A February 2014 note on draft amendments to Togo's mining legislative framework. The draft bill remains subject to change.
Togo's draft mining Bill introduces new environmental and local beneficiation requirements and modernises the legal framework governing mining operations in Togo, bringing it in line with international standards. It is due to be presented to the government in March 2014.
Togo is the world's fourth most important producer of phosphate (the 2013 output was 1.2 million tons). Phosphate represented 7.5 per cent of Togo's exports in 2011.
Its subsoil also holds gold, iron ore, bauxite, gypsum, manganese, uranium and zinc. The State takes a mineral diversification approach; in addition, the production of construction materials such as clinker cement (6.6 per cent of exports in 2011) and the marketing of gold and diamonds from neighbouring countries also form part of mining activities.
Togo’s agricultural sector remains the largest component of its GDP (46.2 per cent in 2012). The government is expanding its extractive industry and investing in its infrastructure. Stakeholders are currently awaiting the award of a phosphate contract for the exploitation of its two billion tons of reserves of carbonate phosphate, with the potential to increase the current output levels fivefold.
Togo’s mining sector is governed by law n°96-004 (February 26, 1996) setting the mining code as amended by law n°2003-012 (October 4, 2003) (the Mining Code). No regulations are currently in force.
In January 2014, draft amendments to the Mining Code (the draft mining Bill) were circulated to industry stakeholders with a draft of the proposed corresponding decrees of application.
The draft mining Bill sets a clear distinction between the mining and quarry regimes. It also proposes a restructuring of categories of mining rights, with a total of nine categories.
It introduces the authorization of recognition (autorisation de reconnaissance).
The prospecting authorization is replaced by a prospecting permit (permis de prospection) which provides for exclusive prospecting rights over a non-renewable period of two years.
No changes have been suggested to provisions governing the research permit; the surface area remains limited to 200 km².
The draft Bill proposes reducing the term of the exploitation permit (permis d’exploitation industrielle or PE) from 20 years to 10 and limiting its area to 10 km². No such limitation is provided in the current Mining Code. Most mining codes in francophone Africa tend not to impose limitations on the area of a PE and allow for a duration typically of between 20 and 25 years.
A lease (amodiation) of a PE is still prohibited under the draft mining Bill, but the assignment, transfer or pledge of a PE becomes subject to approval of the Council of Ministers (rather than the Minister of Mines as provided for under the Mining Code).
Investment thresholds have been introduced to distinguish between artisanal mining, small-scale mining and industrial exploitation. The currency is not indicated but is presumably FCFA.
- artisanal mining – not exceeding 50 million
- small-scale mining – between 50 and 500 million FCFA
- industrial exploitation – more than 500 million FCFA.
No mining right can be requested or granted for speculative purposes. This demonstrates the concern of the authorities about the speculative objectives of some of the industry players.
Togo's draft mining Bill introduces the concept of contract of association (contrat d’association) in addition to the existing concept of investment convention (convention d’investissement), but does not explain the difference between the two. Most of its provisions refer to both types of agreement. Investors are left unclear as to which is more suitable to their operations.
It is clearly stated that both an investment convention and a contract of association can provide for more favourable economic and tax provisions.
Recent mining legislation reforms in francophone Africa include a marked increase in State participation in the capital of mining companies. Togo's draft mining Bill maintains free-carried State participation at 10 per cent, with the possibility of participation up to 20 per cent for the benefit of the private or public Togolese sectors.
The draft mining Bill also introduces new requirements around local preference. Title-holders must give preference to local products and services where they are competitive as to price, quality, warranty and delivery time frames.
Title-holders are also required to give preference to Togolese labour where there are equivalent qualifications.
Other new mining codes are not as flexible as in Togo: they impose strict quotas; or they require mining companies to give preference to local services and goods without making these obligations conditional upon equivalence; or they set specific quotas for the employment of local workers.
Togo's draft mining Bill does not provide for a standalone tax regime. Subject to tax advantages provided in the Mining Code or any regime negotiated as part of a mining convention (investment convention or contract of association), mining title-holders are still subject to standard taxation in Togo.
Where they are more favourable, the tax and economic provisions of the Mining Code and of any mining convention may replace entirely those of the Code of Investment and the Law on the Free Trade Zone (Loi sur la Zone Franche).
The main tax and customs provisions of Togo's draft mining Bill provide for tax benefits consisting of exonerations and customs benefits relating to certain exemptions and a temporary admission regime for certain goods.
Benefits to holders of prospecting and research permits
- a temporary admission regime applicable to equipment and machinery imported for mining activities relating to the title
- exemptions for some fuels and lubricants used for machines and equipment as well as consumables
- exemptions from import and export taxes for personal goods of expatriate personnel
- no VAT on all services received and all goods acquired on the local markets, and appearing on the mining list, except for petroleum products
- no income tax and minimum lump sum tax (impôt minimum forfaitaire) for activities relating to the prospecting or research title
- no tax on salaries (taxe sur les salaires), property tax (impôt foncier) and registration rights relating to the constitution of a company and the increase of its capital.
Benefits to holders of an exploitation permit
- a temporary admission regime applicable to equipment on the mining list – up to a period of three years following the date of first production
(i.e. the date on which there is ‘a mining exploitation reaching a continuous production over 60 days at 90 per cent of its production capacity, as established by the feasibility study … or the first expedition for commercial purposes’)
- an exoneration from all rights and taxes due on tools, spare parts (except parts destined for tourism or private vehicles), and materials destined to be permanently integrated in the works – for a period ending on the date of first production
- an exoneration from entry rights and taxes on chemical products, reagents and oils for equipment – for the entire duration of the exploitation permit
- accelerated depreciation methods, in accordance with the provisions in force
- the creation of a fund for the reconstitution of the deposit or the management of the post closure period, with amounts contributed being deducted for income tax purposes
- no VAT – up to the date of first production
- no income tax and tax on salaries – for a period of three years following the date of first production
- no property tax (impôt foncier) – for the entire duration of the title.
Rates for fixed rights, surface rights and royalties are set by a decree and may also be modified by decree. It is not clear how this is intended to work with the stability guarantee provided under the Mining Code (see below).
A title-holder’s tax and customs advantages are extended to its sub-contractors for the period during which they provide their services.
The draft mining Bill includes an article concerning the tax stability guaranteed to mining title-holders. The clause includes the possibility of opting for a more favourable regime, if one is adopted subsequently, provided it is applied in its entirety.
Stability seems to last only up to the end of the first exploitation permit (and possibly not the renewal periods).
Other than for prospecting and research permits, the grant of any mining title is now subject to an environmental and social impact study (étude d’impact environnemental et social). This leads to the delivery of an environmental conformity certificate.
Mining operations are also subject to environmental audits under the law on environment (Loi-cadre sur l’environnement).
The authorities reserve to themselves the right to cure, at the title-holder’s expense, the latter’s defaults in the performance of obligations around the establishment of a security zone and the marking of boundaries.
Sustainability and governance provisions
- title-holders are required to guarantee respect for human rights
- the implementation of control mechanisms to support transparency and good governance in the mining sector, with an obligation on the part of companies to declare their revenues based on audited statements
- the public character of information, registers and documents concerning the grant of mining rights or mining conventions.
The draft mining Bill aims to promote local and regional development. It therefore requires exploitation companies to contribute financially to development and to carry out socio-economic and community works in the affected area. The financial contribution will be paid annually, at the end of each year.
Mining titles issued prior to the adoption of Togo's new Mining Code will remain valid for the duration, area and mineral substances for which they were delivered. Title-holders must comply with the obligations arising under the new Mining Code, where they are not contrary to the terms of their existing title or the applicable conventions.