Revised bill set to increase gov’t share in mining investment

– Study suggests a reduced royalty fee

A new draft bill believed to amend the existing mining operation proclamation, presented to the House of Peoples’ Representatives (HPR) on Tuesday, has offered the government a five percent share from mining operations without paying any investment costs.

The newly proposed bill also introduces a new rate of royalty fee from investors, lowering the current eight percent to seven percent.

The existing mining proclamation, which has been operational for the past 11 years, states that the government acquires without cost a participation interest of up to five percent for any small or large-scale investment. But this has been to allow the government exactly five percent. According to the bill, “Additional equity participation of the government may also be provided by agreement with the license which shall specify the percentage, timing …”

An explanation attached to the draft bill indicates that the royalty fee adjustment has been made after a study was carried out and the existing fee was said to be “too high”.

A brief Sept. 16, 2013 assessment of Ethiopia’s pro-mining directives courtesy Mayer-Brown can be found here: 

SAUDI ARABIA, ETHIOPIA AND EGYPT – NAVIGATING THE LEGAL MINEFIELD

Investors already engaged in mining operations and those in the licensing process have previously complained about the high royalty fee rate. As a result, the license issuance authority and the Ministry of Finance and Economic Development (MoFED) have collaborated in a study that concluded to reduce the royalty fee rate from eight percent to seven percent “in a bid to attract more investors into the sector,” reads the attached document.

The revised bill also includes a new article that stipulates a license must be issued for people who want to engage in mining operation related activities, such as drilling and laboratory services.

It also explains that a new body is necessary to take responsibility for efficiency assurance and license requests. The new bill says: “Any Ethiopian who wishes to engage in providing consultancy services or technical services, such as drilling or laboratory services to the mining sector, may apply to the ministry for a certificate of competence by paying the appropriate application fee and completing the appropriate form.”

Furthermore, the draft also introduces a new legal framework that proclaims the government should declare the revenue it collects from mining operations to the public. It also includes the establishment of an independent body responsible for publishing the revenue collected from mining.

http://www.thereporterethiopia.com/index.php/news-headlines/item/1280-revised-bill-set-to-increase-govt-share-in-mining-investment

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