; - Export their diamond lots each month; - Support the core of the tax system, collected by the State from the sale of diamonds; - As with all the other levels of diamond marketing, the Buying Offices must record each diamond or lot of diamonds bought on a pre-sealed purchase note, numbered and registered in the books of the Mining Administration; - 48 hours before each export, they must produce a summary of the purchase notes corresponding to the lots to be exported. Each quarter they must present a summary of the turnover and the production of the collectors and artisanal miners who sold products to them. This list of obligations is relatively large and requires a high degree of professionalism from all the offices, and the ability to achieve a high enough turnover to absorb the various overheads, obligated investments and other costs. The prices set for the purchase of diamonds by the Buying Offices take into account all of the overhead expenses incurred. Consequently the subsequent demand for a price low enough to retain a level of profit means the main losers are the artisanal miners and the labourers at the bottom of the value chain. Any level of profit they do receive is further reduced as the majority of the goods bought by the offices are usually handled by at least one collector, further reducing the retained profit margin. The Buying Offices have expanded strongly over the last 3 years and at the beginning of January 2008 there are 13 offices, of which one has obtained a permit for buying gold (the permit is concurrent for gold and diamonds). This increase in the number of Buying Offices cannot be justified economically, given that the production has not increased at the same rate. In fact certain offices have recently been struggling and are even considering closure. However, it must be emphasised that few of the new Buying Office owners have the personal expertise necessary to buy diamonds, and they do not have the necessary experience to sell their stones on the external markets. It would be appropriate for the Authorities to establish some basic criteria in this regard before allowing the parties concerned to indiscriminately open Offices and carry out this highly specialised activity. OS00899/J01 105 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Table 5 - CAR – Official diamond exports 2005-2007 2005 2006 2007 Office Cts Value US$ Cts Value US$ Cts Value US$ DDC 83 896,62 8 857 194,81 114 885,14 12 709 895,57 141 542,46 17 618 282,44 SODIAM 94 590,65 17 956 410,33 195 490,80 24 866 050,65 152 430,97 19 889 732,18 BADICA 38 528,63 9 428 111,67 39 723,48 10 656 275,16 27 127,03 6 706 030,76 ADC 2 464,79 971 283,62 2 275,79 1 024 445,69 5 818,08 1 331 906,06 ORDICA 975,74 289 133,96 286,24 298 694,03 309,30 125 179,70 PRIMO 79 625,20 10 938 991,09 54 963,52 9 462 052,43 60 284,65 10 170 513,02 BELDIAM 313,51 261 686,91 4 678,66 881 015,38 6 668,23 1 450 837,33 MEX 267,15 104 605,93 0 0 CODIORCA 6 183,03 1 212 920,10 IAS 0 0 ADR 12 984,19 2 006 590,69 LIONS Investm. 328,02 117 936,94 KHORDIA UNCMCA Coop. 213,23 135 810,29 2 745,61 1 465 166,31 195,81 89 354,12 VALDIAM 43,70 16 495,31 PANGEA 3673,30 461 884,00 IMG 102,21 7 654,6 BELAFRIQUE 455,57 122 545,47 SOCEMINE 213,03 36 739,20 SOPICAD 60 896,95 9 167 248,35 0 0 DIAMSTAR 14 381,33 2 541 994,11 0 0 CONCEDIA 6 962,37 1 293 787,31 Totals 383 304,59 61 964 197,52 415 529,42 61 504 940,35 413 675,96 60 789 431,90 O = Mining Companies O = No longer in business Source : BECDOR OS00899/J01 106 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Supply of the Buying Offices varies from office to office, but in general, they buy through their local branches in the productive areas in the interior of the country, from their collectors, artisanal and to a lesser extent, direct from the artisan miners. Their representatives work in the interior of the country, buying at prices often lower than those available in Bangui. The price of these goods increases markedly due to both the management costs of the Buying Offices and also to the sizeable costs of transport. The nature of the remote mining areas often calls for air transport and any travel by road requires an escort, since any travel outside of Bangui is considered hazardous because of the presence of criminal bandits. The mining companies er For some years now, the number of mining companies involved in the production and export of diamonds from the CAR has been minimal. There are many reasons for this includingthis, litical risk, lack of perceived security, political instability and sovereign risk the lack of a comprehensive and modern geological database, the comparatively more difficult financial and legal conditions for obtaining exploration permits, the lack of a conducive incentive framework for external investors, etc. Correspondingly the proportion of production from mining companies did not reach 1% in 2007 and was even lower in the two preceding years, as shown in the following table: Source : BECDOR [Legend : Valeur = Value Production – Production Année = Year] At the beginning of 2008, 12 mining companies were listed in the register of the Department General Mining Directorate with valid exploration permits, of which only one was not up to date with the payment of its fees. OS00899/J01 107 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Table 6- Identification sheet of authorised mining companies in CAR N° NAMES PROJECT LOCATION STATUS MINERALS EXPLORED PROVENANCE 01 AURAFRIQUE/AXMIN Passendro Bambari Research Gold, Base metals Canada 02 PANAFRICAN Dimbi Dimbi Exploration Diamonds and gold South Africa 03 PANGEA DIAMOND FIELDS Bogoin Bogoin Exploration Gold South Africa 04 GEMDIAMOND Bania Berberati Exploration Diamonds South Africa 05 IMG Berberati Exploration Diamonds and gold 06 CAD MINING Berberati Exploration Diamonds and gold 07 URAMIN CAR Bakouma Bakouma Exploration Uranium and related substances South Africa 08 ETOILE DIAMANT Bria Exploration Diamonds and gold South Africa 09 NOBLES MINERALS Boda Exploration Diamonds and gold Italy 10 GROUPE PERRIERE Boda Exploration Diamonds and gold Central African 11 K – MINES Berberati Exploration Diamonds and gold Central African-Turkish Central African- 12 GOOD SPEED Carnot Exploration Diamonds and gold Japanese Source : Department of Mines OS00899/J01 108 November 2008 The World Bank Assessment of the Central African Republic Mining Sector The diamond-cutting workshops The first diamond-cutting workshop in Africa, the National Diamonds Office, was created in 1964 in the CAR as a result of a partnership between the GoCAR and an American company, Diamond Distributors Inc. It operated for nearly twenty years without really demonstrating its profitability. Its supply was maintained by the Buying Offices and the mining companies, and was mandated by law. The National Diamonds Office chooses stones selectively and only pays what it considers ‘reasonable’ or discounted prices for its purchases. However, even with these advantages the Office has still failed to make headway in the diamond cutting market. This market is completely detached from the rough diamond market, and requires significant investment and marketing strategies. Sales are generally made to specialised jewellery organisations with long term credit. Diamond-cutting is a highly technical profession, in which one only gains expertise after years of experience using specific, but fairly simple equipment. However, developments in technology have increased the use of highly sophisticated (and expensive) computerised equipment. The stone-cutting workshops which have opened in Bangui have all had difficulties in getting a regular supply of rough diamonds. Currently only one remains relatively active and supplies a few cut stones to the local jewellers. The State should consider the establishment of a diamond cutting school to help train expert diamond merchants, expert valuers etc. In the long term, it could encourage young trainees to establish their own diamond studios with the appropriate equipment. 5.1.2 The financing of the actors of the diamond marketing chain The financing chain of the formal industry operates at four different stages of the industry: - The Buying Offices: financed usually by their parent companies (in the case of subsidiaries), by clients, buyers of their output, by opportune or occasionally foreign or local financiers and sometimes from their own funds; - The Collectors: usually financed by the Buying Offices, by opportune or occasionally foreign or local financiers and sometimes from their own funds; - The artisanal miners: financed by the Buying Offices, the Collectors and sometimes from their own funds; - The labourers: financed by the artisanal miners OS00899/J01 109 November 2008 The World Bank Assessment of the Central African Republic Mining Sector The financing of the Buying Offices The Buying Offices need a very significant working capital, corresponding to their turnover plus a safety margin. The financial backer can easily monitor the progress of his investment, as in principle, the Buying Offices (and their branches in the interior of the country, where applicable) keep methodical, up to date accounts. The financing of the collectors A large amount of the collectors are permanently or occasionally pre-financed by the Buying Offices, to whom they sell their diamonds. The monitoring of the use of the monies allocated for the purchase of diamonds, or for the pre-financing of the artisanal miners, is complicated and often intentionally blurred by the beneficiaries in order to derive the maximum profit from them. The pre-financing of the collectors, given that it carries high risks, is generally agreed upon on the basis of trust. Another group of collectors is pre-financed by other larger colleagues, who have become powerful direct competitors for the Buying Offices. They often establish local branches in all the diamond exploitation areas using capital from other business for their purchases, whether local or otherwise. The financing of the artisanal miners The pre-financing agreements between the artisanal miners and their financial backers (collectors, or in certain cases, the Buying Offices), are usually verbal. The sums which they obtain depend on the scope of the projected operation and on the level of confidence the financial backer has in the artisanal miner. It should be pointed out that according to the law; representatives from the Buying Offices do not have the right to enter mining sites. This rule may be difficult to comprehend, in the sense that someone who finances a mining operation (which is always risky), should perhaps have the right to go and validate and check what has been done with their money, or to see how work is progressing. There has been a marked reduction in the extension of finance to the artisanal miners by these two ’formal’ groups, due to a growing number of bad experiences on site. As a result the artisanal miners accept money more readily from local merchants and other entrepreneurs. OS00899/J01 110 November 2008 The World Bank Assessment of the Central African Republic Mining Sector The financing of the diggers and the mine labourers The artisanal miners acting as chefs de chantier are usually required to provide their labourers with tools to work, and sometimes a daily wage. In some cases the managing artisanal miners is also expected to cover the cost of medical care in the event of accident or illness. Once the stones have been extracted, the labourers'share is calculated and paid according to the price of the diamonds as agreed by the financial backer and the diamond miners. The banks and other money transfer systems The banking system in Central Africa is comprised of the National Central Bank, the Bank of Central African States (Banque des Etats de l’Afrique Centrale), and several other commercial banks. The security situation in the interior of the country has deterred private banks from establishing a systematic presence in all the areas favourable to business. However, such presence will be indispensable in the future for the desired development of the formal precious materials sector. At this stage, apart from the Buying Offices, the use of banking services by the other operators of the industry is fairly limited. In order to remedy this situation, it would be beneficial if the representatives of the diamond industry and the bankers would consider creating some financial products specific to the sector. At the same time, it should be pointed out that many Buying Offices and collectors use other means of accessing large sums of money in Bangui; namely the local merchants, the importation of currency in cash etc. 5.1.3 The legal and institutional framework of the diamond marketing chain Like in all African diamond-producing countries, the Central African diamond industry is governed by strict legislation. Thus the possession, holding, transfer, operations, transport, dispatch, export and conversion of the stones are subject to particular regulations and the obligations to obtain permits issued under the conditions stipulated by the Mining Code and its application texts. The procedures for obtaining these permits range in complication and cost. Buying Offices and mining companies face a number of challenges and expenses compared to the relatively minimal requirements for collectors. The enforceability of these regulations is somewhat erratic, as many informal intermediaries can get involved in the sector for relatively short periods, destabilising the market. The procedures for obtaining a permit are OS00899/J01 111 November 2008 The World Bank Assessment of the Central African Republic Mining Sector often lengthy and tortuous, and certainly discourage some investors. It has been alleged by some parties that those that do remain may make what is locally referred to as a ‘generous gesture’ to expedite the issuing of their permit. The inventory of current producers and traders involved in the mining industry and figures regarding their production are kept by the General Mining Directorate, through the Directorate for Commercialisation, Industry and Mining Register and its bureau BECDOR, the Commercialisation and Mining Register Service, and the Industrial Techniques Service. Monitoring of the mining industry as a whole is undertaken the Brigades Minières and the Directorate for Information and the Suppression of Fraud. As stated in previous sections the latter operates only in Bangui whilst the Brigades Minières are empowered to act throughout the CAR. As the key agency charged with managing the production and marketing of diamonds, the Ministry of Mines jurisdiction is stretched thinly across the entire country. In fact they are represented in only four large cities in the interior of the country, prompting the Brigades Minière to establish their own working system. Thus, it has been alleged that they often visit the mining sites to claim their ‘share’ of the profits. Despite this, members of the Brigade Minière claim that they maintain a good relationship with most of the collectors, as well as with the Buying Offices, and only expect to be paid for putting their stamp on the purchase notes, which are compulsory for travelling from the interior of the country to Bangui. When a conflict arises between artisanal miners or between other operators in the industry, interviewed members of the Brigade Minière say that they are acting in accordance with the Code Minier. However, some artisanal miners and collectors claim that, on such occasions, the subjective interpretation made of the Code Minier varies with the individuals involved. In addition, the many operators in the industry make accusatory complaints that when the Brigades Minières seize diamonds or gold, they allow the accused trafficker to go free and keep the precious metals for themselves. The system of traceability from the mines to the point of export, established in the CAR at the beginning of the 1980s, for all kinds of diamond exploitation (industrial, semi-industrial but also artisanal), has inspired those in charge of the Kimberley Process to formulate their own recommendations for the self regulation of the diamond industry in each of the participating countries. The system in the CAR is quite comprehensive, seeing that it allows the government to know when the diamonds were extracted, on which site, by which group, and to follow their route to the exporting companies. Unfortunately, due to a lack of staff at the level of the mining areas, the production journals stay with the artisanal miners and are rarely collected by the administration to reconcile the production with the purchase notes used for the marketing. OS00899/J01 112 November 2008 The World Bank Assessment of the Central African Republic Mining Sector The monitoring of the marketing of diamonds in Bangui and their exportation is carried out mainly by BECDOR, which in principle receives all the purchase notes from the collectors and the Buying Offices. It checks whether or not the log books have been stamped upon departure from the production site, and it grants an entry permit to Bangui and a departure/export permit if necessary. BECDOR is in permanent contact with all the Buying Offices and plays a double role with regard to the operators: - Educational: to give information about and explain the procedures in force; - Punitive: to prompt action in the event of failure to respect the law. The Principal (the person in charge of the management of BECDOR) reports regularly to the Marketing Director, his superior in the hierarchy. In the past, the Administration undertook many initiatives to enable the local producers to obtain the best prices possible and to promote Central African diamonds. Thus, they created the Bourse (currently closed, but there are apparently plans to reactivate it), special permits allowing non-resident diamond merchants to occasionally come and buy goods, and a permit granted to artisanal cooperatives to export their production directly. The reasons motivating these solutions were more or less liberal but they were regarded as unfair competition by the Buying Offices. They did not have the impact expected by the State and were all abandoned, except for the permit given to the cooperatives to export their production. 5.1.4 BECDOR The Bureau for the Evaluation and Control of Diamonds and Gold, in its current form, was created in 1993 to monitor the internal diamond market and to evaluate official exports. Its responsibilities include: - Valuing rough and cut diamonds, gold and other precious stones and metals destined for export; - Assessing, valuing and selling precious metals; - Preparing orders fixing the market price for the export of stones and precious metals; - Preparing documentation and regulations relating to the marketing and the export of stones and precious metals; - Processing purchase notes from the Buying Offices and from the Collectors with a view to monitoring them better; - Stamping the purchase notes of the Buying Offices and the Collectors and monitoring the activities of the production and the marketing of the Mining Companies; - Checking the rough diamonds and stamping the log books of Collectors on their arrival in, and departure from, Bangui; - Issuing notification of receipt of payment of taxes and export duties and to ensure the collection thereof; OS00899/J01 113 November 2008 The World Bank Assessment of the Central African Republic Mining Sector - Overseeing the placement into boxes of the products intended for exportation after assessment and valuation and the affixing of seals; - Escorting the boxes from the valuation office to the airport and the final control of the seals; - Establishing and issuing of statistics on rough diamonds and gold. BECDOR has a dominant position in the relationship between the operators in the precious minerals industry and the Central African government. Its knowhow, efficacy and integrity are crucial, to ensure that the Central African State receives a proper return on its mineral resources and to satisfy the operators. The diamond exportation process carried out by BECDOR starts in principle 48 hours before the expert assessment, when the representative of the Buying Office sends a summary of the purchase notes corresponding to the diamond lots which it wants to export, and makes an appointment for the assessment and valuation. At the appropriate time, the representative from the Office presents himself with the lots separated into plastic bags pre- sifted according to size and pre-sorted according to characteristics. The lots are weighed and assessed by the BECDOR valuers, in the presence of representatives of the Brigade Minière, the Customs and the Secretariat of the Kimberley Process. After the verification of the classification, prepared beforehand by the Buying Office, and the adjustment of the stones, if necessary, with regard to their quality, the expert assessors calculate the taxable values by relating each sorting (size/purity/colour/shape) to the BECDOR market rates. OS00899/J01 114 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Table 7- BECDOR market price list for rough diamonds QUALITY PRICE in WEIGHT Antwerp SELECT OFF CL BLOCK SPOT (cts) US$ US$ US$ US$ US$ ZA 30 6,100 5,400 18,000 25 5,700 4,600 The classification of stones of less than 17,000 20 5,200 3,700 4.85 cts is done by lots and diamonds of 15,000 15 4,600 3,300 more than 4.85 cts are analysed stone 12,000 by stone. This classification is done in 10 3,300 2,900 many categories. 9,000 9 3,000 2,600 The largest disparity between the 7,000 8 2,700 2,400 market values applied by BECDOR and 6,500 the market prices (ad valorem) of 7 2,600 2,100 Anvers and Tel Aviv applies to the 5,000 6 2,300 1,800 SELECT quality. 4,500 5 1,900 1,500 3,500 4 1,300 1,000 600 450 3,000 3 1,150 1,000 600 450 Smalls,70 2,000 2,5 950 800 400 350 Clivage70 1,400 2 800 650 350 250 Industry,45 1,100 1,5 ct 600 500 250 200 Boart,2 700 1 ct 450 380 200 150 Carbone,1 550 0,75 ct 300 230 110 80 400 Mixed 180 150 110 80 220 Source : BECDOR-Market prices/ Ad valorem – several diamond bureaux at the Anvers and Tel Aviv stock exchanges OS00899/J01 115 November 2008 The World Bank Assessment of the Central African Republic Mining Sector The BECDOR Principal then calculates the various taxes due to the State on the basis of the found market value by adding together the value of all the assortments of diamonds and recovers these sums on behalf of the various Administrations. Table 8 - Structure of the taxes on diamond exports Tax Payee Rate Exit Fee Tax department 4% Mining Promotion Fund Ministry of Mines 1% Tax for Computer Equipment and Finance Equipment Tax department 0.5 % SPPK Permanent Secretariat of the Kimberley Process Ministry of Mines 0.5 % Special Diamond Tax (TSD) Tax department 3% Fivex minimum Tax (IMF) Tax department 3% Total 12 % The last task carried out by the expert assessors in this export operation in the offices of BECDOR is the sealing of the diamonds in a box which is then sent back to the exporter to keep until its departure to the airport, where the representatives of BECDOR, the Brigade Minière and the Customs will proceed with the checking of the box. Transfer of the (sealed) box containing the diamonds to be exported to the airport, which is usually carried out late in the evening, depending on the commercial airline, is performed by the exporter accompanied by a representative of BECDOR and the officers of the Brigade Minière. s One of the BECDOR' strongest assets is its database of statistics concerning the production and trade of diamonds and gold. These figures are carefully kept by the organisation’s analyst and are very useful for an analysis of the development of the diamond and gold industries62.These records are indispensable in order to understand the strengths and weaknesses of the system currently in place. As already stated BECDOR is led by the Principal, who is himself a diamond valuer, who uses the services of six expert assessors for the valuation of precious substances. The gathering of data and the processing of the statistics is carried out by the analyst and his assistant. In addition, they are assisted by a secretary, a trainee secretary and a temporary assistant. The assessment carried out by the valuers determines the amount of taxes recovered by the State and is therefore a heavy responsibility. For this reason, they receive, in addition to their salary as civil servants, bonuses which, for all expert assessors, are at the level of 0.0016% of the market value of the exports. The diamond market has evolved and the prices of certain goods have changed significantly; unfortunately, the expert assessors at BECDOR have not had any retraining for years. This training was funded by the World Bank, and the last training dates back to 1996. Moreover, 62 6 See Annex N° (i), “Situation des recettes générées dans le secteur minier (diamante et or) et leur orientation, 2004-2008). OS00899/J01 116 November 2008 The World Bank Assessment of the Central African Republic Mining Sector new techniques now allow diamonds to be ‘treated’ to change their natural colour or to remove surface staining and impurities; structures like BECDOR should be able to detect these processes and mark them on the ‘pass’ and on the Kimberly Process certificate. The processes of valuing diamonds, assaying gold, collection of taxes and capture of all these data, requires a good working organisation and the appropriate equipment, but also the space to accommodate all the participants in these export activities. This is not the case at the moment, especially with regard to the last two points. Thus, taking into account the important assets which pass through the offices of BECDOR, a vigorous security system must be put in place and insurance cover for risk of theft, workplace accidents, civil responsibility etc, must be contracted. 5.1.5 Fraud Countries with alluvial diamonds in their subsoil generally experience difficulties in managing and regulating this resource. Due to their high value/weight ratio and the relative ease with which they can be extracted, alluvial diamonds have become a target for illegal traffickers. The fraudulent operators have used diamonds for a vast range of illegal purposes, including money laundering, to conceal and export profits and capital, and as hard currency, an alternative way to finance imports into weak economies. Diamond fraud in the CAR has many origins, numerous forms, occurs at all levels of the value chain, and in all areas of the sector. The local population, aware of these fraudulent schemes, is largely apathetic, seeing that it has nothing to lose nor to gain in denouncing them. The widespread lack of security in the interior of the country and the absence of State authority in many areas of the north and the north-east favour the smuggling of goods into the neighbouring countries. In addition, the political development in these countries has a decisive importance on the way in which the traffickers sell their diamonds. The ‘delivery’ of diamonds from the proximal Congolese Equateur Province to the CAR, which spread during the civil instability and civil war in DR Congo, has allegedly almost disappeared as a result of the regulation of the purchase networks in Kinshasha, the near stabilisation of the region, and also due to a more favourable tax on the exportation on diamonds; 3.75% in DRC as opposed to 12% in CAR. In the central-eastern part of the country, the lack of any actual control on the part of national and regional authorities has facilitated the introduction of significant illegal mining operations in northern prefectures of Vakanga and Haute-Kotto. Mining villages, and sometimes even towns have been created. These towns, sometimes quite consequent, do not appear on the official administrative maps. However, they are well known by the inhabitants of the region. Ouandja, Ouanda-Djallé, Sam-Ouandja and in particular Yangou-Pendéré are the largest of these new regional diamond centres. Unlike OS00899/J01 117 November 2008 The World Bank Assessment of the Central African Republic Mining Sector the deposits of Carnot and Bria, which have been exploited for more than 70 years and which are only occasionally ‘resupplied’ by annual flood cycles, the deposits in the north eastern prefecture of Haute-Kotto are almost virgin sites and apparently very productive. The lack of security affecting the roads linking this region to Bangui, as well as the national developments in the local commercial networks allowing for alternative routes for their supplies, means many new operators in the diamond industry transport their goods, in absolute secrecy, especially to Sudan. In the more remote areas of the northern prefectures of CAR (Vakanga and Haute-Kotto) bordering the Janub-Dafur and Ghab Bhar al-Ghazal Sudanese states the mayor of Samoundga has reportedly enormous difficulty in controlling the Sudanese refugees who started digging over entire areas in search of diamonds. It has been stated that many criminal groups, and also rebel militias take advantage of this persistent lack of security to attack the operators and the mineral produce Another diamond and gold trade network has developed in Cameroon. This neighbouring country, which is not yet a participant in the Kimberley Process, has several diamond Buying Offices. The national production of this country alone does not justify the presence of so many Buying Offices. Unsurprisingly some of these offices have established purchase centres in the East and Adamawa provinces, not far from the border with the CAR (Nana- Mambéré, Mambéré-Kadéï, and Sangha-Mbaéré prefectures) and organise regular purchasing expeditions as needed. Actual contraband networks have reportedly been created and they exist thanks to the benevolence of certain countries in the Persian Gulf, the Far East and even China, India and Russia, which are all participants in the Kimberley Process. This confirms the concerns expressed by some elements of civil society and advocacy non-governmental organisations in their report for the plenary session of 2007 of the Kimberly Process (held in Brussels) which stated that it is clear that there is a vast trade in rough diamonds parallel to that of the Kimberley Process. It also said that it may occur partly between non-member countries of the Kimberly Process, but that it is becoming increasingly clear that certain member countries of the Kimberly Process take part in this trade. In order to better understand to extent of the fraud, its nature and its mechanisms, an analysis of the different levels of the diamond industry is required. OS00899/J01 118 November 2008 The World Bank Assessment of the Central African Republic Mining Sector The artisanal miners As stated in section 3, the artisanal miners and their labourers live and work in extremely difficult conditions and earn very little money. Most are not registered and their arduous labour does always enable them to meet even their basic subsistence needs. In these destitute conditions they are constantly tempted to accept any ‘business’ proposition, provided that it brings them enough financial gain satisfy their most pressing needs. The majority of them work illegally, and those who have paid for their licence do not always record their finds in the production journals. This is likely done for several reasons: to avoid showing all their output to the financial backer so that they can sell it for a better price elsewhere; out of fear of the Brigade Minière who may demand a ‘payoff’; to avoid letting others know about a monetary gain, and also to avoid being asked for help by everyone, etc. The Administration’s control at these levels of the industry is very limited, given the lack of institutional capacity and the lack of resources for the officials appointed to monitor it. Thus a large part of the production enters the informal network and evades GoCAR control at this initial stage of the mineral value chain. The artisanal cooperatives The problem of fraud at the level of the artisanal cooperatives is the same as for the artisanal miners, only more likely, given that it is extremely difficult for ten owners who contribute unequally to the execution of the works to get along and to share the profits from the sale of the diamonds produced equitably without respecting or forgetting the numerous “people on the side� that require some form of payment. Therefore the financing of the cooperatives must be monitored closely, but diplomatically, by the authorities, for many obvious reasons. The collectors The collectors have become an inescapable power in the diamond sector. They have a greater economic influence than all the other operators in the precious minerals industry. The Mining Code authorises foreigners to perform the task of a collector, under certain conditions. Moreover, the great majority of the collectors are of foreign origin, and have usually branches in adjoining diamond producing countries. The context in which the collectors work leaves them a lot of scope to act and commercially manoeuvre as they see fit. Any effective control of their dealings is difficult, because of their migratory nature and constant movement. In addition, due the financial means at their disposal, they can travel if necessary, in order to sell their diamonds externally. OS00899/J01 119 November 2008 The World Bank Assessment of the Central African Republic Mining Sector It is worth noting that it is easy, due to the internal sales among the collectors, to direct the diamond lots towards the regular network or to the contraband network, according to the need of the moment. The Buying Offices At this level of the value chain, the overall control and monitoring by the Administration are more marked, which leaves less room for fraudulent behaviour. In order to carry out these ‘advantageous operations’, it would be necessary to have the help of some unscrupulous members of the Administration, or a fairly sophisticated system of fraud. All Buying Offices have a main office in Bangui, and the large organisations have purchased branches in the interior of the country. The restocking with money and the removal of the diamonds from these places tends to occur by airplane. The purchase prices, as well as the prices at evaluation, are often adjusted to the level of the market prices of BECDOR, which again avoids more taxes being paid to the State. The rate of taxation on the exportation of diamonds is already very high, which in part motivates the fraud. The Brigade Minière The Brigade Minière acts on behalf of the State to sanction all offences associated with the exploitation and marketing of diamonds and gold. It has ten offices in the interior of the country, in the main mining zones. It is obliged to report all these operations to the Ministry of Mines. Unfortunately, the behaviour of the staff of the Brigade Minière is often criticised by many operators in the industry. Lack of professionalism, widespread ineffectiveness, abuses of power and corruption are some of the serious reported accusations. Not meaning to condone such unprofessional behaviour, it must be recognised that the Brigade Minière does operate with many constraints and is short staffed. Such dishonest practices, though reprehensible in themselves, are unfortunately considered common and wide spread in the country. BECDOR The high tax rate to be paid at the time of exportation of the diamonds from CAR is inevitably an indicative factor with regard to undervaluation and other forms of fraud. The valuation made on the base of market values (lower than the world market prices) reduces the level of the amounts that the Offices have to pay at this stage. OS00899/J01 120 November 2008 The World Bank Assessment of the Central African Republic Mining Sector It would be natural to consider that the expert assessors of BECDOR, during their valuation work, could be subjected to the temptation of collaborating with the exporters, but it would appear that the working environment of BECDOR is relatively impervious to such practices. It is rather the lack of high-tech equipment, retraining and of course, the method of calculation (market related rather than ad valorem) which are implicated. Evaluation of the fraud It is naturally very difficult to establish the figures for fraud in a sector in which even the legal transactions are confidential and poorly defined. Reports from the last ten years indicate national exports of around 400,000 carats/year for an average value of 60 million US$. Professional opinion is strongly divided; the most optimistic speak of 5% fraud although this is more likely to be 30%, and the most pessimistic mention a figure of upwards of 50% and some even 100%. It seems however reasonable to believe that the real value of diamonds produced in the CAR must be between 80 and 100 million US$, and that therefore the level of fraud is situated between 25% and 40%. 5.1.6 The Kimberley Process During the 90s, the exploitation and marketing of natural resources in general, and diamonds in particular, was the object and the means of financing rebellions which destabilised certain countries such as Angola, Sierra Leone, Liberia and the Democratic Republic of Congo. The horrors caused by these rebellions alerted and moved international opinion. The situation was complex, given that the world supply of rough diamonds had been carried out for decades through various routes which are not easily controlled, and that urgent action was necessary to safeguard the diamond industry, which employed a very large number of professionals throughout the world. In May 2000, the South African Government invited various operators in the diamond industry, and some non-governmental organisations to OS00899/J01 121 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Kimberley to reflect on the means to respond to the problems of conflict diamonds. It was decided that it was imperative to find mechanisms for controlling the export and import of diamonds in order to prevent conflict diamonds from infecting the trade in ‘clean’ diamonds. In July of the same year, at the World Congress of Diamond Merchants, the participants founded the World Diamond Council, to represent the entire community of diamond merchants at the negotiations and at the establishment of a new system, which they called the Kimberley Process. As the negotiations continued, the results of the research of non- governmental organisations and the reports from expert groups from the United Nations came to corroborate the first observations. The Kimberley Process Certification Scheme (KPCS) was launched in February 2003. Taking into account the important role played by diamonds in the economies of certain producing countries in Africa and elsewhere, it is imperative to optimise the revenue and the socioeconomic benefits for these Governments and for the communities in the exploitation zones. If applied to the letter, the system of certification of origin today enables the producing countries and the communities to know what their actual production is, and also to be able to receive the exact taxes which are due to them. Obviously, like any new process, the Kimberly Process encountered initial teething troubles. The diamond industry, composed of several sub-sectors (extraction, trade, cutters, jewellery manufacturers and retailers) is so fragmented that it will be difficult to adopt a system of control for the industry as a whole, let alone impose it effectively. The solution for achieving functional mechanisms for the diamond industry is to establish a system of regulation which is universally applicable for all member countries, but ratified for each of the national legislations. The implementation of the Kimberley Process Certification Scheme is an opportunity for the producing countries to bring their laws and control procedures into line within geographic regions, particularly where they share the same resources and operators. The Kimberley Process Certification Scheme has defined a certain number of regulations controlling the trade of rough diamonds, as well as the minimum conditions which must be satisfied by each participant. The Kimberley Process relies on the contribution of its participants, according the principle of ‘distribution of charges’ supported by the diamond sector and observers from non-trading companies. In the CAR, the Permanent Secretariat of the Kimberly Process is comprised of six people: the Permanent Secretary, his assistant, an accountant, a secretary, a driver and a courier. Its task is to ensure the origin of the lots of diamonds exported, to issue a Kimberly Process Certificate of Central African Origin, and to manage the statistics of rough diamond exports and imports in CAR. The Permanent Secretary (PS) or the assistant undertakes monitoring tasks of the Kimberly Process in other member countries and takes an active role in the yearly Plenary Session of the Kimberly Process. OS00899/J01 122 November 2008 The World Bank Assessment of the Central African Republic Mining Sector The PS is in regular contact with the focal areas of the Kimberly Process in other member countries in order to provide them with national statistics on production and exports. In return, it receives from the statistics centre of the Kimberly Process in Canada a list of the shipments of lots originating from the CAR, which have arrived in other member countries, to enable it to make comparisons so that it can verify if there are any discrepancies with the shipments registered at its level. If there are any anomalies, it must carry out an investigation to identify the source of the problem. The operation of this collaboration undergoes delays and difficulties from time to time; this is why an analysis of the statistics for 2006 (the 2007 statistics will not be ready until the beginning of April) carried out by the Working Group for Kimberly Process statistics, showed some discrepancies between the diamond exports for the last four years in the CAR and imports in the destination countries. This disparity in the figures varies from one year to another, as can be seen from the table overleaf: OS00899/J01 123 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Table 9 - Gaps between the exports declared by the Secretariat of the KP in CAR and the destination country countries Year Operation 7102.10 7102.21 7102.31 Total HS Code Net gap Export CAR cts 143 686,82 53 551,94 133 288,37 330 527,13 28 139,28 Import destination country cts 129 128,51 41 628,64 131 630,70 302 387,85 2003 Export CAR US$ 23 835 462,85 1 876 035,83 22 483 900,96 48 186 399,64 3 867 361,73 Import destination country US$ 21 044 837,16 2 190 347,68 21 083 853,07 44 319 017,91 Export CAR cts 325 717,60 2 395,00 21 338,00 349 450,60 4 003,32 Import destination country cts 303 522,61 5 992,92 35 931,75 345 447,28 2004 Export CAR US$ 46 579 647,78 97 450,00 4 915 261,02 51 592 358,80 843 155,73 Import destination country US$ 43 890 553,21 103 716,59 6 754 933,27 50 749 203,07 Export CAR cts 382 126,26 0,00 630,06 382 756,32 -9 709,37 Import destination country cts 384 095,33 0,00 8 370,36 392 465,69 2005 Export CAR US$ 60 133 559,48 0,00 438 843,79 60 572 403,27 -1 185 529,19 Import destination country US$ 60 175 946,34 0,00 1 581 986,12 61 757 932,46 Export CAR cts 415 226,46 0,00 300,00 415 526,46 -5150,30 Import destination country cts 403 226,02 131,56 17 219,18 420 676,76 2006 Export CAR US$ 58 792 575,33 0,00 274 291,00 59 066 866,33 929 142,01 Import destination country US$ 56 111 768,38 61 480,70 1 964 475,23 58 137 724,32 Source : Kimberly Process Statistics OS00899/J01 124 November 2008 The World Bank Assessment of the Central African Republic Mining Sector The main destinations for Central African diamonds are Belgium, Israel and Switzerland. Other destinations such as Armenia, Canada, India, China, Japan, South Africa, the United Arab Emirates and Saudi Arabia received a small share of these exports. The major disparities recorded on this table must be examined more closely, as follows: - In 2003, CAR declared exports of 330,372 carats to the EU, but the authorities in the EU recorded only 302,372 carats of imports from CAR, a difference of 27,745 carats, which is a difference of almost 10%. - In 2004, the largest discrepancies were with Canada, Israel and Switzerland. Canada even recorded the receipt of four certificates that did not record their weight or value. The CAR also reported exports to Switzerland of 1,930 carats to a value of 460,458 US$ for four certificates, and Switzerland recorded 5,623 carats. The situation with the exports to Israel was similar; the CAR exported, with four Kimberly Process certificates for 122 carats and in Israel, they only registered two certificates for weights of 6,510 carats. - In 2005, the differences were much slighter; for the whole year, they were 9,709 carats for a value of 1,190,000 US$. - In 2006, these disparities came to 5,150 carats, to a value of 929,142 US$. As well as from these disparities in volume and weight, the classification with regard to the nomenclature of the Customs code are different as shown in the following table: Table 10 – Disparities in the nomenclature of the Customs codes Average price (US$/ct.) HS Classification 2003 2004 2005 2006 HS Code 7102.10 US$ 165.88/ct US$ 143.01/ct US$ 157.37/ct US$ 141.60/ct HS Code 7102.21 US$ 34.86/ct US$ 40.69/ct 0.00 0.00 HS Code 7102.31 US$ 165.88/ct US$ 230.35/ct US$ 696.51/ct US$ 914.40/ct Average price (US$/ct) HS Classification 2003 2004 2005 2006 HS Code 7102.10 US$ 162.98/ct US$ 144.60/ct US$ 156.67/ct US$ 139.10/ct HS Code 7102.21 US$ 52.62/ct US$ 17.31/ct 0.00 US$ 467.30/ct HS Code 7102.31 US$ 160.17/ct US$ 187.99/ct US$ 189.00/ct US$ 114.10/ct OS00899/J01 125 November 2008 The World Bank Assessment of the Central African Republic Mining Sector The development of the industry over the last four years has shown constant progress, as confirmed by the following figures: Table 11 - Development of production from 2003 to 2006 Export Period Volume cts. Value US$ Difference % 2003 330,527.13 48,186,399.64 In cts. In value 2004 349,450.60 51,592,358.80 2003-2004 + 5,7 % + 7,0 % 2005 382,756.32 60,572,403.27 2004-2005 + 9,5 % + 17,4 % 2006 415,526.46 59,066,866.33 2005-2006 + 8,5 % - 2,5 % 2003-2005 1,062,734.05 160,351,161.71 2003-2005 + 15,8 % + 25,7 % 2003-2006 1,478,260.51 219,418,028.04 2003-2006 + 25,7 % +22,6 % Source: Kimberley Process Statistics The reconciliation of the number of certificates issued by the relevant authorities of the CAR and the number of certificates received by the destination countries demonstrates some gaps, which perhaps should be rechecked by the authorities concerned. Table 12- CAR Kimberley Process certificates (2003) received on Received in certificates certificates Difference in number Total KP error on arrival arrival Participating Destination country Not of Export 92 European Union -44 -44 Import 136 Export 1 Saudi Arabia 1 1 Import Export 5 Slovakia 5 5 Import Export 2 South Africa 1 1 Import 1 Export 4 United States of America 4 4 Import Export 104 Total -33 11 -44 Import 137 OS00899/J01 126 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Table 13 - CAR Kimberley Process certificates (2004) received on Received in certificates certificates Difference in number Total KP error on arrival arrival Not Participating Destination country of Export 6 Canada 2 2 Import 4 Export 104 European Union -4 -4 Import 108 Export 4 Israel 2 2 Import 2 Export 4 Switzerland 0 0 Import 4 Export 2 United Arab Emirates 0 0 Import 2 Export 1 United States of America 1 1 Import Export 121 Total 1 5 -4 Import 120 Table 14 – CAR Kimberley Process certificates (2005) Difference in Not received Received in certificates certificates number of on arrival Total KP error on arrival Participating Destination Country Export 2 Armenia 0 Import 2 Export 1 Canada 1 1 Import People’s Republic of Export 0 China Import Export 56 European Union -2 -2 Import 58 Export 1 India 0 Import 1 Export 24 Israel 0 Import 24 Export 15 Switzerland -5 -5 Import 20 Export 1 United Arab Emirates 1 1 Import Export 9 United States of America 9 9 Import Export 109 Total 4 11 -7 Import 105 OS00899/J01 127 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Table 15 – CAR Kimberley Process certificates (2006) received on Received in certificates certificates Difference in number Total KP error on arrival arrival Not Participating Destination Country of Export 46 European Union 5 5 Import 41 Export 17 Israel 2 2 Import 15 Export 2 Japan 0 Import 2 Export 15 Switzerland 1 1 Import 14 1 United Arab Emirates 1 1 Export 3 United States of America 2 2 Import 1 Export 84 Total 11 11 Import 73 Conversely, the average export prices of exports from the CAR and imports into the countries of destination are fairly similar. Table 16 – Average export prices of exports from the CAR and imports into the countries of destination Year Average price recorded by Average price recorded by the the CAR destination country 2003 US$ 145,79 US$ 146,56 2004 US$ 147,64 US$ 146,91 2005 US$ 158,25 US$ 157,36 2006 US$ 142,15 US$ 138,20 Currently, the CAR Secretariat of the KP uses data supplied by BECDOR to undertake the reconciliation between the official diamond export figures and the national production. It would be much more suitable to establish a census unit within the Secretariat for the production data (artisanal production logs), the purchase notes from the collectors/ Buying Offices and the exports carried out by BECDOR (and for which the Secretariat issues certificates from the KP). These data could be captured by the computerised system, which would then enable reconciliation, at any time, of the production and the exports, which is one of the recommendations of the KP. The Secretariat functions with an appropriate budget, in view of the tasks that it has to accomplish. The salaries of the staff, the travel which is imperative within the framework of the international collaboration of the KP, promotions and general expenses are among the expenses which must be borne by the Secretariat. The s Secretariat' budget is derived from a tax which is levied on all diamond exports, at the level OS00899/J01 128 November 2008 The World Bank Assessment of the Central African Republic Mining Sector of 0.50%. Thus the Secretariat of the KP had a budget of 163,333,014 F CFA (~326,000 US$) at its disposal in 2006, and of 148,773,913 F CFA (~297,000 US$) in 2007. The Secretariat is not autonomous in the management of its budget, and each expenditure must be personally authorised by the Minister in charge of Mines in person. Moreover, it would appear that the budget of the Secretariat is occasionally used for the needs of other organisations which have little or no connection with the KP. Any non-specified or uncertain use of these funds must be reviewed and the responsibility for the management of it must be referred to the Permanent Secretary, who must periodically justify all his expenditure to his superiors in the hierarchy. 5.1.7 Gold The demand for gold is widespread throughout the world. East Asia, the Indian sub-continent and the Middle East represent around 70% of the world demand. More than 50% of the demand is attributable to only five countries: India, Italy, Turkey, the United States and China. Jewellery regularly represents around three-quarters of the demand for gold. During 2006, the turnover of the jewellery trade stood at 44 billion US$, making jewellery one of the largest categories of consumer goods in the world. ! " # !$ % & " !'" %! &! "" (!) !'"*!" * +, - " .! / ! $! & 0 1 ! - '! # 2 3! ")!$ , * $4 Source : World Gold Council [Legend: Shares in the World Gold Reserves. Etats Unis = United States; Allemagne = Germany; Autres Pays = Other Countries; Italie = Italy; Suisse = Switzerland; Japon = Japan; Pays Bas = The Netherlands; Chine = China; Rusie = Russia; Inde = India; Royaume Uni = United Kingdom; Liban = Lebanon; Espagne = Spain; Autriche = Austria; Belgique = Belgium OS00899/J01 129 November 2008 The World Bank Assessment of the Central African Republic Mining Sector The Central African gold industry Gold does not receive as much attention from the CAR Authorities as diamonds. Since its discovery in CAR territory in 1912, in the centre of the country, successive Governments have not deployed the means necessary to control and promote it, which has resulted in an astonishing discrepancy in the export results. The State could however draw considerable revenue by putting in a greater effort to promote, formalise and better regulate this important sub-sector. There are indications of gold in many areas of the country and many promising auriferous deposits have been identified. Currently the company “AURAFRIQUE/AXMIN� is in the advanced exploration stage and if the final feasibility is still strong, could possibly start construction soon; another, “K-MINES� is at a also at an advanced stage in its exploration. The system of pre-financing of the artisanal gold miners is quite similar to that of the diamond industry, with the difference that for gold, the buying price per gram at which it will be sold is often known in advance. The marketing is also informal, and is generally controlled by foreigners who use the gold as hard currency for their own needs. Thus, by pre-financing the artisanal miners, who are generally from their family, ethnicity or country of origin, they retain a high degree of control of “their market�. Many Buying Offices have tried to extend their buying activities to the purchase of gold but they have all failed due to this established competition; the merchant-buyers of the gold do not pay for a precious minerals trading licence, nor do they pay the export taxes. The jewellers The 14 jewellers authorised by the Ministry of Mining are all located in Bangui, and work under the systematic control of BECDOR. The assaying and hallmarking of their production is undertaken by the Industrial Techniques Service. The weak buying power of the CAR nationals has prevented the emergence of a large local market for jewellery. The jewellers operating locally have been forced to adapt to a largely foreign expatriate clientele. In 1993, the State created an organisation called the National Jewellery (Bijouterie Nationale) to help the Central African jewellers to establish themselves and gain experience. The Administration provided the National Jewellery with the appropriate financial means and working equipment. The National Jewellery, already very involved in the development of the jewellery sector in CAR, should have a more active role in the development of the gold industry of the country. The promotion and practical training of student jewellers should be part of its function. OS00899/J01 130 November 2008 The World Bank Assessment of the Central African Republic Mining Sector The BECDOR procedures for exporting gold The procedures for exporting gold are almost identical to those for exporting diamonds, except regarding the assessment of the value of the product and the amount of export taxes to be paid to the State. The value to BECDOR of gold is 5,000 F CFA per gram (~10 US$); and recently the price of gold on the international markets has exceeded 13,000 F CFA per gram (~26 US$). It is fortunate that to calculate the taxes to be paid by the exporter, the purchase price must be stated, and the highest value among the two is taken to calculate these taxes; it is systematically the value of the exporter which is used as the basis for the calculations. Using the stated value, rather than market prices as a basis for payment of the taxes for the gold must cause the State to lose significant amounts of tax revenue. In the majority of countries exporting precious substances, the taxes are calculated ad valorem. The lack of professional equipment and know-how for carrying out a reliable assay has led the directors of BECDOR in certain cases to call on the experience of the Industrial Techniques Service, which is in charge of the hallmarking of all the jewellery manufactured in CAR. Table 17- Structure of taxes on the exportation of gold Tax Destination Rate Exit Fee Taxation department 1% Mining Promotion Fund Ministry of Mining 0.75% Tax for Computer Equipment and Finance Taxation department 0.50% Fixed minimum Tax Taxation department 3% TOTAL 5.25% Industrial Techniques Services The responsibilities of the Directorate for Commercialisation, Industry and Mining Register (Direction de la Commercialisation, de l’Industrie et du Fichier Minier) and of the Industrial Techniques Service (Service des Techniques Industrielles) include the hallmarking of all jewellery manufactured in CAR. The hallmark issued by this department has a dual purpose: it certifies that the taxes due to the State have been paid, and provides a guarantee to the customer of the purity (carat) of the gold in the item of jewellery, which is declared by the jeweller. The method used by this department to assay the gold is not precise. There are currently much better processes which could be used by the authorities to give more credibility to this certification. OS00899/J01 131 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 5.1.8 The organisational and structural constraints The Administration - Lack of contacts in the Administration with the international professional structures (public and private); - Lack of dialogue between the Administration and the professionals operating legally in CAR; - Administrative weakness with regard to enforcing the law; - Lack of sufficient monitoring staff, especially in the mining zones (production statistics, inventory of the purchase notes of the diamonds/gold, verification of tax declarations; - Lack of professional courses on diamonds valuation for the BECDOR staff and trainings of gold assaying techniques; - Lack of a international markets’ prices updating system for diamonds/gold; - Lack of cohesion between the various Administrations. The private sector - Lack of transparency in commercial transactions; - Lack of transparency in the financing of the gold and diamond industries; - The existence of a conflict of interest between different operators in the industry; - A lack of dialogue among the formal operators of the industry to reach a common vision on ways to improve the working environment. Structural constraints - A framework and set-up which is too rudimentary to undertaken competently the exports and the quality control of precious substances (BECDOR and the Industrial Techniques Service); - Scattering of the Buying Offices in different districts of Bangui. The legal constraints - The taxation rate of 12%, which is calculated and partially recovered by BECDOR at the time of export, encourages clandestine exports; - Not using the gold market value to calculate the export taxes thereby reducing the State’s potential revenue; - Lack of a designated Central African institution for the promotion of mining; OS00899/J01 132 November 2008 The World Bank Assessment of the Central African Republic Mining Sector - A lack of legal proceeding following seizure for fraud carried out by the Brigade Minière squads or others; - The lack of legal authority on the part of the mining officers to seize precious minerals and draft statements to the Public Prosecutor (an authority granting the authority to mining engineers the power of judiciary police for application of the Mining Code). The institutional constraints - The lack of a Chamber of Mines or a representative structure for all operators in the mining sector; - The lack of a national institution for the ethics of the industry and the prevention of corruption; - The concentration of decision powers into the Minister’s Cabinet. The security constraints - The widespread lack of security throughout the Central African territory, even in the areas controlled by the Government; - The militarisation of the sector (military presence in most of the Buying Offices in Bangui and in the exploitation zones); - The lack of a system of foolproof and safe transfer of the sealed parcels by BECDOR to the airport. 5.1.9 Conclusions The potentialities of precious mineral exploitation in the CAR are enormous, but their economic and social benefits are slight. Identification of all the shortcomings and difficulties in the mining sector of the CAR, studying them in detail and finding specific solutions for them can be done in a more exhaustive manner. It was done in the past and this study endeavours to consolidate their recommendations, brings them up to date and adds some reforms which are crucial in our point of view. However, it is doubtful whether these efforts will change the situation of this industry in CAR, if a new work spirit is not established by all the participants (the operators and the Administration), where they decide to work together for each other’s interest. An analysis of the marketing system of precious minerals in other countries where the diamond trade has developed in a rational and durable manner, indicates that: - The procedures and regulations of the trade are administered by those in charge of the industry, chosen by all the participants; OS00899/J01 133 November 2008 The World Bank Assessment of the Central African Republic Mining Sector - The operations of the sector are restricted to a defined framework; - This system has enabled them to better control the commercial transactions and to work within well-secured frameworks where they have been able to establish specific services for the operators and where the States can more easily carry out controls. Therefore: - Giving more decisional power to the representative designated by the industry would create a new synergy and will give more credit to entire system; - Reshaping the commercial landscape in Bangui and then gradually in the rest of the country would maintain the existence and development of the industry; - Giving more consistency to the trade regulations would enable more transparency and improve the regulations of competition. It is believed that the one of best ways to improve the current work structure and achieve the above mentioned conditions could be to centralise all the commercial transactions of precious minerals, the associated services and the export formalities, into one, appropriately equipped, complex. All the activities of the Buying Offices, the mining companies and all the Administrations Departments and services associated with mining activities would be housed in this building – a notion currently advocated by some parties in countries like Sierra Leone Recommendations regarding the control of the mining sector - Consider disbanding the Brigade Minière in its current form and create of a new structure combining the officers of the Gendarmerie and of the Police with appropriately trained geoscientists, placed under the authority of the Ministry of Mines, with judicial police powers under oath; - Train and manage the officers of the organisation by national and foreign professionals; - Endow the new control structure with the logistical and financial means to competently carry out their remit; - Create a multidisciplinary commission to investigate breaches committed by the mining Administration officials; - Reinforce the existing regional monitoring staff, appoint new regional representatives; assigning them operational tasks (verification of the mining and commercial activities on the sites, recording of the data obtained and collection of the production logs) and provide them with the means to carry out their mission; OS00899/J01 134 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Recommendations regarding the structure - Encourage the local banks through appropriate awareness campaigns to open branches in the centres of production, offer facilities for the professionals and provide specific products for the precious substances industry. Recommendations regarding the training of staff - Organise training courses for the BECDOR valuers and train new diamond valuers and gold assayers; - Research the appropriateness of a long term concept to create technical schools and training centres for the various careers associated with the mining sector. Recommendations regarding the institutions - Expand, refurbish and appropriately equip the national public institutions in charge of evaluation and quality control and exports (BECDOR, Permanent Secretariat of the Kimberley Process, Industrial Technology Service); - Establish a designated marketing centre for precious minerals in Bangui. Recommendations regarding the legal aspects - Revise the export procedures for diamonds and gold; - Consider splitting the current purchasing permit (Buying Offices and collectors) which allows transactions in all precious minerals, into two separate permits : a diamond buying permit and another permit limited to the purchase of gold; - Review the structure of the gold marketing industry; o Review the current system of tax collection for diamond and gold exports for example Special Diamond Tax, which represents the tax payable by the collectors to the Government, should be paid directly by these collectors to the State, for example in the form of annual taxes; o The Fixed Minimum Tax is a tax on profits, payable by each taxpayer operating in the territory of the CAR subject to the declaration of industrial and commercial profit, from which it is deductible. o The contributions of the Buying Offices, except the export taxes, can be collected annually thus not cumulatively to the taxes recovered at the export procedures. OS00899/J01 135 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 5.2 The impact of the mining sector on the public finances of the Central African Republic (data collection and reconciliation of revenues)63 5.2.1 Generalities The CAR bases its mining policy around a single mechanism, namely adjustments to the fiscal conditions it can apply to the sector. As a result, mining derived income plays a significant role as regards to overall fiscal income, and consequently to national public finances. Management of fiscal income derived from mining is therefore a critical objective for good governance. Structure of the State budget The State’s income mainly originate from: - Taxes and duties paid on commodities that are exported. Given the almost total lack of manufactured products that are exported, and the collapse of the production of exportable cash-crops that provide income (cotton, coffee, and tobacco) the only realistic commodity remaining are minerals (diamonds and gold) and forestry products (logs and lumber) to generate much needed foreign export earnings. The future industrial production of gold, in the central eastern part of the country, cannot yet be taken into consideration. Diamonds generated approximately 2 billion F CFA (~4,000,000 US$) in export duties, while the forestry sector contributed 7.4 billion F CFA (~14,700,000 US$) to the State’s coffers, in the benchmark 2006 year. - Import and excise duties paid on imported products. In this respect the under- performance of customs authorities significantly reduces the expectations which could legitimately be placed on this State agency. Furthermore, in 2006 the sovereign and traditional role of collecting customs duties was outsourced to a private foreign company. However, this attempted privatisation did not enable the chronic inadequacies that had been noted to be corrected. The GoCAR has subsequently complained regarding the agreement with the company Unitec Bénin, although concretisation of the end of the contract is still slow, as Unitec is putting up resistance. There are almost no exportable Central African services being sold abroad. Secondarily, the State generates little revenue from direct and indirect taxes on the operations of manufacturing companies (breweries, tobacco manufacturers, general trade, etc.) and service companies (telephones especially in 2006-2007, transport, general trade, etc.). In 63 This section has been written by Jean-Eudes Teya, Mining Sector Specialist, of Xiane Consult International, Central African Republic; and edited by Wardell Armstrong. OS00899/J01 136 November 2008 The World Bank Assessment of the Central African Republic Mining Sector addition, the number of manufacturing companies and service companies has dramatically dropped over the last ten years, but mobile telecommunications operators have been spared; the turnover of the latter has increased significantly since last year. Regional and local authorities’ revenues Poll tax had previously been collected by traditional chiefs of villages and the constitutional heads of districts. They retained part of the tax as a collection fee, a form of remuneration, and for the needs of local administration. Since it was abolished in 1994, no other new revenue sources have been formulated to replace it as regards to regional and local authorities’ income. Routine market taxes, which are collected from traders who depend upon the daily, weekly and periodical markets throughout the country, do not generate sufficient funds to meet the significant needs of the populations in terms of local social investments, and even basic road, health, and educational infrastructure, leisure facilities, etc. It may be considered rather illusionary to hope that a substantial share of revenues derived from mineral resources could be devoted to regions remote from urban areas, since such resources currently barely cover the salaries of centralised civil service. Civil servants are typically concentrated in Bangui, and, due to their central position at the heart of the Central African administration, may be considered critical in attracting all external aid, but they place enormous pressure on the limited government resources, to the detriment of disadvantaged rural populations. This distortion compromises balanced development of the different regions of the country (urban vs. rural), and constitutes a roadblock to the development of regions remote from urban areas. The construction and the periodic maintenance of the nation’s road network which opens up, and provides greater access to isolated rural areas (the Bangui to Garoua-Boulaï road, the 4th parallel road, the Bangui-Birao road, etc.), the improvement of communication routes (main roads, secondary roads and rural tracks), the construction of a small number of schools and health centres, and the supervision and organisation of rural communities with regards to livelihood and production activities, are all supported at arm’s length by Official Development Assistance funding from the international community, or are financed to a large extent by resources provided by international non-governmental organisations. OS00899/J01 137 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 5.2.2 Financing the rural authorities through taxes on natural resources The centralisation of the collection of taxes on natural resources (the remains of the Treasury’s ‘single fund’ principle) combined with the inadequacy of tax receipts which are mostly allocated to paying the salaries of civil servants and by the activities of the central administration (which constitute priority areas for these funds among the State’s sovereignty expenditure) prevent the construction of economic infrastructure in rural areas. Although there are some promising perspectives in relation to the proposed commencement of the construction of development clusters using initial funding from the European Union, a possible internal solution could involve the transfer of part of these mineral derived tax receipts to the budgets of rural district administrations. This is already the case in the forestry sector and this precedence could be potentially extended to the mining sector. Forestry sector Since the end of the 1990s, all rural districts receive a discount on forestry taxes. However, the application of this fiscal procedure demonstrated that discounts were adopted without any controls, and in some cases were allegedly embezzled by certain local authorities, instead of being used to build rural economic infrastructure. Hence in 2007, the GoCAR established a ‘special district receipts account’ at the Central Bank, and put in place mechanisms to enable the public management of the funds for the benefit of the beneficiary districts.64 Two structures were established: - An inter-ministerial committee to approve fund usage programmes; - A committee to oversee and monitor forest districts’ investment projects. Fiscal discount mechanism: the rural districts in which forestry activities occur is mandated to draw up an annual investment budget which must subsequently be approved by a tri- partite inter-ministerial committee (composed of the Regional Government Agency, Water and Forests, and Finance). Civil society does participate in the decision-making process through the involvement of local non-governmental organisations which sit on Municipal Councils. Detailed budgets elaborate the specifics of development projects planned on behalf of local people (i.e. roads, health centres, educational establishments, the development of markets, etc.). 64 Presidential Instructions N° 001/PR of 16 May 2007 on forest districts’ tax management methods [a bank account was opened for each forest district], with additions provided for in the Presidential Instructions N° 011/PR of 3 September 2007 [Set- up of a Districts’ Receipts Special Account in the accounts of the Central Bank.]. Order n° 008 of 3 October 2007 creating a committee to approve uses of forestry taxes assigned to districts, amended by and with additions provided for in order n° 009 of 26 December 2007. OS00899/J01 138 November 2008 The World Bank Assessment of the Central African Republic Mining Sector The forestry companies are obliged to pay a predetermined share of their income which is payable to districts via the special account held at the Central Bank on behalf of each beneficiary district. After the budget has been approved by the committee, Ministers authorise payment of funds into the districts’ accounts, in three instalments. An evaluation committee verifies the justification of the use of each instalment before any more funds are disbursed. Mining sector It has been reported that the districts that currently accommodate mining activities are insisting that a mechanism to that adopted in the forestry sector, be applied to mining. However, certain districts in the south-west of the country would obtain a double advantage if this was to happen, since they possess both forest and mineral resources (namely Lobaye, Sangha Mbaéré, Mambéré Kadéï, etc.). The extension of this mechanism would however be highly beneficial to districts in the centre and the north of the country which are currently deprived of this type of vital revenue. 5.2.3 Diamonds produced by ASM operators Almost all diamonds in the CAR are produced by the ASM sector (in excess of 99% in weight and approximately 97.55% in value in 2006). In 2006, four Buying Offices handled 98% of flows from ASM operators. Four other Buying Offices had to settle for a share of sales of the remaining 2%. Diamonds from ASM operations amounted to a value of 59.57 million US$ (excluding export taxes), and the average price per carat was 144.38 US$. Receipts for the State were 1.9 billion F CFA (~3.57 million US$). OS00899/J01 139 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Share of diamond production bought by the various Buying Offices (2006) The eight purchasing offices, depending on their positioning and their sources, have very differentiated procurement policies. In 2006, ORDICA did not purchase industrial diamonds, or carbon or boarts; the average price per carat paid was as a result quite high; 1,043 US$ per carat. At the other end of the scale, the company SODIAM appears to have systematically purchased boarts and carbon (27.86% in weight of its sales; no other office exceeded 5%). Its average price per carat was thus 127 US$ per carat above the average value of across-the-board prices. In 2006 there were ten diamond and gold purchasing offices, of which only eight were operating. Table 18 – List of Buying Offices Buying Office Production in F CFA Production in US$ Sodiam 13.203.872.897 26,378,633 DDC 6.736.244.651 13,457,637 Badica 5.658.482.112 11,304,488 Primo 5.033.811.893 10,056,525 ADC 546.029.551 1,090,855 Ordica 160.100.000 319,847 Mex 57.637.866 115,149 Beldiam 41.343.229 82,595.3 Sopicad 0 0 DiamStar 0 0 OS00899/J01 140 November 2008 The World Bank Assessment of the Central African Republic Mining Sector However, a series of Decrees65 adopted on October 3, 2008, have revoked the authorisation of seven of the eight operating Buying Offices, on the basis that they did not respect articles 70 and 103 of the Code Minier, which create the obligation for Buying Offices to export their production monthly, and to invest 250 million F CFA (~500,000 US$) in real estate within three years. Diamonds bought by the Buying Offices in 2006 (ad valorem) 5.2.4 Diamonds mined by industrial operators The production of diamonds by mining companies has always been minimal (see Annex 3, N° History of the production of diamonds since the origin). In 2006, the production of diamonds in official mining statistics originating from the operations of mining companies only accounted for 0.71% of total production, and 2.45% of the total value of national production. However, the cooperative UNCMCA (Union Nationale de Coopératives Minières Centrafricaines, the national union of CAR mining cooperatives) was responsible for almost the entire share of production. However, the equipment and the working methods of the UNCMCA are actually more akin to those of ASM producers than of typical industrialised mining operations. The difficulty of deploying heavy mining plant and equipment (bulldozers, backhoes, excavators, motorised jigs, etc.) appears to be related to the alluvial nature of deposits in the CAR which have relatively low grades. Currently twelve or so mining companies are operating in the gold and diamond areas; they are domiciled in Canada, South Africa, Japan, Italy and Turkey. They currently operate using more mechanised methods; and this may mean that production could possibly increase in the future, especially the production of gold. 65 Decrees n°08.348 to 354, retrieving the authorisation of ORDICA, ADC, CENTRAFRIQUE DIAMANT CAD, BELLO DIAMANT BELDIAM, DIAMSTAR, DIAMOND DISTRIBUTORS CENTRAFRIQUE DDC, GEMME CENTRAFRIQUE GEMCA. OS00899/J01 141 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Table 19 - Statistics of Production of Mining Companies, and Total Production STATISTIQUE DE PRODUCTION DES SOCIETES MINIERES & TOTALE PERIODE DE PRODUCTION : ANNEE 2006 TOTAL (Société) COOPERATIVE TOTAL BUREAUX TOTAL SOCIETES SOCEMINE UNCMCA D'ACHAT GENERAL MINIERES Carats 213,03 2.745,61 2.958,64 412.570,78 415.529,42 Valeur 19.619.024 779.461.668 799.080.692 31.867.522.199 32.666.602.891 Prix unit. CFA 92.095 283.894 270.084 77.241 78.614 Prix unit. $ 172,46 533,64 504,84 144,38 146,95 % Poids 7,20% 92,80% 0,71% 99,29% 100,0% % Valeur 2,46% 97,54% 2,45% 97,55% 100,0% Taxes perçues 1.177.141 46.767.700 47.944.841 1.912.051.333 1.959.996.174 Taux effectifs 6,00% 6,00% 6,00% 6,00% 6,00% Valeur en dollar 36.672 $ 1.456.981 $ 1.493.653 $ 59.567.236 $ 61.060.889 $ Translation: Vertically, Carats, Value, Price per unit in F CFA, Price per unit in US$, % Weight, % Value, Taxes levied, Tax rate, Value in US$; Horizontally, Company SOCEMINE, Cooperative UNCMCA, Total Mining Companies, Total Buying Offices, Grand Total. 5.2.5 Evaluation of mining derived income – 2006 All export-related duties and taxes All of the duties and taxes received in relation to the diamond sector are detailed in the following table66. However, the monetary figure of 3,429,993,304 F CFA (~6,800,000 US$) listed for “fiscal and customs export duties and taxes� is different to the amount detailed in the mining statistics as it sourced from a different document67. The latter, which is a working document drawn up for the Fixed Minimum Tax (Impôt Minimum Forfaitaire) at the time of the review which took place in February and March of 2007, states that the export tax changed to 6% in 2006. To be exhaustive in the analysis of taxation relating to diamond purchasing offices, it is important to include the Fixed Minimum Tax and the tax on collectors; these two forms of taxation taken together generate the same amount of revenue as the 6% export tax; which results in a total of 3,872,047,507 F CFA (~7,700,000 US$) with respect to the various “duties and taxes� levied on the sector. 66 Source: Audit report on the sources of the Ministry of Mines, Energy and Hydraulics’ revenue – first half-year of 2007. 67 Working document of the International Monetary Fund’s mission, dated 24th February to 3rd March 2007 – CTP/PAS (page 40). OS00899/J01 142 November 2008 The World Bank Assessment of the Central African Republic Mining Sector It is this overall fiscal pressure, amounting to nearly 12%, which influences investors, when assessing the comparative advantages and fiscal terms of operating in diamond-producing countries in Africa. By only placing emphasis on the export tax, the monetary figures set out in the various official documents, do not therefore present the full picture as regards to all of the contributions from the diamond purchasing offices sub-sector. The collection of data, the recording of data and follow-up work on data, as well as the publication of data, should be better understood by the departments responsible for mining statistics. This would undoubtedly justify the implementation of more effective procedures, coupled with efficient computerisation of the data. Market entry taxes The category includes the guarantee fund, which is the ‘key money’ that the diamond purchasing offices pay before setting up, and also trading dues, which are paid both by the offices and the collectors who work for them. For the period under review, market entry taxes contributed a sum of 556,126,750 F CFA (~1,100,000 US$). Taxes on ASM production operations These record the trading dues of ASM operators and the mining cooperatives’ registration fees. However, revenue from artisanal miner cards and mine labourers cards, which are paid to local government agencies, and actually produce minimal revenues, have not been included. Operating licences / land area taxes These include, duties levied on new mining licences (and on renewals of mining licences), which are paid on a predetermined periodical basis, and also land area taxes, which are payable annually. For operating licences registration fees amounted to 58 million F CFA (~115,000 US$) in 2006, for the various types of permits. Whereas, land area taxes in 2006 generated a total of 73 million F CFA (~ 143,000 US$). OS00899/J01 143 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Thus the various duties, taxes and fees levied on the diamond sector in 2006 amounted to almost 4.5 billion F CFA (4,480,070,727 F CFA (~ 8,900,000 US$). Regrettably, the variability of the methods used to group together duties and taxes combined with the fluctuation of the rates of taxes make comparisons between different years difficult. OS00899/J01 144 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Cumulated fees accruing from the attribution of mining titles Permit F CFA US$ Reconnaissance permit 19,500,000 ~39,000 Special exploitation permit (for cooperatives) 1,500,000 ~3,000 Research permit 27,000,000 ~54,000 Exploitation permit 10,000,000 ~20,000 Total 58,000,000 ~116,000 Cumulated surface taxes Permit F CFA US$ Exploitation permit 49,000,000 ~98,000 Research permit 24,076,770 ~48,000 Total 73,076,770 ~146,000 Total (mining sector) 131,076,770 ~262,000 Cumulated fees accruing from the creation and operation of Buying Offices (commercial sector) Authorisation F CFA US$ Guarantee Fund (3 Buying Offices) 150,000,000 ~300,000 Licence for Buying Offices (7) 112,660,000 ~225,000 Licence for Collectors 293,466,750 ~586,000 Total (commercial sector) 556,126,750 ~1,111,000 Cumulated fees accruing from the artisanal sector Authorisation F CFA US$ Licence for Artisanal Miners (244) 8,552,200 ~17,000 Agreement of Cooperatives (35) 12,267,500 ~24,500 Total (artisanal sector) 20,819,700 ~41,500 Cumulated taxes levied on diamond export Tax F CFA US$ Diamond export tax (buying offices) 1,912,051,333 ~3,800,000 Diamond export tax (mining companies) 47,944,841 ~100,000 Fixed minimum tax and tax levied on the 1,912,051,333 ~3,800,000 collectors Total (diamond export tax) 3,872,047,507 ~7,700,000 Grand total of revenues accruing from the 4,580,070,727 ~9,150,000 diamond mining sector OS00899/J01 145 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Table 20 - Statistics of Production of Buying Offices (2006) ACHAT STATISTIQUE DE PRODUCTION DES BUREAUX D' PERIODE DE PRODUCTION : ANNEE 2006 TOTAL BADICA PRIMO SODIAM SOPICAD DDC ADC DIAMSTAR ORDICA BELDIAM MEX BUREAUX Carats 39.723,48 54.963,52 195.490,80 0,00 114.885,14 2.275,79 0,00 286,24 4.678,66 267,15 412.570,78 Valeur 5.658.482.112 5.033.811.893 13.203.872.897 0 6.736.244.651 546.029.551 0 160.100.000 471.343.229 57.637.866 31.867.522.199 Prix unit CFA 142.447 91.585 67.542 58.635 239.930 559.321 100.743 215.751 77.241 Prix unit $ 268,26 172,15 127,20 110,63 450,15 1043,51 188,30 391,56 144,38 Cours du $ 531,00 532,00 530,99 530,01 533,00 536,00 535,01 551,00 534,98 Valeur de la production en US dollar 59.567.236 $ Distribution 5 Cts + 1.815,84 2.162,62 3.317,47 0,00 1.346,07 165,41 0,00 106,28 180,13 5,27 9.099,09 Valeur 1.201.698.675 1.262.269.384 1.989.976.388 0 636.549.378 113.484.158 0 82.069.379 80.948.718 2.028.950 5.369.025.030 Prix unit CFA 661.787 583.676 599.848 472.895 686.078 772.200 449.391 385.000 590.062 Prix unit $ 1.246,30 1.102,35 1.129,66 892,25 1.287,20 1.440,67 839,98 698,73 1.104,15 % Poids 4,57% 3,93% 1,70% 1,17% 7,27% 37,13% 3,85% 1,97% 2,21% % Valeur 21,24% 25,08% 15,07% 9,45% 20,78% 51,26% 17,17% 3,52% 16,85% Taillables 31.389,95 36.960,06 110.894,83 0,00 82.646,92 1.931,95 0,00 179,90 3.267,20 240,46 267.511,27 Valeur 4.274.490.102 3.312.793.864 10.363.239.636 0 5.323.872.929 397.522.272 0 78.030.621 353.256.408 54.930.030 24.158.135.862 Prix unit CFA 136.174 89.632 93.451 64.417 205.762 433.744 108.122 228.437 90.307 Prix unit $ 256,45 168,48 176,00 121,54 386,05 809,22 202,10 414,59 168,80 % Poids 79,02% 67,24% 56,73% 71,94% 84,89% 62,85% 69,83% 90,01% 64,84% % Valeur 75,54% 65,81% 78,49% 79,03% 72,80% 48,74% 74,95% 95,30% 75,81% Industriels 6.133,51 13.249,58 26.814,50 0,00 26.237,86 161,16 0,00 0,00 1.127,90 21,42 73.745,93 Valeur 181.882.636 450.019.822 818.313.368 0 772.037.429 35.010.531 0 0 37.029.554 678.886 2.294.972.226 Prix unit CFA 29.654 33.965 30.518 29.425 217.241 32.831 31.694 31.120 Prix unit $ 55,85 63,84 57,47 0 55,52 407,58 0 0 61,37 57,52 58,17 % Poids 15,44% 24,11% 13,72% 22,84% 7,08% 0,00% 24,11% 8,02% 17,87% % Valeur 3,21% 8,94% 6,20% 11,46% 6,41% 0,00% 7,86% 1,18% 7,20% Carbone & Boart 384,18 2.591,26 54.464,00 0,00 4.654,29 17,27 0,00 0,00 103,43 0,00 62.214,43 Valeur 410.699 2.728.823 32.343.505 0 3.784.915 12.590 0 0 108.549 0 39.389.081 Prix unit CFA 1.069 1.053 594 813 729 1.049 633 Prix unit $ 2,01 1,98 1,12 1,53 1,37 1,96 1,18 % Poids 0,97% 4,71% 27,86% 4,05% 0,76% 0,00% 2,21% 0,00% 15,08% % Valeur 0,01% 0,05% 0,24% 0,06% 0,00% 0,00% 0,02% 0,00% 0,12% Translation vertically: Carat, Value, Price per Unit in F CFA, Price per Unit in US$, % Weight, % Value Per Buying Office and per quality (>5cts, gem quality, industrial quality, Carbon and Boart) OS00899/J01 146 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Table 21- Statistics of Exportation of Buying Offices (2006) ACHAT STATISTIQUE DES EXPORTATIONS DES BUREAUX D' EXPORTATIONS DE L'ANNEE 2006 TOTAL BADICA PRIMO SODIAM SOPICAD DDC ADC DIAMSTAR ORDICA BELDIAM MEX BUREAUX Carats 39.723,48 54.963,52 195.490,80 0,00 114.885,14 2.275,79 0,00 286,24 4.678,66 267,15 412.570,78 Valeur 5.658.482.112 5.033.811.893 13.203.872.897 0 6.736.244.651 546.029.551 0 160.100.000 471.343.229 57.637.866 31.867.522.199 Prix unit CFA 142.447 91.585 67.542 58.635 239.930 559.321 100.743 215.751 77.241 Prix unit $ 268,26 172,15 127,20 110,63 450,15 1.043,51 188,30 391,56 144,38 Caractéristiques + 5 cts 1.815,84 2.162,62 3.317,47 0,00 1.346,07 165,41 0,00 106,28 180,13 5,27 9.099,09 Valeur 1.201.698.675 1.262.269.384 1.989.976.388 0 636.549.378 113.484.158 0 82.069.379 80.948.718 2.028.950 5.369.025.030 Prix unit CFA 661.787 583.676 599.848 472.895 686.078 772.200 449.391 385.000 590.062 Prix unit $ 1.246,30 1.102,35 1.129,66 892,25 1.287,20 1.440,67 839,98 698,73 1.104,15 % Poids 4,57% 3,93% 1,70% 1,17% 7,27% 37,13% 3,85% 1,97% 2,21% % Valeur 21,24% 25,08% 15,07% 9,45% 20,78% 51,26% 17,17% 3,52% 16,85% Taillables 31.389,95 36.960,06 110.894,83 0,00 82.646,92 1.931,95 0,00 179,90 3.267,20 240,46 267.511,27 Valeur 4.274.490.102 3.312.793.864 10.363.239.636 0 5.323.872.929 397.522.272 0 78.030.621 353.256.408 54.930.030 24.158.135.862 Prix unit CFA 136.174 89.632 93.451 64.417 205.762 433.744 108.122 228.437 90.307 Prix unit $ 256,45 168,48 176,00 121,54 386,05 809,22 202,10 414,59 168,80 % Poids 79,02% 67,24% 56,73% 71,94% 84,89% 62,85% 69,83% 90,01% 64,84% % Valeur 75,54% 65,81% 78,49% 79,03% 72,80% 48,74% 74,95% 95,30% 75,81% Industriels 6.133,51 13.249,58 26.814,50 0,00 26.237,86 161,16 0,00 0,00 1.127,90 21,42 73.745,93 Valeur 181.882.636 450.019.822 818.313.368 0 772.037.429 35.010.531 0 0 37.029.554 678.886 2.294.972.226 Prix unit CFA 29.654 33.965 30.518 29.425 217.241 32.831 31.694 31.120 Prix unit $ 55,85 63,84 57,47 55,52 407,58 61,37 57,52 58,17 % Poids 15,44% 24,11% 13,72% 22,84% 7,08% 24,11% 8,02% 17,87% % Valeur 3,21% 8,94% 6,20% 11,46% 6,41% 7,86% 1,18% 7,20% Carbones & Boart 384,18 2.591,26 54.464,00 0,00 4.654,29 17,27 0,00 0,00 103,43 0,00 62.214,43 Valeur 410.699 2.728.823 32.343.505 0 3.784.915 12.590 0 0 108.549 0 39.389.081 Prix unit CFA 1.069 1.053 594 813 729 1.049 633 Prix unit $ 2,01 1,98 1,12 1,53 1,37 1,96 1,18 % Poids 0,97% 4,71% 27,86% 4,05% 0,76% 2,21% 15,08% % Valeur 0,01% 0,05% 0,24% 0,06% 0,00% 0,02% 0,12% 339.508.927 302.028.714 792.232.374 404.174.679 32.761.773 9.606.000 28.280.594 3.458.272 1.912.051.333 Taux effectif 6,00% 6,00% 6,00% 6,00% 6,00% 6,00% 6,00% 6,00% 6,00% Valeur en dollar 10.656.220,74 9.461.969,97 24.866.429,76 12.709.743,04 1.024.446,87 298.694,30 880.991,68 104.605,25 59.567.235,73 Translation vertically: Carat, Value, Price per Unit in F CFA, Price per Unit in US$, % Weight, % Value Per Buying Office and per quality (>5cts, gem quality, industrial quality, Carbon and Boart) And levied export tax (tax rate and value in US$) OS00899/J01 147 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 5.2.6 Categorisation of State revenues Table 22 – Categorisation of State revenues Government body Revenue by which tax is Remarks deducted Export Duties Export Duty - 4 % Mining Promotion Fund - 1% SPP Kimberley - 0,5 % Central Computer Processing Fee - (Public Treasury) 0,5 % As well as the export tax, the State collects : : IMF - 3 % Special purchase tax - 3 % Licences from the main Buying Offices (18.5 Each Buying Office has a single main central Central Million F CFA, ~37,000 office US$) Licences from the secondary Buying Offices Central (3.5 Million F CFA, ~7,000 US$) The rates are indicated in point 10 of the Property taxes from the questionnaire, but we were not able to obtain Central mining companies details of the activities of the Mining Registry in 2006 The rates are indicated in point 10 of the Mining cooperatives’ questionnaire, but we were not able to obtain licences details of the activities of the Mining Registry in 2006 Collectors’ licences Central Artisanal miner’s cards Central Mine labourers’ cards Provincial / Local Various fines imposed on Yield unknown in the absence of regulatory Treasury of Bangui offenders laws. Fees to the tax officers and These fees constitute a payment received in Designated tax customs officers who assist addition to the export taxes. They benefit only officers in the exportation the officers mentioned. At the time when this practice was introduced, Accompaniment of parcels there were no security companies in the CAR. Officers from the for export by units from the It is likely that the ‘security function’ will evolve Mining Brigade police force as the private sector becomes more established. Officers from the The current security situation imposes the use Accompaniment through Mining Brigade or of armed escorts on all missions ‘outside the bush terrain by units from from the Central capital’. This does not apply to the mining the police force African Armed Forces sector. This sum is only paid by the Buying Office at Guarantee fund (for the the start of the activity. It is collected by the record) State through a system of 50 Million F CFA (~100,000 depreciation/transfer at a rate of 10% per US$) annum. OS00899/J01 148 November 2008 The World Bank Assessment of the Central African Republic Mining Sector 5.2.7 Categorisation of State expenses In the CAR, it would appear that only the expenditure specifically linked to the chain of exportation is documented, to the exclusion of any other usual expenses such as salaries of GoCAR officials, or the ongoing operating costs of the administration Table 23 - Categorisation of State expenses Expenses Remarks Distribution of the Mining Promotion Fund : Mining Promotion Fund [1% of the export 20 % is used for the valuators’ bonuses value] (managed by the Ministry of Mines 20 % goes to the Ministry of Mines administration with the approval of the Ministry of 60 % is used for various expenses (mission costs, Finances] furniture, fuel, etc.) Kimberley Process (managed by the Subsidies and running costs for the entire Ministry of Ministry of Mines) Mines including expenses for overseas missions 5.2.8 Data reconciliation (public and private sources) After considerable dialogue, unfortunately only two of the Buying Offices agreed to make all their 2006 financial records available in order to enable a reconciliation of their data with that of the official statistics. Notwithstanding this seemingly negative response, the sample does constitute a representative one, because the two willing Buying Offices together actually represent more than half of the diamond exports, both in weight and in value. Structure of taxes and duties The first obvious difference is that the official statistics show only the following as ‘export taxes’: ‘export duties’, ‘computer processing fee’, ‘Mining Promotion Fund’, which became the ‘PDSM’68 in 2000 and ‘Kimberley Process Tax’. The Fixed Minimum Tax/IMF and the ‘special purchase tax’ do not appear in the monthly or annual mining statistics, and yet their figure equates to that of the export taxes (see Table overleaf) 68 PDSM : Projet de Développement du Secteur Minier [Mining Sector Development Project] OS00899/J01 149 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Table 24 - Comparison of the information given by the public sector - Administration in charge of Mines, and Fiscal Administration - with the information from the fiscal 1 archives of the Buying Offices (N° and N° 2) Fixed Minimum Tax, Exit Fees and Value in Cts Value in F CFA Special Taxes and Taxes Miscellaneous Buying Office N° 1 39 724,36 5 658 482 112 339 508 927 343 743 415 Statistics 39 723,48 5 658 482 112 339 508 927 - VOID - Differences 0,0022% 0,0000% 0,0000% Fixed Minimum Tax, Exit Fees and Value in Cts Value in F CFA Special Taxes and Taxes Miscellaneous Buying Office N° 2 195 489,75 13 184 374 091 791 062 445 802 953 864 Statistics 195 490,80 13 203 872 897 792 232 374 - VOID - Differences -0,0005% -0,1479% -0,1479% Fixed Minimum Tax, Exit Fees and Value in Cts Value in F CFA Special Taxes and Taxes Miscellaneous Total Of N°1 and N° 2 235 214,11 18 842 856 203 1 130 571 372 1 146 697 279 Statistics 235 214,28 18 862 355 009 1 131 741 301 - VOID - Differences -0,0001% -0,1035% -0,1035% For many diamond merchants, this issue is a significant one: in all the countries in which they operate, they consider the taxation which affects their sector of activity to be composed of all the payments that they make to the State and these are usually designated (duties, taxes, fees (export) taxes etc). This is one of the fiscal parameters which allows investors to classify and compare countries and to gain an initial understanding with respect to the business climate and fiscal stability of the diamond sector.69 69 N.B.: January 2006 was the last month in which the ‘IDV tax’69 was collected. OS00899/J01 150 November 2008 The World Bank Assessment of the Central African Republic Mining Sector External cohesion This facilitates a comparison of the data supplied by each Buying Office with its performance as shown in the official statistics of the Ministry of Mines. The results are shown in the table overleaf and appear satisfactory on the whole. The variation in caratage is considered normal, as it can vary from one stage to the other of the evaluation/export process: discovery and withdrawal of non-diamonds, precision and conditions of the weighing, etc. This is commonplace and in the same bundle of export documents, different forms sometimes record different weights.70 70 N.B.: The Buying Offices have stated that there may be some small material errors and discrepancies, in the data they provided due to the fact that they processed their raw data quickly in order to dispatch it urgently to our team. OS00899/J01 151 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Table 25 - Data supplied by Buying Office N°1 Kimberley N° the tax Permit for and Finance Exit Fee (4%) Independent Equipment Permanent Secretariat Promotion Kimberley Fund (1%) Computer Minimum Diamond Tax (3%) Valuator Process Taxable (F CFA) Special TOTAL Weight buying Mining (0,5%) Value Fixed (Cts) Date (1%) (3%) Exit Tax N° of 14/01 A001 351 2 885,37 423 448 838 16 937 953,52 12 703 465,14 4 234 488,38 2117244,19 4 234 488,38 2 117 244,19 12 703 465,14 55 048 348,94 21/02 F007 359 3 605,34 543 335 303 21 733 412,12 16 300 059,09 2 716 676,52 5 433 353,03 2 716 676,52 16 300 059,09 65 200 236,36 30/03 D017 370 7 124,61 960 479 700 38 419 188,00 28 814 391,00 4 802 398,50 9 604 797,00 4 802 398,50 28 814 391,00 115 257 564,00 30/04 X028 384 4 090,96 593 678 160 23 747 126,40 17 810 344,80 2 968 390,80 5 936 781,60 2 968 390,80 17 810 344,80 71 241 379,20 19/05 C034 390 2 885,14 393 777 952 15 751 118,08 11 813 338,56 1 968 889,76 3 937 779,52 1 968 889,76 11 813 338,56 47 253 354,24 09/06 F039 396 2 455,39 331 535 417 13 261 416,68 9 946 062,51 1 657 677,09 3 315 354,17 1 657 677,09 9 946 062,51 39 784 250,04 30/06 G043 251 1 398,10 197 556 772 7 902 270,88 5 926 703,16 987 783,86 1 975 567,72 987 783,86 5 926 703,16 23 706 812,64 12/07 I045 253 2 629,54 350 239 880 14 009 595,20 10 507 196,40 1 751 199,40 3 502 398,80 1 751 199,40 10 507 196,40 42 028 785,60 31/07 M050 258 1 439,83 231 749 746 9 269 989,84 6 952 492,38 1 158 748,73 2 317 497,46 1 158 748,73 6 952 492,38 27 809 969,52 14/08 O052 260 1 177,02 228 694 430 9 147 777,20 6 860 832,90 1 143 472,15 2 286 944,30 1 143 472,15 6 860 832,90 27 443 331,60 29/09 T062 274 3 494,12 548 561 738 21 942 469,52 16 456 852,14 2 742 808,69 5 485 617,38 2 742 808,69 16 456 852,14 65 827 408,56 02/10 U063 275 1 553,33 172 377 057 6 895 082,28 5 171 311,71 861 885,29 1 723 770,57 861 885,29 5 171 311,71 20 685 246,84 31/10 Y069 282 2 191,56 316 606 854 12 664 274,16 9 498 205,62 1 583 034,27 3 166 068,54 1 583 034,27 9 498 205,62 37 992 822,48 30/11 A077 291 1 154,17 131 752 280 5 270 091,20 3 952 568,40 658 761,40 1 317 522,80 658 761,40 3 952 568,40 15 810 273,60 21/12 E082 296 1 639,88 234 687 985 9 387 519,40 7 040 639,55 1 173 439,93 2 346 879,85 1 173 439,93 7 040 639,55 28 162 558,20 TOTAL 39 724,36 5 658 482 112 226 339 284,48 169 754 463,36 4 234 488,38 28 292 410,56 56 584 821,12 28 292 410,56 169 754 463,36 683 252 341,82 Tax rate 12,07% Found in official statistics : 339 508 927 Not found in official statistics : 343 743 415 OS00899/J01 152 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Internal cohesion 2 Buying Office N° recorded the same purchase value for the batch of 30/11 and that of 22/12. This is a material error which we have corrected. Similarly, the caratages entered for the first and fifth exports are incorrect. The values shown are the correct values from the export documents. The other remarks are directly recorded in the table on the following table. Table 26- Data supplied by Buying Office N°2 Fixed Minimum Tax Kimberley Process Special buying tax Diamond Valuator Mining Promotion Tax for Computer Secretariat of the Equipment and Exit Permit N° Finance (0,5%) Taxable Value Kimberley N° Exit Fee (4%) Independent Permanent Fund (1%) (F CFA) Weight TOTAL (Cts ) Date (3%) (1%) (3%) If the Special Buying Tax had been calculated on BECDOR, the following column (in blue) shows the basis of the Taxable Value as evaluated by 31/01 D005 356 17 606,75 1 466 294 572 58 651 782,88 43 988 837,16 14 662 945,72 7331472,86 14 662 945,72 7 331 472,86 43 988 837,16 190 618 294,36 04/03 I010 363 30 698,10 1 235 484 000 49 419 360,00 37 064 520,00 6 177 420,00 12 354 840,00 6 177 420,00 37 064 520,00 148 258 080,00 24/03 M014 367 16 808,37 1 276 488 180 51 059 527,20 38 294 645,40 6 382 440,90 12 764 881,80 6 382 440,90 38 294 645,40 153 178 581,60 which amounts would have been levied/. 07/04 R021 375 15 792,59 859 266 000 34 370 640,00 25 777 980,00 4 296 330,00 8 592 660,00 4 296 330,00 25 777 980,00 103 111 920,00 06/05 Z031 387 12 786,29 1 175 672 000 47 026 880,00 35 270 160,00 5 878 360,00 11 756 720,00 5 878 360,00 35 270 160,00 141 080 640,00 09/06 F038 395 11 841,72 1 147 685 500 45 907 420,00 34 430 565,00 5 738 427,50 11 476 855,00 5 738 427,50 34 430 565,00 137 722 260,00 07/07 H044 252 12 103,06 1 290 028 000 51 601 120,00 38 700 840,00 6 450 140,00 12 900 280,00 6 450 140,00 38 700 840,00 154 803 360,00 18/08 P054 263 34 568,71 1 075 307 050 43 012 282,00 32 259 211,50 5 376 535,25 10 753 070,50 5 376 535,25 32 259 211,50 129 036 846,00 29/09 T061 273 14 262,39 1 077 211 000 43 088 440,00 32 316 330,00 5 386 055,00 10 772 110,00 5 386 055,00 32 316 330,00 129 265 320,00 31/10 Y068 281 12 162,39 1 097 889 000 43 915 560,00 32 936 670,00 5 489 445,00 10 978 890,00 5 489 445,00 32 936 670,00 131 746 680,00 03/11 Z072 285 1 207,85 177 129 289 7 085 171,56 5 313 878,67 885 646,45 1 771 292,89 885 646,45 5 313 878,67 21 255 514,68 30/11 A075 289 7 618,81 726 959 000 29 078 360,00 21 808 770,00 3 634 795,00 7 269 590,00 3 634 795,00 21 808 770,00 87 235 080,00 22/12 C81 295 8 032,72 578 960 500 23 158 420,00 17 368 815,00 2 894 802,50 5 789 605,00 2 894 802,50 17 368 815,00 69 475 260,00 TOTAL 195 489,75 13 184 374 091 527 374 963,64 395 531 222,73 14 662 945,72 65 921 870,46 131 843 740,91 65 921 870,46 395 531 222,73 1 596 787 836,64 Tax Rate. 12,11% OS00899/J01 153 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Table 26- Data supplied by Buying Office N°2 Value when bought Kimberley Process Special buying tax Diamond Valuator Mining Promotion Tax for Computer Secretariat of the Fixed Minimum Equipment and Exit Permit N° Finance (0,5%) Taxable Value Kimberley N° Exit Fee (4%) Independent Permanent Fund (1%) Tax (3%) (F CFA) Weight TOTAL (Cts ) Date (1%) (3%) 31/01 D005 356 17 606,75 1 466 294 572 58 651 782,88 43 988 837,16 14 662 945,72 7331472,86 14 662 945,72 7 331 472,86 1 368 381 000 41 051 430 187 680 887,20 04/03 I010 363 30 698,10 1 235 484 000 49 419 360,00 37 064 520,00 6 177 420,00 12 354 840,00 6 177 420,00 1 235 484 000 37 064 520 148 258 080,00 24/03 M014 367 16 808,37 1 276 488 180 51 059 527,20 38 294 645,40 6 382 440,90 12 764 881,80 6 382 440,90 1 272 513 000 38 175 390 153 059 326,20 07/04 R021 375 15 792,59 859 266 000 34 370 640,00 25 777 980,00 4 296 330,00 8 592 660,00 4 296 330,00 859 266 000 25 777 980 103 111 920,00 06/05 Z031 387 12 786,29 1 175 672 000 47 026 880,00 35 270 160,00 5 878 360,00 11 756 720,00 5 878 360,00 1 175 672 000 35 270 160 141 080 640,00 09/06 F038 395 11 841,72 1 147 685 500 45 907 420,00 34 430 565,00 5 738 427,50 11 476 855,00 5 738 427,50 1 147 685 500 34 430 565 137 722 260,00 07/07 H044 252 12 103,06 1 290 028 000 51 601 120,00 38 700 840,00 6 450 140,00 12 900 280,00 6 450 140,00 1 290 028 000 38 700 840 154 803 360,00 18/08 P054 263 34 568,71 1 075 307 050 43 012 282,00 32 259 211,50 5 376 535,25 10 753 070,50 5 376 535,25 1 075 307 050 32 259 212 129 036 846,00 29/09 T061 273 14 262,39 1 077 211 000 43 088 440,00 32 316 330,00 5 386 055,00 10 772 110,00 5 386 055,00 1 077 211 000 32 316 330 129 265 320,00 31/10 Y068 281 12 162,39 1 097 889 000 43 915 560,00 32 936 670,00 5 489 445,00 10 978 890,00 5 489 445,00 1 097 889 000 32 936 670 131 746 680,00 03/11 Z072 285 1 207,85 177 129 289 7 085 171,56 5 313 878,67 885 646,45 1 771 292,89 885 646,45 167 135 000 5 014 050 20 955 686,01 30/11 A075 289 7 618,81 726 959 000 29 078 360,00 21 808 770,00 3 634 795,00 7 269 590,00 3 634 795,00 726 959 000 21 808 770 87 235 080,00 22/12 C81 295 8 032,72 578 960 500 23 158 420,00 17 368 815,00 2 894 802,50 5 789 605,00 2 894 802,50 598 459 306 17 953 779 70 060 224,18 TOTAL 195 489,75 13 184 374 091 527 374 963,64 395 531 222,73 14 662 945,72 65 921 870,46 131 843 740,91 65 921 870,46 13 091 989 856 392 759 696 1 594 016 309,59 Tax Rate. 12,09% 2 1 – On its Synthesis Note, Buying Office N° announces a total of 179.838,27 carats bought in the year, despite the summation amounting to 195.489,80 cts. The 15.653, 53 carats difference corresponds roughly to the last two export operations (30/11 and 22/12). This is probably therefore a mere but significant calculation mistake. 2 –Buying Office N°2 calculates the Special buying Tax of 3% on the basis of the buying costs, and not on the basis of the taxable value evaluated by BECDOR, thus the difference of ~2,8 million F CFA (~5,600 US$) Found in official statistics : 791 062 445 Not found in official statistics : 802 953 864 OS00899/J01 154 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Analysis Complexity: The complex structure of the taxation on diamonds makes it somewhat difficult to comprehend, and does not offer a single ‘characteristic’ which would enable the departments responsible for the collection of the various taxes to make informed deductions at source under the various categories (profit-sharing, shares etc.). This is certainly not advantageous for the overall tax yield. Procedure: It appears that the two Buying Offices under review have not calculated certain taxes in the same manner. The tax in question is the ‘Special Purchase Tax’. One of the Buying Offices makes a deduction of 3% on the taxable basis, while the other makes it on its purchase value. One potential solution to this small predicament would be to standardise the procedures, as the market price list already does for the valuation of the parcels. Stabilisation of the taxation structure: The structure of the taxation on diamonds is very unstable, and every two years, if not every year, a new tax is created or is revoked, is amended, or is transformed into another tax etc. Such a perplexing situation makes it difficult to predict the business environment, and is therefore encouraging clear disincentive for responsible investment in the diamond sector. It is questionable whether it is advantageous that the standardisation of marketing taxes is undertaken annually and linked to the Finance Laws, and is therefore based only on budgetary requirements, regardless of the constraints and parameters of the diamond market, the performance criteria or the development objectives of the sector. By way of an example, the list below shows the change in the structure of this tax71 between 1988 and 1995. It becomes practically impossible to ascertain whether the tax revenue is improving or deteriorating from one year to another, because there is no single taxation structure. 71 Source : J.E. Teya, “Revue du secteur Minier centrafricain�, étude réalisée en mars 2004 pour la Mission de consultation multi-bailleurs conduite par la Banque Mondiale [“ Review of the Central African Mining Sector “, a study carried out in March 2004 for a multiple-sponsor consultation mission conducted by the World Bank] OS00899/J01 155 The World Bank Assessment of the Central African Republic Mining Sector - (Budgetary) Ordinance 82.006 of 20 Jan. 1982 Mining tax (diamonds) :10 % Export tax (diamonds) :8 % Special tax for the Buying Offices (IMF) :2 % - (Budgetary) Ordinance 85.003 of 29 Jan. 1985 Single tax (Mining tax + Export tax) :10 % Fixed Minimum Tax :2 % - (Budgetary) Ordinance 88.009 of 24 Feb. 1988 Tax on raw diamond exports :10 % Tax on gold exports :3 % Special tax ( company tax instalment ) :2 % - (Finance) Law N° 92.001 of 29 Feb. 1992 Single tax (Mining tax + Export tax) :8 % Fixed Minimum Tax :2 % - (Finance) Law N° 94.003 of 22 Mar. 1994 Tax on export of raw diamonds :8 % - (Finance) Law N° 95.001 of 22 Feb. 1995 Export tax on the export of diamonds :6 % Tax on export turnover :2 % A memorandum from the General Directorate of Customs and Indirect Taxation indicated the break-up of these two taxes between the various tariff positions, as follows: - Export Tax (Taxe à l’Exportation) : 3% - Fixed Minimum Tax (Impôt Minimum Forfaitaire - IMF) : 2% - Mining Promotion Fund (Fond de Promotion Minière - FPM): 1% - Tax on Company Turnover (Taxe sur le Chiffre d’Affaire des Entreprises - TCAE) : 2% - Tax for Computer Equipment and Finance (Redevance Equipement Informatique et Finance - REIF) : 0.08% - Customs Computer Processing Fee (Redevance Informatique Douane Trésor - RIDT) : 0.17% Errors due to manual processing: On the two permits from January 2006 (for the two Buying Offices examined) under column [5] Export tax collected by the State, the value of the 2 Independent Valuator tax (1%) was entered for Buying Office N° and the value of the 1. export tax (4%) was entered for Buying Office N° The last value is the standard practice. OS00899/J01 156 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Numbering of the permits: The numbers of the permits are not consecutive (or do not increase) in the chronological order of the exports. It appears that many different log books have been used. This makes it impossible to maintain strict control of the documents issued, as fraudulent documents may have been created with certain missing numbers. Conclusions The analysis conducted here for the purpose of reconciliation of the data arising from the official statistics and the financial archives of the Buying Offices has enabled certain conclusions to be deduced. 5.2.9 Distribution of mining revenue among the various operators in the industry The revenues generated by mining activity (particularly diamond mining) support the national economy, as they are distributed between the various government departments and non- government operators. By making some assumptions and estimations regarding the organisation of the sector, the contractual relationships between the various operators, the rates of the various taxes, the cost of services etc., an assessment of the likely distribution of the cash between the various areas and stakeholders has been attempted. Public operators State (Public Treasury): The State essentially receives the export tax, the collectors’ licences, the artisanal mining licences, and the revenue from the artisanal mining and labourers’ cards. The VAT levied on the sale of small mining equipment has not been included. Local communities: The local communities do not yet receive a share of the mining taxation. They only receive an indirect share originating from the artisanal miners who live in these communities and spend money within the local economy. OS00899/J01 157 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Private operators Artisanal miners72 (~1.000 officially registered) and mine labourers: In the official terminology in the CAR, the artisanal miners are the team leaders and mine owners. They employ a workforce with high numbers of mining labourers. The former pay for an artisanal mining licence, whereas the latter buy a mining labourer’s card from the local administration; the traceability of the revenue arising from the sale of the cards is poor. For the purpose of this particular study, the artisanal population (artisans, labourers and associated services) will be, as an assumption, conservatory estimated at 100,000 mine labourers and 1,000 artisanal miners73. The ASM sector is completely dependent on the collectors, who provide them with equipment and food, and they are paid when the diamonds are traded. Only a small number of them have attempted to enfranchise themselves by forming mining cooperatives. Collectors (293): These are the intermediaries between the Buying Offices, which finance them, and the artisanal miners, whom they supervise and manage. As they generally have greater revenue at their disposal, they are in a position to dictate the conditions of the contracts which bind the artisanal producers to them. Buying Offices (7): Largely comprised of expatriates, the officers of the Buying Offices are intermediaries between the national market and the international markets, with considerable and valuable knowledge of the national diamond sector and market. This knowledge, long held exclusively by them, has largely protected them from competition from national operators, and given them sole mastery of the Central African diamond industry. However, over the last twenty years, certain national operators have been gradually starting to gain access to the international markets, either overtly (through creation of companies or acquisition of holdings) or by illegal, or indirect means (fraud, travel, etc). Service providers The service providers also share in the results of the mining and marketing of diamonds. Examples of these are transport services (domestic or international), the purchase of fuel for pumping operations on the mining sites, the distributors of small mining equipment, the insurance providers for the Buying Offices and for local and international transport, the 72 There is a great disparity in the official figures issued by the Ministry of Mines : thus the “Report of the Audit of Sources of Revenue� gives the number 244 as the population of artisans in 2006 [Page 12], whereas the “Report of the Activities of the Marketing Department and the Mining Sector “ gives the figure of 938 when showing the regional distribution. For the purposes of this study, we will use the approximate figure of 1,000. The same documents also give different figures for the number of collectors (293 as opposed to 298 – 1.7% ) and for the amounts received from licenses in 2006 (F CFA 293,466,750 as opposed to F CFA 297,298,500 – 1.3%). 73 For a discussion on the number of artisanal miners and mine labourers in the CAR, see section 3. OS00899/J01 158 November 2008 The World Bank Assessment of the Central African Republic Mining Sector telecommunications providers, the security companies, the banking services, etc. The diamond industry actually indirectly supports several other economic sectors. 5.2.10 Fraud General nature and types of fraud The level of fraud has been subject to many different evaluations, and has been considered as being between 25% and 40% in this report. A study of public finances should focus on the extent that the fraud disrupts the mining sector and depletes the financial resources of the State. The following types of fraud have been distinguished: Occasional fraud, such as that undertaken by opportunist travellers who manage to buy a few diamonds and then try to make a quick profit by evading the scrutiny of the inspection services; Organised fraud, which is carried out by specialised networks or corrupt economic operators, specialised in this type of criminal activity. Box 12 - Variation of the average price per carat Variation du Prix moyen par Carat 180 160 140 120 US $ollar 100 80 60 40 20 0 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 OS00899/J01 159 November 2008 The World Bank Assessment of the Central African Republic Mining Sector There are several driving factors behind the fraudulent activity: Firstly, the differing taxation systems in the neighbouring countries. As many of the neighbouring countries (Cameroon, DR Congo) have a more attractive taxation system, fraud networks smuggle the stones out of the CAR fraudulently in order to export them officially from these countries. Secondly speculation with some fortunate collectors able to amass large batches of diamonds. With significant means at their disposal, and knowledge of the international markets, as well as the local socio-political and economic contacts, they take advantage of the GoCAR poor resources for policing in order to export fraudulently the diamonds. Next there is fraud linked to trade between sectors. Customs fraud in the importation of ‘fast moving’ consumer goods is generally ‘resolved’ by the illegal exportation of diamonds. Thus the flow of goods coming and going escapes the vigilance of the customs services and the scrutiny of the GoCAR. Lastly the ’flight’ of large rough stones. The operators questioned were unanimous in declaring that large stones are rare in CAR. In fact, between 1999 and 2001, an underlying drop was observed in the average price per carat of raw diamonds, which went from $US 144/Ct to $US 125/Ct. It is highly unlikely that this trend can be attributed to geological reasons, but more probably to fraud which concentrates on large stones. In the same way, the significant drop of the price per carat between 1978 and 1983 may be linked to the extremely high rate of the export tax at that time [20%], which drove more exports towards illegal and fraudulent channels. Another explanation can be found in the reported financial harassment by the Brigades Minières of the artisanal miners who declare the large stones. Estimation of the fraud High: The high estimation of the fraud (50% and higher), arises from comparison of the number of official exports with that of the diamonds declared in Belgium with provenance from the CAR. But the declaration of origin carried out upon the entry of the diamonds into Belgian territory is purely nominal. Even though the Kimberley Process has strongly increased the traceability of the circulation of diamonds, a certain impenetrability and deliberate evasion still remains in the market. OS00899/J01 160 November 2008 The World Bank Assessment of the Central African Republic Mining Sector The statistics recorded in Belgium which describe the origin of the diamonds must therefore be treated with caution when used for documenting the level of the fraud74. Low: The professionals of the sector, as well as the private companies and government bodies responsible for the investigation and suppression of fraud, believe that the incidence of fraud is probably in the region of 5%. However, it would be reasonable to assume that this is a very low and unrealistic underestimate and a more conservative low estimate would be in the order of 30%. A third approach consists of regarding the figure of 635,935 carats achieved in 1968 as the annual potential which the level of technological development and other parameters associated with the mining conditions in the CAR enabled to be produced. It could therefore be said that from 1995 to 2002, the average incidence of fraud was around 28% of the weight of production. It is known that traffickers are usually only interested in large stones; that being the case, it is possible to estimate the average value of fraudulently exported goods. Making the double hypothesis that fraud represents around 28% of the production, and that the average value of the fraudulent stones is around $US 280/Ct, that is, double the average value, we can estimate that for the last twelve years the level of fraud totalled 7 million dollars per year. Whatever the origin or the level of the fraud, it places the GoCAR at a disadvantage due to loss of taxation revenue (customs, marketing tax, duty) and also reduced flow of moneys which are meant to pass through official routes (banks, insurance companies, etc.). 5.2.11 Conclusions and recommendations The contribution of the mining sector to the public finances of the State is diminished by many aspects of the current taxation and by the obstacles which persist in the business environment. The structure of the taxes and duties is overly complex, even though all the revenue is generally destined for the Public Treasury. The concept of a ‘single office’ for the exportation of diamonds and gold and even for all the taxation to be levied (export tax, duties, etc) would be of enormous benefit to the current operators. This would enable the diamond export companies to draw a single cheque and deal with only one authority in a single location (resulting in a saving of time and a reduction of levies). The absence of a regulatory law makes it impossible to determine the yield from certain taxes, for example: fines imposed on offenders, property taxes levied on the mining 74 This prudent approach was also adopted by the Mission for Inspection of the Kimberley Process in the Central African Republic (8 to 15 June 2003), which moreover enumerated in its report at least five reasons which could lead certain importers to declare diamonds originating from other sources as Central African. OS00899/J01 161 November 2008 The World Bank Assessment of the Central African Republic Mining Sector companies, and licences bought by the mining cooperatives. Increasing the scope of activities of the officers responsible for recording mining statistics, and providing effective, adapted computer software at their disposal and at the disposal of the private sector, would enable a better assessment of the levels of production, the flow of moneys and the levels of taxes. In many diamond (and gold) exporting countries, the administration officials are skilled professionals who speak the same language as their subordinates and are experienced in the workings of the international market. A lack of knowledge of the intimate workings of the international diamond (and gold) market is often apparent in the management of the GoCAR administration and has proven to be the source of several failures of understanding. Central African officials must have more regular exposure to the realities of the international diamond and gold market. An improvement of the organisation of the export process is necessary in order to evade flaws and to avoid creating opportunities for fraudulent behaviour (continuous numbering of the permits and the Kimberley certificates, for example, or standardisation of the methods of calculating the taxes in order to obtain ‘tax justice’). Interest by the local populations in deriving a share of the distribution of the mining revenue, following the example of the forestry sector, could also lead civil society to participate at the side of the GoCAR in the fight against fraud. Finally, harmonisation of the rates of export taxes within the CEMAC75 or the CEEAC76, accompanied by standardisation of the valuation methods, even if that still seems like a remote or utopian aim, could be an advantageous progression for the mineral producing countries of central Africa. 75 Afrique Centrale, or Central African States Translator’s note: CEMAC = Communauté Économique et Monétaire de l' Economic Community 76 Translator’s note: CEEAC = Communauté économique des États de l’Afrique centrale, or Economic Community of Central African States OS00899/J01 162 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Repartition of mining income OS00899/J01 163 November 2008 The World Bank Assessment of the Central African Republic Mining Sector OS00899/J01 164 November 2008 The World Bank Assessment of the Central African Republic Mining Sector ANNEXES Annex N° 1 Competitive Position and Recommendations for Reform of the CAR Mining Sector Fiscal System, by Professor James Otto Annex N° 2 Environmentally Protected Areas and Gold and Diamond Deposits in the Central African Republic Sources: Map compiled by Wardell-Armstrong using own data (mineral resources) and data collected from the Convention on Biological Diversity website http://www.biodiv.be (environmentally protected land). Annex N° 3 Historic of diamond production since the origin Annex N° 4 Audit Report on the sources of revenues of the Ministry of Mines, Energy and Hydraulics, first trimester 2007 Rapport d’audit des sources de recettes du ministère des mines, de l’énergie et de l’hydraulique, 1er trimestre 2007 Annex N° 5 Rapport d’audit des bonus de signatures des conventions minières, des transferts de parts de capitaux propres et leur utilisation pour la période 2004 à 2006, 31 décembre 2007 Audit Report on the engagement bonuses of mining conventions, transfer of share of capital and their use for the 2004-2006 period, December 31, 2007 Annex N° 6 Documents collected OS00899/J01 November 2008 The World Bank Assessment of the Central African Republic Mining Sector OS00899/J01 November 2008 Annex N° 1 Competitive Position and Recommendations for Reform of the CAR Mining Sector Fiscal System Prepared by Wardell Armstrong LLP in association with James Otto Table of Contents 1. Executive Summary …………………………………………………………..... 1 2. Factors Affecting Investment Decision Making By International Mining Companies ……………………………………………………………...... 12 3. The Taxation Dilemma Faced by All Governments: Fiscal diversity or uniformity? ………………………………………………..... 17 4. Description of the Existing CAR Mining Fiscal System …………………...... 20 5. Description of the Standard Gold Mine Model ………………………....…..….. 29 6. Comparison of the CAR Tax System to Minerals Tax Systems in Selected Countries ……………………………………………………….....… 34 7. Tax System Sensitivity to Prices and Costs ……………………………....…… 38 8. Comparisons of Approaches and Rates in a Cross-Section of Countries for a Selection of Different Tax Types ………………………...…. 42 9. Summary, Final Observations, and Recommendations: Large Scale Mines…………………………………………………………….……....…..…… 91 References ……………………………………………………………….........………….. 98 Abbreviations CSM Colorado School of Mines DETR Effective Tax Rate (discounted at 12%) ETR Effective Tax Rate (undiscounted) IRR Internal Rate of Return NPV net present value UNCTAD United Nations Conference on Trade and Development USD United States Dollars VAT Value Added Tax List of Figures Figure 1. Model Gold Mine: Comparative Effective Tax Rates Figure 2. Policy Potential Index (Fraser Institute) Figure 3. Perception of Taxation Regimes (Fraser Institute) Figure 4. The Optimal Effective Tax Rate Figure 5. Distribution of Mine Revenues (from sales) Figure 6. Breakdown of Total Taxes Paid Over Life of Model Gold Mine Figure 7. Summary of Taxes and Fees Figure 8. Sample Model Gold Mine Spreadsheet List of Tables: Table 1. A Subjective Appraisal of the CAR’s Approach to Mine Taxation Table 2. Competitive Position of CAR’s Fiscal System on a Model Gold Mine Table 3. World Bank Ranking System: Importance to Mining Sector Reform Table 4. World Bank Survey Financial and Taxation Investment Criteria Score Table 5. Taxes Sometimes Applied to Mines in Other Countries and Whether, in Practice, they are Applied by the CAR Table 6. Description of CAR’s Mining Fiscal System Table 7. CAR: Identification of items that may be deducted for calculating net income subject to income tax Table 8. Summary of CAR’s Mining Fiscal System as Reproduced in the Computer Analysis Gold Mine Model (base case assumptions) Table 9. Comparative Economic Measures for a Model Gold Mine in Selected Jurisdictions – ranked by ETR Table 10. Gold Model: Tax System Sensitivity to Price and Cost Changes Table 11. Availability of Tax Stabilization in Selected Jurisdictions Table 12. Income Tax Rates Applied to Mining Projects in Selected Jurisdictions Table 13. Tax System Sensitivity to Income Tax Table 14. Depreciation Applied to Typical Mining Equipment in Selected Jurisdictions Table 15. Loss Carry Forward/Back Policy in Selected Jurisdictions Table 16. Tax System Sensitivity to Loss Carry Forward Period Table 17. Deductibility of Pre-production Exploration Costs Table 18. Ring Fencing Policy in Selected Jurisdictions Table 19. Presence of Mineral Royalty Tax Systems in Selected Jurisdictions Table 20. Gold Royalties in Selected Nations Table 21. Tax System Sensitivity to a Royalty Tax Table 22. Typical Import Duties on Mine Equipment Table 23. Typical Export Duties on Minerals Table 24. Tax System Sensitivity to VAT Table 25. VAT on Imported Goods and Services in Selected Jurisdictions Table 26. Dividend Withholding and Similar Taxes in Selected Jurisdictions Table 27. Loan Interest Withholding Tax in Selected Jurisdictions Table 28. Tax System Sensitivity to Withholding Tax Table 29. Tax System Sensitivity to Transfer of Funds Tax Table 30. Equity Requirements in Selected Jurisdictions Table 31. Tax System Sensitivity to Signature Bonus The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Acknowledgements Consultant James Otto, who prepared the large scale mine fiscal analysis, would like to acknowledge the valued assistance of Wardell Armstrong LLC and AFRIC AUDITEC (chartered accountants) who provided information on the Central African Republic mining fiscal system. In particular, Ms Emmanuelle de Pooter was instrumental in confirming data and obtaining information where gaps existed. Additionally, Mr Jacob-Désiré N’Gaya, Inspector Principal des Impôts, Directeur Général, and his staff provided verification of the fiscal system assumptions. OS00899/J01 Annexe n°1 1 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto 1. Executive Summary This chapter investigates the Central African Republic’s (CAR) mining fiscal regime taking into account major government taxes, fees, and duties. Recognizing that the CAR has both the potential for a significant large scale mining industry as well as an active small scale mining sector, it addresses both scales of operation. For large scale mines, it compares each major type of direct and indirect tax levied on the mining industry with similar types of taxes in other selected countries and uses a model mine to examine the competitiveness of the current fiscal system. Special issues associated with small scale mining are analyzed as well. Recommendations for reform are offered. The chapter consists of two main conceptual parts. The first part is focused on the fiscal system applied to large scale mines and the second part examines special issues associated with small scale mining. The analysis of large scale mine taxation was done by Wardell Armstrong LLP and sub- consultant James Otto who is an internationally recognized expert on mining fiscal systems. He has been an advisor to many governments on fiscal reform initiatives and mining agreement negotiations. His books on mining taxation have been published and/or distributed by the United Nations and the World Bank. This chapter contains the following:-- • executive summary; • large scale mining fiscal system analysis: a summary of the CAR’s existing large scale mining taxation system; a section describing different types of mining taxes, tables comparing each major form of tax levied in the CAR with similar taxes levied by about 20 other nations; a description of the base case mine model used for the total effective tax rate comparative study; a description of the assumptions used to construct the CAR mining tax model; a table showing the results of the model (including the economic measures such as IRR, effective tax rate, and total government take) in comparison to the results from analyses for about 20 other countries as reported in Global Mining Taxation Comparative Study 2nd edition; a description of variations to the CAR tax system; a table showing the effect of such variations on the CAR tax model; base case model spreadsheet results; conclusion about the competitiveness of the CAR large scale mining fiscal system and recommendations for reform. OS00899/J01 Annexe n°1 2 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto The key findings of this chapter are as follows: • Taxation is an important criterion that foreign investors analyze when deciding where to invest, but it is not the only criteria. • This study has analyzed the competitive position of the CAR mineral sector statutory tax system to determine if it is internationally competitive. The tax systems of thirty jurisdictions, including the CAR’s, were assessed using a proprietary gold mine model. Based on well accepted measures of comparison--internal rate of return (IRR77) and overall effective tax rate (ETR78)--it was determined that the current CAR mineral sector tax system is a moderately high tax jurisdiction ranking 20 highest out 30 jurisdictions. • Most companies will not invest in a project unless the IRR is at least above 12%, and many companies would require a much higher IRR in the CAR which is considered a risk-prone location. Using 2008 cost assumptions in the gold mine model, the current fiscal system would yield an IRR of 12% at a gold price of $485 per ounce. • Nations that have enjoyed high levels of mineral sector investment and that are generally acknowledged as obtaining a “fair share� of fiscally derived revenues usually have a total undiscounted effective tax rate (ETR) of between 40 and 70%. Using 2008 cost assumptions in the gold mine model, the current fiscal system would yield an ETR of between 44 to 62% over a gold price range of US$1000 to US$485. The ETR in the CAR at any gold price is higher than in many nations but is not unreasonable. • The fiscal needs and administrative capabilities of individual nations vary and tax systems thus evolve differently in different nations. However, as the world moves forward into the new century it is clear that mining fiscal systems are becoming increasingly similar. Nations whose mining fiscal systems impose a non-transparent taxation system (such as a negotiated system) or a system that investors perceive as inappropriate (such as one in which taxes not tied to profitability dominate) can expect to see lower levels of investor interest than nations with transparent systems that approach the “global� norm. • Most international mining companies will find the level and types of statutory taxes in the CAR acceptable. It is recommended that the existing fiscal regulatory system be retained. However two problem issues were identified. In some instances, mines have been required to pay a nontransparent (secret) signature bonus that does not have its basis in any fiscal law. Secondly, the VAT refund system is reported as not currently be functional. It is recommended that the use of negotiated signature bonuses be discontinued and that either VAT refunds be made promptly or alternatively mine inputs be exempted from VAT. 77 A technical definition of internal rate of return (IRR) is provided in the report. 78 A technical definition of total Effective Tax Rate (ETR) is provided in the report.. ETR is a measure of the level of taxation that takes into account all taxes, tax incentives, fees, duties, and other distributions to government. OS00899/J01 Annexe n°1 3 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Explanations for specific observations are provided in the main body of this chapter regarding each major tax type. The specific observations include the following: Observation on Tax Stabilization Companies and their lenders find tax system stabilization very attractive, and some developing nations allow mine fiscal systems to be stabilized for a limited time period. However, most countries, including the CAR, do not provide fiscal stabilization under general tax law. The CAR does however sometimes allow fiscal stabilization under a negotiated concession. Such concessions are not passed as a law by Parliament but Parliament is informed. A legal question may arise if the Parliament changes a tax rate and this conflicts with a stabilized rate. For this reason in most nations concession agreements that provide stabilization are sent to Parliament for ratification as a law. Nations that frequently change their fiscal systems or that do not honor stabilization arrangements are considered high risk by many companies. Observations on Income Tax The rate of income tax in the CAR (30%) is typical of the rates applied by many other nations. Observation on Depreciation The concept of depreciation is that a taxpayer should be able to over the life of a piece of physical plant (equipment or building) deduct the full cost of that plant. Governments in almost all major mining countries provide an acceleration of depreciation deductions for mine equipment and plant. The CAR allows a taxpayer to deduct depreciation calculated using a straight-line schedule of depreciation rates which range between 5 and 20%. For a typical piece of large fixed mining equipment the deprecation rate is 10%. Most nations allow “accelerated� depreciation with a depreciation rate greater than 10%. Observation on Pre-production Exploration and Other Costs Most mining tax systems allow certain pre-production costs to be accumulated and then either expensed in the first year of production or amortized over a number of years. In many nations, the amortization period is accelerated. In the CAR, preproduction costs of establishment (pre-production exploration, site development, feasibility and similar costs) may be recovered through amortization over a three period (33 1/3%) using the straight- line calculation method. OS00899/J01 Annexe n°1 4 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Observation on Loss Carry Forward Time Limit Some nations have moved to eliminate any maximum time limit on the carry forward of losses for income tax purposes. The time limit in nations that set a time limit is typically in the 5 to 10 year range. The loss carry forward time in the CAR is currently 3 years. Investors in very large mines would prefer a longer loss carry forward period. Observation on Deductibility of Investment in Communities and Public Infrastructure Companies are often willing to invest in local community infrastructure, services and sustainable development initiatives, and many nations encourage such investment by allowing such expenditures to be tax deductible. The CAR allows expenditure on community infrastructure to be expensed as incurred, subject to a cap of 5/1000 of taxable income. Observation on Ring-Fencing Most nations do not ring fence mining projects. In other words if a single legal entity runs and operates multiple exploration and mining projects, it can combine the revenues and costs from all of them for taxation purposes. This is also the practice in the CAR. Observation on Royalty-Type Taxes The CAR imposes a number of royalty-type taxes that are based on the sales value of the mineral including the following: Release Penalty/Fee, Mining Promotion Tax, Computing Equipment Tax, Fixed Minimum Tax (IMF). IMF is creditable against income tax (BIC). Diamond sales are additionally subject to a SPP Kimberly tax of 0.5%. The rates for each tax type may vary with the mineral being sold. For gold the combined “effective� royalty is comparable to the rates in many other nations. Observations on Import Duty Import duty is mainly paid during the period in which a mine is being constructed during which there are no sales revenues. Thus, companies view such an input tax very negatively. Most mining nations have exempted mines from import duty during construction or zero-rated most mine type equipment categories. In the CAR, mines are exempt from import duty. OS00899/J01 Annexe n°1 5 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Observation on Export Duty Almost all nations have exempted minerals from export duties or zero-rated mineral export categories. It is probable that many mining companies avoid investing in nations with appreciable export duties. Like most nations today, the CAR does not impose export duties on minerals. Observation on VAT Value added tax is becoming widespread and largely has replaced general sales tax in most nations. Typically, mining nations handle VAT in two ways. Where the mineral produced is sold for consumption within the country the normal VAT system is applied. However, where the output is exported, the sales transaction is free of VAT (zero-rated or exempt) and there is a way for VAT to be negated on inputs (exemption, zero-rated, refund or credit scheme). The approach in the CAR is VAT is payable on inputs and if the mineral is exported, input VAT is refundable. However, it is reported that the VAT refund process is impaired because the funds available to make refunds are not adequate in some cases to allow full refunds. If this is the case, it doubtful that any large mine would be able to bear the VAT input tax burden and remain profitable. An essential reform to fiscal system is to either exempt mines that export minerals from paying input VAT, or to reinstitute the VAT refund system. Observation on Withholding Taxes Most nations impose withholding tax on remitted dividends, loan interest and on payments for foreign sourced services. The CAR does so also at a rate of 15% on remitted dividends and services. A 1% withholding tax may also in some cases apply to foreign loan interest payments (different information sources had varying opinions on this issue). The rate can be less for payments in countries that have tax treaties with the CAR. The 15% rate is comparable to that in many other nations. Observation on Transfer of Funds Tax Most nations do not impose a tax on funds transferred out of the country except for withholding taxes. The CAR imposes a tax on the transfer of funds. The rate varies depending on the destination from 0 to 0.5%. Observation on Land Area Fees The CAR annual land area related fees for exploration and exploitation permit areas are similar to the fees imposed in other nations. OS00899/J01 Annexe n°1 6 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Observation on Equity Participation Most nations today do not participate as an equity partner in mining projects. The few nations that do require a free equity interest do so in the range of around 10% percent. The very few nations that require or retain an option for more than 10% equity usually acquire their equity on a paid basis. The CAR does not require a mandatory state equity share. Observation on Minimum Tax and Excess Profits Tax Very few nations impose excess profits on mines. Such taxes, regardless of their form, are viewed very negatively by investors. When profits are high, companies already pay more income tax. Many mines lose money when commodity prices are low and may require funds saved from higher price periods to remain in business. It is usually in the interest of both the investor and the government to keep a mine open so that future revenue flows will occur. The CAR does not impose an excess profits tax but does levy a minimum tax to insure that some tax is paid in years when no profits are made. Observation on Bonus Payments and Permit Fees Bonus payments are common in the petroleum industry but very few nations impose bonus payments on the mining industry. Unlike most nations, the CAR typically requires a large bonus payment on the signing of a mining agreement. Almost all nations impose a one- time permit fee at the time that a mining permit authorization is issued. The fee is usually nominal, just a few hundred or thousands of dollars and this is the practice in the CAR. The above observations are summarized in Table 1 where the CAR’s approach to various fiscal issues is subjectively appraised by the Author as “typical,� “low� (more generous to taxpayers), and “high� (being less generous to taxpayers). Table 2 and Figure 1 indicate the relative ranking of the CAR fiscal system to fiscal systems in selected other nations. Detailed comparisons and analysis are provided later in this Chapter. OS00899/J01 Annexe n°1 7 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 1. A Subjective Appraisal of the CAR’s Approach to Mine Taxation ______________________________________________________________________ Tax Type / Incentive Comparability* Comment on Current System ___________________ __________ _____________________________ Government free equity typical - none required Property tax (on land) typical - none Surface rentals • Reconnaissance typical - none • Exploration typical - set fee per square kilometer • Mining typical - set fee per square kilometer Import duties typical - mines are exempt Export duties typical - none (however, some royalty type taxes have export duty type attributes) Royalty-type taxes high - relatively high (composed of 4 parts) Tax stabilization low - stabilization not available under statutory law (may be provided in a concession agreement) Dividend withholding tax typical - 15% (treaty rates may differ) Foreign services w/H tax typical - 15% (treaty rates may differ) Loan Interest W/H tax low - low compared to most countries 1% (treaty rates may differ) Bonus payment high - very few nations require a bonus payment Transfer of Funds Tax high - very few nations have this tax VAT ? - although VAT is assessed on inputs, the refunding process does not function in practice Income tax rate typical - 30% Tax treatment of: depreciation high - depreciation period is long (10 years) exploration costs typical - accelerated amortization available (3 years) development costs typical - accelerated amortization available (3 years) feasibility costs typical - accelerated amortization available (3 years) community costs typical - expensed loss carry forward high - 3 years (very short for mines) tax holidays typical - none ring-fencing typical - multiple projects of one legal entity are not ring fenced remote location low - some incentives may be negotiated OS00899/J01 Annexe n°1 8 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto _______________________________________________________________________ * “low� means that the approach would result in lower fiscal revenues than in many other mining nations; “typical� means the approach is similar to that in other mining nations; “high� means that the method would result in higher fiscal revenues being paid than in many other mining countries OS00899/J01 Annexe n°1 9 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 2. Competitive Position of CAR’s Fiscal System on a Model Gold Mine Foreign Investor’s Effective Tax Rate - Country Internal Rate of Return ETR (%) (un-discounted) (%) Lowest taxing quartile Sweden 19.2 29.1 South Africa 18.8 32.6 Chile 18.3 36.8 Argentina 16.6 42.5 W. Australia 15.2 43.1 Peru (2005) 15.0 45.2 Egypt (2007) 13.7 45.2 Second lowest taxing quartile Zimbabwe 15.7 45.9 USA (Nevada) 15.1 49.3 Papua New Guinea (2002) 13.3 52.6 Bolivia 12.2 52.4 Kazakhstan 13.5 54.4 Greenland 14.7 54.9 Ghana 13.6 56.7 Second highest taxing quartile Tanzania 12.7 57.9 Mozambique (2002) 12.6 59.9 th Indonesia (7 gen COW 2002) 11.2 61.2 Uzbekistan 11.2 62.0 Mexico 10.4 62.9 Central African Republic (2008) 9.6 66.6 Philippines (2007) 8.3 67.8 Ontario Canada 10.7 68.3 Highest taxing quartile Dominican Republic (2001) 8.2 68.6 Ivory Coast 9.1 69.1 Indonesia (non-COW 2007) 7.9 72.8 China 7.1 73.9 Vietnam (2007) 6.2 77.5 Romania (2007) 3.7 83.5 Poland 3.0 90.2 Burkina Faso -1.6 106.0 NA – not available. Source: values in the table for all jurisdictions except CAR, Dominican Republic, Egypt, Indonesia, Mozambique, Papua New Guinea, Peru, Philippines, Romania and Vietnam are extracted from: J. Otto, J. Cordes and M. Betarseh, Global Mining Taxation Comparative Study, second edition, IGRPM Colorado School of Mines, March 2000. OS00899/J01 Annexe n°1 10 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto OS00899/J01 Annexe n°1 11 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto 2. Factors Affecting Investment Decision Making By International Mining Companies 2.1 Investment Decision Making by International Mining Companies Companies have many countries to choose from when deciding where to expend their exploration and development budgets. Those nations with prospective geology, reasonable tax terms, acceptable legislation, and political stability have brighter prospects for long term mineral sector development than where one or more of these attributes are absent. In analysing investment conditions a company will apply key criteria, including tax criteria, and see how well these are met. Surveys by the World Bank (Naito and Remy, 2001a; Naito, Remy and Williams, 2001b) provide insight into mining fiscal systems. The 2001 World Bank survey work was intended to measure how important certain factors are for the mineral sector. Respondents included 35 governments and 43 mining companies or individuals. A scoring tabulation system was used based on the degree to which respondents indicated the importance of each factor. The two following tables indicate the importance levels and their determination for each factor. Table 3. World Bank Ranking System: Importance to Mining Sector Reform Importance to mining sector reform Extremely important Very important Partially important Somewhat important Restrictive Very restrictive OS00899/J01 Annexe n°1 12 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 4. World Bank Survey Financial and Taxation Investment Criteria Scores Criteria Importance Financial regimes : Use of offshore accounts A1: yes Very important A2: no Very restrictive Guaranteed right to repatriate profits A1: yes, in foreign currency or no restriction (open market availability) Extremely important A2: yes, in foreign currency subject to availability through Central Bank Partially important A3: no guaranteed right to repatriate profits Very restrictive Exchange control A1: minor administrative controls but market based exchange rates Extremely important A2: significant controls and non-market based exchange rate Very restrictive Predictability and stability of mining taxation regime A1: mining legislation or contracts guarantee stability of taxes for certain periods Extremely important A2: some changes to taxation arrangements but country track record is acceptable Partially important A3: frequent changes to taxation arrangements Very restrictive Tax burden for mines : Tax structure A1: predominantly profit based taxes only with no or moderate ad valorem royalty Very important A2: predominantly output or input based taxes (royalties, customs duties, VAT, employment taxes) Very restrictive Royalty A1: none or less than 2% ad valorem Extremely important A2:2 – 4% ad valorem Somewhat important A3: 4% or more ad valorem Very restrictive Corporate income tax A1: less than 30% Partially important A2: 30 – 40% Somewhat important A3: 40% or more Very restrictive Dividend withholding tax A1: less than 10% Partially important A2: 10 – 18% Somewhat important A3: 18% or more Very restrictive Value added tax A1: none, exempt, or recoverable from clients or upon export of product Partially important A2: applied and not recoverable from clients or upon export of product Very restrictive Import taxes and duties (excluding VAT) A1: none or exemption granted for mining industries Very important A2: applied less than 10% Somewhat important A3: applied 11 – 20% Restrictive A4: applied, greater than 21% Very restrictive Taxes/fees/other duties on exports (in addition to royalties) A1: none Extremely important A2: yes, but less than 1% Somewhat important A3: yes, 1 – 3% Restrictive A4: yes, greater than 3% Very restrictive Accelerated depreciation OS00899/J01 Annexe n°1 13 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto A1: allowed for calculation of income tax Very important A2: not allowed for calculation of income tax Very restrictive Source: Derived from Appendix B, Naito and Remy, 2001a. The World Bank survey helps to explain which fiscal factors are considered important for a successful mining sector but do not determine how attractive the fiscal system is in individual nations. There are publicly available sources that rank countries by their tax systems such as that prepared by the Fraser Institute (McMahon and Vidler, 2008). This survey ranks 68 jurisdictions (nations, states or provinces). Unfortunately, the publication does not report on the CAR. This is attributable to the low level of interest in the CAR by the international mining community. Although CAR does not appear in the ranking, the ranking has been included in this chapter so that readers will have an appreciation of how investor perceptions and analytical assessments can identify impediments to mineral sector investment. Two figures reproduced from the Fraser institute report appear below as Figure 2 and Figure 3. The first ranks the overall mineral sector policy environment and the second just the taxation system for 68 jurisdictions. OS00899/J01 Annexe n°1 14 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Figure 2. Policy Potential Index (Fraser Institute) Source: Figure 1, Fraser Institute Annual Survey of Mining Companies 2007/2008 (McMahon and Vidler), 2008, p.9). OS00899/J01 Annexe n°1 15 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Figure 3. Perception of Taxation Regimes (Fraser Institute) Source: Figure 8, Fraser Institute Annual Survey of Mining Companies 2007/2008 (McMahon and Vidler), 2008, p.31). OS00899/J01 Annexe n°1 16 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto 3. The Taxation Dilemma Faced by All Governments: Fiscal diversity or uniformity? The task of devising a mineral sector fiscal system is not easy. There are many types of minerals and a system that is optimal for one mineral such as gold may be less ideal for another mineral, such as common sand. However, the most difficult policy issues are not what tax mechanisms, rates and incentives to implement, but rather, to what extent should mining be treated differently than other income generating activities, such as oil & gas, agriculture, and light and heavy manufacturing. Each type of income generating activity can claim some element of uniqueness laying the groundwork for some sort of special tax treatment. If policy-makers chose the path of accommodation of special sector needs, tax legislation will grow more complicated and the burden on government regulatory taxation departments will increase. It is argued by some proponents that by providing “incentives� to one sector, other sectors, or the public as a whole, will suffer. It is often said that preferential tax treatment causes distortions between sectors and harms the overall economy. Others argue that because each sector is unique, each sector should be taxed in a manner that takes that uniqueness into account. Thus, governments are faced with a dilemma--a uniform tax system applicable to all sectors, or a more complicated system that accounts for uniqueness in each economic sector. 3.1 Unique Nature of the Mining Industry and the Tax Policy Response Most countries tax mineral enterprises somewhat differently than other industries, and tax policy makers often consider two concepts that will, in part, determine the extent to which mine taxation differs from taxes levied on other types of private enterprises. These two concepts are “uniqueness� and “ownership.� It is argued that the mining industry is fundamentally different from most other types of business and because of its unique nature it should be accorded special, preferential treatment. Nations accord preferential treatment in many ways but most approaches derive from government recognition of the following mining industry attributes: • A lengthy and costly exploration program will proceed the start-up of a mine. Exploration expenses are incurred before taxable income is available and thus governments provide special provision for how pre-production (pre-income) exploration expenses are handled for future income tax purposes. • Mine development is exceptionally capital intensive and an operation will initially need to import large quantities of diverse equipment from specialized suppliers. Many governments recognize the capital intensity of the industry and provide various means to accelerate recovery of capital costs once production commences. OS00899/J01 Annexe n°1 17 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto • With regard to equipment import dependency, governments often provide a mechanism where equipment imported during mine construction is effectively free of duty (zero-rated or exempt). Likewise, most countries provide some or complete relief from value added tax on equipment and technical service purchases, particularly if the mine product is destined for export. • Mine products are often destined for highly competitive export markets. Most governments effectively impose no export duties on minerals and provide a means whereby VAT or GST on export sales is either not applied or applied in a way that allows for a refund or tax credit. • Mines produce raw materials that are prone to substantial price changes on a periodic, business cycle related basis. Provision is often provided to allow a project to carry forward losses from unprofitable years to reduce taxes in profitable years. • After mining ceases and there is no income, a mine will incur significant costs relating to closure and reclamation of the site. There is a trend for governments to require a set- aside of funds for closure and reclamation in advance of closure and to provide some sort of deduction for this set-aside against current income tax liability. • Many mining projects will have a long life span, and companies will attempt to minimize their tax risk exposure by stabilizing some or all of the relevant taxes for at least part of that lifespan. Governments provide tax stability through a number of different legislated and negotiated approaches. • Where the level of investment is particularly large, a government may enter into a standard or negotiated agreement, including tax provisions, with the mine that has the effect of supplementing or supplanting general laws, including laws that address tax matters. • In instances where negotiated or stabilized agreements are in force, income from an operation governed by an agreement may be “ring fenced� even though the general tax law does not impose ring-fencing restrictions. Recent trends to harmonize fiscal systems across economic sectors have been the subject of debate in many countries, but almost all nations with a substantial mining sector still provide some sort of preferential tax treatment to the mining sector. While this preferential treatment tends to lower some sorts of taxes in comparison with other sectors, this is balanced by the imposition of special taxes arising from another aspect of the mineral endowment--national ownership. In most nations, minerals belong to the state or to the people of the state as a common good. When a company extracts or sells the mineral, ownership of that mineral will transfer from the state, or its people, to the extracting company or purchaser. In most nations, a transfer of minerals from the public to the private sector is politically sensitive. Tax policy makers generally provide that a payment must be made for the transfer regardless of OS00899/J01 Annexe n°1 18 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto whether or not any profit is generated. The most common form of a tax that seeks to compensate for the loss of national ownership is a form of unit- or value-based royalty. The concept of a royalty type tax, a “public to private sector property transfer tax� not based on income or profit, is, generally speaking, unique to the natural resources sectors. While many nations impose a royalty “type� tax on mineral producers, the trend has been to move toward lower royalty taxes and to rely increasingly on income-based type taxes. 3.2 Discrimination Within the Sector Within the mining sector, pressures may be brought to bear on tax authorities to provide special treatment of certain classifications of mines. For example, some would argue that mines producing industrial building minerals should receive preferential treatment over export-oriented mines because they contribute more directly to national development. Others would argue that because large mines employ more than a certain number of workers, they should receive special treatment because their positive impact on the local economy is large. Still others would argue that small mines should receive special treatment because it encourages a higher level of entrepreneurial exploration. Still other would argue that artisanal miners should be exempt from all forms of taxation because their earnings are too low to make collection and compliance a worthwhile endeavor. OS00899/J01 Annexe n°1 19 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto 4. Description of the Existing CAR Mining Fiscal System Today, the world is becoming ever more economically linked and a nation that desires to attract foreign investment must increasingly take into account both the needs of the nation and the needs of investors in order to compete in the international marketplace. In such an environment it is useful to understand whether the current CAR fiscal system is meeting the needs of the nation and whether the system is viewed as competitive by private sector investors. In this section, the existing CAR fiscal tax system that is applied to large scale mining is described based on a comprehensive questionnaire provided by sub-consultant James Otto to Wardell Armstrong who completed the questionnaire after consultation with AFRICAUDITEC (chartered accountants) and relevant taxation authorities. It should be noted that some elements of fiscal laws are vague or can be interpreted in different ways, and the information reported here is thought to be a reasonable but not necessarily exact approximation of the fiscal system that may be applied to a typical medium or large scale mine. Table 5 contains a list of tax types that are sometimes used by governments to tax the mineral sector and indicates whether each tax type is imposed by statutory law in the CAR. As can be seen in the table, many of the major tax types are imposed. Detailed comparisons of tax rates are provided in subsequent tables. In this study "tax" is defined as any tax, fee, impost or other payment that is paid by a taxpayer to the government or to another party because the taxpayer is required to do so by government. OS00899/J01 Annexe n°1 20 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 5. Taxes Sometimes Applied to Mines in Other Countries and Whether, in Practice, they are Applied by the CAR Check one Level of government Tax type Yes No Central Provincial Comment (optional) Gov’t Gov’t Income tax X X or X Minimum tax X X or X Royalties X X or X or License Withholding tax on remitted X X or X except touring vehicles and office dividends supplies Withholding tax on remitted X loan interest Withholding tax on foreign X services Import duties on equipment X Export duties X No export duty per se, but some taxes on minerals have export duty type attributes Excise/sales tax X on purchased equipment Excise/sales tax X on minerals paid by mine Value added tax on services X Value added tax X on equipment Value added tax X on mineral sales Property tax/fee X X or X Education tax/fee X Local development tax/fee Fees based on Land Area X Stamp tax X Not applied to sales but may apply to some other types of transactions Payroll tax X CDS X X or X Contribution to Social Development – Except Research permit SPPK (Kimberly) X X or X for diamond IMF (Fixed Minimum Tax) X X or X Special Tax / Buy X X or X for diamond Computing royalties X X or X Transfer of funds tax X The current CAR mining fiscal system is described generally in Table 6 and details regarding various deductions for computing taxable income are given in Table 7. OS00899/J01 Annexe n°1 21 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 6. Description of the CAR’s Mining Fiscal System ___________________________________________________________________ • Income tax (BIC - Industrial and Commercial Profits Tax) • 30% on taxable income (exploration permit activities are exempt Mining Code §91) • minimum tax: in the absence of profit, a fixed tax is paid, on the basis of 1.5% of the turnover (minimum payable is 1,500,000 F CFA per annum) • deductions for computing taxable income: • feasibility studies: amortized over 3 years (33 1/3 %) using the straight-line method (alternatively can be expensed all at one time) • pre-production exploration costs: amortized over 3 years (33 1/3 %) using the straight-line method • mine-site development costs: amortized over 3 years (33 1/3 %) using the straight- line method • equipment costs: mine equipment is depreciated straight-line according to its classification under Art.126 bis 24 wherein rates for various types of equipment are typically in the 5 to 20% range (for example: transport 20%, excavators 10%, buildings 5%) • costs qualifying for depreciation or amortization may not be adjusted for inflation • costs associated with local community infrastructure: expensed, subject to a limit of 5/1000 of taxable income • the following types of costs may be deducted for calculating net taxable income: pre-production exploration costs; mine-site development costs; feasibility study cost; annual operating costs; depreciated capital cost of equipment and plant; loan interest, withholding tax on remitted loan interest, fees based on land area (exploration permit, exploitation permit), payroll taxes paid by the mine, release penalty/fee, mining promotion tax, computing equipment tax, community related infrastructure subject to a cap, transfer of funds tax. Note the following taxes are not deductible: withholding on services, withholding on remitted dividends, and IMF. • depletion allowance: none • IMF may be credited against income tax • taxes similar to royalty • on gold: (additive effective rate - 5.25%) • release penalty/fee: 1% of sales revenues, deductible • mining promotion tax: 0.75% of sales revenues, deductible • computing equipment: 0.5% of sales revenues, deductible • fixed minimum tax (IMF): 3% of sales revenues, creditable against income tax or the 1.5% minimum tax on turnover • on diamonds: (additive effective rate - 12%) OS00899/J01 Annexe n°1 22 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto • release penalty/fee: 4% of sales revenues, deductible • mining promotion tax: 1% of sales revenues, deductible • computing equipment: 0.5% of sales revenues, deductible • SPP Kimberly: 0.5% of sales revenues, deductible • Special tax on purchase: 3% of sales revenues, deductible • fixed minimum tax (IMF): 3% of sales revenues, credited against income tax or the 1.5% minimum tax on turnover • other mineral commodities: information not available • license issue fees: • reconnaissance permit: 500,000 F CFA • exploration permit: 1,500,000 F CFA, 1st renewal 3,000,000, 2nd renewal 6,000,000, transfer 1,500,000 • exploitation permit: 5,000,000 F CFA, 1st renewal 7,000,000, 2nd renewal 10,000,000, 3rd renewal 16,000,000, 4th renewal 25,000,000, transfer 5,000,000 • excess profits tax: none • signature bonus: payable according to negotiated mining convention (not required by law) • withholding tax on foreign loan interest: 1%, deductible (information sources disagree whether this is always charged) • withholding tax on dividends and distributions remitted abroad: 15%, not deductible • withholding tax on salaries and fees paid to foreign consultants: 15%, not deductible • tax on transfers of funds • 0.0% when the transfer is toward a CEMAC destination (CEMAC is the Economic and Monetary Community of Central Africa – Cameroon, Chad, the Republic of the Congo, Equatorial Guinea and Gabon) • 0.25% when transfer is towards “Franc�-zone countries excluding CEMAC ((Benin, Burkina Faso, Côte d'Ivoire, Guinea Bissau, Mali, Niger, Senegal, Togo, Congo, Chad, Comoros and France) • 0.50% when transfer towards countries outside the “Franc�-zone • Import duty on foreign equipment: exploration permit holders are exempt (Mining code Article §90; mining permit holders are exempt except for touring vehicles and office supplies during construction and expansions (Mining Code Article §92) • export duties on minerals: none per se, but some taxes have export duty like attributes (see royalty above) • education tax: none. • stamp taxes: not applied to sales but may apply to some other types of transactions • VAT on goods and services: 19% is applied to inputs, but export sales are exempt. Input VAT is refundable by law however it is reported that in practice, the funds available for refunds are be under-funded. OS00899/J01 Annexe n°1 23 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto • property tax: when a mining company owns a property which has been built upon or not, excluding property for mining exploitation it pays property tax (the value of the buildings not related to the mining activities but located on the same property are subjected to the property tax on buildings) • area based fees: • reconnaissance permit: none • Exploration permit: for diamond & gold: 3,000 F CFA sq.km for first two years, 6,000 F CFA sq.km for years 3 and 4, 15,000 F CFA sq.km for later years; for other than diamond & gold: 1,500 F CFA sq.km for first two years, 3000 CFA F sq.km for years 3 and 4, 8,000 F CFA sq.km for later years; per annum, deductible • exploitation permit: for diamond & gold: 20,000 F CFA sq.km for first period of validity, 50,000 F CFA sq.km for 2nd period of validity, 75,000 F CFA sq.km for third period of validity, 50,000 F FCA for 4th period of validity; for other than diamond & gold: 5,000 F CFA sq.km for first period of validity, 12,000 CFA F sq.km for 2nd period of validity, 20,000 F CFA sq.km for 3rd period of validity, 12,000 F FCA for 4th period of validity; per annum, deductible • circulation tax: minor road tax (for example, on a 75km section a touring car would pay 500 F CFA and a truck 1,000 F CFA for transit). • payroll taxes paid by employer: 10% of gross salary for Contribution to Social Development; 18% of gross salary for retirement fund • payroll taxes withheld for employee: 5% of the gross salary Fixed Tax on the Person, tax on the revenue, Additional Tax 1,500 F CFA per employee (annual) • worker profit participation: none • stamp taxes: for all sales transactions there is no stamp tax. However, for every other operation that may occur (registration in front of a notary/solicitor, etc.) there is a stamp tax of 1,000 F CFA per page. • tax incentives • loss carry-forward: 3 years (from year of loss) • loss carry-back: none • tax credits: IMF may be credited against income tax/minimum tax on turnover. • remote location: if more than 100 km from Bangui, some fiscal matters may be negotiated according to the Charter of Investments • exploration permit holders are exonerated from: • registration and ownership transfer taxes except those related to lease agreements and rental of houses • business licence tax (CP) • corporation tax (IS) • commercial tax (BIC) • tax on income from liquid assets (RCM) • social development tax (CDS) OS00899/J01 Annexe n°1 24 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto • mining permit holders are exempt from registration and ownership transfer tax, except for such taxes in respect of lease agreements and rentals of houses • tax stabilization: none provided by law, however this may be available in a negotiated agreement. Parliament is informed of such agreements and may challenge them, but such agreements are not approved by parliament. • local equity requirement: there is no mandatory requirement that an equity share be held by citizens or CAR companies • government equity requirement: there is no mandatory requirement that an equity share be held by the government, but by mutual consent, a share can be provided by negotiated agreement • local community development: expenses incurred in regard to investment in community infrastructure may be expensed as incurred (subject to a cap of 5/1,000 of taxable income) • mandatory preference to be given to procuring local goods and services: none • ring-fencing: no ring-fencing for most operations • revenues from mineral sales can be held abroad: no, all revenue must be repatriated within 30 days • foreign exchange restriction: minimal _________________________________________________________________________ OS00899/J01 Annexe n°1 25 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 7. CAR: Identification of items that may be deducted for calculating net income subject to income tax Deductible Not Deductible Income tax paid to provincial or local government X Pre-production exploration expenses X Mine site development costs X Feasibility study cost X Annual operating costs X Capital cost of equipment and plant X Loan interest X IMF (Impôt Minimum Forfaitaire) X (creditable Taxe de Promotion X Equipement Informatique X Droit de sortie X Withholding tax on interest X Withholding tax on dividends X Withholding tax on foreign services X Import duties on equipment X Export duties on minerals X Value added tax on equipment and services X Local development taxes and fees X Property tax X Fee based on land area (such as rent) X Stamp taxes X Payroll taxes X Investment in local community infrastructure X Investment in local community services X Transfer of funds tax X The mine model used in the comparative analysis was developed at a level of detail similar to the level used for pre-feasibility studies. Thus, some simplifications have been employed to allow estimations to be calculated where detailed information is lacking. The simplified tax assumptions for the mine modeled in this analysis are summarized in Table 8. Minor taxes and fees, generally those that would annually be less than $20,000 per year, are not included in the analytical model but are instead assumed to be included in operating costs. OS00899/J01 Annexe n°1 26 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 8. Summary of the CAR’s Mining Fiscal System as Reproduced in the Computer Analysis Gold Mine Model (base case assumptions) ___________________________________________________________________ Modeled tax features in the "base case" include: • Income tax (BIC - Industrial and Commercial Profits Tax) • 30% on taxable income • minimum tax: in the absence of profit, a fixed tax is paid, on the basis of 1.5% of the turnover (minimum payable is 1,500,000 F CFA per annum) • deductions for computing taxable income: • feasibility studies: amortized over 3 years (33 1/3%) using the straight-line method • pre-production exploration costs: amortized over 3 years (33 1/3%) using the straight-line method • mine-site development costs: amortized over 3 years (33 1/3%) using the straight- line method • equipment depreciation: 10% straight line • the following types of costs are deducted for calculating net taxable income: amortized pre-production exploration costs, mine-site development costs, feasibility study costs; annual operating costs; depreciated capital cost of equipment; loan interest and withholding tax on remitted loan interest; exploitation permit fee, annual fee based on land area held under the exploitation permit; release penalty/fee; mining promotion tax; computing equipment tax, transfer of funds tax. • the following are not deductible: withholding on remitted dividends, withholding on foreign services, IMF, VAT, signature bonus. • IMF is credited against income tax or fixed tax • Royalty-like taxes • release penalty/fee: 1% of sales revenues, deductible • mining promotion tax: 0.75% of sales revenues, deductible • computing equipment: 0.5% of sales revenues, deductible • fixed minimum tax (IMF): 3% of sales revenues, creditable against income tax or the 1.5% minimum tax on turnover • signature bonus: USD2,000,000, not deductible • withholding on foreign loan interest: 1%, deductible (based on conflicting information about whether this is assessed, it has been included) • withholding on foreign dividends: 15%, not deductible • withholding on payments for foreign services: 15%, not deductible • import duty on foreign equipment: exempt • exploitation permit fee: 5,000,000 F CFA, deductible • exploitation permit land fee: 20,000 F CFA per km2 per annum, deductible OS00899/J01 Annexe n°1 27 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto • value added tax: 19%, refundable • property tax on buildings and land: none (mining exploitation is exempt and all buildings are used for exploitation) • stamp tax: none (minor – less than 20,000USD per annum and assumed included in operating costs) • circulation tax: none (minor – less than 20,000USD per annum and assumed included in operating costs) • tax incentives: loss carry-forward: 3 years • transfer of funds tax: 0.5% times amount remitted outside the country (assuming non- franc countries) applied to: • all payments for the purchase of equipment from outside the CAR • all profit remittances sent outside the CAR • all loan payments including principal and interest sent outside the CRA • all payments to service providers sent outside the CAR ___________________________________________________________________ OS00899/J01 Annexe n°1 28 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto 5. Description of the Standard Gold Mine Model In order to assess the CAR tax system as compared to fiscal regimes in a cross-section of countries, a proprietary mine model was used. The model is based on the standard gold mine model developed by James Otto in 2000, and was used for mining tax studies at the Institute for Global Resources Policy and Management at the Colorado School of Mines, and for fiscal reform projects in some nations since then. The model has been reported widely and has been used in the preparation of the well known Global Mining Taxation Comparative Study referenced in this Chapter’s annex. 5.1 Methodology and Limitations Inherent in the Standard Mine Model There are a number of ways to assess a mineral sector taxation system. The method used in this study is to create a financial model of a typical mine and then to calculate a number of quantifiable economic measures based on that model. These measures include an investor' s measure of profit (the investor’s Internal Rate of Return), the total effective tax rate (ETR), and the distribution of sales revenues to each party. When building a mine model that incorporates various tax and impost features it is necessary to determine the depth to which the model will attempt to mirror the fiscal system. In theory, a very detailed model could accurately account for every “tax� type. However, many types of taxes are calculated based on a level of information available only where a detailed feasibility study is available. The level of detail in the mine model is similar to that found in many mine pre- feasibility studies. Some of the simplifying assumptions and limitations that may impact the tax analysis are described below. Depreciation. In many countries, the costs of acquiring equipment and plant may be used to reduce the income or profits tax liability through the means of depreciation or amortization deductions. In many countries, different classes of assets are depreciated using different calculation methods or different rates or different economic “lives�. To accurately model a mine one would therefore need to identify every building and piece of equipment (and its price) qualifying as being depreciable. The model simplifies the depreciation calculation by assuming only one representative class of depreciable capital and one method of calculation. Payroll taxes. The group of taxes commonly referred to as “payroll taxes� are not directly included in the model. The payroll taxes paid by the mining company can include a wide variety of government levies tied to the activity and salary level of each employee. Examples include government mandated company contributions to social security, pension or national retirement schemes, and to national or other health care programs. The base annual operating costs are assumed to include these types of taxes. OS00899/J01 Annexe n°1 29 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Excise taxes. These are assumed to be included in operating costs. Tax minimization methods. One of the limitations of any tax study is the degree to which the study should incorporate legal tax minimization methods. The most “transparent� system was used as the basis of the model. 5.2 Standard Mine Model - Basic Attributes Many factors can be taken into consideration when selecting the parameters and values to define a mine model, and the selection of key project attributes can influence taxation system analysis. For example, some tax systems may be more favorable to shorter-lived mines than longer-lived mines. The approach chosen by Otto when creating the year 2000 standard mine model was not to determine the optimal configuration of a mining project given the tax system, but instead to define a set mine model, and determine the taxes it would pay in any selected country. To insure the reasonableness of the mine model, feedback, comment and guidance was sought from a number of major mining companies (headquartered in the U.S.A., U.K, and Australia) prior to settling on the final project parameters. The gold model used in this Chapter was constructed in 2000. Key parameters and values are shown in the box below. Since the model was first developed in 2000, costs and prices have changed, and this impact is analyzed in this study by sensitivity analysis (a range of prices and costs are used to assess the impact on IRR and ETR of values higher and lower than those used in the base case assumption set). This approach has been used in order that the results from the model can be used to compare the CAR’s fiscal system results to the results reported for over twenty nations in Global Mining Taxation Comparative Study Second Edition (and in some other nations since 2000). That study is scheduled for probable updating next in 2010. OS00899/J01 Annexe n°1 30 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Gold Metal Mine Model Assumptions Total reserve base: 2,350,000tr.oz au Average annual metal sold: 261,000tr.oz.au Development period: 2 years Production period: 9 years Debt to equity 60:40% Loan life: 5yrs Loan interest rate: 8% Mine cost: US$182,000,000 Pre-production exploration US$ 5,000,000 Feasibility US$ 10,000,000 Development US$ 40,000,000 Equipment/plant US$127,000,000 Working capital US$ 12,000,000 Reclamation US$ 10,000,000 Base annual operating costs: US$210tr.oz au Sales price US$361tr.oz au Type of analysis: escalated (nominal) Escalation of costs: 3% per year Escalation of metal price: 2.5% per year Deposit size, capacity and mine life. The size of a deposit will lend some guidance to defining the size (annual capacity) and life of a project. However, given the same deposit, different companies would view the optimal extraction rate and mine life differently. Should the firm build a large capacity project and mine a deposit quickly, or a small capacity plant and mine it over many years? Taxation policies can influence such decisions. In the development of the model, a reasonable medium capacity mine was assumed. Financing. The extent to which a mine is financed through debt rather than equity capital can have a measurable impact on the amount of taxes it pays. This is largely attributable to the fact that in many jurisdictions, some or all interest payments on loans may be used as a deduction when calculating the amount of income subject to a profits or income tax. Most large scale mines use a combination of debt and equity capital financing. Debt financing can reach up to 100% and for many mines a 60 to 40% debt to equity balance is common. A ratio based on 60% debt to 40% equity has been assumed. The amount to be borrowed is based on 60% of the capital costs incurred during the two-year mine development period and the first year of production. It is assumed that the borrowed amount is in the form of three separate loans, each made one year apart, commencing in the first year of project development. It is assumed that subsequent mine expenditures are paid from funds generated by sales revenues. An annual OS00899/J01 Annexe n°1 31 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto percentage rate of 8% compound interest has been assumed for all three loans and the repayment period for each loan is 5 years. Loan repayment is calculated assuming simple compound interest with annual equal end of year payments. Costs. The costs associated with a mine will have an effect on that mine’s tax liability. In most tax jurisdictions, some taxes (such as those based on profits or income) will be directly affected by certain costs, i.e., costs may be allowable as expensible or deductible for computing the amount of taxable income. Costs for any one activity will vary considerably from country to country. For example, mine capital equipment costs are lower in Canada than in Zambia but labor costs in Zambia are lower than in Canada. To provide comparability with the CSM global mining tax study, the base capital cost and operating cost are the same as used in the CSM model. The CSM base case costs were established using input from several multinational mining companies who were asked to submit their best estimates of what it would cost to establish and run a “typical international� medium scale operation and from annual surveys of costs reported in Mining Journal. All remaining tax benefits from any write-offs at the end of the project have been neglected. Costs have escalated rapidly over the past three years and this impact is reflected in the CAR tax model price and cost sensitivity table. Prices. Most mineral commodities are subject to substantial price variations over even a short time horizon. The base-case 2000 model uses a long-term price assumption for gold, i.e., the 10 year average London PM fix reported by Gold Fields Mineral Services price from 1989- 1998--$361.00 per ounce (note: the London PM fix for the period of 1997 to 2006 was $367). Sensitivity of the tax system to price changes is provided. Escalation adjustment. Costs and prices in every country are subject to escalation/de- escalation factors, such as inflation/deflation and technological progress, and costs and prices relating to the mineral sector are no exception. In the mine models, capital costs, operating costs (recurring costs) and working capital are escalated at 3 percent per year and prices at 2.5 percent per year. Since no adjustments have been provided for costs and operating efficiencies in the various countries, the model mine before-tax rate of return is identical in each country. The before- tax rate of return is 24.4%. For a 12.0% discount rate the project before-tax net present value is $50million. All cash flows represent escalated (nominal) dollars. 5.3 Economic Measures and Profiles Based on the estimated cash-flows resulting from the model mine, a number of economic measures and profiles were calculated. OS00899/J01 Annexe n°1 32 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Internal Rate of Return. The investor’s discounted internal rate of return (IRR) is a commonly used measure of profitability. Given a model mine, a fiscal system yielding a higher IRR is preferred by an investor over a fiscal system yielding a lower IRR. IRR is defined as that interest rate which equates the sum of the present value79 of cash inflows with the sum of the present value of cash out-flows for a project.80 An alternative, but numerically identical definition, is that the IRR is the interest rate at which the net present value of a project is equal to zero. A company can compare a project’s IRR to the company’s hurdle rate (the minimum IRR) that every project must meet. If a project’s IRR is equal to or exceeds the hurdle rate, the project meets the company’s minimum profitability requirements. While IRR is useful to determine the effect of a fiscal system on profitability, it does not directly measure taxation levels, nor does it provide governments with a measure of their fiscal take. However, by looking at both the before-tax and after-tax IRRs, an investor can compare how the various methods of taxation can impact this economic measure of profitability. Effective tax rate. The effective tax rate (ETR) is a measure, expressed as a percentage of the effective net cash flow, of all amounts payable by the company to the government. ETR is calculated by summing the value of all taxes and other payments to the government paid in each year, then dividing that sum of the total effective annual cash flow. value of all amounts paid to government Effective Tax Rate = --------------------------------------------------------------------- value of project before-tax cash flow 79 The term “present value� is used in its classical accounting meaning to indicate that the calculation has taken into account the time value of money. The time value of money is simply recognition that given a set amount of money, one would prefer to have that sum earlier rather than later. The standard way in which to account for the time value of money is to adjust future earnings and costs to a base year by discounting those amounts to the base year at a given discount rate. For the purposes of this study, all present value calculations were based on a discount rate of 12 percent. 80 Donald Gentry and Thomas O’Neil, Mine Investment Analysis, American Institute of Mining, Metallurgical and Petroleum Engineers, New York 1984, p.267. OS00899/J01 Annexe n°1 33 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto 6. Comparison of the CAR Tax System to Mineral Tax Systems in Selected Countries A comparison of mine taxation in different taxing jurisdictions is not straightforward. A comparison of any one type of taxing mechanism (such as a royalty tax or income tax rate) may lead to certain insights, but taken alone may not provide a useful indication of how mine taxation in one jurisdiction compares to that in another. To gain a broader understanding of how the overall system works and compares, it is necessary to analyze the fiscal system as a whole. To facilitate such an analysis, it is a common practice to define a hypothetical model mine and then apply different taxation systems to that mine. In this study, as was described in the preceding section, a model mine was defined and various measures of taxation and profitability calculated to allow comparison (see descriptions provided above) with results reported by the Colorado School of Mines and the mining taxation Sub- consultant for other nations. Table 9 summarizes measures of profitability (IRR) and overall effective tax rate (ETR) for the gold mine model applying the fiscal systems in over twenty jurisdictions. The results show that compared to other nations, the overall current mining tax system in the CAR imposes a higher effective rate than do many other nations. This primarily is attributable to the large number of taxes that are not tied to profitability. OS00899/J01 Annexe n°1 34 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 9. Comparative Economic Measures for a Model Gold Mine in Selected Jurisdictions – ranked by ETR Foreign Investor’s Effective Tax Rate - Country Internal Rate of Return - ETR IRR (un-discounted) (%) (%) Lowest taxing quartile Sweden 19.2 29.1 South Africa 18.8 32.6 Chile 18.3 36.8 Argentina 16.6 42.5 W. Australia 15.2 43.1 Peru (2005) 15.0 45.2 Egypt (2007) 13.7 45.2 Second lowest taxing quartile Zimbabwe 15.7 45.9 USA (Nevada) 15.1 49.3 Papua New Guinea (2002) 13.3 52.6 Bolivia 12.2 52.4 Kazakhstan 13.5 54.4 Greenland 14.7 54.9 Ghana 13.6 56.7 Second highest taxing quartile Tanzania 12.7 57.9 Mozambique (2002) 12.6 59.9 th Indonesia (7 gen COW 2002) 11.2 61.2 Uzbekistan 11.2 62.0 Mexico 10.4 62.9 Central African Republic (2008) 9.6 66.6 Philippines (2007) 8.3 67.8 Ontario Canada 10.7 68.3 Highest taxing quartile Dominican Republic (2001) 8.2 68.6 Ivory Coast 9.1 69.1 Indonesia (non-COW 2007) 7.9 72.8 China 7.1 73.9 Vietnam (2007) 6.2 77.5 Romania (2007) 3.7 83.5 Poland 3.0 90.2 Burkina Faso -1.6 106.0 NA – not available. Source: values in the table for all jurisdictions except CAR, Dominican Republic, Egypt, Indonesia, Mozambique, Papua New Guinea, Peru, Philippines, Romania and Vietnam are extracted from: J. Otto, J. Cordes and M. Betarseh, Global Mining Taxation Comparative Study, second edition, IGRPM Colorado School of Mines, March 2000. OS00899/J01 Annexe n°1 35 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto An important part of mineral sector fiscal policy is to decide whether the primary tax objective is to maximize the fiscal take in the short term, or in the long term. If the goal is short-term maximization, the system needs to impose a high effective tax rate (ETR) – the combined rate that takes into account the value of all the tax and fee types paid by the mine. If the ETR is too high, individual mines will pay more, but in the long run there will be fewer mines, thus fewer taxpayers, a smaller tax base, and a smaller contribution to the treasury. If the effective tax rate is too low, the government will needlessly forgo fiscal revenues. If the ETR is too high, the tax base will not grow over time and revenues will be foregone (companies will not come, explore, and discover more mines). Good tax policy will strive to set the effective tax rate at T*, where an optimal balance is found (see Figure 4). For most nations, the optimal mining ETR is between 40 and 60 percent for base metal mines and 40 to 70 percent for gold mines. Figure 4. The Optimal Effective Tax Rate NPV – net present value (the amount of all taxes and fees paid by mines to the government as adjusted for the time value of money) Source: J. Otto et al., Mining Royalties: A Global Study of their Impact on Investors, Government and Civil Society, World Bank Press, 2006. It is of course not possible to accurately know what the ideal effective tax rate is for the CAR. What is clear from this study is that a typical medium sized gold mine is taxed more heavily in the CAR than in many other countries. A graphical presentation is provided in Figure 1 in the Executive Summary. OS00899/J01 Annexe n°1 36 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto 7. Tax System Sensitivity to Prices and Costs The base case used in the model gold mine was created in 2000 and since that time prices and costs have increased. It is important to understand both how the CAR tax system ranks compared to other nations (such as was measured in the previous section) but also how the system affects the economic viability of a project. Using the mine model that incorporates the CAR fiscal system the effective tax rate (ETR) was assessed to see how it was affected by price and costs changes. The base case parameters were held constant except for the parameter being tested, i.e., only one parameter was varied at a time except for one set of scenarios when 3 parameters were varied. Table 10 indicates the results. The last section of the table where operating, capital and prices are all varied from the base case is of special importance. As was indicated earlier in the study, the base case uses year 2000 cost and price assumptions developed in the model reported in Global Mining Taxation Comparative Study. This was done in order to allow the CAR tax system to be compared to models in over twenty other nations. Prices and costs change over time and can change substantially in either direction over a very short interval. In 2008 the average reported worldwide reported gold mine operating cost is US$317 per ounce, the gold price is well above its 10 year average (2007-1998) of US$367 per ounce and capital costs have increased. To provide an estimate of the EFT and IRR in 2008, the model was run assuming a gold price varying from 400 to US$1000/oz, operating cost of US$275/oz, and a capital cost of US$250,000,000. The operating cost of US$275 was used in lieu of the average 2008 operating cost of US$317 because the US$317 average includes many high cost underground mines, and it would be expected that at least initially, companies will be targeting deposits in the CAR that can be exploited using surface mining whose operating costs are less than underground mines. Most companies would not invest in a project unless the IRR is at least above 12% and many would require a much higher rate in the CAR which is considered as posing above normal risks. As can be seen in the table, the IRR at prices less than $485 per ounce is too low to justify mine development. Some gold mining companies are currently using base case price assumptions around the $485 per ounce level. Observation: Most companies will not invest in a project unless the IRR is at least above 12%, and many companies would require a much higher IRR in the CAR which is considered a risk-prone location. Using 2008 cost and price assumptions in the mine model, the OS00899/J01 Annexe n°1 37 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto current fiscal system would yield an IRR of about 12% at a gold price of $485 per ounce. The effective tax rate would be 62% which is higher than in many nations but not unreasonable. OS00899/J01 Annexe n°1 38 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 10. Base Case Gold Model: Tax System Sensitivity to Price and Cost Changes Effective Tax IRR System Effect Rate (%) % Price Sensitivity: US$300/oz 518 NC US$361/oz (base case) 66.6 9.6 US$400/oz 55.2 19.3 US$500/oz 47.4 38.7 US$600/oz 45.2 54.2 Regressive at lower prices, US$700/oz 44.1 67.9 neutral at higher prices US$800/oz 43.4 80.2 US$900/oz 43.0 91.5 Operating Cost Sensitivity: US$175/oz 54.8 18.9 US$200 62.0 12.4 US$210/oz (base case) 66.6 9.6 US$250/oz 126 -3.1 Regressive US$300/oz NC NC US$350/oz NC NC Capital Cost Sensitivity: US$100,000,000 59.7 15.6 US$127,000,000 (base case) 66.6 9.6 US$150,000,000 75.4 5.5 Regressive US$200,000,000 109.1 -1.0 US$300,000,000 NC NC Effect of a Combination of Cost and Price Increases: Gold Price: US$400/oz Operating cost: US$275/oz 237.0 -7.0 Capital costs: US$250,000,000 Gold Price: US$485/oz Operating cost: US$275/oz 61.4 12.5 Capital costs: US$250,000,000 Gold Price: US$500/oz Operating cost: US$275/oz 57.9 15.4 Capital costs: US$250,000,000 Gold Price: US$600/oz Regressive Operating cost: US$275/oz 49.0 31.5 Capital costs: US$250,000,000 Gold Price: US$700/oz Operating cost: US$275/oz 46.2 45.0 Capital costs: US$250,000,000 Gold Price: US$800/oz Operating cost: US$275/oz 44.9 57.0 Capital costs: US$250,000,000 OS00899/J01 Annexe n°1 39 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Gold Price: US$900/oz Operating cost: US$275/oz 44.1 67.9 Capital costs: US$250,000,000 Gold Price: US$1000/oz Operating cost: US$275/oz 43.5 78.1 Capital costs: US$250,000,000 NC: If cumulative cash-flow is too negative, IRR and effective tax rate cannot be calculated. OS00899/J01 Annexe n°1 40 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto 8. Comparisons of Approaches and Rates in a Cross-Section of Countries for a Selection of Different Tax Types With the exception of the CAR, and such as other nations as are specially noted at the bottom of each table, the tax information reported in the following tables was gathered via a questionnaire distributed by the mining taxation Sub-consultant in 1999/2000 and reported in the aforementioned Global Mining Taxation Comparative Study Second Edition (Otto et al, 2000). The information on the fiscal system in the CAR was obtained from a detailed tax system questionnaire completed by AFRIC AUDITEC (Chartered Accountants) in February 2008. 8.1 Tax Stabilization Many mines are long-lived and companies are reassured by systems that reduce their fiscal vulnerability, particularly during the loan and project payback periods. However, while stabilization is attractive to companies many governments are hesitant to use it. There is a basic tenet of state sovereignty that one generation of lawmakers should not be able to bind the hands of future lawmakers. Additionally, tax stabilization is sought by all sectors as it reduces fiscal uncertainty. If stabilization is offered to one sector, other sectors will also seek it. Table 11 shows for selected countries whether they allow mineral sector tax stabilization or not. If taxes are stabilized for various mines, then an administrative challenge can arise over time. As the underlying tax laws change, each stabilized mine will have a tax regime dating to the time the stabilization arrangement was entered into. This means that over time there will be many tax regimes, and the government agency charged with tax administration will increasingly face a more complicated situation monitoring and enforcing each. This incurs costs. The government has a dilemma. On the one hand, stabilization agreements enhance the potential for mineral sector investment, and on the other, they complicate the tax system and raise administrative challenges. Stability is important to investors and to their lenders, and nations that have been successful in maintaining substantial mining sector foreign investment, such as Argentina, Chile, Indonesia, Papua New Guinea, Peru, and Zambia offer stabilization options. In the CAR, fiscal system stabilization is not available under statutory law but is sometimes allowed in a concession agreement. OS00899/J01 Annexe n°1 41 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Observation on Tax Stabilization Companies and their lenders find tax system stabilization very attractive, and some developing nations allow mine fiscal systems to be stabilized for a limited time period. However, most countries, including the CAR, do not provide fiscal stabilization under general tax law. The CAR does however sometimes allow fiscal stabilization under a negotiated concession. Such concessions are not passed as a law by Parliament but Parliament is informed. A legal question may arise if the Parliament changes a tax rate and this conflicts with a stabilized rate. For this reason in most nations concession agreements that provide stabilization are sent to Parliament for ratification as a law. Nations that frequently change their fiscal systems or that do not honor stabilization arrangements are considered high risk by many companies. OS00899/J01 Annexe n°1 42 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 11. Availability of Tax Stabilization in Selected Jurisdictions Stabilization Country Comments available? Argentina Yes 30 yrs, provincial and municipal taxes, import duties, exchange rules Bolivia No Burkino Faso Yes For term of the contract except for mining tax & fees Canada (Ontario) No CAR No/Yes Normal tax law – no; negotiated agreements - yes, Chile Yes 10 yrs, if mine elects a higher tax of 42% China No Normal tax law – no; negotiated agreements - yes, for the life of the Egypt No/Yes agreement Ghana No Greenland No Guinea Yes 10 yrs for operating permits and 25 years for concessions If a general mining licence, no stabilization. If a Contract of Work or Indonesia No/Yes Coal Cooperation Contract, fiscal stabilization applies to at least some fiscal matters Ivory Coast No Kazakhstan Yes Taxes stabilized for life of mining agreement There are two possible ways: 1) a negotiated agreement may provide for stabilization, and 2) if the mine qualifies under the Law on Laos PDR Yes Promotion of Foreign Investment as a promoted activity or is in a designated zone customs duties and income rates are stabilized for the periods granted for that investment under that law. Madagascar Yes 15 to 30 years Mexico No Mongolia Yes Company may negotiate a stability agreement Mozambique Yes Papua New Twenty years from the authorization to mine or for the period of Yes Guinea finance, whichever is shorter Either mining contracts system is 10-15 yrs; or Legal Stability Peru Yes Agreements systems is 10 yrs Philippines No - Poland No - Romania No - South Africa No - Sweden No - Tanzania No - USA No - Major taxes may be frozen for 10 yrs from date of establishment; may Uzbekistan Yes be difficult to implement Vietnam No W. Australia No - Yemen Yes Life of an Exploitation Contract Zambia Yes Negotiable, 10 to 15 years Zimbabwe No - OS00899/J01 Annexe n°1 43 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto nd Source: James M. Otto, John Cordes & Maria L. Batarseh, Global Mining Taxation Comparative Study (2 ed. 2000) except for Bolivia, Central African Republic, Egypt, Guinea, Indonesia, Lao PDR, Madagascar, Mongolia, Mozambique, Papua New Guinea, Peru, Philippines, Romania, Yemen and Zambia. Information conveyed in this table may become out of date and should be viewed with caution. Check local statutes for the current treatment. 8.2 Income Tax (Industrial and Commercial Profits Tax - BIC) At the beginning of the 20th century, the main way governments taxed mines was by imposing some type of royalty tax on production and various other taxes such as import/export duty. Today, however, almost all nations rely primarily on profit (income) based taxes although most retain a low-rate royalty. When designing an income tax system there are two key elements—the income tax rate, and the tax base that the rate is applied to. In this section, income tax level is first examined followed by an examination of the tax basis. Over the past two decades there has been a general lowering of income tax rates, and it is now uncommon to see a corporate income tax rate higher than 35%. There has been a trend to lower income tax rates, particularly in nations where tax avoidance is high. Many nations have a rate between 20 and 35%. Table 12 lists corporate tax rates for a cross-section of nations surveyed in 2000 (or more recently as noted). In the CAR the income tax rate is 30%. Table 13 shows the impact of a variety of income tax rates. OS00899/J01 Annexe n°1 44 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 12. Income Tax Rates* Applied to Mining Projects in Selected Jurisdictions Corporate Income Tax Country Comment Rate (%) Argentina 35% Bolivia 25% a 25% surtax may also apply in some years Burkino Faso 35% Canada 28% 29.12% including 4% surtax (provincial income tax also applies) CAR 30% if no profits, minimum tax of 1.5% of turnover Chile 15% two elective regimes are available China 33% 30% to central government, 3% to provincial govt. Egypt 20% Ghana 35% Greenland 35% Guinea 35% Indonesia Graduated up to 30% 10% for the first fifty million rupiah; 15% for the next fifty million rupiah; 30% for over one hundred million rupiah. Ivory Coast 35% Kazakhstan 30% excess profits tax may also apply Lao PDR 20 to 35% rate determined by negotiation Madagascar 25%; If IRR >20%, These rates are for large scale mines qualifying for LGIM 35%; if IRR >25%, 40% status Mexico 34% Mongolia 30% Mozambique 32% Papua New 30% 32% if option to stabilize taxes is selected Guinea Peru 27% 29% if operating under a tax stabilization agreement Philippines 30% Currently 35%, 2009 = 30% Poland 22% Romania 16% South Africa 30% Special rates apply to gold mines Sweden 28% Tanzania 30% USA Progressive to 35% Uzbekistan 33% Vietnam 28 to 50% Most mines at 28%, at the Prime Minister’s discretion W. Australia 30% Yemen 35% Zambia 25% For copper mines with agreements Zimbabwe 35% * - rate before any exemption or incentive reduction applied; IRR – Internal Rate of Return Source: James M. Otto, John Cordes & Maria L. Batarseh, Global Mining Taxation Comparative Study (2nd ed. 2000, p.49) except for more recent tax rates for Central African Republic, Bolivia, Egypt, Guinea, Indonesia, Lao PDR, Madagascar, Mongolia, Mozambique, Papua New Guinea, Peru, Philippines, Romania, Vietnam, Yemen and Zambia. Information conveyed in this table may become out of date and should be viewed with caution. Check local statutes for the current treatment. OS00899/J01 Annexe n°1 45 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 13. Tax System Sensitivity to Income Tax Income Tax Effective Investor Government Revenue: Tax Rate IRR All Taxes & Fees (%) (%) (USD) 25% 62.3 10.6 108,786,000 30% (base case) 66.6 9.6 116,270,000 35% 70.9 8.6 123,766,000 Observations on Income Tax The rate of income tax (BIC) in the CAR (30%) is typical of the rates applied by many other nations. 8.2.1 Depreciation In most of the surveyed nations, tax policy is mainly implemented through manipulation of the tax base rather than through a variable or negotiated income tax rate. The tax rate is commonly uniform for all tax-payers, or for all tax payers at a given level of profit. The most common form of tax-base incentive for mining is accelerated depreciation. Most nations provide the mining industry with some sort of accelerated depreciation (see Table 14). In the CAR plant and equipment is depreciated using the straight-line method. The depreciation rate varies from between 5 and 20% for most mine related items. Buildings are typically at 5%, most fixed equipment at 10%, and transport equipment at 20%. Costs qualifying for depreciation may not be adjusted for inflation. Observation on Depreciation The concept of depreciation is that a taxpayer should be able to over the life of a piece of physical plant (equipment or building) deduct the full cost of that plant. Governments in almost all major mining countries provide an acceleration of depreciation deductions for mine equipment and plant. The CAR allows a taxpayer to deduct depreciation calculated using a straight-line schedule of depreciation rates which range between 5 and 20%. For a typical piece of large fixed mining equipment the deprecation rate is 10%. Most nations allow “accelerated� depreciation with a depreciation rate greater than 10%. OS00899/J01 Annexe n°1 46 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 14. Depreciation Applied to Typical Mining Equipment in Selected Jurisdictions Accelerated Country Depreciation method for typical large equipment depreciation? Argentina Yes 3 yr straight-line Bolivia Yes 8 yr straight-line Burkino Faso No Useful life minus one year Canada Yes Up to 100% in yr incurred for new mine or 25% declining pool balance (Ontario) CAR Yes 10 years Chile Yes 3 yr straight-line China Yes 10 years st Egypt Yes 25%+30% 1 year, then 25% declining balance st Ghana Yes 75% in 1 yr, then 50% declining balance Greenland Yes the company may decide the rate and period Guinea Yes Declining balance at a factor of 2.5 Indonesia Limited 12.5 % declining balance or 6.25% straight-line Ivory Coast Yes Method of acceleration depends on life of equipment Kazakhstan Yes 25% declining balance method Lao PDR Yes 5 years straight-line Madagascar Yes Straight-line at 10% rate or if eligible, at 2.5 times normal rate Mexico No - Mongolia Yes 5 year straight-line (20%) Mozambique Yes Depends on the type of development; under FBC, special accelerated depreciation at double the normal straight-line rate; mine life, or 25% straight-line Papua New Yes Depreciated straight line over 10 years. Mobile plant may be depreciated Guinea using a 25% declining balance pool Peru Yes Can select the rate of straight line dep. up to the allowed max; most mining, processing and power equipment has a max of 20% pa; roads and buildings have a max of 3% unless a stabilization agreement (15 yrs) is in effect in which case a 5% max applies; costs for govt. approved infrastructure such as a school, hospital or recreational facility can be expensed as incurred. Philippines Yes If expected life is greater than 10 years, twice the normal straight-line rate; if life is less than 10 years, the normal rate; for most long-lived mining equipment a 5 year period is typical. Poland Yes 5 yrs straight-line (20%) Romania Yes Election: 1) according to published schedules of straight-line lives for different categories of equipment and plant with lives typically in the 3 to 12 year range; or 2) take 50% of the cost in the first year of production, and the remainder at a straight-line rate based on the depreciation life of the equipment/plant st South Africa Yes Expensed in 1 year of production Sweden Yes 5 yrs straight-line (20%) Tanzania Yes 12.5% straight-line USA No - Uzbekistan Limited 8% straight-line OS00899/J01 Annexe n°1 47 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Vietnam Yes 5 to 8 years straight-line, at taxpayers discretion W. Australia Yes Prime cost or diminishing value methods, (usually less than effective life) Yemen No According to schedule, typically 10% Zambia Yes Expensed as incurred st Zimbabwe Yes Expensed in year incurred or 1 year of product Source: James M. Otto, John Cordes & Maria L. Batarseh, Global Mining Taxation Comparative Study nd (2 ed. 2000, p.51) except for Bolivia, Central African Republic, Egypt, Guinea, Indonesia, Lao PDR, Madagascar, Mongolia, Mozambique, Papua New Guinea, Peru, Philippines, Romania, Vietnam, Yemen and Zambia. Information conveyed in this table may become out of date and should be viewed with caution. 8.2.2 Loss Carry Forward One of the most common tax incentives offered by governments is to allow taxpayers the ability to carry forward losses from one year to offset taxable income in future years. For capital-intensive industries, like mining, and for industries exceptionally prone to large commodity price fluctuation, like mining, loss carry forward is an important issue. One of the main purposes of a long loss carry forward period is to allow marginally economic mines to survive time periods when prices are low. Money saved by the mining company through loss carry forward can be accumulated during high price periods and used to survive low price periods. The CAR allows losses to be carried forward for three years from the year of loss, but loss carry-back is not allowed. This is an exceptionally short period and would be looked on with disfavor by investors. Loss carry forward and loss carry back periods are shown in the following table. Table 16 shows that the impact of a longer loss carry forward period has a negligible impact on a medium scale gold mine that has a life of about 10 years. The impact would be appreciable on very large mines that have a long cost recovery period. OS00899/J01 Annexe n°1 48 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 15. Loss Carry Forward/Back Policy in Selected Jurisdictions Loss Carry Forward Loss Carry Back Country Available? Time limit (years) Available? Time limit (years) Argentina Yes 5 No - Bolivia Yes None No - Burkino Faso Yes 5 No - Canada(Ontario) Yes 7 Yes 3 CAR Yes 3 No - Chile Yes None No - China Yes 5 No - Egypt Yes 5 No - Ghana Yes None No - Greenland Yes None Yes 5 Guinea Yes 3 No - Indonesia Yes 5 No - Ivory Coast Yes 5 No - Kazakhstan Yes 7 No - Lao PDR Yes 3 No - Mexico Yes 10 Yes None Madagascar Yes 5 No - Mongolia Yes 2 No - Mozambique Yes 10 No - Papua New Guinea Yes None No - Peru Yes 4 No - Philippines Yes 5 No - Poland Yes 5 No - Romania Yes 5 No - South Africa Yes None No - Sweden Yes None No - Tanzania Yes None No - USA Yes 15 Yes 3 Uzbekistan No - No - Vietnam Yes 5 No - W. Australia Yes None No - Yemen Yes 3 No - Zambia Yes 10 No - Zimbabwe Yes None No - Source: Derived from James M. Otto, John Cordes & Maria L. Batarseh, Global Mining Taxation Comparative Study (2nd ed. 2000, p.60) except for Bolivia, Central African Republic, Egypt, Guinea, Indonesia, Laos, Madagascar, Mongolia, Mozambique, Papua New Guinea, Peru, Philippines, Romania, Vietnam, Yemen and Zambia. Some information conveyed in this table may become out of date and should be treated with caution. Check local statutes for the current treatment. OS00899/J01 Annexe n°1 49 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 16. Tax System Sensitivity to Loss Carry Forward Period Loss Carry Forward Period Effective Investor Government Revenue: Tax Rate IRR All Major Taxes & Fees (%) (%) (USD) 3 years (base case) 66.6 27.9 116,270,000 5 years 66.6 27.9 116,270,000 No limit 66.6 27.9 116,270,000 Observation on Loss Carry Forward Time Limit Some nations have moved to eliminate any maximum time limit on the carry forward of losses for income tax purposes. The time limit in nations that set a time limit is typically in the 5 to 10 year range. The loss carry forward time in the CAR is currently 3 years. Investors in very large mines would prefer a longer loss carry forward period. 8.2.3 Deductibility of Pre-production Exploration and Other Expenses Substantial costs will be incurred by a company before it commences mining. For example, exploration, preparation of feasibility studies and work plans, and site development will all need to be done and can be quite costly. Most governments allow such costs to be deducted. Since there is no income during pre-production many governments provide for some form of deferred deductibility. The most common approach is to allow such costs to be accumulated, then deducted beginning in the first year of commercial sales. The deductions are usually either expensed in that year with a provision for the carry-forward of unused deductions, or amortized over a defined time period. In the CAR costs associated with pre-production exploration, feasibility studies and development can be amortized over three years using the straight-line method (33 1/3%). Tax treatment of pre-production exploration and similar costs by other nations varies widely and descriptions are provided in Table 17. Observation on Pre-production Exploration and Other Expenses Most mining tax systems allow certain pre-production costs to be accumulated and then either expensed in the first year of production or amortized over a number of years. In many nations, the amortization period is accelerated. In the CAR, preproduction costs of establishment (pre-production exploration, site development, feasibility and similar costs) OS00899/J01 Annexe n°1 50 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto may be recovered through amortization over a three period (33 1/3%) using the straight- line calculation method. Table 17. Deductibility of Pre-Production Exploration Costs Country Treatment of Pre-Production Exploration Costs Argentina 200% deduction; 100% expensed and 100% depleted Bolivia expensed in year incurred Burkina Faso amortized straight-line over 3 years Central African Republic amortized straight-line over 3 years st Chile deducted in 1 year of production st China amortize over at least one year in 1 year of production Egypt expensed as incurred Ghana 75% 1st year of production, declining balance subsequently Greenland May be carried forward for future deduction Indonesia Expensed st Ivory Coast amortize over 5 years starting the 1 year of production Kazakhstan 15% declining balance Lao PDR Expensed Mexico expensed fully as incurred or may elect to amortize straight- line at 10%/yr Mongolia amortize over 5 yrs, commencing in first year of production Papua N.G 200%, 100% expensed as incurred, 100% amortized at 25% declining balance from start of production Peru expensed in year incurred or amortized over the life of the mine Philippines amortized at twice the normal straight-line rate, or may be added to and taken as part of a depletion allowance Poland amortized straight-line over 5 years Romania amortized over the life of the mine st South Africa expensed fully in 1 year of production Sweden expensed in year incurred Tanzania expensed in 1st year of production USA-Arizona depleted over life of mine Uzbekistan amortized straight-line over 10 years Vietnam Amortized straight-line over 3 years W. Australia deductible in year incurred Yemen amortized over 3 years st Zimbabwe expensed in year incurred or 1 year of production Source: James M. Otto, John Cordes & Maria L. Batarseh, Global Mining Taxation Comparative Study 53 (2d ed. 2000) (except for Bolivia, Central African Republic, Egypt, Indonesia, Lao PDR, Madagascar, Mongolia, Mozambique, Papua New Guinea, Peru, Philippines, Romania, Vietnam, and Yemen). OS00899/J01 Annexe n°1 51 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto 8.2.4 Deductibility of Investment in Communities and Infrastructure There is interest by many mining companies in furthering the development of communities and peoples affected by a mine. This is motivated by a company concern that it will be able to maintain a “social licence� to operate in harmony with the community. One way to foster such harmony is to invest in developing communities that are impacted by mining. Attention is also increasingly paid to instituting sustainable development practices so that when the mine closes, the affected communities will be able to carry-on with alternative economic activities. Thus, investments made in the community during the mine life are important to investors, and they will be concerned about how these investments will be treated for tax purposes. The current CAR tax system partially recognizes the value of money spent by a mining company on community infrastructure and allows such expenditure to be expensed in the year incurred. The deduction of such costs is capped at 5/1000 of taxable income costs. Observation on Deductibility of Investment in Communities and Public Infrastructure Companies are often willing to invest in local community infrastructure, services and sustainable development initiatives, and many nations encourage such investment by allowing such expenditures to be tax deductible. The CAR allows expenditure on community infrastructure to be expensed as incurred, subject to a cap of 5/1000 of taxable income. 8.2.5 Ring Fencing Ring fencing (where an accounting wall is imposed on a discrete mine as opposed to allowing all activities of a company operating in the country to be combined in a single accounting) is a concept that is applied by some nations to mines that are subject to different taxation systems. Most nations do not ring fence mining unless individual mines are subject to one of the three following situations: (1) a mine is subject to a distinct and unique negotiated tax system; (2) the tax system or some part of the tax system to which a mine is subject is stabilized for a term of years; or (3) the tax system is subject to a resource rent type of tax. If any one of these three situations apply, most nations would ring fence that mine (see Table 18). The rationale for ring fencing is obvious in the above cases where combining the books of two or more mines that have different tax systems would be an administrative challenge. However, there may be certain types of activities where it makes sense to modify a ring fencing scheme. For example, take the situation of exploration. The reserves at any one OS00899/J01 Annexe n°1 52 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto mine are finite, and unless further exploration takes place, the mine will eventually close and the contribution to government revenue will be lost. By allowing exploration expenditures in areas off the mining lease to be deductible, a mining company is encouraged to undertake such exploration. In the CAR, all operations of a single taxable entity may be reflected in a single accounting (i.e. no ring fencing). Observation on Ring-Fencing Most nations do not ring fence mining projects. In other words if a single legal entity runs and operates multiple exploration and mining projects, it can combine the revenues and costs from all of them for taxation purposes. This is also the practice in the CAR. OS00899/J01 Annexe n°1 53 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 18. Ring Fencing Policy in Selected Jurisdictions Mines are ring fenced? Country (Yes or No?) Comments Argentina No Bolivia No Burkino Faso Yes Canada (Ontario) No Central African Republic Chile No China Yes Egypt No Ghana No Greenland No Indonesia Sometimes contract of work mines are ring-fenced, other mines are not Ivory Coast No Kazakhstan Yes Lao PDR No Madagascar No Mexico No Mongolia No Mozambique Sometimes Papua New Guinea Sometimes mines operating under negotiated special mining leases are ring fenced; other mines are not Peru Sometimes there is no ring fencing unless the tax entity has entered into differing tax stabilization agree- ments for different mines Philippines No Poland No Romania No South Africa Yes Sweden No Tanzania No USA No Uzbekistan No Vietnam No W. Australia No Yemen Sometimes mines with negotiated Exploitation Contracts which stabilize fiscal terms are ring fenced; other mines/quarries are not Zimbabwe No may consolidate books if mines are not registered as Ltd. Source: James M. Otto, John Cordes & Maria L. Batarseh, Global Mining Taxation Comparative Study 53 (2d ed. 2000) (except for Bolivia, Central African Republic, Egypt, Indonesia, Lao PDR, Madagascar, Mongolia, Mozambique, Papua New Guinea, Peru, Philippines, Vietnam, and Yemen). Caution: Information in this table may be out of date. Check local statutes for the current treatment. OS00899/J01 Annexe n°1 54 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto 8.3 Royalty-Type Taxes Over the past century, there has been a trend to de-emphasize tax systems based on royalties and to instead implement systems that rely on tax mechanisms that are based on “ability to pay�, i.e., profit-based taxes. A few nations have eliminated mineral royalties entirely, while others have reduced their importance. Table 19 provides a list of nations surveyed and whether or not they use mineral royalties as a form of raising mineral sector fiscal revenues. Most nations that impose an ad valorem royalty based on gross sales value (or net smelter return) generally do so at a rate less than 5% (except for diamonds and other precious stones). Table 20 lists royalty rates and their basis in a cross-section of nations. In most nations minerals belong to the state. Like any other form of property the owner of property expects to receive payment when the property is transferred to another party. In some years, a typical mine will generate no taxable income for purpose of calculating income tax and thus were only an income tax to be applied, the state would receive no money even though the mine produced and sold minerals. The use of a royalty insures that regardless of profitability, the nation will receive at least a minimum payment for the sale of its non-renewable resource. Most nations impose at least a minimal royalty for this reason. There are many types of royalties, and it is not useful to report on comparative rates because the amount of royalty will be based on both the rate and the basis. There are many methods by which governments determine a royalty basis including the following: sales invoice value, market value, net smelter return, sales value less costs, and so forth. A comprehensive book on mineral royalties has been published by the World Bank (Otto et al, 2006) which contains an analysis of different royalty types, the rates at which they are applied, and the legislation for about forty nations. In the CAR, several royalty-like taxes are applied to minerals and each is based on the purchase value of the mineral sold. For gold the effective royalty rate is 5.25%: 1% release penalty/fee, 0.75% mining promotion tax, 0.5% computing equipment tax, 3% fixed minimum tax (IMF). For diamonds the rate is 12%: 4% release penalty/fee, 1% mining promotion tax, 0.5% computing equipment tax, 3% fixed minimum tax (IMF), SPP Kimberley 0.5%, special tax on purchase 3%. It is rare to see a gold royalty higher than 5%. Table 21 shows the impact of imposing different royalty type tax rates on the model gold mine. OS00899/J01 Annexe n°1 55 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Observation on Royalty Type Taxes The CAR imposes a number of royalty-type taxes that are based on the sales value of the mineral including the following: Release Penalty/Fee, Mining Promotion Tax, Computing Equipment Tax, Fixed Minimum Tax (IMF). IMF is creditable against income tax (BIC). Diamond sales are additionally subject to a SPP Kimberly tax of 0.5%. The rates for each tax type may vary with the mineral being sold. For gold the combined “effective� royalty is comparable to the rates in many other nations. OS00899/J01 Annexe n°1 56 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 19. Presence of Mineral Royalty Tax Systems in Selected Jurisdictions Country Royalty Imposed? Comment Argentina No/Yes Set by each state; some have royalties others don’t. Bolivia Yes Burkino Faso Yes Canada (Ontario) No No royalty in most provinces, some exceptions. CAR Yes Composed of 4 or 5 separate taxes Chile Yes China Yes Egypt No No royalty in the mining law but may be imposed in an agreement Ghana Yes Greenland No Guinea Yes Indonesia Yes Ivory Coast Yes Kazakhstan Yes Lao PDR Yes Madagascar Yes Mexico No Mongolia Yes Mozambique Yes PNG Yes Peru Yes Philippines Yes Poland Yes Romania Yes South Africa No Except on certain lands. Under consideration in 2007. Sweden No Tanzania Yes USA No No federal tax, some states impose severance tax Uzbekistan Yes Vietnam Yes W. Australia Yes Yemen Yes Zambia Yes Zimbabwe No Under consideration. nd Source: James M. Otto, John Cordes & Maria L. Batarseh, Global Mining Taxation Comparative Study (2 ed. 2000, p.60) except for Bolivia, Central African Republic, Egypt, Guinea, Indonesia, Lao PDR, Madagascar, Mongolia, Mozambique, Papua New Guinea, Peru, Philippines, Romania, Vietnam, Yemen and Zambia. Caution: Some information conveyed in this in this table may be out of date. Check local statutes for the current treatment. OS00899/J01 Annexe n°1 57 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 20. Gold Royalties in Selected Nations Country / law Royalty type Rate or unit fee Basis Angola Ad valorem Gold - rate set separately Production value Mining Law No.1/92 for each mining title Argentina Ad valorem Gold - rates vary according Mine mouth value - sales Mining Investment Law No.24.196, to province, subject to a value less allowable Resolution 56/97, provincial laws maximum rate of 3% deductions such as Note: all provinces have transportation, insurance set the rate at 0% except and freight, milling, for two provinces who have beneficiation, amortization set it at 3% Australia Ad valorem Gold - 4% Ex-mine value New South Wales Mining Act 1992, Mining Regulations 2003 Australia Profit based Gold - 18% (of "profit") Net-back value: gross Northern Territory revenues less operating Mineral Royalty Act 1982 costs, capital cost recognition, eligible exploration costs, and other allowable costs Australia Ad valorem Gold The revenue base for gold Queensland Fixed rate - 2.7% will be determined by Mineral Resources Act 1989, Note: taxpayer may or multiplying the actual quantity Mineral Resources Regulations elect once for Variable rate -1.5 to 4.5% of gold sold, disposed of or 2003 either a fixed rate (sliding scale starts at 1.5% used, by the spot price or a variable rate based on LME spot price received where the gold is per troy ounce less than sold on the spot market. A$430 and can go as high Where gold is delivered in as 4.5% when the price terms of a forward sales exceeds A$680) contract, or used as repayment of a gold loan or gold overdraft facility (or payment of sundry charges under such facilities), the revenue base will be determined as being the relevant gold quantity multiplied by the gold price used for the purposes of calculating the variable rate (ie the London Bullion Market p.m. fix price quoted on the day of delivery, translated into $A by applying the hedge settlement rate) OS00899/J01 Annexe n°1 58 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Country / law Royalty type Rate or unit fee Basis Australia Ad valorem Gold - 2.5% Gold produced times the Western Australia gold spot price on the Mining Act 1978 London Bullion Market Mining Regulations 1981 Botswana Ad valorem Gold - 5% Sale value receivable at the Mines and Minerals Act No. 17 of mine gate 1999 Bolivia Sliding scale ad Gold - Gross sales value based on Mining Code, Law 1777 valorem Price higher than international reference price US$700.00: 7% Note: rates are reduced by From 400.00 to 700.00; 60% for sales in the internal .001x price market Below 400.00: 4% Brazil Ad valorem Gold - 1% Sales revenue minus Law 7990, 2/28/1989 (waived for small scale transportation, insurance Law 8001, 3//13/1990 miners - garimpeiros) and certain taxes Canada Profit-based Gold - the greater of 13% Net revenue - gross British Colombia of net revenue less 2% of revenues less operating Mineral Tax Act Chapter 291 net proceeds, or 2% of net expenses, development proceeds expenses once in production, and non-capital reclamation costs. Note: 2% of net proceeds acts as a minimum tax. Canada Profits-based Gold - 0 to 14% sliding Output value (profit) - Northwest Territories Sliding scale scale statutorily defined revenues Canada Mining Regulations CRC 0% - $C10,000 or less less statutorily defined 1516 5% - >10,000 up to 5 allowances and costs (most million exploration, capital and 6% - >5 million up to 10 operating costs) million 7% - >10 million up to 15 Note: $C = Canadian dollars million 8% - >15 million up to 20 million 9% - >20 million up to 25 million 10% - >25 million up to 30 million 11% - >30 million up to 35 million 12% - >35 million up to 40 million 13% - >40 million up to 45 million 14% - >45 million OS00899/J01 Annexe n°1 59 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Country / law Royalty type Rate or unit fee Basis Canada Profits-based Gold - 10% Gross revenue from sale of Ontario Note: mines qualifying as mineral products less most Mining Tax Act, R.S.O. 1990, "remote mines" pay 5% operating and capital costs CHAPTER M.15 including exploration and an allowance for depreciation; if less than $C500,000 no tax is due; deductions available for in-province processing costs Central African Republic Ad valorem Gold: Release/penalty: 1% Sales revenues mining promotion: 0.75% Sales revenues computing equipment: 0.5% Sales revenues fixed minimum tax (IMF): 3%, creditable or the 1.5% Sales revenues minimum tax on turnover China Unit-based Gold - 0.4 to 30 Yuan/t Taxable quantity Mineral Resources Law of the "resources royalty" Note: amount and basis is Peoples Republic of China (as decided mine by mine amended 29 August 1996). “Resources Royalty Regulations (temporary) of the People Republic Ad valorem Gold - 4% Sales income times of China�, N. 139, 199. "mineral coefficient of recovery rate Regulations for the Collection and compensation fee" Administration of the Mineral Resources Compensation Fee N.150. 1994. Two royalties are paid. Colombia Ad valorem Gold - not less than 0.4% Mine mouth value Law 685 of August 15, 2001 "Mining Code" Cuba Ad valorem Gold - the State sets a rate Basis is set mine by mine Law No.76 (the Mining Law) for each mine within one of using one of three methods: Resolution No. 51/97 3 bands: a) the sale price of the 3 to 5 %, 1 to 3 %, or up to 1 production; b) the average %. trimester quotation registered in the international market of the finished goods, or c) the value expressly agreed. Dominican Republic Ad valorem Gold - 5% Sales price F.O.B. Mining Law of the Dominican (export royalty) Dominican port Republic No. 146 Note: creditable against income tax OS00899/J01 Annexe n°1 60 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Country / law Royalty type Rate or unit fee Basis Ghana Sliding scale ad Gold - Total mineral revenue Mining and Minerals Law of 1986, valorem based on 3% if operating ratio is 30% or less; Mineral (Royalties) Regulations level of profitability 3% + 0.225 of every 1% by of 1987 which the operating ratio exceeds 30% but is less than 70%; 12% if operating ration is 70% or more (Note: for most mines rate is typically 3%) Operating ratio equals operational costs / value of minerals won India Ad valorem Gold - 1.5% for primary Value of contained gold Mines and Minerals Development gold; 2.5% for byproduct (primary gold) or actually gold Act 1957 as amended produced gold (by-product gold) based on the London Bullion Market Association price Indonesia** (local company PK Ad valorem Gold - 3.75% Selling price type license) Indonesia Unit-based Gold Kgs gold metal contained in th (7 generation Contract of Work, Limonite ore the sold product foreign-owned company) <2,000 Kgs - US$225.00/Kg >= 2,000 Kgs - US$235.00/Kg Madagascar Ad valorem Gold - 2% Selling price Law No. 990022 Mining Code Mexico No royalty Gold - no royalty Mongolia Ad valorem Gold - from placer mines: For exported products: Minerals Law of 1997 7.5%; average monthly prices of from other mines: 2.5% products, or similar products, based on regularly published international market prices or on recognized principles of international trade; for products sold or used on the domestic market: the sales value based on the domestic market price for the particular or similar product OS00899/J01 Annexe n°1 61 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Country / law Royalty type Rate or unit fee Basis Mozambique Ad valorem Gold - 3 to 8% Value of mining product Mining Code No.14/2002 Negotiated for each mine Myanmar Ad valorem Gold - 4 to 5% Value of mineral sold based Mines Law of 1994 on the prevailing international price for that mineral when the sale is affected Namibia Ad valorem Gold - maximum 5%, as Market value Minerals Act of 1992 determined by the Minister Nigeria Not specified Gold - as may be As may be prescribed by Mineral and Mining Decree 1999 prescribed by the Minister the Minister. Papua New Guinea Ad valorem Gold - 2% If for export, f.o.b revenue Mining Act1992, Mining Act 1997 otherwise the net smelter section 105 return. Peru Sliding scale ad Gold - Sales value minus treatment Law of Mining Royalty No28258 valorem based on Up to US$60million - 1% costs or the equivalent annual sales >US$60million to market value (small scale miners US$120million - 2% have rates of 0%) >US$120million - 3% OS00899/J01 Annexe n°1 62 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Country / law Royalty type Rate or unit fee Basis Philippines (FTAA) Ad valorem Gold - If concentrate: the actual Excise tax rate is 2%; market value shall be the if mine is on a mineral world price quotations of the reservation then 5% royalty refined mineral products applies; content thereof prevailing in in addition to the excise tax the said commodity and reservation royalty, if exchanges, after deducting mine is on ancestral land, the smelting, refining and royalty for indigenous other charges incurred in people is negotiated at a the process of converting rate of at least 1%. the mineral concentrates into refined metal traded in Note: most mines pay at those commodity 2% because they are not exchanges on a mineral reservation or ancestral lands. If other than concentrate: actual market value of minerals or mineral without any deduction from mining, milling, refining (including all expenses incurred to prepare the said minerals or mineral products in a marketable state), as well as transporting, handling, marketing or any other expenses: Provided, That if the minerals or mineral products are sold or consigned abroad by the seller under C.I.F. terms, the actual cost of ocean freight and insurance shall be deducted Russia Ad valorem Gold - 6% 3 valuation methods are Federal Law 126-FZ Note: if the taxpayer paid provided: most mines will for the discovery of the pay based on sales deposit, rate is 0.7 x 6 = proceeds less certain 4.1% government imposed taxes and fees and deductions relating to transportation and handling South Africa Ad valorem royalty Gold - proposed: 3% Proposed: gross sales value bill has been Rate above is proposed in introduced to pending royalty bill Parliament OS00899/J01 Annexe n°1 63 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Country / law Royalty type Rate or unit fee Basis Tanzania Ad valorem Gold - 3% Mining Act 15 of 1998 Netback value:If export sale, FOB at the point of export from Tanzania. If domestic sale, delivery value minus costs for transport, insurance, handling, smelting, refining and processing. Turkey Profit-based Gold - 10% Gross profit as defined in Turkish Mining Law No. 3213 as regulations amended 21/02/2001 United States Ad valorem Gold - at least 2%, Market price Arizona (applies only to commissioner to determine Title 27 - Minerals, Oil and Gas minerals in certain rate state lands, otherwise no royalty) United States Ad valorem Gold - 2 to 7% Adjusted sales value Michigan (applies only to 2% of adjusted sales value minerals in certain of the minerals is $12 or state lands, less per short ton; otherwise no increasing by 1/2% for royalty) each $6.00 increase in the adjusted sales value per short ton; up to a maximum rate of 7% United States Profit based Gold - 5% of net proceeds Net proceeds - gross yield Nevada (applies only to above $4 million (sales revenue) less most minerals in certain mine operating and capital state lands, costs, depreciation, otherwise no downstream processing and royalty) transportation charges, and private party royalties OS00899/J01 Annexe n°1 64 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Country / law Royalty type Rate or unit fee Basis Venezuela Ad valorem Gold - 3% Commercial value in the Mining Law Decree 295, Decree mine in which is included 1234 of 2001 the costs that incur until the moment that the extracted mineral, crushed or not, is deposited on the vehicle that will transport it outside the boundaries of the granted area or to a beneficiation or refining plant, regardless of its place of location, taking into consideration its content and the price of the mineral on the buyer’s market among other relevant factors. Zambia Ad valorem Gold - 2% (large scale Net back value: FOB value Mines and Minerals Act 1995 mines) for exported minerals -or- market value less costs for transport, insurance, handling, smelting, refining and processing Zimbabwe No royalty Gold - no royalty Not applicable OS00899/J01 Annexe n°1 65 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 21. Tax System Sensitivity to Royalty-Type Taxes Royalty-Type Taxes on Gross Effective Investor Government Revenue: Sales Revenue Tax Rate IRR All Major Taxes & Fees (%) (%) (USD) 0% 56.7 12.4 99,982,000 2% 63.9 10.5 111,460,000 (1% release fee, 0.75% promotion fee, 0.25% computing equipment fee, IMF = 0%) 3% 64.7 10.3 112,961,000 (1% release fee, 0.75% promotion fee, 0.5% computing equipment fee, IMF=0.75%) 4% 65.0 10.2 113,441,000 (1% release fee, 0.75% promotion fee, 0.5% computing equipment fee, IMF=1.75%) 5.25% (base case) 66.6 9.6 116,270,000 (1% release fee, 0.75% promotion fee, 0.5% computing equipment fee, IMF=3%) 6% 67.9 9.3 118,469,000 (1% release fee, 0.75% promotion fee, 0.5% computing equipment fee, IMF=3.75%) 7% (1% release fee, 0.75% 69.6 8.7 121,401,000 promotion fee, 0.5% computing equipment fee, IMF=4.75%) * base case royalty type taxes include : 1% release penalty/fee, 0.75% mining promotion tax, 0.5% computing equipment tax, 3% fixed minimum tax (IMF). OS00899/J01 Annexe n°1 66 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto 8.4 Import and Export Duties 8.4.1 Import Duties Mining is capital intensive and utilizes specialized equipment that is usually imported. This means that an import duty on equipment has a direct impact on project economics in the project’s early years. Project feasibility studies calculate various projections of profitability, such as internal rate of return and net present value, and such quantitative measures are very sensitive to large costs in the early years of a project. Even modest levels of equipment import duties can sink a marginal project. Competition for mineral sector investment worldwide is fierce, and most countries have either eliminated import duties on mine equipment or have found ways to exempt projects or their equipment from such duties. Table 22 lists typical import duties in a cross-section of mining nations around the world. As can be seen in the table, most of the sample nations impose no or low duty and those nations with higher duty usually have some means of exempting mines. The imposition of customs duty carries with it substantial burdens and costs for government in terms of the manpower and time required for tax collection. Most countries are in the process of reducing import duties to values of zero or close thereto. Many nations find that over time, corrupt practices can creep into customs services, particularly where high import duties are levied. OS00899/J01 Annexe n°1 67 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 22. Typical Import Duties on Mine Equipment Country Typical import duty on Comments large equipment Argentina None 1% “control fee� applies to most imports Bolivia 5% Refundable Burkino Faso 11% only applicable at exploitation Canada (Ontario) 0.5% may be less if from within North American Free Trade Agreement (NAFTA) area CAR Exempt exempt except for touring vehicles and office supplies Chile 10% added to depreciable costs and recovered through depreciation China None Ghana Exempt imports for commencement of mining are exempt, later imported equipment is exempt if it appears on the “Mining List� Greenland None Guinea Partially exempt exempt during construction then 5.6%; 0.5% registration tax regardless of phase th Indonesia None to 10% 7 generation COW: exempt non-COW: can apply for exemptions, in practice most pay at 2.5% and then receive refund or tax credit,; if no exemption most mine equipment is rated at 1 to 10% Ivory Coast 0.75% exemptions can be negotiated on an individual mine basis Kazakhstan None Lao PDR Probably exempt Negotiable Madagascar None* *for qualifying large-scale mines--during exploration: exempt; during construction: exempt; during mining: combined import duty rate is 5% paid at time of import but is then deductible as depreciation Mexico 35% exemptions available to some types of mines, may be less if from NAFTA region Mongolia 5% Specific types of equipment listed in a regulation are exempt Mozambique Exempt Papua New Guinea None Peru 5 to 7% rates vary widely depending on the import Philippines 1% may be exempt if application is approved under either the Investment Act or the Mining Act Poland 9% If imported from another E.U. nation, exempt. Romania Exempt South Africa None import duty may apply to spares and parts Sweden None zero-rated if from within the European Union, otherwise 0.6% unless it is not available in the EU, then 0% Tanzania None USA rates vary Uzbekistan None normal rate is 3 to 6%, but can be exempted Vietnam Exempt OS00899/J01 Annexe n°1 68 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto W. Australia 5% Yemen Exempt? Negotiable in an Exploitation Agreement Zimbabwe 5% Source: derived from James M. Otto, John Cordes & Maria L. Batarseh, Global Mining Taxation nd Comparative Study (2 ed. 2000, p.32) except for Central African Republic, Guinea, Indonesia, Lao PDR, Madagascar, Mongolia, Mozambique, Papua New Guinea, Philippines, Vietnam, Yemen and Peru. Caution: Information conveyed in this table may become out of date. Check local statutes for the current treatment. In the CAR, exploration permit companies benefit from a temporary admission regime and imported equipment listed in an attachment to the permit are exempted from import duty (Mining Code §90). Holders of a mining permit are exempt from customs duties and levies during the construction of the mine (except for touring vehicles and office supplies) and for replacement equipment due to a technical incident or expansion (Mining Code §92-93). Observation on Import Duty Import duty is mainly paid during the period in which a mine is being constructed during which there is no sales revenues. Thus, companies view such an input tax very negatively. Most mining nations have exempted mines from import duty during construction or zero-rated most mine type equipment categories. In the CAR, mines are exempt from paying import duty. 8.4.2 Export Duties In the past, export duties were levied to both raise revenue and provide a tool to encourage downstream processing (ores and concentrates were charged at a higher rate than were metals and metal goods). However, in today’s competitive global market, most nations no longer impose export duty on minerals (see Table 23). In today’s global economy nations are steadily reducing or eliminating export duties as they encourage their domestic industries to maintain competitiveness and enter into the global marketplace. Minerals are widely available and export duties tend to discourage investment by foreign and local producers alike who need to be able to sell to the highest paying customer, whether domestic or foreign. The CAR does not currently impose export duties on mineral sales. However, it does levy four taxes which have some attributes of export duty, and these are described in this Chapter’s royalty section. Observation on Export Duty OS00899/J01 Annexe n°1 69 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Almost all nations have exempted minerals from export duties or zero-rated mineral export categories. It is probable that many mining companies avoid investing in nations with appreciable export duties. Like most nations today, the CAR does not impose export duties on minerals. OS00899/J01 Annexe n°1 70 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 23. Typical Export Duties on Minerals Country Export duty on most minerals? (Yes or No?) Argentina No Bolivia No Burkino Faso No Canada (Ontario) No Central African Rep No Chile No China No Egypt Yes (some base metals) Ghana No Greenland No Indonesia No Ivory Coast No Kazakhstan No Lao PDR No Madagascar No Mexico No Mongolia No Mozambique No Papua New Guinea No Peru No Philippines No Poland No Romania No South Africa No Sweden No Tanzania No USA No Uzbekistan No Vietnam Yes W. Australia No Yemen No Zambia No Zimbabwe No Source: James M. Otto, John Cordes & Maria L. Batarseh, Global Mining Taxation Comparative Study (2nd ed. 2000, p.32) except for Central African Republic, Egypt, Indonesia, Lao PDR, Madagascar, OS00899/J01 Annexe n°1 71 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Mongolia, Mozambique, Papua New Guinea, Peru, Philippines, Vietnam, Yemen and Zambia. Caution: Information conveyed in this table may become out of date. Check local statutes for the current treatment. 8.5 Value Added Tax - VAT This type of tax is becoming more common worldwide. In nations where such a tax is in use, it is commonly applied to most purchases, both in terms of capital goods as well as services. Because it is a “consumer� tax and export minerals must compete globally, almost all mineral exporting nations have chosen to eliminate the impact of the tax in one way or another on both export mineral sales and imported equipment and service purchases. The means to achieve this negation vary widely and involve varying degrees of complexity and government administration. The simplest form of negation is exempting VAT on all mining inputs and outputs for qualifying projects. More complex schemes involve rebates, crediting, refunds, deferrals, and a host of other mechanisms. While many nations negate the effect of VAT on exported products, many do apply VAT to mining products that serve domestic markets. Table 25 lists for selected tax jurisdictions whether or not they assess VAT. It also indicates whether relief from VAT is available to mines for purchased equipment. The VAT situation in the CAR is unclear. A VAT of 19% applies to the purchase of goods and services. Export sales are exempt and for projects with such sales VAT should be refundable. However, it is reported that the VAT refund process is impaired because the funds available to make refunds are not adequate in some cases to allow full refunds. If this is the case, it doubtful that any large mine would be able to bear the VAT input tax burden and remain profitable. Table 24 shows two VAT scenarios. First it assumes that the model mine pays the 19% VAT on all inputs and receives a refund for such tax. Second it assumes that VAT is paid on inputs but that there is no refund. Table 24. Tax System Sensitivity to VAT Effective Investor Government Revenue: VAT Assumption Tax Rate IRR All Major Taxes & Fees (%) (%) (USD) 19% on inputs, export sales exempt, input VAT refundable 66.6 9.6 116,270,000 (base case) 19% on inputs, export sales 84.8 3.9 148,056,000 exempt, no refund OS00899/J01 Annexe n°1 72 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Observation on VAT Value added tax is becoming widespread and largely has replaced general sales tax in most nations. Typically, mining nations handle VAT in two ways. Where the mineral produced is sold for consumption within the country the normal VAT system is applied. However, where the output is exported, the sales transaction is free of VAT (zero-rated or exempt) and there is a way for VAT to be negated on inputs (exemption, zero-rated, refund or credit scheme). The approach in the CAR is VAT is payable on inputs and if the mineral is exported, input VAT is refundable. However, it is reported that the VAT refund process is impaired because the funds available to make refunds are not adequate in some cases to allow full refunds. If this is the case, it doubtful that any large mine would be able to bear the VAT input tax burden and remain profitable. An essential reform to fiscal system is to either exempt mines that export from input VAT, or to reinstitute the VAT refund system. OS00899/J01 Annexe n°1 73 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 25. VAT on Imported Goods and Services in Selected Jurisdictions Country VAT is payable on If the product is exported, means are available to purchase of goods and negate the VAT effect on foreign goods and services services purchased by a mine (exempt, zero- rated, credits, deferral, refund, etc.) Argentina Yes Yes Bolivia Yes Yes Burkino Faso Yes Yes Canada (Ontario) Yes Yes Central African Rep Yes Yes (VAT is refundable, but in practice the refund system may not function) Chile Yes Yes China Exempt - Ghana Exempt - Greenland None - Guinea Exempt - Indonesia Yes Yes Ivory Coast Yes None Kazakhstan Yes Yes Lao PDR Exempt VAT system is not being implemented at present Madagascar Yes Yes Mexico Yes Yes Mongolia Yes Yes Mozambique Yes Yes Papua New Guinea Yes Yes Peru Yes Yes Philippines Yes If the mine will export all of its production, VAT paid on services may either be refunded or claimed as a tax credit certificate by the taxpayer. The tax credit certificate may be used by the taxpayer in payment of internal revenue taxes. VAT paid on the importation or purchase of capital goods cannot be refunded and can only be claimed as input VAT credits deductible against output VAT. Since VAT on exported minerals is zero rated, no crediting is available if the mine product is exported. Poland Yes Yes Romania Yes Yes, if from within the E.U. – exempt, and if product is exported - input VAT is refundable South Africa Yes Yes Sweden Yes Yes Tanzania Exempt - USA None - Uzbekistan Exempt - Vietnam Yes Yes W. Australia Yes Yes Yemen Exempt? Probably (negotiated agreement) OS00899/J01 Annexe n°1 74 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Zimbabwe None - Source: derived from James M. Otto, John Cordes & Maria L. Batarseh, Global Mining Taxation Comparative Study (2nd ed. 2000, p.48) except for Central African Republic, Guinea, Indonesia, Lao PDR, Madagascar, Mongolia, Mozambique, Papua New Guinea, Philippines, Romania, Vietnam, Yemen and Peru. Caution: Information conveyed in this table may become out of date. Check local statutes for the current treatment. 8.6 Dividend, Loan Interest and Foreign Services Withholding Taxes Many nations impose various forms of withholding taxes, for example on remitted dividends, loan interest, and foreign services. These taxes can be appreciable for large mines. Tables 26 and 27 list withholding tax rates for a number of countries. The general rates described in the tables must be used with some caution. Although many governments define a high dividend withholding tax rate, perhaps with the objective of promoting reinvestment or providing national mining companies with an advantage over foreign firms, they often enter into bilateral investment treaties or double taxation treaties that lower or eliminate such taxes for companies headquartered in key trading partner countries. The CAR imposes withholding taxes on remitted dividends and payments to foreign service providers at a rate of 15% (such withholding payments are not deductible for computing income subject to the Industrial and Commercial Profits Tax). A 1% withholding tax may apply to payments of foreign loan interest and is deductible. However, information sources differed on whether the 1% tax applies in all situations. Lower withholding rates may apply with some tax treaty countries. The impact of a range of withholding taxes on dividends and service contracts using the mine model are shown in Table 28. Table 28. Tax System Sensitivity to Withholding Tax Withholding Tax Effective Investor Government Revenue: (on dividends and service Tax Rate IRR All Major Taxes & Fees contracts remitted outside the (%) (%) (USD) CAR) 0% 50.6 13.4 88,364,000 10% 61.7 10.9 107,677,000 15% (base case) 66.6 9.6 116,270,000 20% 71.2 8.5 124,252,000 OS00899/J01 Annexe n°1 75 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Observation on Withholding Taxes Most nations impose withholding tax on remitted dividends, loan interest and on payments for foreign sourced services. The CAR does so also at a rate of 15% on remitted dividends and services. A 1% withholding tax may also in some cases apply to foreign loan interest payments (different information sources had varying opinions on this issue). The rate can be less for payments in countries that have tax treaties with the CAR. The 15% rate is comparable to that in many other nations. OS00899/J01 Annexe n°1 76 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 26. Dividend Withholding and Similar Taxes in Selected Jurisdictions Dividend Country Withholding Tax Comment rate (%) Argentina 0 35% on the excess of the accumulated taxable net income Bolivia 12.5 Burkino Faso 12.5 Canada (Ontario) 25 Central African Rep 15% Chile 35 15% income tax is credited against the withholding tax China None Egypt None Ghana 10 most mines negotiate an exemption Greenland 35 Guinea 15 Indonesia 20 Most tax treaties reduce the rate to 15% Ivory Coast 12 Kazakhstan 15 Lao PDR None Madagascar 10 Mexico 35 Mongolia 20 Mozambique 10 PNG 10 Peru 0 An additional rate of 4.1% on income tax applies when dividends are distributed. Philippines 35* Nonresident foreign corporations; 35%, reducing to 30% in 2009 Nonresident alien individuals: 25% Philippine individuals: 10% Poland 20 Romania 16 South Africa 12.5 Secondary Tax on companies is levied on dividend basis Sweden None Tanzania 10 USA 30 Uzbekistan 15 Vietnam None W. Australia 30 0% if dividend is fully franked Yemen None Zambia None Zimbabwe 20% Credited against income tax * where rates are given they refer to the general rate. Many nations have bilateral investment or double taxation treaties that greatly lower the rate or eliminate. OS00899/J01 Annexe n°1 77 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Source: James M. Otto, John Cordes & Maria L. Batarseh, Global Mining Taxation Comparative Study (2nd ed. 2000, p.45) except for Bolivia, Central African Republic, Egypt, Guinea, Indonesia, Lao PDR, Madagascar, Mongolia, Mozambique, Papua New Guinea, Peru, Philippines, Romania, Vietnam, Yemen and Zambia. Some information conveyed in this in this table may be out of date. Check local statutes for the current treatment. OS00899/J01 Annexe n°1 78 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 27. Loan Interest Withholding Tax in Selected Jurisdictions Loan interest Country withholding tax Comment rate (%)* Argentina 15.05 35% on inter-company loans Bolivia 12.5 Burkino Faso 12.5 Canada (Ontario) 25 note: local finance is available Central African Rep 1%? Note: conflicting information Chile 4% 4% when loan is granted by foreign bank; 35% otherwise. China none Egypt none Ghana 10 may be exempted by negotiated agreement Greenland none Guinea none Indonesia 20 most tax treaties reduce this to 10% Ivory Coast 18 Kazakhstan 15 Lao PDR none Madagascar 25 Mexico 15 Mongolia 20 PNG exempt Peru 4.99 4.99% when loan is granted by foreign bank or exceeds a cap; 30% otherwise. Philippines 20 Poland 20 (in 2000) Romania 16 South Africa none Sweden none Tanzania none USA 30 Note: local financing available Uzbekistan 15 Vietnam 10 W. Australia 10 Note: local financing available Yemen none Zambia 0 (for copper and cobalt) 15 for other minerals Zimbabwe 10 may be used as an income tax credit OS00899/J01 Annexe n°1 79 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto * where rates are given they refer to the general rate. Many nations have bilateral investment or double taxation treaties that greatly lower the rate or eliminate it for loans originating in the treaty country. Source: James M. Otto, John Cordes & Maria L. Batarseh, Global Mining Taxation Comparative Study (2nd ed. 2000, p.45) except for Bolivia, Central African Republic, Egypt, Guinea, Indonesia, Lao PDR, Madagascar, Mongolia, Mozambique, Papua New Guinea, Peru, Philippines, Romania, Vietnam, Yemen and Zambia. Some information conveyed in this in this table may be out of date. Check local statutes for the current treatment. 8.7 Transfer of Funds Tax The CAR levies a tax on the transfer of funds from within the CAR to outside the CAR. The rate varies depending on the location to which are to be transferred. The policy rationale is unclear, very few nations have such a tax. One policy reason would be to discourage the transfer of funds out of the country. Most nations use withholding taxes or reinvestment incentives for this purpose. Any reason may be historical, a vestige of colonial times when colonial administrators were motivated to favor one group of investors over another. Regardless of the motivation, the tax is significant. The presence of the tax will almost surely result in companies seeking to reduce its impact by efforts to maintain purchases and sales outside the CAR. The tax on transfer of funds is levied as follows:-- • 0.0% on the transfer when the transfer is toward a CEMAC destination (CEMAC is the Economic and Monetary Community of Central Africa – Cameroon, Chad, the Republic of the Congo, Equatorial Guinea and Gabon). • 0.25% when transfer is towards “Franc�-zone countries excluding CEMAC ((Benin, Burkina Faso, Côte d'Ivoire, Guinea Bissau, Mali, Niger, Senegal, Togo, Congo, Chad, Comoros and France). • 0.50% when transfer towards countries outside the “Franc�-zone. Table 29 shows the effect of various levels of transfer of funds tax on the model gold mine. 5.2.11.1.1.1.1.1.2 Table 29. Tax System Sensitivity to Transfer of Funds Tax Transfer of Funds Tax Effective Investor Government Revenue: Tax Rate IRR All Major Taxes & Fees (%) (%) (USD) 0% 65.6 10.0 114,460,000 0.25% 66.1 9.8 115,366,000 0.50% (base case) 66.6 9.6 116,270,000 If exempted during construction, 66.4 9.8 115,817,000 then 0.50% OS00899/J01 Annexe n°1 80 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Observation on Transfer of Funds Tax Most nations do not impose a tax on funds transferred out of the country except for withholding taxes. The CAR imposes a tax on the transfer of funds. The rate varies depending on the destination from 0 to 0.5%. 8.8 Tax Collection and Distribution There is no function of government more controversial than tax collection and distribution. It is a key way in which power is allocated in a regulated society. Governments have many options regarding the distribution of taxes. Traditionally, the option chosen by many developing nations is that most tax revenues flowed to central government and then were distributed according to the budgeting process. The area or region in which a mine was located did not receive any particular preference except as resulted from budget decisions. However, there has been a recent move to provide a greater level of tax participation at provincial and local levels. This is particularly true in nations with strong local governments (or where tribal customary law acts in parallel with government). In some nations if there is strong local opposition to a mine, perhaps because there is a perception that local minerals are being mined with little fiscal benefit to the local community, that opposition can effectively stop mine development regardless of whether the government has granted development permission. There are a variety of policy options. One option is to distribute revenue collections by allocating taxing power--some taxes to be collected by central government, some by local government. In allocating tax collection power, care must be taken to take into account two main factors: (1) limitations should be imposed to constrain too high a level of locally imposed tax and fees (i.e., the need for a closed list of local taxes and taxes that are capped), and (2) the capability of local government to effectively collect the tax. Another option is for taxes to be collected by central government but then, as required by statutory allocation, to remit the required portion to local government. Central government is often better equipped for the tax collection (and auditing) function than is local government. However, there is a danger that irrespective of what the statute says, local government will not receive its due. For this reason, most mining companies prefer to pay the intended level of government directly rather than rely on an internal remittance system. Local governments prefer to receive taxes directly from the taxpayer rather than relying on remittance from central government. OS00899/J01 Annexe n°1 81 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto A third option, and one that was discussed in another section above, is for central government to forgo some portion of taxes by allowing the company to deduct qualified investments made in local communities. Another distribution option is for the government to mandate that a special tax, fee, contribution or distribution be made by the company for the benefit of a designated class of beneficiaries. Examples of such “targeted� distributions include mandatory contributions linked to salaries of employees such as contributions to insurance, retirement funds, profit sharing and so forth and contributions to special purpose funds such as for local sustainable development efforts. Table 5 shows the level of government that various taxes are paid to. 8.9 Land Area Fees Most nations assess a rent or usage fee on exploration, mines and quarries based on the land area that they occupy or use under permit or contract. Usually such rent/fee is uniform for all holders of a like type of permit and rates and collections are low relative to most other taxes such as income tax and royalty. Such land rental is usually deductible for computing income subject to income tax. It is not uncommon for mine and quarry land rentals to be paid to local rather than central government but it is uncommon for rental rates to be set by local government. The reason for this is that local government will naturally seek to maximize rent from such sources and if given unfettered authority to set rents for individual operations, will be prone to develop corrupt and abusive practices. Additionally, many governments that have given rental setting and collecting authority to local government have found that the expenditure of such revenues may take place in a nontransparent way. In the CAR, land use fees are applied to prospecting permit area and to exploitation permit area based on a square kilometer basis. The amounts escalate over time. The fees are set out in Table 6. OS00899/J01 Annexe n°1 82 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Observation on Land Area Fees The CAR annual land area related fees for exploration and exploitation permit areas are similar to the fees imposed in other nations. 8.10 Government Equity Today, very few governments are interested in taking up an equity interest in mining (see Table 30). In the past, the rationale behind the government taking an equity role was based mainly on two perceptions: (1) the government needed to exert a greater level of control over its natural resources, and (2) the government would benefit financially from an equity stake. However, with improvements in mining laws and tax laws, and with a greater appreciation of the risks involved with mining, most nations have now rejected taking an equity stake and exert the desired level of control through laws. Improvements in mining tax systems have prompted governments to focus on risk-free tax measures rather than on risk-prone equity as the primary means by which to reap financial benefits. Of the few governments that still take an equity share, there are several approaches used. One is where the government takes a working interest, i.e. pays it full share of all costs and takes its share of profit distributions. While almost all mining companies would prefer no state participation, if such participation is necessary for political reasons, this is the approach that will least dissuade investors. The government of Papua New Guinea uses this working interest approach and has been able to attract substantial investment. Such an approach does not alter the investor’s rate of return. Another approach is where the government requires an interest and pays no share of costs but is entitled to a proportionate equity share of distributed profits. The impact on the investor’s rate of return is very similar to a dividend or remitted profits withholding tax. This free equity approach is not acceptable to most companies who will look to other jurisdictions in which to invest. The free equity approach is used almost exclusively in the West Africa region where mining investment remains relatively low although it is highly prospective for many minerals. Some nations in this region, such as Guinea, have the ability under the law to take a free equity share but have concluded that requiring such a share is in the long term counterproductive because it drives away investors who would otherwise invest, pay taxes and contribute to development. In the CAR state equity is not required. However, it is not banned and can, by mutual agreement, be made part of a negotiated agreement. OS00899/J01 Annexe n°1 83 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Table 30. Equity Requirements in Selected Jurisdictions Country Mandatory local private equity interest Mandatory state equity interest required by required by law or policy? law or policy? Argentina No No Bolivia No No Burkina Faso No Yes, 10% free equity Canada (Ontario) No No Central African No No Republic Chile No No China No No Egypt No No/Yes (required only for gold projects granted licenses in 2006/7) Ghana No Yes, 10% free equity Greenland No No Guinea No t No, (recent agreements don' include gov’t equity) Indonesia No/Yes, some generations of COWS Policy not certain at this time require phased offering of shares to nationals Ivory Coast No Yes, 10% free or carried interest Kazakhstan No No Lao PDR Yes/No (no specific requirement, Yes/No (no specific requirement, negotiable) negotiable) Mali No Yes Mongolia Yes No/Yes (the state has an option to take up to a 50% equity stake in strategic deposits it helped explore and up to 34% in other strategic deposits) Mexico No No Mozambique No No Papua New Guinea No/Yes (local landowners may opt for a No/Yes (the state may opt for a paid equity paid equity interest) interest) Peru No No Philippines Yes/No (60% ownership by nationals No required unless investment is made under certain constitutionally defined agreements such as an FTAA) Poland No No Romania No Sometimes, for example up to 19.3% for some gold projects South Africa No No Sweden No No Tanzania Yes No USA No No Uzbekistán No No Vietnam No No OS00899/J01 Annexe n°1 84 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto W. Australia No No Yemen No No Zambia No No Zimbabwe No No Source: except for Bolivia, Central African Republic, Egypt, Indonesia, Lao PDR, Mongolia, Mozambique, Papua New Guinea, Peru, Philippines, Romania, Vietnam, Yemen and Zambia, derived nd from Global Mining Taxation Comparative Study, 2 edition 2000. Observation on Equity Participation Most nations today do not participate as an equity partner in mining projects. The few that do require a free equity interest do so in the range of around 10% percent. The very few nations that require or retain an option for more than 10% equity acquire their equity on a paid basis. The CAR does not require a mandatory state equity share. 8.11 Minimum Tax and Excess Profits Tax Commodity prices fluctuate greatly reflecting supply and demand in the world economy. There are a variety of fiscal methods available to governments which can be used to collect additional revenues in times of high prices including for example, a form of resource rent tax, a graduated royalty that increases as the price of the commodity increases, and a graduated income tax. However, it is important for tax policy makers to plan for both periods of high prices and low prices (note: loss carry forward tends to smooth out and reduce the impact of extreme price fluctuations). Profit based taxes such as income tax and dividend withholding track profitability in times of high prices. Some, but very few governments, levy a special form of excess profits tax. Of the very few nations that do levy a form of excess profits tax, the most common approach is a graduated royalty rate which increases as some measure of either commodity price (such as in Bolivia) or profitability (such as in Ghana) increases. Some nations impose a minimum tax to insure that at least some tax is paid even if a mine is not generating a profit. The CAR does not impose an Excess Profits Tax but does, in the absence of a profit, levy a 1.5% tax on turnover with the minimum payable being 1,500,000 F CFA per annum. Observation on Minimum Tax and Excess Profits Tax Very few nations impose excess profits on mines. Such taxes, regardless of their form, are viewed very negatively by investors. When profits are high, companies already pay more income tax. Many mines lose money when commodity prices are low and may require funds saved from higher price periods to remain in business. It is usually in the interest of both the investor and the government to keep a mine open so that future OS00899/J01 Annexe n°1 85 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto revenue flows will occur. The CAR does not impose an excess profits tax but does levy a small minimum tax to insure that some tax is paid in years when no profits are made. 8.12 Bonus Payments and Permit Fees There are three main types of bonus payments that are used in the petroleum sector: a signature bonus, a triggered bonus, and an annual bonus. A signature bonus is a lump sign paid to the government upon signature of a production sharing or other form of contract. A trigger bonus is a one time lump sum paid to the government when an agreed event takes place, such as reaching a certain number of barrels per day production target. An annual bonus, which is rare, is an annual lump sum payment to government. Bonus payments of any type are not used in the mining industry except in rare occasions where a known deposit is tendered by bid. It is common for nations to assess permit fees upon the issuance of the permit authorization. In almost all mining countries the fee is nominal amounting to just a few hundred or thousands of dollars. The CAR typically requires a signature bonus payment at the time a mining convention is signed. Permit fees also are applied: Reconnaissance Permit: 500,000 F CFA; Exploration Permit: 1,500,000 F CFA; Exploitation Permit: 20,500,000 F CFA. Table 31 shows the impact of various signature bonuses on the model gold mine. Table 31. Tax System Sensitivity to Signature Bonus Effective Investor Government Revenue: Signature Bonus Tax Rate IRR All Major Taxes & Fees (USD) (%) (%) (USD) 0 65.5 10.2 114,270,000 2,000,000 (base case) 66.6 9.6 116,270,000 5,000,000 68.3 8.9 119,270,000 10,000,000 71.2 7.8 124,270,000 Observation on Bonus Payments and Permit Fees Bonus payments are common in the petroleum industry but very few nations impose bonus payments on the mining industry. Unlike most nations, the CAR typically requires a large bonus payment on the signing of a mining agreement. Almost all nations impose a one- OS00899/J01 Annexe n°1 86 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto time permit fee at the time that a mining permit authorization is issued. The fee is usually nominal, just a few hundred or thousands of dollars and this is the practice in the CAR. OS00899/J01 Annexe n°1 87 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto 9. Summary and Final Observations: Large Mine Taxation • Taxation is an important criterion that foreign investors analyze when deciding where to invest, but it is not the only criteria. • This study has analyzed the competitive position of the CAR mineral sector statutory tax system to determine if it is internationally competitive. The tax systems of thirty jurisdictions, including the CAR’s, were assessed using a proprietary gold mine model. Based on well accepted measures of comparison--internal rate of return (IRR81) and overall effective tax rate (ETR82)--it was determined that the current CAR mineral sector tax system is a moderately high tax jurisdiction ranking 20 highest out 30 jurisdictions. • Most companies will not invest in a project unless the IRR is at least above 12%, and many companies would require a much higher IRR in the CAR which is considered a risk-prone location. Using 2008 cost assumptions in the gold mine model, the current fiscal system would yield an IRR of 12% at a gold price of $485 per ounce. • Nations that have enjoyed high levels of mineral sector investment and that are generally acknowledged as obtaining a “fair share� of fiscally derived revenues usually have a total undiscounted effective tax rate (ETR) of between 40 and 70%. Using 2008 cost assumptions in the gold mine model, the current fiscal system would yield an ETR of between 44 to 62% over a gold price range of US$1000 to US$485. The ETR in the CAR at any gold price is higher than in many nations but is not unreasonable. • The fiscal needs and administrative capabilities of individual nations vary and tax systems thus evolve differently in different nations. However, as the world moves forward into the new century it is clear that mining fiscal systems are becoming increasingly similar. Nations whose mining fiscal systems impose a non-transparent taxation system (such as a negotiated system) or a system that investors perceive as inappropriate (such as one in which taxes not tied to profitability dominate) can expect to see lower levels of investor interest than nations with transparent systems that approach the “global� norm. • Most international mining companies will find the level and types of statutory taxes in the CAR acceptable. It is recommended that the existing fiscal 81 A technical definition of internal rate of return (IRR) is provided in the report. 82 A technical definition of total Effective Tax Rate (ETR) is provided in the report.. ETR is a measure of the level of taxation that takes into account all taxes, tax incentives, fees, duties, and other distributions to government. OS00899/J01 Annexe n°1 88 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto regulatory system be retained. However two problem issues were identified. In some instances, mines have been required to pay a nontransparent (secret) signature bonus that does not have its basis in any fiscal law. Secondly, the VAT system is reported as not currently be functional with regard to refunds. It is recommended that the use of negotiated signature bonuses be discontinued and that either VAT refunds be made promptly or alternatively mine inputs be exempted from VAT. To facilitate a better grasp of the base case mine model results a variety of figures are included in this section. OS00899/J01 Annexe n°1 89 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Figure 5. Distribution of Mine Revenues (from sales) C.A.R. Cost and Profit Distribution (not discounted) Company profits Taxes & Free Equity Dividends Loan Costs Capital Costs Operating Costs 0 100,000,000 200,000,000 300,000,000 400,000,000 500,000,000 600,000,000 700,000,000 OS00899/J01 Annexe n°1 90 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Figure 6. Breakdown of Total Taxes Paid Over Life of Model Gold Mine C.A.R. - Model Gold Mine (base case not discounted) Equipement Transfer of Informatique Funds Tax VAT Fee 1.9% 0.0% Mining 4.1% Promotion Tax Signature 6.2% bonus 1.7% Exploitation Permit Fee BIC Income Tax 0.0% 28.3% Area Rental 0.4% IMF 24.7% Droit de Sortie 8.2% W/H Dividends W/H Interest W/H Services 17.7% 0.2% 6.4% OS00899/J01 Annexe n°1 91 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto Figure 7. Summary of Taxes and Fees (Base Case) Gross Revenue 959,354,589 - Transfer of Funds Tax 2,249,919 0.2% 1.9% - Value Added Tax 0 0.0% 0.0% - Signature bonus 2,000,000 0.2% 1.7% - BIC Income & Minimum Tax 32,938,927 3.4% 28.3% - Exploitation Permit Area Rental Fee 490,141 0.1% 0.4% - Droit de Sortie 9,593,546 1.0% 8.2% - W/H Tax (foreign consulting services) 7,414,970 0.8% 6.4% - W/H Tax (Interest remitted) 211,917 0.0% 0.2% - W/H Tax (Dividends remitted) 20,586,688 2.1% 17.7% - IMF (Impôt Minimum Forfaitaire) 28,780,638 3.0% 24.7% - Exploitation Permit Fee 11,140 0.0% 0.0% - Mining Promotion Tax 7,195,159 0.8% 6.2% - Equipement Informatique 4,796,773 0.5% 4.1% = Total Taxes 116,269,819 12.1% 100.0% OS00899/J01 Annexe n°1 92 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto OS00899/J01 Annexe n°1 93 November 2008 The World Bank Assessment of the Central African Republic Mining Sector CAR Mining Taxation System: Competitive Position in association with James Otto OS00899/J01 Annexe n°1 94 November 2008 The World Bank Assessment of the Central African Republic Mining Sector References McMahon, Fred and Cam Vidler (2008), Fraser Institute Annual Survey of Mining Companies 2007/2008, Vancouver: Fraser Institute. Naito, Koh and Felix Remy (2001a), Mining Sector Reform and Investment Results of a Global Survey, London: Mining Journal Books for the World Bank Group Mining Department and Metal Mining Agency of Japan. Naito, Koh, Felix Remy and John Williams (2001b), Review of Legal and Fiscal Frameworks for Exploration and Mining, London: Mining Journal Books for the World Bank Group Mining Department and Metal Mining Agency of Japan. Otto, James and John Cordes (2002). The Regulation of Mineral Enterprises: A Global Perspective on Economics, Law and Policy, Chapter 2; Westminster (CO): Rocky Mountain Mineral Law Foundation. Otto, James; Maria Loiusa Beraun and John Cordes (2000). Global Mining Taxation Comparative Study 2nd edition; Golden (CO): Colorado School of Mines (note: Chinese edition 2006, Beijing: Geological Publishing House of the Ministry of Land and Resources). Otto, James et al, (2006) Mining Royalties: A Global Study of their Impact on Investors, Government, and Civil Society; Washington DC: World Bank Press (available in English and Spanish). OS00899/J01 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Annex N° 2 Environmentally Protected Areas and Gold and Diamond Deposits in the Central African Republic Sources: Map compiled by Wardell-Armstrong using own data (mineral resources) and data collected from the Convention on Biological Diversity website http://www.biodiv.be (environmentally protected land). OS00899/J01 November 2008 The World Bank Assessment of the Central African Republic Mining Sector OS00899/J01 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Annex N° 3 Historic of diamond production since the origin Production Soc. Min. Pro. Totale Origine Bureaux Production Valeur mercuriale Cours Taxes Perçues/Etat Val. Moy. / Ct Sect. Carnot Sect. Bria Soc. Min. indéterminée achat d' Officielle millions F CFA millions US $ US $ millions $ % F CFA $ 1961 26.012 21.841 47.853 697 62.934 111.484 497,4 2,028 245,3 4.462 18 1962 41.420 16.544 57.964 3.415 204.039 265.418 1.579,70 6,448 245 5.952 24 1963 58.382 15.144 73.526 256 328.404 402.186 2.518,50 10,279 245 6.262 26 1964 59.409 382.872 442.281 3.067,40 12,518 245 6.935 28 1965 91.794 445.016 536.810 3.466,40 14,144 245,1 6.457 26 1966 77.274 462.661 539.935 3.697,80 15,051 245,7 6.849 28 1967 45.708 474.920 520.628 3.532,90 14,361 246 6.786 28 1968 61.951 573.984 635.935 4.627,60 18,691 247,6 7.277 29 1969 27.639 507.677 535.316 3.961,00 15,288 259,1 7.399 29 1970 1.491 482.447 483.938 3.571,50 12,935 276,1 7.380 27 1971 1.223 437.449 438.672 1.972,60 7,161 275,5 4.497 16 1972 2.804 521.298 524.102 3.309,20 13,127 252,1 6.314 25 1973 1.248 379.218 380.466 2.895,70 13,07 221,6 7.611 34 1974 25.196 329.547 354.743 3.326,60 13,841 240,3 9.377 39 1975 79.998 258.896 338.894 2.930,20 13,691 214 8.646 40 1976 1.001 278.827 279.828 3.498,50 14,663 238,6 12.502 52 1977 - 297.154 297.154 5.532,00 22,528 245,6 18.617 76 1978 - 303.008 303.008 9.151,20 40,692 224,9 30.201 134 1979 23.167 290.900 314.067 8.341,60 39,225 212,7 7,85 20,00% 26.560 125 1980 5.133 336.575 341.708 8.420,30 39,89 211,1 7,98 20,00% 24.642 117 1981 9.942 301.961 311.903 7.556,70 27,959 270,3 5,59 20,00% 24.228 90 1982 27.941 248.632 276.573 7.753,90 23,712 327 4,74 20,00% 28.036 86 1983 30.484 264.873 295.358 8.900,10 23,36 381 4,67 20,00% 30.133 79 1984 3.049 334.101 337.150 11.810,40 27,026 437 3,78 14,00% 35.030 80 1985 13.946 338.930 352.876 12.463,30 27,758 449 3,33 12,00% 35.319 79 1986 - 357.379 357.379 10.631,80 30,684 346,5 3,64 11,86% 29.749 86 1987 - 412.224 412.224 13.022,30 43,336 300,5 5,17 11,93% 31.590 105 1988 - 359.111 359.111 14.463,50 48,535 298 5,56 11,46% 40.276 135 1989 2.863 444.813 447.676 19.751,90 61,918 319 6,67 10,78% 44.121 138 1990 6.622 408.167 414.789 16.788,90 61,611 272,5 7,13 11,57% 40.476 149 1991 1.498 428.235 429.734 16.748,00 59,285 282,5 6,97 11,75% 38.973 138 1992 201 414.077 414.277 16.658,90 62,983 264,5 6,29 9,99% 40.212 152 1993 127 494.796 494.923 20.866,90 73,891 282,4 12,28 16,62% 42.162 149 1994 2.757 528.235 530.992 41.274,80 74,841 551,5 5,99 8,00% 77.732 141 1995 2.842 3.712 477.698 484.252 37.610,90 75,373 499 6,22 8,25% 77.668 156 1996 9.657 477.701 487.359 36.027,80 70,367 512 4,75 6,75% 73.925 144 1997 3.117 5.669 478.001 486.787 40.705,80 69,833 582,9 4,47 6,40% 83.621 143 1998 45.950 374.017 419.967 34.864,00 59,239 588,5 3,55 6,00% 83.016 141 1999 10.369 11.986 409.814 432.169 38.370,80 62,392 615 3,73 5,98% 88.787 144 2000 22.438 438.567 461.004 43.953,60 61,823 711 3,71 6,00% 95.343 134 2001 12.267 437.003 449.270 41.216,70 56,272 732,5 6,75 12,00% 91.742 125 2002 5.124 409.664 414.788 36.316,50 52,288 694,5 6,27 12,00% 87.554 126 2003 378.000 378.000 28.400,00 48,898 580,8 5,87 12,00% 75.132 129 2004 4.911 386,72 348.187 353.485 27.763,31 51,797 536 3,18 6,14% 78.542 146,5 2005 446 213,23 382.636 383.295 32.716,80 61,730 530 2,91 4,72% 85.357 161,1 2006 2.959 412.571 415.529 32.666,60 61,061 534,98 3,66 6,00% 78.614 146,9 2007 417.691 29.754,78 62,774 474 7,53 12,00% 71.236 150,3 61 à 07 125.814 53.529 903.888 26.335 17.717.219 19.065.134 758.957 1.780,38 160,25 OS00899/J01 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Annex N° 4 Audit report on the sources of revenues of the Ministry of Mines, Energy and Hydraulics, first trimester 2007. Rapport d’audit des sources de recettes du Ministère des Mines, de l’Energie et de l’Hydraulique, 1er trimestre 2007. OS00899/J01 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Annex N° 5 Audit report on the engagement bonuses pertaining to mining conventions, transfer of shares of capital and their use for the 2004-2006 period; December 31, 2007. Rapport d’audit des bonus de signatures des conventions minières, des transferts de parts de capitaux propres et leur utilisation pour la période 2004 à 2006 ; 31 décembre 2007. OS00899/J01 November 2008 The World Bank Assessment of the Central African Republic Mining Sector Annex N° 6 Documents collected OS00899/J01 November 2008 SITUATION DES RECETTES GENEREES DANS LE SECTEUR MINIER AU PROFIT DE L'ETAT SUR L'EXPORTATION DE DIAMANT PERIODE : ANNEE 2004 Recettes Versées au Trésor RAISONS PRODUCTION VALEUR VALEUR TAXE D S IMF 3% TAXE I D V TAXE 3% CASDOR TAXE R I D T 3%DS+0,50%RIDT SOCIALES (en Carats) ACHAT EXPERTISE 3% 2% COLLECT 0,75% 0,50% +3%COLL+3%IMF (en FCFA) (en FCFA) BADICA 38 420,65 3 701 169 246 4 299 774 514 128 993 235 128 993 235 85 995 490 111 035 077 32 248 309 21 498 873 390 520 421 PRIMO 88 385,76 4 822 285 500 5 783 729 176 173 511 875 173 511 875 115 674 584 144 668 565 43 377 969 28 918 646 520 610 961 SODIAM 64 089,27 5 579 740 900 5 734 336 844 172 030 105 172 030 105 114 686 737 167 392 227 43 007 526 28 671 684 540 124 122 SOPICAD 46 650,17 3 564 001 500 3 942 944 726 118 288 342 118 288 342 78 858 895 106 920 045 29 572 085 19 714 724 363 211 452 DDC 98 524,71 4 596 338 863 6 303 523 233 189 105 697 189 105 697 126 070 465 137 890 166 47 276 424 31 517 616 547 619 176 COMIGEM 3 007,85 351 809 000 360 100 250 10 803 008 10 803 008 7 202 005 10 554 270 2 700 752 1 800 501 33 960 786 ADC 2 604,36 227 166 000 232 005 327 6 960 160 6 960 160 4 640 107 6 814 980 1 740 040 1 160 027 21 895 326 CONCEDIA 8 390,88 488 233 000 673 689 721 20 210 692 20 210 692 13 473 794 14 646 990 5 052 673 3 368 449 58 436 822 ORDICA 1 121,44 104 000 000 144 762 018 4 342 861 4 342 861 2 895 240 3 120 000 1 085 715 723 810 12 529 531 SANFAMI 1902,74 199 695 500 223 706 469 6 711 194 6 711 194 4 474 129 5 990 865 1 677 799 1 118 532 20 531 785 CMC 341,32 45 000 000 51 164 676 1 534 940 1 534 940 1 023 294 1 350 000 383 735 255 823 4 675 704 UNCMCA 45,4 12 800 000 13 571 358 407 141 407 141 271 427 384 000 101 785 67 857 1 266 138 TOTAL 353484,55 23692239509 27763308312 832899312 832899312 555266166 710767185 208224812 138816542 2515322226 Nota Bene DS= Droit de Sortie (3%) perçu par la Douane au profit du Tresor Public IMF= Impôt Minimum Forfaitaire ( 3%) perçu par la Douane au bénéfice des Impôts au Impôts au bénéfice du Tresor TSD = Taxe sur l'achat des collecteurs ( 3%) perçue les impots les bénéfice du Tresor Public CASDOR = Caisse d'Avance spéciale sur le Diamant et Or (0,75) au bénéfice des Mines RIDT = Redevance Informatique Douane Tresor ( 0,5%) perçue par la Douane au bénice du bloc Finance IDV = Intrenational Diamond Valor ( 2%) perçu par la Société Privé IDV pour son propre compte PERIODE : ANNEE 2005 au Trésor 3%DS+0,50%RIDT RAISONS Taux de SOCIALES PRODUCTION VALEUR VALEUR Taxe imposable change Valeur en dollars TAXE D S IMF 3% TAXE I D V TAXE 3% CASDOR TAXE R I D T SPPK +3%COLL+3%IMF BUREAUX (en Carats) ACHAT EXPERTISE 6,25-5,50-4,25-6% 3-1,75-3% 2-1,25-1% COLLECT 0,75 et 1 % 0,25 et 0,50 % 0,25%et 0,50% (en FCFA) (en FCFA) BADICA 38 528,63 4 588 628 000 4 987 471 074 236 311 072 529 9 428 111,67 109 692 901 149 626 134 51 216 949 149 577 189 38 703 044 24 937 355 13 765 686 433 833 579 PRIMO 79 625,20 4 663 004 500 5 764 848 305 271 695 601 527 10 938 991,09 121 021 720 159 016 361 59 333 572 172 943 450 38 611 378 28 824 241 14 412 121 481 805 772 SODIAM 94 590,65 9 212 787 400 9 480 984 654 445 979 969 528 17 956 410,33 214 416 470 284 429 538 96 087 186 263 102 043 73 837 944 47 404 924 26 433 021 809 352 975 SOPICAD 60 896,95 4 526 851 200 4 849 474 378 229 657 101 529 9 167 248,35 104 607 981 145 484 232 48 673 645 139 009 353 37 529 010 24 247 373 12 873 093 413 348 939 DDC 83 896,62 4 070 406 472 4 694 313 251 222 523 453 530 8 857 194,81 92 221 633 128 586 996 47 618 425 128 586 996 36 896 957 23 471 556 11 384 990 372 867 181 ADC 2 464,79 416 196 373 510 895 183 22 425 210 526 971 283,62 9 652 831 15 326 857 6 608 218 15 326 857 3 831 712 2 554 477 1 277 238 42 861 022 DIAMSTAR 14 381,33 1 143 817 750 1 337 088 904 61 813 172 526 2 541 994,11 28 081 888 40 112 666 13 472 244 40 112 668 10 028 166 6 685 445 3 342 723 114 992 667 ORDICA 975,74 128 050 000 152 951 866 6 500 454 529 289 133,96 2 893 651 4 588 556 1 529 519 4 588 556 1 147 139 764 760 382 380 12 835 523 CONCEDIA 6 962,37 324 127 000 658 537 743 27 987 854 509 1 293 787,31 17 439 960 19 756 132 7 974 054 19 756 132 4 939 033 3 292 689 1 644 344 60 244 913 BELDIAM 313,51 124 043 000 143 142 739 6 083 566 547 261 686,91 2 504 998 4 294 282 1 431 427 4 294 282 1 073 571 715 714 357 856 11 809 276 BELAFRIQUE 445,57 56 013 476 65 928 511 2 801 962 538 122 544 980 236 1 977 855 659 285 1 977 855 494 464 329 643 164 821 5 439 102 UNCMCA 213,23 71 165 000 71 165 000 3 517 325 524 135 811 1 245 388 2 134 950 711 650 2 134 950 533 738 355 825 177 913 6 363 925 TOTAL 1 383 294,59 29 325 090 171 32 716 801 608 1 537 296 740 530 61 729 814,35 704 759 656 955 334 559 335 316 174 941 410 331 247 626 155 163 584 002 86 216 186 2 765 754 874 Nota Bene DS= Droit de Sortie ( allant de3% en passant par 1,75% pour revenir à 3%) perçu par la Douane au profit du Tresor Public IMF= Impôt Minimum Forfaitaire ( 3%) perçu par la Douane au bénéfice des Impôts au Impôts au bénéfice du Tresor TSD = Taxe sur l'achat des collecteurs ( 3%) perçue les impots les bénéfice du Tresor Public CASDOR = Caisse d'Avance spéciale sur le Diamant et Or ( allant 0,75% à 1%) au bénéfice des Mines au benice du bloc Finance RIDT = Redevance Informatique Douane Tresor ( allant de 0,25% à 0,5%) perçue par la Douaneau bénice du bloc Finance IDV = Intrenational Diamond Valor ( allant 2% en passant par 1,25% pour finir à 1%) perçu par la Société Privé IDV pour son propre compte SPPK = Secretariat Permanent de Processus de Kimberley (allant de 0,25% à 0,5%) pour son propre compte PERIODE : ANNEE 2006 Valeur en PRODUCTION VALEUR VALEUR Taux de change dollars TAXE D S IMF TAXE SD PDSM R I EF SPPK Contribution au Budget 12% RAISONS SOCIALES (en Carats) ACHAT EXPERTISE 4,00% 3% 3% 1,00% 0,50% 0,50% = Ds 4% + PDSM 1% + BUREAUX (en FCFA) (en FCFA) IMF 3% + TSD 3%+RIEF 0,50% SPPK 0,50% BADICA 39 723,48 5 202 613 000 5 658 482 112 531 10 656 275,16 226 339 284 169 754 463 169 754 463 56 584 821 28 292 411 28 292 411 679 017 853 PRIMO 54 963,52 3 924 687 500 5 033 811 893 532 9 462 052,43 201 352 476 151 014 357 151 014 357 50 338 119 25 169 059 25 169 059 604 057 427 SODIAM 195 490,80 13 072 491 050 13 203 872 897 531 24 866 050,65 528 154 916 396 116 187 396 116 187 132 038 729 66 019 364 66 019 364 1 584 464 748 SOPICAD 0,00 0 0 0 0 0 0 0 0 0 0 0 DDC 114 885,14 5 727 819 600 6 736 244 651 530 12 709 895,57 269 449 786 202 087 340 202 087 340 67 362 447 33 681 223 33 681 223 808 349 358 ADC 2 275,79 503 210 000 546 029 551 533 1 024 445,69 21 841 182 16 380 887 16 380 887 5 460 296 2 730 148 2 730 148 65 523 546 ORDICA 286,24 160 100 000 160 100 000 536 298 694,03 6 404 000 4 803 000 4 803 000 1 601 000 800 500 800 500 19 212 000 DIAMSTAR 0,00 0 0 0 0 0 0 0 0 0 0 0 BELDIAM 4 678,66 410 730 000 471 343 229 535 881 015,38 18 853 729 14 140 297 14 140 297 4 713 432 2 356 716 2 356 716 56 561 187 MEX 267,15 56 047 000 57 637 866 551 104 605,93 2 305 515 1 729 136 1 729 136 576 379 288 189 288 189 6 916 544 UNCMCA 2 745,61 751 839 995 779 461 668 532 1 465 153,51 31 178 467 23 383 850 23 383 850 7 794 617 3 897 308 3 897 308 93 535 400 SOCEMINE 213,03 12 730 480 19 619 024 534 36 739,75 784 761 588 571 588 571 196 190 98 095 98 095 2 354 283 0 TOTAL 415 529,42 30 123 940 625 32 666 602 891 534 61 173 413,65 1 306 664 116 979 998 087 979 998 087 326 666 029 163 333 014 163 333 014 3 919 992 347 NB : DS = Droit de Sortie (4%) perçu par la Douane au bénéfice du Tresor public IMF= Impôt Minimum Forfaitaire ( 3%) perçu par la Douane au bénéfice des Impôts TSD = Taxe sur l'achat des collecteurs ( 3%) perçue les impots au bénéfice du Tresor PDSM = Projet de Developpement du Secteur Minier ( 1% ) au bénéfice des Mines ( ancien CASDOR) REIF = Redevance Equipement Informatique et Finance ( 0,5%) perçue par la Douane au bénéfice du bloc Finance (ancien RIDT) SPPK :Secretariat Permanent de Processus de Kimberley ( 0,5%) pour son propre compte PERIODE : ANNEE 2007 Taux de PRODUCTION VALEUR VALEUR Taxe imposable change Valeur en dollars TAXE D S IMF 3% TAXE 3% CASDOR TAXE R I D T SPPK Contribution au Budget 12% RAISONS SOCIALES (en Carats) ACHAT EXPERTISE 6,00% 4,00% COLLECT 1,00% 0,50% 0,50% = Ds 4% + PDSM 1% + BUREAUX (en FCFA) (en FCFA) IMF 3% + TSD 3%+RIEF 0,50% SPPK 0,50% BADICA 27 127,03 3 085 418 000 3 272 543 009 196 352 581 477 6 860 677,17 130 901 720 98 176 290 98 176 290 32 725 430 16 362 715 16 362 715 392 705 161 PRIMO 60 284,65 4 058 011 000 4 942 869 327 296 572 160 470 10 516 743,25 197 714 773 148 286 080 148 286 080 49 428 693 24 714 347 24 714 347 593 144 319 SODIAM 152 430,97 9 656 425 900 9 686 299 571 581 177 974 473 20 478 434,61 387 451 983 290 588 987 290 588 987 96 862 996 48 431 498 48 431 498 1 162 355 949 DDC 141 542,46 7 202 466 229 8 544 866 985 512 692 019 469 18 219 332,59 341 794 679 256 346 010 256 346 010 85 448 670 42 724 335 42 724 335 1 025 384 038 ADR 12 984,19 890 628 906 977 209 666 58 632 580 468 2 088 054,84 39 088 387 29 316 290 29 316 290 9 772 097 4 886 048 4 886 048 117 265 160 ADC 5 818,08 612 846 511 647 306 346 38 838 381 470 1 377 247,54 25 892 254 19 419 190 19 419 190 6 473 063 3 236 532 3 236 532 77 676 762 BELDIAM 6 668,23 626 455 000 706 557 779 42 393 467 473 1 493 779,66 28 262 311 21 196 733 21 196 733 7 065 578 3 532 789 3 532 789 84 786 933 CODIORCA 6 183,03 566 593 000 588 266 247 35 295 975 470 1 251 630,31 23 530 650 17 647 987 17 647 987 5 882 662 2 941 331 2 941 331 70 591 950 LIONS 328,02 57 435 288 57 445 288 3 446 717 487 117 957,47 2 297 812 1 723 359 1 723 359 574 453 287 226 287 226 6 893 435 IAS 0,00 0 0 0 0 0,00 0 0 0 0 0 0 0 MEX 0,00 0 0 0 0 0,00 0 0 0 0 0 0 0 ORDICA 309,30 59 210 000 59 210 000 3 552 600 473 125 179,70 2 368 400 1 776 300 1 776 300 592 100 296 050 296 050 7 105 200 VAALDIAM 43,70 6 191 302 8 082 702 484 962 490 16 495,31 323 308 242 481 242 481 80 827 40 414 40 414 969 924 PANGEA 3 673,30 182 863 047 220 318 667 13 219 120 477 461 884,00 8 812 747 6 609 560 6 609 560 2 203 187 1 101 593 1 101 593 26 438 240 IMG 102,21 3 697 172 3 697 172 221 830 483 7 654,60 147 887 110 915 110 915 36 972 18 486 18 486 443 661 UNCMCA 195,81 40 120 000 40 120 000 2 407 200 449 89 354,12 1 604 800 1 203 600 1 203 600 401 200 200 600 200 600 4 814 400 0 TOTAL 417 690,98 27 077 289 437 29 754 782 759 1 785 286 966 474 62 773 803,29 1 190 191 710 892 643 783 892 643 783 297 547 928 148 773 964 148 773 964 3 570 575 131 NB : DS = Droit de Sortie (4%) perçu par la Douane au bénéfice du Tresor public IMF= Impôt Minimum Forfaitaire ( 3%) perçu par la Douane au bénéfice des Impôts L'EXPERT EVALUATEUR PRINCIPAL TSD = Taxe sur l'achat des collecteurs ( 3%) perçue les impots au bénéfice du Tresor PDSM = Projet de Developpement du Secteur Minier ( 1% ) au bénéfice des Mines ( ancien CASDOR) REIF = Redevance Equipement Informatique et Finance ( 0,5%) perçue par la Douane au bénéfice du bloc Finance (ancien RIDT) SPPK :Secretariat Permanent de Processus de Kimberley ( 0,5%) pour son propre compte PERIODE : JANVIER à MAI 2008 Taux de PRODUCTION VALEUR VALEUR Taxe imposable change Valeur en dollars TAXE D S IMF 3% TAXE 3% CASDOR TAXE R I D T SPPK Contribution au Budget 12% RAISONS SOCIALES (en Carats) ACHAT EXPERTISE 6,00% 4,00% COLLECT 1,00% 0,50% 0,50% = Ds 4% + PDSM 1% + BUREAUX (en FCFA) (en FCFA) IMF 3% + TSD 3%+RIEF 0,50% SPPK 0,50% BADICA 16 611,09 1 469 594 000 1 499 747 530 89 984 852 429 3 495 914,99 59 989 901 44 992 426 44 992 426 14 997 475 7 498 738 7 498 738 179 969 704 PRIMO 34 161,80 1 675 141 000 2 036 627 902 122 197 674 429 4 747 384,39 81 465 116 61 098 837 61 098 837 20 366 279 10 183 140 10 183 140 244 395 348 SODIAM 88 927,96 4 594 912 850 4 622 657 568 277 359 454 430 10 750 366,44 184 906 303 138 679 727 138 679 727 46 226 576 23 113 288 23 113 288 554 718 908 DDC 41 023,51 1 224 013 000 1 441 277 452 86 476 647 431 3 344 031,21 57 651 098 43 238 324 43 238 324 14 412 775 7 206 387 7 206 387 172 953 294 ADR 8 124,31 476 470 500 486 987 393 29 219 244 429 1 135 168,75 19 479 496 14 609 622 14 609 622 4 869 874 2 434 937 2 434 937 58 438 487 ADC 444,26 50 315 000 52 830 924 3 169 855 423 124 895,80 2 113 237 1 584 928 1 584 928 528 309 264 155 264 155 6 339 711 BELDIAM 614,58 67 911 000 76 903 344 4 614 201 448 171 659,25 3 076 134 2 307 100 2 307 100 769 033 384 517 384 517 9 228 401 CODIORCA 4 419,30 318 424 000 365 060 127 21 903 608 432 845 046,59 14 602 405 10 951 804 10 951 804 3 650 601 1 825 301 1 825 301 43 807 215 LIONS 0,00 0 0 0 0 0,00 0 0 0 0 0 0 0 IAS 0,00 0 0 0 0 0,00 0 0 0 0 0 0 0 MEX 0,00 0 0 0 0 0,00 0 0 0 0 0 0 0 ORDICA 2 864,54 214 500 000 271 193 990 16 271 639 422 642 639,79 10 847 760 8 135 820 8 135 820 2 711 940 1 355 970 1 355 970 32 543 279 KHORDIA 0,00 0 0 0 0 0,00 0 0 0 0 0 0 0 VAALDIAM 0,00 0 0 0 0 0,00 0 0 0 0 0 0 0 PANGEA 1 539,36 72 520 316 72 897 303 4 373 838 436 167 195,65 2 915 892 2 186 919 2 186 919 728 973 364 487 364 487 8 747 676 IMG 0,00 0 0 0 0 0,00 0 0 0 0 0 0 0 UNCMCA 402,02 164 890 000 164 890 000 9 893 400 434 379 930,88 6 595 600 4 946 700 4 946 700 1 648 900 824 450 824 450 19 786 800 0 TOTAL 199 132,73 10 328 691 666 11 091 073 533 665 464 412 431 25 722 498,18 443 642 941 332 732 206 332 732 206 110 910 735 55 455 368 55 455 368 1 330 928 824 NB : DS = Droit de Sortie (4%) perçu par la Douane au bénéfice du Tresor public IMF= Impôt Minimum Forfaitaire ( 3%) perçu par la Douane au bénéfice des Impôts TSD = Taxe sur l'achat des collecteurs ( 3%) perçue les impots au bénéfice du Tresor PDSM = Projet de Developpement du Secteur Minier ( 1% ) au bénéfice des Mines ( ancien CASDOR) REIF = Redevance Equipement Informatique et Finance ( 0,5%) perçue par la Douane au bénéfice du bloc Finance (ancien RIDT) SPPK :Secretariat Permanent de Processus de Kimberley ( 0,5%) pour son propre compte SITUATION DES RECETTES GENEREES DANS LE SECTEUR MINIER AU PROFIT DE L'ETAT SUR L'EXPORTATION DE L'OR PERIODE : ANNEE 2004 PRODUCTION VALEUR VALEUR VALEUR TAXE D S IMF PDSM Contribution au Budget 5,25 % R I EF RAISONS SOCIALES (en Grammes) ACHAT EXPERTISE TAXABLE 1,00% 3% 0,75% 0,50% = Ds 1% + PDSM 0,75% + BUREAUX (en FCFA) (en FCFA) (en FCFA) IMF 3% + RIEF 0,50% DDC 516,50 2 840 750 2 840 750 2 840 750 28 408 85 223 21 306 14 204 149 139 CONCEDIA 190,30 951 500 951 500 951 500 9 515 28 545 7 136 4 758 49 954 ADC 21,70 108 500 108 500 108 500 1 085 3 255 814 543 5 696 SANFAMI 2 367,90 11 839 500 11 839 500 11 839 500 118 395 355 185 88 796 59 198 621 574 TOTAL 3 096,40 15 740 250 15 740 250 15 740 250 157 403 472 208 118 052 78 701 826 363 PERIODE : ANNEE 2005 PRODUCTION VALEUR VALEUR VALEUR TAXE D S IMF PDSM Contribution au Budget 5,25 % R I EF RAISONS SOCIALES (en Grammes) ACHAT EXPERTISE TAXABLE 1,00% 3% 0,75% 0,50% = Ds 1% + PDSM 0,75% + BUREAUX (en FCFA) (en FCFA) (en FCFA) IMF 3% + RIEF 0,50% CONCEDIA 54,70 273 500 273 500 273 500 2 735 8 205 2 051 1 368 14 359 ADC 2 484,20 13 015 000 13 015 000 13 015 000 130 150 390 450 97 613 65 075 683 288 DDC 4 134,20 20 671 000 20 671 000 20 671 000 206 710 620 130 155 033 103 355 1 085 228 ORDICA 3 445,10 20 670 000 20 670 000 20 670 000 206 700 620 100 155 025 103 350 1 085 175 BELDIAM 253,80 1 348 850 1 348 850 1 348 850 13 489 40 466 10 116 6 744 70 815 TOTAL 10 372,00 55 978 350 55 978 350 55 978 350 559 784 1 679 351 419 838 279 892 2 938 863 PERIODE : ANNEE 2006 PRODUCTION VALEUR VALEUR VALEUR TAXE D S IMF PDSM R I EF Contribution au Budget 5,25 % RAISONS SOCIALES (en Grammes) ACHAT EXPERTISE TAXABLE 1,00% 3% 0,75% 0,50% = Ds 1% + PDSM 0,75% + BUREAUX (en FCFA) (en FCFA) (en FCFA) IMF 3% + RIEF 0,50% MEX 1 782,30 9 796 000 9 796 000 9 796 000 97 960 293 880 73 470 48 980 514 290 ORDICA 4 353,70 22 175 450 22 175 450 22 175 450 221 755 665 264 166 316 110 877 1 164 211 BELDIAM 49,50 249 000 249 000 249 000 2 490 7 470 1 868 1 245 13 073 UNCMCA 2 484,20 12 421 000 12 421 000 12 421 000 124 210 372 630 93 158 62 105 652 103 TOTAL 8 669,70 44 641 450 44 641 450 44 641 450 446 415 1 339 244 334 811 223 207 2 343 676 PERIODE : ANNEE 2007 PRODUCTION VALEUR VALEUR TAXE D S IMF PDSM Contribution au Budget 5,25 % R I EF RAISONS SOCIALES (en Grammes) ACHAT EXPERTISE 1,00% 3% 0,75% 0,50% = Ds 1% + PDSM 0,75% + BUREAUX (en FCFA) (en FCFA) IMF 3% + RIEF 0,50% KHORDIA 1 494,50 12 555 000 12 555 000 125 550 376 650 94 163 62 775 659 138 CODIORCA 96,92 580 000 580 000 5 800 17 400 4 350 2 900 30 450 ADC 8 291,00 46 231 000 46 231 000 462 310 1 386 930 346 733 231 155 2 427 128 SOCEMINE 715,50 3 577 500 3 577 500 35 775 107 325 26 831 17 888 187 819 MEX 1 908,10 13 930 600 13 930 600 139 306 417 918 104 480 69 653 731 357 TOTAL 12 506,02 76 874 100 76 874 100 768 741 2 306 223 576 556 384 371 4 035 890 PERIODE : JANVIER à MAI 2008 PRODUCTION VALEUR VALEUR VALEUR TAXE D S IMF PDSM Contribution au Budget 5,25 % R I EF RAISONS SOCIALES (en Grammes) ACHAT EXPERTISE TAXABLE 1,00% 3% 0,75% 0,50% = Ds 1% + PDSM 0,75% + BUREAUX (en FCFA) (en FCFA) (en FCFA) IMF 3% + RIEF 0,50% KHORDIA 3 934,72 37 410 375 19 673 600 37 410 375 374 104 1 122 311 280 578 187 052 1 964 045 UNCMCA 1 562,90 7 087 500 7 814 500 7 814 500 78 145 234 435 58 609 39 073 410 261 IAS 3 186,70 25 862 055 15 933 500 25 862 055 258 621 775 862 193 965 129 310 1 357 758 IAS 5 124,20 28 594 270 25 621 000 28 594 270 285 943 857 828 214 457 142 971 1 501 199 IAS 8 068,69 40 385 000 40 343 450 40 385 000 403 850 1 211 550 302 888 201 925 2 120 213 UNCMCA 793,40 3 973 500 3 967 000 3 973 500 39 735 119 205 29 801 19 868 208 609 IAS 2 499,00 12 502 000 12 502 000 12 502 000 125 020 375 060 93 765 62 510 656 355 ORDICA 2 369,90 11 867 500 11 867 500 11 867 500 118 675 356 025 89 006 59 338 623 044 KHORDIA 1 765,70 16 303 320 16 303 320 16 303 320 163 033 489 100 122 275 81 517 855 924 UNCMCA 3 948,80 29 250 000 29 250 000 29 250 000 292 500 877 500 219 375 146 250 1 535 625 TOTAL 33 254,01 213 235 520 183 275 870 213 962 520 2 139 625 6 418 876 1 604 719 1 069 813 11 233 032 NB : Droit de Sortie (DS) = 1% perçu par la Douane au bénefice du Tresor Public Impôt Minimum Forfaitaire (IMF) = 3% perçu par la Douane au bénéfice des Impôts projet de developpement du secteur minier (PDSM) = 0,75% perçu par les Mines dont 55% du montant sont reversé au Tresor Redevance Equipement Informatique et Finance (REIF) = 0,5% perçue par la Douane au profit du bloc Finance COMMENTAIRE Il mérite de signaler qu' en dehors des PDSM qui sont perçus au niveau des Mines comme taxes dont une partie (55%) du montant sont reversés au Trésor public, tous les autres Droits et Taxes sont versé pour le compte des Institutions dont on a fait mention ci- haut. Par contre en ce qui concerne les patentes des Bureaux d'Achat, Collecteurs et les Artisans miniers ainsi que les droit des permis miniers, les taxes superficiaires sur ces permis et les cautions de garantie d'ouveryture des Bureaux d'Achat sont versés directement soit au Trésor ou Impôt selon le cas sur l'avis d'encaissement établi par le Service des Mines aux intéressés au profit des Institutions précitées. Quant à ce qui est de bonus perçu sur les activités minières, je vous demanderai de voir avec les autorités des Mines et des Finances car c'est des situations qui se traite conjoitement que je ne maîtrise pas bien les données. = 0 c ] o n v z 5 q, = B -lB ni 4 -l = O o n -tl z z m U, I H- Z R ) H t U o ' T] .Tl s\ F \ L9l06l08 NG.Huguette MINISTERE DES FINANCES ET DU BUDGET REPUBLIQUE CENTRAFRICAINE **********rt or*r.rrffi*#LABTNET UNITE - DIGNITE - TRAVAIL ********* DIRECTION GENERALE DES IMPOTS ET DES DOTVIAINES DIRECTION GENERALE ADJOINTE DES IMPOTS ET DES DOMAINES DrREcrroNDE"" #:ïitrE DEs MoyENNEs ENTREPRISES A *********** nll sERvrcEDE GESTTONNr ********** ^t " \\ u"É-ry-; / MFB/ DTR.CAB/DGrD/ DGArD)DFME/ Sc. SITUATION DE LA PATENTE DES COLLECTEURS, ARTISANSET COOPERATIVES MINIERS DE LA DIRECTION DE LA FISCALITE DES MOYENNES ENTREPRISES SERVICEDE GESTION. / Janvierà Juin 2008 Nature de la patente Nombre Montant payé CollecteursMiniers 248 246.826.500 Artisans Miniers t32 4.626.600 Coopératives Minières 08 237.882 Total Général 388 25t.690.982 EFiDE SERVICE"I ffi ;. . ^': (,),. i 'i" SITUATION DES RECETTES GENERES DANS LE SECTEUR MINIER AU PROFIT DE L’EATAT CENTRAFRICAIN TITRES MINIERS N° LIBELLE DROIT DE TAXE INSTITUTIO DELIVRANCE SUPERFICIAIRE N BENEFICIAI RE 01 Permis de reconnaissance 500.000 DGID 02 Permis Général de 1.500 000 1500 F /KM2/AN DGID Recherche ( validité 3ans) 1er renouvellement 3.000 000 3.000F 2è renouvellement 6.000 000 6.000 F A partir de la 6 e année 6.000 000 15.000 F Transfert 1.500 000 03 Permis d’Exploitation 5.000 000 20.000/KM2/AN DGID 04 Permis Spécial 60.000 DGID d’Exploitation TAXE A L’EXPORTATION SUR LE DIAMANT N° LIBELLE POURCENTAGE INSTITUTION SUR LA VALEUR BENEFICIAIRE TAXABLE 01 Droit de sortie 4% Trésor Public 02 IMF 3% DGID O3 TSD 3% Trésor Public 04 Régie Mines 1% 55% Tresor (CASDOR) 45% Mines 05 SPPK 0,5% SPPK O6 REIF 0,5% Bloc Finance TAXE A L’EXPORTATION SUR L’OR N° LIBELLE POURCENTAGE INSTITUTION SUR LA VALEUR BENEFICIAIRE TAXABLE 01 Droit de sortie 1% Trésor Public 02 IMF 3% DGID 03 Régie Mines 0,75% 55% Tresor (CASDOR) 45% Mines O4 REIF 0,5% Bloc Finance SITUATION DES PATENTES ET FONDS DE GARANTIE N° LIBELLE MONTANT INSTITUTION BENEFICIAIRE 01 Patente Bureaux 18.5000 000/an DGID d’Achat Central 02 Patente Bureaux 3.500 000/an DGID d’Achat centre Secondaire 03 Patente Collecteurs 1.009 500/an DGID O4 Patente Exploitants 35 050/an DGID Artisans 05 Patente Bijouterie 400.000 DGID 06 Caution d’ouverture 50.000 000 TRESOR des Bureaux d’Achat 07 Frais d’ouverture O8 Fonds de Garantie de 10.000 000 TRESOR Fonderie 09 Taxe sur l’Achat 2% de la valeur DGID d’Or Brut des d’achat Bijouteries