Analysis of Guinean new mining fiscal regime: Considerations for improvement

Abstract

From 1990s the mining regulatory and legal framework that supported great harmonization and stability in Africa mining sector has not fully contributed in creating more opportunities of foreign investments.22Many authors have conducted the study on African resources-rich countries mining regulatory and legal framework with objective of creating more opportunities of foreign investments, but the external origin of the reform process responsible for the new regulatory frameworks over the last 20 years has had other far-reaching implications of governance to rich the goal. This has been demonstrated in numerous articles such as Campbell (2002) (Regulating Mining in Africa: for Whose Benefit? corporate strategies and government policies in the international diamond industries), Otto (2002) (Investing for sustainability: the management of mineral wealth) and Sakala (2012) (Africa: Experts to Review Africa's Tax Incentives) and so on. In line with this aforementioned Guinea adopted a new mining code in September 2011 which replaced the mining code of 1995. This study sheds light on some of the central issues in the continuing process of mining legislation revision, the short term optimization of mining taxes and incentives attractiveness so as to illustrate their effects on both government revenues and returns on investment. Through a quantitative comparison of the tax rates in the context of developed and developing resources-rich countries, it can be concluded that the past regulatory frameworks are uncompetitive in terms of foreign investments' attraction. The new regulation code itself has some negative impacts on the previous investments, as well as bringing down living standards in areas of critical importance for socio-economic development.33The adoption of new mining code coincided with the economic crisis of some operating companies in Guinea such as BHP Billiton, Rusal Alumina and Rio Tinto who were ready to slow some of their worldwide investments with mineral exploration projects. One of the immediate consequences was, some of those companies stopped operations by fearing that falling mineral commodity and government intervention could precipitate massive investment losses. This generated the decrease of numerous relative economic activities including direct and indirect jobs (see Revenue Watch Institute (2013).