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ADDIS ABABA, Nov 25 (Reuters) - Ethiopia vowed on Monday to
remove barriers to investment in its mining sector, focusing
efforts on minerals used in agriculture and construction which
will help drive its industrialisation.
Ethiopia, which has a mostly artisanal mining industry,
wants to woo foreign mining companies to kick-start development
of its vast mineral resources, a key part of its efforts to plug
a large trade deficit and generate foreign exchange.
Prime Minister Abiy Ahmed is shaking up several sectors in a
liberalisation drive aimed at transforming Ethiopia into a
middle-income country.
"Our ministry will keep reforming to remove uncertainties
that held back the development of the mining industry," minerals
minister Samuel Urkato said in a keynote speech to a mining
conference in Addis Ababa on Monday.
The government will give incentives to investors who develop
minerals used in agriculture such as potash, a key ingredient in
fertilizer, as well as construction minerals, a draft policy
document seen by Reuters ahead of the speech showed.
The ministry is still working out the details on tax and
incentive policies, Samuel told Reuters, and the revised mining
law would be announced by August next year.
IDEAL NEW MINING DESTINATION?
Ethiopia set out its stall as "Africa's ideal new mining
destination" at the conference in the Sheraton Hotel.
Changes to its mining policies have been expected since
February this year. Ethiopia aims to increase the mining
sector's contribution to GDP to 10% by 2030 from the current 3%.
The government cut the corporate income tax rate for miners
to 25% more than two years ago from 35%, and has lowered the
precious metals royalty rate to 7% from 8%.
Despite such reforms, Ethiopia faces stiff competition on
the continent in vying for much-needed foreign investment.
Democratic Republic of Congo's new mining code introduced
last year increased the royalty rate for precious metals from
2.5% to 3.5% - half the Ethiopian rate.
On the other hand, Ethiopia's current law guarantees the
government just a 5% minimum equity stake in projects - less
than in many African countries.
Guinea's mining code, for example, grants the government a
free 15% stake in mining projects.
Access to hard currency remains a big stumbling block for
international miners wanting to operate in Ethiopia, where
foreign exchange reserves are low.
"It's foreign exchange that is the key barrier to investing
and growing investment within Ethiopia," said Christopher
Suckling, sub-Saharan Africa country risk analyst at IHS Markit.
Government guarantees of access to foreign exchange would
help attract more miners to Ethiopia, he added, which in turn
could help bring in more hard currency to bank coffers.
Norwegian fertilizer company Yara is among those
planning to develop potash, found in the remote Danakil
depression in the northern Afar region of the country, through
its Yara Dallol project.
Kefi Minerals' Tulu Kapi site in the west of the
country is expected to produce its first gold in 2021, executive
chairman Harry Anagnostaras-Adams said.
U.S. gold miner Newmont GoldCorp is exploring in
Ethiopia's Tigray region.
While Ethiopia's conference pitch focused on industrial
mining, analysts say it cannot achieve its goal solely by
attracting large-scale miners, given the lengthy timeline for
developing major projects.
The government is therefore enlisting the help of
organisations such as the Canadian International Resources and
Governance Institute (CIRDI) to develop the artisanal mining
sector and increase government proceeds from these activities.
Of the high-value minerals Ethiopia produces, 60%-80% are
mined artisanally, while that figure rises to 80%-95% for
construction minerals such as basalt, pumice and limestone,
according to Rahel Getachew, senior programme officer at CIRDI's
project supporting the ministry of mines.
(Writing by Helen Reid; editing by Richard Pullin, Omar
Mohammed and David Evans)
