The Ferdi provides the first legal and tax database that lists the tax regime applicable to industrial gold mines in 22 African producing countries since the 1980s and a simulation tool for sharing the mineral resource rent between State and investors.
The tools provided make it possible to: 1) understand the characteristics of the mining taxation, 2) know the evolution of the mining taxation, 3) compare the mining taxation between African countries, 4) compare mining taxation between projects of the same country, 5) assess the sharing of the mineral resource rent between State and investors.
Improving the mobilisation of domestic resources is a hight priority for African countries. The heavy dependence of these countries on the extractives industries implies understanding the mechanisms and consequences of the mining tax Regim applied in Africa on the development of the extractive industry as well as the public revenu collection.
Although several international institutions, non-governmental organisations and universities publish on this issue, data on mining tax Regim in Africa remains difficult to access. Thus, improving the transparency of information in the African mining sector has become a priority for the international community.
The database provided has three major innovations:
The database now concerns 14 French-speaking countries, 7 English-speaking countries and 1 portuguese-speaking country: Angola, Benin, Burkina Faso, Cameroon, Chad, Republic of the Congo, Democratic Republic of the Congo, Cote d’Ivoire, Gabon, Ghana, Guinea, Kenya, Madagascar, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, South Africa, Tanzania and Zimbabwe.
The database currently focuses on gold, that is exploited in 34 of the 54 African countries, making it the second larger producer in the world.
The information provided here is intended for researchers, States and public administrations, international institutions and all national and international stakeholders. The objective is to contribute to the improvement of public policies and the information of companies, with a goal of international development.
Full access to the legal and tax data of the website requires a subscription. The subscription is free for individuals or institutions that commit to make no commercial use. On the other hand, financial participation is requested from individuals or companies wishing to use the data for commercial purposes.
States have to arbitrate between the will to attract foreign investors and the need to increase public revenues. Applied to the economic data of a representative mine and associated with a cash flow model, this database offers the means for researchers and analysts to summarize the tax burden that should apply to mining companies in the African countries according to the legislation. The indicator calculated is the average effective tax rate (AETR), that represents the share of the mineral resource rent captured by the State on a mining project.
A very high AETR, near 100% or higher, should not be too strictly interpreted. It does not mean that the State manages to collect all of the rent; rather it means that the tax burden makes the mine economically unviable. This illustrates the significant impact of the tax system and the gold price on the profitability of a mining project.
The unprecedented historical depth of this database makes it possible to follow the evolution of the average effective tax rates since the 1990s in 21 African countries. This history shows the impact of the successive tax reforms decided by African States (rates, bases, calculation rules) to try to adapt to a context of instability of world prices.
Simulations are now available for the year 2019. These simulations make it possible to estimate the mineral resource rent sharing accruing to the State, i.e. the average effective tax rate (AETR), by applying a country's tax legislation to a mine representative of African gold mines.
Of the 22 countries in the sample, 6 experienced a change in their AETR in 2019. In Benin, Chad, Cote d'Ivoire and Mali, AETRs are increasing. While in Mauritania and Zimbabwe, AETRs are declining. However, variations in AETRs are fairly small, except in two countries where they may be particularly large. In Cote d'Ivoire, the elimination of the corporate tax exemption and the minimum tax exemption leads to an increase in the AETR of up to 8.6% for a high-grade mine and a price of gold set at $1,500/oz. In Zimbabwe, the introduction of a variable mining royalty rate based on the price of gold decreases the AETR by up to 26% for a low-grade mine and a price of gold set at $1,100/oz. Note that in Gabon, the coming into force of the new mining act did not result in a change in the AETR because mining taxation remained virtually unchanged.
Updated tax data for 2019 are now available for Nigeria, Sierra Leone and Tanzania.
In Nigeria, mining taxation has not changed. In Sierra Leone, taxation has also not been amended either (Finance Act, 2019, No. 2 of 2019). In Tanzania, the new version updated to 2018 of the mining act has been published (Mining Act, 2010, No. 14 of 2010, amended by Finance Act, 2018, No. 4 of 2018) and the withholding tax on income from the sale of mineral has been repealed (Written Laws (Miscellaneous Amendments) (No. 2) Act, 2019, No. 6 of 2019).
The mining sector is an important contributor to tax revenues in many African countries. In 2015, the extractive sector accounted for more than 20% of the total revenues of nine countries on the continent. Mining tax systems must then both attract investors and ensure sufficient revenues for governments. Following the increase in commodity prices in the second half of the 2000s, most African countries reformed their mining laws in order to capture a larger share of the rent generated by mining companies. This trend continues: mining royalty rates are rising, mineral resource rent taxes are reappearing, and free equity for the state is becoming more and more common.