Crafting a Winning Code: Cote d’Ivoire Takes on Mining Reform

Legislative reform is the first step to unleashing Cote d’Ivoire’s potential.

Amelia Salutz

Cote-d-Ivoire-BLOG

ABIDJAN, COTE D’IVOIRE – Amongst West Africa’s resurgent mining sectors, Cote d’Ivoire has emerged as one of the most highly prospective countries in the region. Home to over one-third of the Birimian Greenstone belt, Cote d’Ivoire has indications of great mineral potential, yet its annual gold production is dwarfed by its neighbors in Ghana, Burkina Faso and Mali.

The country remains vastly underexplored due in part to the political instability that has plagued the country in in the last decade. Though the agriculture sector has long been the economy’s mainstay, the 2011 change of power ushered in an administration keen on kick-starting its mineral potential. Before mining can become a pillar of the Ivoirian economy and a top investment destination, however, the government is working to put its house in order. Governed by a mining code written in 1995, the sector’s legislation is long overdue for reform.

In 2012, Cote d’Ivoire posted a GDP growth rate of 9.8%, a strong figure following its -4.7% rate in 2011, which resulted from the year’s presidential election standoff and five months of ensuing turmoil. As the country’s political and economic conditions stabilize, President Alassane Ouattara has declared that the time for mining is now. In an effort to diversify the national economy, Ouattara has called for the mining sector to become an economic leader for the country. The government has a stated aim for the sector to contribute up to 8% of GDP within the next decade.

Though Cote d’Ivoire has shown potential for a diversity of metals and minerals, gold is its strongest commodity. In 2012, the country’s gold mines produced 7 mt of gold per year. As interest on the parts of the government and investors rise, gold production is expected to reach 20 mt by 2020, according to a report issued by DLA Piper Africa Group.

In order for the sector to live up to government objectives and private sector projections, Cote d’Ivoire must first make it over the hurdle of reform. While significant strides have been made, the task has proven to be a difficult one. In March 2012, the government announced the process of reform was underway, however more than a year and a half later, the prospect of any reforms coming into effect remains a distant one.

The back and forth of draft ordinances proposed by the government and evaluated by the industry has mapped out the government’s steep learning curve as it seeks to fashion a policy that accurately reflects the realities of the modern mining landscape. A notable example of this was the initial proposal of production sharing agreements, in the style of legislation governing the petroleum sector. Industry outcry over this measure quickly nixed it from the reform platform. A first draft bill was proposed to the industry at the end of 2012, followed by a second attempt in early 2013.

Principal changes to the code currently under discussion include a potential limitation of the number of permits that a company may hold. The issue of mining conventions has also been addressed. Such conventions have been signed between the government and operators in the past; however details on the terms of such conventions remain unclear. A further proposal is the introduction of a 20% capital gains tax with regards to mining permits.

While the issues at hand have been volleyed between political committees and private sector consultation, President Ouattara made the decision to move the mining portfolio out of the Ministry of Energy and Mines and into the Ministry of Industries, now called the Ministry of Industries and Mines. This move, which came in July, has prolonged the reform process but will hopefully pave the way to better understanding of the sector on the part of the government. Now under the guidance of Jean Claude Brou, Minister of Industries and Mines, the government is hoping to bring a more nuanced approach to the sector’s governance and to foster closer ties between mining and downstream manufacturing.

As the path towards legislative reform continues, the issuing of permits has been slow and sporadic. In recent months, however, as a sign of the government’s renewed will, the administration is pushing through more licenses and bringing more confidence to the growing numbers of explorers who are attracted by Cote d’Ivoire’s geological potential and numerous development advantages, including available infrastructure and cheap power.

While ranking low on the 2014 World Bank “Doing Business” index at 167 out of 189 economies, Cote d’Ivoire’s last two years have shown significant signs of improvement. The decision of the African Development Bank to move its base back to Abidjan is being heralded as a vote of confidence in the country’s future stability. As the country’s climate improves for investment, the mineral sector will be poised for growth as the global mining industry climbs out of its current downturn.

Though the global sector is still in its trough, Cote d’Ivoire can waste no time in putting the building blocks into place for the industry. Once exploration dollars flow more freely, the country will be in close contention with other resurgent mining jurisdictions in the region, among them Burkina Faso, Gabon, Guinea, Mali and Sierra Leone. With reform underway in all of these countries, the pressure is on for Cote d’Ivoire to push through an attractive legislative framework worthy of its rich mineral resources.

This article was written 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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