A New Kid on the Block: Rwanda’s Bid for Mineral Growth

Rwanda counts on regulatory stability to launch its mining sector.

Amelia Salutz

Rutongo-BLOGPhoto courtesy of Rutongo Mines

KIGALI, RWANDA – Not far from the giants of African mining sits Rwanda, a landlocked—though some prefer to say land-linked—country with low levels of mineral production but big ambitions for that to change. While its production levels are slight on an international scale, at home the sector plays a much more significant role, with mining ranking as the second largest export earner in the Rwandan economy. In 2012, the sector contributed $136 million in export revenues, a culmination of a growth rate of 44% per annum since 2008, when the government first began the privatization process for its mineral concessions. Five years later, the forecasted value of mineral exports for 2013 is set at $190 million.

As the global mining slump continues to cast its gloom over much of the industry, a country in the initial stages of mining development is a rare story of optimism. In hopes of establishing the sector, which was identified as a high priority industry in the country’s Vision 2020, the government has turned a careful eye towards encouraging private sector development and expanding the country’s mineral portfolio.

Rwanda’s main mineral exports are tin, tantalum and tungsten ores. Tin and tungsten production traces back to the 1930s, while tantalum has taken off in recent years as demand is driven by the electronics sector. Rwanda is the world’s fourth largest producer of tantalum, accounting for about 12% of global production, according to the US Geological Survey. Gold is also mined, though at present only in the artisanal sector, making volumes difficult to accurately record.

“We have been focused on tin, tungsten and tantalum as they are the most easily mined, but we have also seen good indications of base metals such as copper, zinc and lead, as well as rare earth elements and gold,” said Evode Imena, the minister of state in charge of mining. “There are good gold deposits in the north of the country, with two companies having discovered up to 700,000 ounces. The northern part of Rwanda features the continuation of the Twangiza-Namoya belt from the DRC which also holds good potential for gold.”

Aiming to prove its mineral diversity, Rwanda’s Natural Resources Authority has contracted Beak, a German consultancy, to explore and delineate mineral anomalies in four prospective target areas. The government has also called for expressions of interest for several potential mining projects: one cassiterite concession open to international investors and another concession with tin mineralization intended to be developed as an exemplary mine for small-scale miners and technical students to train and perform field work.

While the government has put forth its best efforts in capacity building, large-scale investment will be needed to transform the private mining sector into an industrial industry. Of the over 500 mining companies active in Rwanda, small-scale mining accounts for the vast majority. Roughly 80% of the sector qualifies as small-scale miners, and contributes over 60% to the sector’s overall exports. Unable to use their concessions as collateral to access bank loans and very much in need of modern technology, small scale mining companies are seeking avenues for pre-financing from local mineral traders and the rare international company looking to secure its supply. Without demonstrated mineral potential, attracting international investors, particularly in this climate, is proving to be an uphill battle.

Yet where Rwanda’s mining sector lacks volume and capacity, the country has a strong regulatory framework to boost its appeal as an investment destination. In an effort to woo international investors, Rwanda has made significant strides in implementing regulatory reform. Hailed by some as the Singapore of Africa, Rwanda has earned a top spot amongst African countries on the World Bank’s 2013 Ease of Doing Business rankings as the fourth highest rated African nation after South Africa, Mauritius and Tunisia. The country also boasts very low levels of corruption and was ranked as the least corrupt country in East Africa on Transparency International’s 2013 Corruption Perceptions Index.

Further strengthening its regulatory attractiveness, the government of Rwanda signed an agreement in 2010 with the International Tin Research Institute (ITR) to implement a traceability system for domestically produced tin, tantalum and tungsten. The mineral tagging and sealing scheme went into effect in 2011 with the objective of meeting end user requirements set by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Rwanda’s adherence to the ITRI traceability system makes it the only country in East Africa to do so. Two years later, local companies are gritting their teeth as they accommodate high implementation costs in hopes of boosting the country’s international marketability.

In a last piece of reform aimed at the mining sector, the country’s mining code is currently under review. As a response to private sector requests, the edition of bills will allow for longer license periods and facilitate the acquisition of loans. Along with the new licensing scheme, however, the tax scheme is slated to change as well.

“We will be issuing an artisanal mining license for five years, and then there will be another license with a flexible duration to depend on the feasibility studies, recoverable resources and planned technology use,” said Emena. “There will also be the formal introduction of a royalty tax on minerals: 4% for base metals and 6% for precious metals. It is the first of its kind in the country so that companies can give back to the government as they develop their projects.”

Hopefully this tax increase has not come too soon. With the goal of reaching $400 million in mineral exports by 2017 and an increase in production from 8,000 mt to 18,000 mt, the government and private sector has their work cut out for them. Providing the government’s current reforms can effectively facilitate the private sector’s move towards mechanization, the goal might not be so lofty. If the government’s precedent for flexibility is any indication, if the reforms fall short of the mark, it will not be long before they go back to the drawing board.

This article was produced as part of the research conducted on African mining jurisdictions by Global Business Reports (GBR) as part of our partnership with African Mining Indaba LLC. The aim of this partnership is the production of the single most comprehensive intelligence report on the continent’s mineral sector. The Official Mining in Africa Country Investment Guide, will be launched next February 2014, as the only official publication providing country-specific information at Africa’s top mining event, the 2014 Investing in Africa Mining Indaba™ held in Cape Town, South Africa. 

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