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Wednesday, 20 August 2014

Ataf has action plan to address tax base erosion

Multinational companies shifting their profits from Africa to low-tax jurisdictions are only partly responsible for the erosion of the continent’s tax revenue bases. Business Day reports that the African Tax Administration Forum (Ataf) believes some countries have signed away their tax revenue because of weak domestic policies, and ill-conceived tax incentives and mining contracts. 

For two years the Organisation for Economic Co-operation and Development (OECD) has been on a drive to address profit shifting and base erosion and the report says, Ataf agrees with the need for an action plan and has embarked on a drive to address problems that cause base erosion in Africa but are not on the OECD’s agenda. Ataf executive secretary Logan Wort says domestic policies and ofte, badly written mining contracts, erode tax bases in Africa. Ataf will address the tax challenges of e-commerce, hybrid mismatch arrangements, abuse of double tax treaties, the establishment of dummy headquarters and the requirement to disclose aggressive tax-planning arrangements.

Kenya is to impose capital gains and windfall taxes on oil, gas and mining companies within months to ensure it maximised benefits from its mineral resources. Business Report quotes President Uhuru Kenyatta as saying: ‘This is something that we are very clear about. We want to ensure that we as a country also are able to benefit from both the windfall and capital gains tax.’ Tullow Oil and partner Africa Oil have found oil reserves in northern Kenya and the government wants to avoid a similar situation to that in Uganda, where Tullow is contesting in court the state revenue authority’s demand that it pay capital gains tax following its sale of assets.

Tuesday, 19 August 2014

Glencore eyes Guinea’s iron ore deposits

Glencore has expressed interest in iron deposits in Guinea, although the company said it had not pitched for a stake in Simandou. Reuters reports that Glencore is the latest mining major looking to invest in iron ore assets in Guinea. Most interest is focused on Simandou, one of the biggest deposits, however, any potential investors in Simandou are treading carefully. 

Israeli-owned BSG Resources, which was stripped of its licence to develop part of Simandou following a Guinean corruption investigation, is seeking arbitration and has threatened to sue companies that invest in its former licence area. Three sources close to the government said London-listed Glencore had indicated its interest in investing in Simandou, in a meeting with government officials in Conakry in June.

ArcelorMittal has, meanwhile, announced it had signed deals to purchase stakes in an iron ore project in Guinea. According to an Engineering News report, ArcelorMittal said that it would buy a 43.5% stake in Euronimba from Billiton Guinea, a unit of BHP Billiton and a 13% stake from Compagnie Francaise de Mines et Metaux, a unit of Areva. 

Euronimba holds a 95% indirect interest in the Mount Nimba iron ore project, a deposit with an estimated 935m tonnes of direct shipped ore with an average grade of 63.1% of iron. The site is about 40km from ArcelorMittal’s mine in Liberia. The company should be able to use its Liberian railroad and port facilities, meaning that its capital expenditure would be much lower than otherwise the case, CFO Aditya Mittal said. He added that approval for exporting ore from Guinea to Liberia was critical to the acquisition.

Global heavyweights in the race for $3bn East African oil pipeline project

International firms, some individually and others as consortia, are vying for the contract to build a multibillion-dollar petroleum pipeline connecting the oilfields in KenyaUganda and South Sudan to the proposed Lamu Port, on theKenyan coast.

Designs for the $3-billion Hoima–Lokichar–Lamu pipeline have been received from Tullow Oil and Africa Oil, which has submitted a design for the Lokichar–Lamu route; Toyota Tsusho (Hoima–Manda Bay–Lamu), Tullow, Total and CNOOC (Hoima–Lokichar–Lamu), Lapsset (Juba–Lokichar–Moyale–Lamu) and Total (Hoima–Eldoret–Lamu/Mombasa.

The submission of the designs follow on the request for proposals (RfP) issued by the governments of UgandaKenya and South Sudan in June 2014. The three governments intend to hire a consultant to oversee the feasibility study and preliminary engineering designs of the proposed pipeline.
The consultant will also supervise the imple-mentation of the project, which will include theconstruction of tank terminals in Hoima, Lokichar and Lamu, pumping stations and a 9-km-long pipeline from the Lamu tank terminal to offshore mooring buoys.
“The feasibility study and preliminary design will be jointly financed by the partner States, ensuring that the entire pipeline is designed to the same standards and codes,” the three governments say in a joint communique.
The proposed pipeline will be used to export crude oil from Kenya and Uganda through the Lamu port.
Earlier this month, East Africa Community heads of State (except Tanzania’s PresidentJakaya Kikwete) met in KigaliRwanda, where they resolved to accelerate the project.
Uganda is to submit comments on the RfP to the project steering committee for approval by July 10, 2014, and issuance of an addendum to the RfP [is expected] by July 11, 2014,” reads the communique, which was issued at the end of the summit.
After settling on the design issue, the partners plan to embark on a fundraising campaign. The pipeline project will be one of the largest joint infrastructure projects in the East Africa region.
The pipeline, which is part of the multibillion-dollar Lamu PortSouth Sudan–Ethiopia Transport, or Lapsset, Corridor Project, is a key priority for Kenya and Uganda, which have discovered crude oil reserves in the last few years.Uganda’s endowment is estimated at 3.5-million barrels, while Kenya is determining the level of its reserves.
By John Muchira

Monday, 18 August 2014

Mozambique trying to ease coal companies' pain, but no tax breaks

Mozambique is discussing with its foreign coal mining partners ways to help them ride out depressed markets but will not be offering special tax breaks to ease the pain, its mineral resources minister said on Monday.
Esperanca Bias told Reuters the government understood that companies such as Vale of Brazil and Rio Tinto, which helped Mozambique to start up in 2011 as a coal producer and exporter, were feeling the pain of depressed global prices for coal used in steelmaking and generating power.
The southern African nation, which still bears the scars of a 1975 to 1992 civil war, has the world's fourth-largest untapped recoverable coal reserves, estimated at over two billion tonnes.
Vale is investing billions of dollars on rail and port networks to bring greater volumes of coal to the market, up from a current export capacity of five million tonnes per year. It is targeting 22-million tonnes by 2017/18.
But Vale, which announced an accumulated loss of uS$44-million for Mozambique operations in the first quarter, says it urgently needs to cut operating costs to remain competitive.
"We're studying this," Bias said on the sidelines of the fifth Mozambique Coal Conference in Maputo. "We are working on it to see what can be done from our side." she added.
Mining companies face the challenge of getting coal, mostly from mines in Tete province, over 600 km to 900 kmto ports on the Indian Ocean coast. This is in a nation that urgently needs modern railways and ports.
Comparatively, major coal producer Australia has to carry its coal only about 200 km to ports which give access to the same big overseas export markets of China and India, putting the fledgling southern African producer at a costs and logistics disadvantage.
Bias said that although the government was looking at ways to tackle the challenging logistics, this would not involve any special concessions.
"We don't believe that reducing tax will resolve the problem. We don't think the tax system needs to be changed," she said.

First Nacala Train This Year

Addressing the Maputo conference, the director of Vale's Global Coal Division, Pedro Gutemberg, said the Brazilian company remained committed to Mozambique.
It was investing more than US$4.5-billion in a 900 km railway from Moatize through Malawi to Nacala port in northern Mozambique. Nacala is being developed as a deep-water coal export terminal capable of taking bulk carriers.
"Definitely, the plan is to have the first full train by the end of the year," Gutemberg said.
The Nacala terminal would be tested in January or February to be able to start exporting next year.
Bias said this would complement the existing Sena rail line carrying coal from Tete province to Beira port in central Mozambique. This line had been improved too, she said.
Gutemberg said Vale was talking to prospective partners to join it in Mozambique but he denied this formed part of any potential "exit strategy".
Coal miners are hoping a combination of continuing Chinese demand and the potential growth of the steel market in India will improve long-term coal prices, although prospects for the next few years remain depressed.
Bias said a revision to mining laws currently before parliament offered tax breaks to firms willing to process minerals, including coal, in Mozambique - for example building steelworks or thermoelectric plants or transforming coal into liquefied fuel.
But she made clear this kind of local processing was not necessarily being demanded of the existing coal producers.
"We're not saying the additional value has to be brought by the mining companies," she said. "It would be other companies. But if the mining companies have other industries in their portfolio, why not them too?"

Sunday, 17 August 2014

Mali cancels mining permits

Mali has cancelled 130 mining permits, about 30% of existing permits in the gold-producing West African nation, in a drive to clean up the sector, reports The Africa Report. The new government said in September that it will carry out a complete inventory of existing mining contracts, titles and licences and was ready to renegotiate permits that were not in the country’s interest.

Hassimi Sidibe, a technical adviser in the ministry said the cancelled permits include those held by Malians as well as foreigners and targeted those where no development has taken place. The mines ministry said the cancellation would effectively unfreeze those permits and allow the government to issue them to other investors with the technical and financial ability to pursue explorations.