KINSHASA – Mining companies in the Democratic Republic of Congo asked the government to adjust pending value-added tax repayments for a slump in the franc that could cost them as much as $210-million collectively.
Federation des Entreprises du Congo, the country’s largest business lobby group, sent the request in a letter to Finance Minister Henri Yav Mulang on May 5. John Nkono, the secretary-general of the FEC’s Chamber of Mines, said Wednesday the group is still waiting for a response.
The Finance Ministry said last month that mining companies could offset unpaid VAT reimbursements against other tax liabilities. Miners, who welcomed the move, say they stand to lose as much as 30% of the $700-million owed by the government if the current exchange rate is used.
“The wish of the mining corporation, which we support, is that VAT credits are reimbursed, taking into account the evolution of the Congolese franc exchange rate,” the FEC said in the letter. Mulang didn’t answer his phone and didn’t immediately reply to a text message when Bloomberg sought comment.
VAT on imports is calculated in dollars, but paid and reimbursed in Congolese francs. The currency has weakened 34% over the past 12 months to 1 411 per dollar. While VAT should be repaid in 90 days, some mining companies including Tiger Resources have been waiting almost two years to be reimbursed.
As the payments are overdue, the government should reimburse VAT at the exchange rate on the day the credit was calculated and not at the current rate, the FEC said.
The government halted the reimbursement of VAT last April and then in July suspended VAT on imports for mining companies for 12 months to prevent arrears from increasing further. Repaying hundreds of billions of Congolese francs of VAT would have brought further pressure to bear on the local currency when the companies changed the francs back into dollars, the finance minister said at the time. The government would begin to make repayments, Mulang said, but it has made little progress.
London-listed Randgold Resources, which operates the Kibali gold mine alongside Johannesburg-based AngloGold Ashanti, said in April that it’s owed more than $200-million in unpaid VAT and duty refunds. London-listed Glencore and China Molybdenum also have mining projects in the country.
If the government can’t repay the VAT at historic exchange rates, it should reimburse in dollars, the FEC said. The country’s foreign-exchange reserves stood at $738-million at the end of April, according to the central bank.
The FEC also urged the government to maintain the suspension of VAT on imports for at least another year. The current order expires in July.
Increased production in the mining sector has driven rapid economic growth in Congo in the past decade. Africa’s biggest copper producer since 2013, Congo shipped 1.22-million metric tons of the metal last year, in addition to 64 007 t of cobalt and 22 648 kg of gold.
Still, lower prices for the metals in 2015 and 2016 saw economic growth slow to 2.5% from 6.9% a year earlier, and heaped pressure on the Congolese franc as earnings from mineral exports, which generate 95% of the country’s foreign exchange, fell.