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.

Israeli billionaire finds 3 billion barrel oil reserve in DR Congo

An oil company owned by Israeli billionaire Dan Gertler said on Thursday it had discovered reserves of around 3 billion barrels in the Democratic Republic of Congo, an amount similar to the proven reserves of oil producers Britain and South Sudan.

The crude was discovered around Lake Albert on Congo's eastern border with Uganda, Oil of DR Congo said in a statement.

An analysis of seismic survey data "indicates around 3 billion barrels of oil in place", it said.

"These are very positive results from our extensive seismic campaign," said Giuseppe Ciccarelli, Oil of DR Congo's CEO. "We continue to believe the project has the potential to provide significant revenues and multiple other benefits to the people of (Congo)."

The nearby Ugandan blocks are estimated to hold a similar amount of oil and are being developed by British company Tullow, France's Total and China National Offshore Oil Corp (CNOOC).

Oil of DRCongo said it now plans to prepare for the drilling of two exploration wells on the site by building infrastructure and relocating local communities.

Resource-rich Congo produces just 25,000 barrels of oil per day from onshore and offshore fields in western coastal areas and is seeking to increase production dramatically to boost growth and relieve poverty.

Oil made up just 1.7 percent of Congo's gross domestic product in 2012, according to the International Monetary Fund. Oil of DRCongo said production of 50,000 barrels per day at Lake Albert would expand Congo's economy by 25 percent.

But industry sources point to the difficulty of exporting the oil from eastern Congo - a region hundreds of kilometres from export points on the shores of the Indian and Atlantic oceans.

LUCRATIVE BUSINESS?

Oil of DR Congo operates blocks one and two at Lake Albert on behalf of Foxwhelp and Caprikat, both subsidiaries of Gertler’s Netherlands-based company Fleurette which has several interests in Congo’s mining sector.

Campaign groups such as Global Witness say Gertler, an influential figure in Congo with close ties to President Joseph Kabila’s government, received concessions at low prices before selling them on for large profits, particularly in a series of mining deals between 2010 and 2012.

In January, Reuters revealed that Gertler had sold one of his Congo-based oil companies, Nessergy Ltd, to the government for US$150 million - 300 times the amount paid for the oil rights.

Gertler, who has joint Israeli and Congolese citizenship and says his firm has invested more than US$7 billion in the local economy, vigorously denies receiving favourable deals at knockdown prices.

A spokesman said at the time that the Nessergy rights had dramatically increased in value since they were obtained in 2006, partly due to the discovery of significant nearby oilfields.

By Peter Jones

Source: Reuters

Standard Bank: East African oil and gas discoveries to kick-start economic transformation,

East African oil and gas discoveries are poised to fundamentally transform the economies of the region as the fuel resources usher in new investment in road, rail, power and industrial infrastructure, according to Standard Bank.

Uganda, Kenya, South Sudan, Ethiopia, Tanzania and Mozambique have emerged as one of the most prolific oil and gas exploration regions in the world over the last 10 years, says Mr Simon Ashby-Rudd, the London-based global head of oil and gas at Standard Bank, Africa’s biggest lender. These discoveries will establish the region as a major hydrocarbon province in the decades to come and drive wider economic growth throughout East Africa.

“Over and above the traditional oil and gas regions in Africa, notably West Africa, East Africa has essentially been a forgotten desert in terms of upstream oil and gas exploration over the last 40 years,” said Mr Ashby-Rudd. “This has changed completely over the last decade, oil and gas companies are starting to realise the potential in nations along the East African rift valley and Standard Bank believes this is going to fundamentally transform the region’s economy.”

Oil exploration in East Africa was sparked off by the discovery of between 1.5 and 2 billion barrels of commercially viable oil reserves in northern Uganda in the middle of the last decade. Last year the country announced that total known oil reserves in the country were estimated at about 3.5 billion barrels.

The discovery of oil in Uganda coupled with the fact that exploration licences in East Africa were comparatively cheap due to the fact that the region was not regarded as an oil rich area, ushered in further exploration activity in other countries along the Rift Valley. As a result, further oil discoveries were made in southern Ethiopia and Kenya with additional gas finds in Tanzania and Mozambique.

One of the biggest indicators that the region is likely to experience an oil- and gas-led boom in the next half decade is the fact that several projects in East Africa are likely to come on stream at similar times.  Mozambique and Tanzania’s gas and liquefied natural gas projects are expected to come on stream in 2019 with Kenyan and Ethiopia expected to begin commercialisation of their oil deposits over the next six to seven years. Uganda is set to begin oil production by 2018/19, while South Sudan is already producing.

“Oil investment could accelerate the economic growth of several economies in the region,” said Mr Ashby-Rudd. “While the discoveries might be fairly modest in a global context, they’re very significant in a regional economic context.”

Plans are now underway to construct an oil pipeline linking Uganda’s oil fields to the coastal port of Lamu in Kenya. In February this year Uganda signed a memorandum of understanding (MOU) with oil companies operating in the country to facilitate the development of an oil refinery in the country as well as a pipeline that enables crude reserves to be exported.

“A pipeline would really kick-start economic growth in the region as it would usher in additional investments, the necessary infrastructure which in turn will enable further investment in industrial operations,” said Mr Ashby-Rudd. “Oil thus becomes the catalyst for an economic transformation across the region. An oil pipeline could become the backbone on which an entire infrastructure corridor could be constructed.”

Mr Ashby-Rudd says Uganda’s efforts to link its oil reserves to the coast to facilitate exports could be replicated by other landlocked nations in Africa.  This would allow additional infrastructure corridors to be developed as a means of harnessing the economic potential of central and east African nations such as Tanzania and the Democratic Republic of Congo.

Burgeoning economic growth in East Africa is also likely to result in increasing demand for fuel within that region, which imported a collective $10bn of fuel and petroleum products in 2012. Standard Bank expects total demand for petroleum products in East Africa to treble by 2030 with Kenya likely to remain the largest market in the region, which the bank estimates will record compound annual growth rates of between 5% and 7% over the next half decade.

This is press release by the Standard Bank South Africa

Uganda’s hopes in extractives sector lie in EITI

Uganda has high expectations in the extractives sector, especially with an addition of oil and gas resource to the basket of the abundant mineral resources. However, these hopes can only be realised if the country agrees to sign up to the Extractive Industries Transparency Initiative (EITI).

The EITI is an international standard for transparency in extractive industry payments and receipts.

In countries participating in the EITI, companies are required to publish what they pay to governments and governments are required to publish what they receive from companies. For Uganda, only Tullow Oil Plc has done so.

The Ministry of Energy and Mineral Development recently conducted a two-day consultative workshop at Speke Resort Munyonyo to review the mineral policy, law and taxation. This is in addition to the highly-geared second edition of the Uganda Mining, Energy, Oil and Gas conference and exhibition scheduled for May 20 and 21 next year. Uganda Chamber of Mines and Petroleum, in partnership with the Energy ministry, is organising the 3rd Mineral Wealth Conference, 2014, scheduled for October 1 and 2, 2014. Its theme is: “Uganda’s Transformation: A New Era in Mining”.

These and other efforts are an indication that the extractive industry is taking centre stage in the governance of Uganda’s political economy. We appreciate that the Uganda government has interested itself with full force in investing in extractives resources. This is one way of enhancing its resource envelope to improve the standard of living for Ugandans and reach out to the poorest of the poor.

Hitherto, Uganda deliberately undertook the Sustainable Management of Mineral Resources Project (SMMRP), from 2008 to 2012, with financial and technical support from World Bank, African Development Bank and Nordic Development Fund. Under this project, the government undertook geo-surveys and mineral resources assessment in which it identified potential mineral target areas for exploration and development.

According to official records obtained from the Energy ministry, since 2012, more than 726 licences in mineral development and mining have been issued, up from 100 in the previous ten years. This means that Uganda’s prospective bases have increased over time, hence expanding the extractives sector as well as increased payments in terms of revenues from, so far, the concessional licences.

This will add onto the projected value of the 3.5 billion barrels of oil so far confirmed from Uganda’s additional golden resource, estimated to have so far contributed $2.4bn in foreign direct investment (FDI). The growing positive expectations and needs of the sector with the growing well-intentioned ideals of government, as stipulated in both the National Development Plan (NDP) and Vision 2040, need to be insulated by both the national and international bulletproofs.

This should be through signing up to EITI. Definitely, it is in the interest of government to see that Ugandans are getting out of poverty and enjoying services. That alone will earn the government support and, therefore, the next term in office. The EITI campaign benefits government more than the activists, especially CSO representatives and passionate individual campaigners.

In order to support government to spearhead the translation of natural resource wealth into better development for the local citizens, the EITI becomes the key centrepiece of the value-chain.

The EITI further increases public information, thereby empowering the public to put to task their government to account for every penny of the resource revenues, which many governments in Africa tend to fear. It also helps in enhancing revenue collection and management, for improved service delivery.

In other cases, EITI enhances opportunities for attracting investors; increases trust among key players in the governance and the service delivery chain (citizens, government, CSOs, private companies and investors), and hence makes it easy for constructive dialogues and effective prioritisation. The EITI debate should, therefore, be mainstreamed in all government undertakings, including the aforementioned events and other conferences.

Source: The Observer