Analysis of revised Mining Code in Democratic Republic of the Congo

The Democratic Republic of the Congo (DRC), Africa’s second-largest country by area, is rich in mineral resources, with reserves of various non-ferrous metals ranking among the highest globally as at the time of writing this article. In 2002, with assistance from the World Bank, the DRC enacted its Mining Code, which included incentives such as a 10-year stabilisation clause to attract major international mining companies. This transformed mining into a cornerstone of the country’s economic development.

However, the rapid growth of the mining sector did not deliver the anticipated significant benefits to the nation’s economy and social development. In March 2018, the DRC introduced a revised Mining Code, implementing substantial changes such as increasing state equity participation, introducing new taxes and raising tax rates. These amendments have had a profound impact on companies investing in the DRC.

Although seven years have passed since the enactment of the revised Mining Code, it continues to generate attention and raise questions. This article provides a concise overview of the key amendments in the revised Mining Code, focusing on six main aspects.

Enhancing government revenue

The revised Mining Code in the DRC significantly increases government revenue from the mining sector through various measures. First, regarding equity interests, the new law mandates the transfer of 10% non-dilutable shares to the government when applying for or transferring mining rights, tailings exploitation rights and small-scale mining rights. An extra 5% equity transfer to the government is also required for each renewal of mining or tailings exploitation rights. These provisions directly increase the government’s stake in mining companies, ensuring greater long-term benefits from mining development.

Second, in terms of tax revenue, the law introduces substantial adjustments to tax rates and bases. For instance, the mineral royalty on non-ferrous metals has risen from 2% to 3.5%, while newly classified strategic minerals such as cobalt, germanium and coltan are subject to a 10% royalty. The tax base has also shifted from “the total actual sale price minus transportation, inspection, insurance and marketing costs” to “gross commercial value”, broadening the scope of taxable income.

The revised law also introduces new taxes, including a windfall profits tax, a special tax on share transfer premiums, signature bonuses and entry fees. These measures ensure the government benefits from surging mineral prices and equity transactions.

Increasing local benefits

The revised Mining Code in the DRC mandates that Congolese natural persons must hold at least 10% of shares in mining companies. For companies engaged in mineral processing, the shareholding requirement for Congolese natural persons is set at a minimum of 50%. This provision aims to ensure that local residents directly benefit from mining activities, promoting social equity and economic development.

Raising entry barriers

The new Mining Code significantly raises the threshold for entering the DRC’s mining sector. Applicants for mining rights must demonstrate stronger financial capacity. For instance, the minimum financial requirement for exploration rights applicants has increased from 10 times to 50 times the annual surface area fee payable in the final year of the initial exploration licence.

The law also excludes individuals from applying for mining and quarrying rights, restricting eligibility to legal entities registered within the DRC, with a local office and a business scope limited to mining activities. Prospective investors must also submit various documents, including tax certificates and certificates of good conduct.

Social and environmental duty

The revised law reinforces the social and environmental obligations of mining companies. Rights holders are required to conduct environmental and social impact assessments, develop environmental and social management plans, and prepare social responsibility charters. Holders of mining and permanent quarrying licences must allocate 0.3% of their annual turnover to community development projects. Strict penalties are imposed for non-compliance with social and environmental responsibilities.

Local processing, subcontracting

The revised Mining Law in the DRC obliges mining rights holders to process extracted minerals within the country, permitting the export of raw minerals only under exceptional circumstances. This measure aims to retain the economic benefits of mineral processing domestically.

The law also mandates that mining subcontracting activities comply with the 2017 Subcontracting Law and related regulations, which requires subcontracting companies to be at least 51% owned by Congolese natural persons. These provisions are designed to boost local employment, increase government tax revenues and further stimulate the domestic economy.

Better regulation, transparency

A lack of transparency in the mining sector was a key driver behind the DRC government’s decision to revise the Mining Code. The new law incorporates the principles and standards of the Extractive Industries Transparency Initiative (EITI), requiring mining and quarrying rights holders to publish monthly reports.

These reports must detail the quantity, quality and value of minerals produced, sold or exported, as well as the specific amounts of taxes, royalties and fees payable and paid to the national treasury, decentralised entities and state agencies. The law reinforces tracking mechanism, requiring comprehensive monitoring and regulation of the entire mineral supply chain.

The enactment of the revised Mining Code marks a significant shift in the country’s mining investment landscape. The amendments not only enhance government oversight of the mining sector but also raise entry and compliance requirements for foreign investors.

While the law’s stringent provisions on transparency, environmental responsibility and community contributions increase operational costs and compliance risks for companies, the DRC’s abundant mineral resources remain a strategic investment opportunity for businesses capable of swiftly adapting to the new regulations.

Cheng Jun is an equity partner and Dong Hui is an associate at Zhong Lun Law Firm