The use of tax and non-tax incentives has proven effective in countries such as Rwanda, Botswana, and Indonesia, according to a publication by the International Conference on the Great Lakes Region (ICGLR). ALSO READ: Luna Smelter: Meeting global standards for local mineral processing Countries such as Rwanda, Botswana, and Indonesia, offer corporate tax concessions and tax-free periods to encourage investment in mineral value addition, the publication indicates. It outlines regional guidelines on mineral beneficiation (mineral processing), value addition, and cross-border trade in the Great Lakes Region. Mineral beneficiation, also known as ore dressing, is the process of separating economically valuable minerals from their ores by physical or chemical methods. ALSO READ: Rwanda to add gold to foreign reserves portfolio in next fiscal year The aim of these guidelines is to complement existing instruments and initiatives by the ICGLR and its member states to develop responsible mineral supply chains in the region. ALSO READ: Govt publishes list of top 10 ready-to-mine blocks Value addition in mining refers to increasing the value of raw minerals as they move through the supply chain, from extraction to final product manufacturing. “Governments may use tax and non-tax incentives to attract investment in mineral processing and beneficiation, thereby promoting local value addition rather than the export of raw materials. Tax incentives are fiscal tools designed to reduce the cost of investment by lowering an investor’s tax liability. They are thus a mechanism available to governments to encourage specific investments,” the publication states. ALSO READ: RDB unveils mineral reserves seeking investors for value addition The ICGLR specifies that tax incentives can include reduced corporate tax rates, tax holidays, exemptions from import duties, and streamlined administrative procedures. “Non-tax incentives may include infrastructure support, grants, subsidies, and training programmes. Tax and non-tax incentives are considered a ‘carrot-based’ approach, offering benefits to companies willing to invest in downstream activities.” ALSO READ: Rwanda eyes $2bn in annual mineral export earnings by 2029 The document notes, for instance, that Rwanda’s 2021 Investment Code provides such incentives, making it a regional hub for mineral processing. Similarly, Botswana and Indonesia have used tax breaks to boost their diamond and nickel industries, respectively. “Generally, tax and non-tax incentives are effective tools for promoting mineral value addition and encouraging investment in local processing and refining. Rwanda aims to become a regional mineral beneficiation hub and is increasingly positioning itself as an important part of regional value creation.” ALSO READ: A look at 10 ways Rwanda can double mineral recovery rate In addition to promoting due diligence in responsible sourcing, the report notes that Rwanda seeks to achieve a high level of compliance with standards for occupational health and safety, as well as social and environmental protection. A value chain analysis aims to identify the opportunities and challenges related to specific minerals in advancing a country’s socio-economic development. “This is demonstrated by a comprehensive value chain analysis of non-metallic minerals in Rwanda, prepared by the African Development Bank (AfDB),” the report states. ALSO READ: Rwanda gets equipment to support sustainable mining efforts The Rwandan government is committed to formalising its mining sector, attracting international mining investors, and increasing downstream processing and beneficiation of minerals. “In fact, Rwanda is on a promising path to realising its vision,” the ICGLR adds, noting that the country has already succeeded in attracting investment in three smelters—gold, tin, and tantalum (the Gasabo Gold Refinery, the LuNa Smelter for tin, and PowerX, a tantalum refinery)—all of which have the capacity to process significant volumes of minerals from within the country and the region Tax incentives in Rwanda for in-country value addition As indicated, tax incentives in Rwanda for in-country value addition include 15 percent preferential corporate income tax for projects exporting processed minerals up to 50 percent of turnover of minerals produced in Rwanda, accelerated depreciation of assets at 50 percent, import duty exemption on heavy machinery used in mining, VAT exemption on mining equipment, value added tax refund, as well as capital gains tax exemption and 0 percent corporate income tax for companies planning to relocate headquarters to Rwanda. ALSO READ: Inside Rwanda’s Tungsten mine which is the leading producer in Africa “Additionally, Rwanda has put in place a number of non-tax incentives to attract investments in mining, processing and beneficiation, providing also a One Stop Centre for investors at the Rwanda Development Board (RDB).” They also include quick facilitation of investment registration, facilitation with respect to tax-related services and exemptions, provision of environmental impact assessment certificates, facilitation with obtaining visas and work permits, notary services provided by RDB’s One Stop Centre, and assigning a key account manager to projects registered within the One Stop Centre. Jean Malic Kalima, an investor in Wolfram mining, said: As investment in mineral value addition increases, investors in extraction also benefit a lot, since we will no longer have to sell to middlemen when exporting. If the number of investors in mineral processing increases, we can strike deals with them to modernize our operations. “This leads to higher mineral revenues and better prices. As miners, we have also received incentives including import duty tax exemptions on mining equipment and machinery to help modernize our operations and boost productivity. The equipment also ensures better safety for mine workers.
