By
Appolinaire Nishirimbere
While the COVID-19 pandemic struck and is still ravaging the entire world, tax dodgers are intensifying their tricks to steal more and more from the poor. This is increasing the inequality gap plus negatively impacting developing countries like Burundi.
To cope with this situation, as it appears in its National Development Plan (PND)[1], Burundi intends to rely on domestic resource mobilisation namely the mining sector to propel its economy. In fact, the country not only holds 6% of the world’s nickel deposits but also has gold, tantalum, tin, tungsten, rare earths plus industrial minerals including kaolin, phosphates, and limestones.
However, despite all these efforts, the Burundi Revenue Office (OBR) regrets the huge losses in the sale of minerals. So where does the money from the mining sector go and who benefits from it? Under normal conditions -given the wealth of Burundian subsoil- mining could significantly contribute to job creation, diversify the economy, allow the transfer of technology, and contribute to the increase of state revenue. However, so far it contributes to only 1% of the GDP and 3% of Burundi’s export earnings.[2]
This situation is explained, on the one hand, by the fact that mining activity in Burundi has hitherto been dominated by traditional methods characterized by rudimentary exploitation techniques, low production capacity, and non-compliance in environmental standards. It is also hampered by unfair practices such as tax evasion and avoidance. Furthermore, it is recognised that there is a significant gap that exists between the declaration in production, exports of mineral substances and the actual values. This represents significant revenue losses for the state.
Recently, the sector has become increasingly industrialised with the arrival of multinationals to invest in it. Thus, five companies were approved for geological and mining research work at the end of June 2019. These are Ntega Holding, for coltan and associated minerals (Runyankezi); Tanganyika Gold, for gold and associated ores (Mabayi); RainBow, for rare earth ores (Gakara); African Mining, for gold and associated minerals (Muhwazi) and CVMR, for Nickel and vanadium (Nyabikere, Waga and Mukanda).
In relation to industrial mining, five agreements have been signed between Burundi and the following companies: Comptoirs miniers des exploitations minières du Burundi (COMEBU); Burundi Musongati Mining (BMM); Tanganyika Gold Mining Burundi (TMB); Rainbow Mining Burundi (RBM); and African Mining Burundi.
| COMPANY PROFILES Comptoirs miniers des exploitations minières du Burundi (COMEBU) – COMEBU is approved for exploitation of coltan and cassiterite in Kabarore commune, Kayanza province, and cassiterite in Murehe, Kirundo province. COMEBU, has a 25-year mining license, covering 2 areas: Kabarore and Murehe. The total area of these perimeters amounts to 39.02 km2. Burundi Musongati Mining (BMM) – In April 2005, KERMAS Ltd, a Russian group registered in the British Virgin Islands bought SAMANCOR Chrome, a subsidiary of SAMACOR Holdings Ltd, a South African company whose shareholders were BHP Billiton (60%) and Anglo-American (40%). This is how Kermas South Africa was born. KERMAS then created the subsidiary SAMANCOR Nickel (SAMANCOR NI/HK) based in Hong Kong. In December 2008, a three-year mining exploration permit was granted to SAMANCOR NI/HK on the perimeters of Musongati, Waga, and Nyabikere. Through its subsidiary Kermas Investment International, KERMAS alone financed the costs relating to exploration and obtaining the exploitation permit, including the feasibility study. In May 2014, in accordance with the provisions of the mining code, the Government of Burundi signed a mining exploitation agreement on the Musongati deposit with the company Burundi Mining Metallurgy International (BMM International) which is a subsidiary of the company KERMAS South Africa and where Kermas Investment International holds 91% of the shares. For the exploitation of nickel and associated minerals, BMM International has created with the State of Burundi, a joint company, called Burundi Musongati Mining (BMM-SM) up to 85% of the shares for BMM International and 15% of the shares returning free of charge to the State of Burundi as owner of the subsoil. Tanganyika Gold Mining Burundi (TMB) – In May 2013, a mining exploration permit for three years was granted to the company Ets Jbelli for the exploration of gold and associated elements in the perimeter of Mabayi in the province of Cibitoke covering an area of 516.9 km2. In September 2016, the exploration permit was renewed for the first time, but this time in the name of the Russian company Tanganyika Gold S.A. One year later, in October 2017, a gold mining license and associated elements was granted to Tanganyika Gold for a period of 25 years at the Cimba site in Mabayi commune. The prospective studies available indicate that the deposits at the Cimba site amount to 14 tonnes of gold, 36,000 tonnes of copper and 16 tonnes of silver. In accordance with the Mining Code, a joint company called Tanganyika Mining Burundi was formed in which the Burundian Government owns 15% of the shares in the joint company. On 31 October 2018, work began on the gold deposit and associated minerals. Rainbow Mining Burundi (RBM) – In May 2011, the company Rainbow Rare Earths registered in the Anglo-Norman Island of Guernsey obtained an exploration permit for rare earths and associated minerals from Gakara in the province of Bujumbura (Decree No. 100/141 of 16 May 2011). In April 2015, a rare earth exploitation permit from Gakara/Bujumbura was granted to Rainbows International Resources Ltd, a 100% subsidiary of Rainbows Rare Earths registered in the British Virgin Islands and the mining agreement for 25 years approved by decree No. 100/110 of 18 April 2015. For the exploitation of rare earths and associated minerals, Rainbows International Resources has created with the State of Burundi, a joint company, Rainbow Mining Burundi SM, to the rate of 90 % of shares for Rainbow International and 10% of shares without payment due to the State of Burundi as owner of the subsoil (See Article 13/Convention of 27 March 2015). African Mining Burundi – On August 21, 2017, the British company African Mining Limited obtained an exploration permit for gold and associated minerals on the Muhwazi perimeter located in Butihinda Commune, Muyinga Province. This perimeter has previously been the subject of the same activities by two other mining companies which have already withdrawn, namely Flemish Investments Limited and Burundi Mining Company (BUMINCO). After 9 months of research work, convincing results seem to have led to the identification of exploitable sites. BUMINCO applied for an exploitation permit on the Masaka perimeter. On August 8, 2018, the African Mining Limited Company obtained the operating license, and a mining agreement was approved where the State has a stake of up tp 15% in the capital of African Mining Burundi which will exploit the deposit of gold in Masaka and in nine other identified mining sites. The beginning of works took place on 8 October 2018, but the production schedule has not been revealed. |
The conventions between Burundi and the mining companies are drawn up in accordance with the model convention contained in the Mining Regulations. This model convention is inspired by the World Bank Model Mining Convention. Any draft convention is first examined by the government. For the draft convention to be signed it is scrutinised beforehand and then adopted by the Council of Ministers. All of this works to constitute a guarantee of balance and of mutual benefits sought, since the convention gets to analysed by various departments to varying levels. Therefore, mining in Burundi is governed by the mining code which was put in place by law No. 1/21 of 15 October 2013. The tax regime established by this law is characterized by a sharp increase in taxes and mining fees compared to the 1976 mining code and the creation of new taxes.
This mining code is supplemented by Decree No. 100/19 of 16 June 2015 on the Burundi Mining Regulations which sets the conditions and modalities of application. The mining tax regime applies to all operators of the mining and quarrying sector in Burundi and to all prospecting operations, industrial and artisanal exploration research, and quarry products. However, the code and the mining regulations have been seriously criticized by independent or internal observers including some government representatives in the said joint businesses.
Prof. Steve de Cliff’ comment on tweet following the Government’s measure to suspend mining contracts with Rainbow Mining Burundi involved in rare earths exploitation.
For example, in 2018, Prof. Steve Decliff (professor of chemistry at the University of Burundi), the State representatives on the Board of Directors in the rare earths mining company Rainbow Mining Burundi made the following remark -before being fired from this capacity -in what he called “secrets behind the exploitation of rare earth deposits of Gakara in Burundi”, from it:
“For those who do not know it, the name ‘rare earth’ is given to a group of 17 strategic metals including the 15 of the rows of lanthanides on the periodic table, to which we add scandium and yttrium. There is no doubt that the rare earths deposits at Gakara in Burundi is of exceptional quality. The rare earth veins are in atypical grades that do not exist anywhere in the world. Levels range from 47% to 67%, with an average grade of 55%.
By comparison, the other largest mine in terms of grade is the Steenkampskraal rare earth mine in South Africa, but its average grade is only 14.4%. The other rare earth mines that exist elsewhere in the world have grades that rarely exceed 5%. This is the case of Chinese rare earth mines, which occupy the third place in terms of deposits.
The rare earths exploitation of Gakara is carried out via a joint company, Rainbow Mining Burundi (RMB sm) developed under a mining title which grants to Rainbow Rare Earths (based in London) 90% of the shareholding, and only 10% to the Burundian State. But what the public does not know is that the Rare Earths plant in Kabezi (rural Bujumbura) does not produce ‘rare earth metals’ as such, but rather so-called rare earth concentrates.
To extract the rare earth metals, the company must transport its cargo of ‘concentrates’ to a hitherto secret destination, with another intermediary, ThyssenKrupp, a financial multinational based in Germany. The problem is that in calculating the dividends that accrue to each of the two shareholders, Rainbow Rare Earths claims that the process of separating rare earth concentrates into its metals costs 71% of the real value of these highly strategic metals.
The Burundian Government, which has (remember) only 10% as shares against 90% of Rainbow Rare Earths, sees its shares reduced to 2.9%. That’s not all. From this fraction, we must also deduct recurring costs (such as consultancy and travel experts RRE), which amount to several billion Burundian francs per year. After the final count, for USD 100 of rare earth sold, it’s not USD 2.9 that will land in state coffers, but barely USD 1 or maybe less, or even nothing at all if there is ‘interception by some local eaters’. There are some solutions that all converge in the need to build a rare earth separation plant in Burundi. Perhaps jointly with one or other African countries that have these strategic deposits.” (Author translation).
Oddly enough, huge sums of money in this sector escape the tax net. As announced by the spokesperson for the Burundi Revenue Office (OBR), during an information workshop for Burundi miners on 16th February 2021[3], OBR expected to collect more than USD 5 billion, but the amount received is not even half of that expected. However, UN experts on the DRC reveal that Burundi sold 2,000 kg of gold in 2020 when only 500 kg was recorded in the OBR’s books.[4]
It is probably against the above-mentioned background in the mining sector that the Prime Minister Alain Guillaume Bunyoni announced, that Burundi is looking into suspending some contracts with the mining companies. Stating this before parliament, while presenting the government’s mid-term report this year, Premier Bunyoni indicated this as a point of consideration since the country is not benefiting from the contracts.
Globally, Africa loses a lot of capital in illicit financial flows annually. Among this capital that leaves the African continent each year, false invoicing of exports represents USD 30 to 52 billion, mainly linked to gold smuggling. This represents 77% of the under-invoicing of mineral exports in Africa followed by diamond (12%) and platinum (6%).[5]
In Burundi, if OBR were able to track and recover this money to return it to the public treasury, it could be used to cope with the consequences already engendered by the coronavirus pandemic. For instance, the lost USD 2.5 million, once recovered, can pay 1,041 medical doctors annually.
Appolinaire Nishirimbere is a tax justice campaigner in Burundi and co-founder of “Initiative citoyenne pour l’environnement et le développement durable (ICED). Email : appotjna@gmail.com, Phone: +257 75 938 450.
END NOTES
[1] http://www.presidence.gov.bi/wp-content/uploads/2018/08/PND-Burundi-2018-2027-Version-Finale.pdf
[2]https://www.globaltaxjustice.org/sites/default/files/Exploitations%20minieres%20et%20gouvernance%20des%20ressources%20naturelles-Etude%20-Actionaid%20Burundi.pdf – French
[3] https://obr.bi/index.php/en/actualites/1354-l-obr-sensibilise-les-exploitants-des-carrieres-et-mines-sur-leurs-devoirs-fiscaux – French
[4] https://www.radiyoyacuvoa.com/a/obr-amakori-y-ubutare-n-inzahabu-ntagera-mu-kigega-c-uburundi/5784877.html – Kirundi
[5]https://www.dw.com/fr/pour-tout-lor-de-lafrique/a-55979508 c (French)
