The Rwandan government says it has implemented a package of incentives to attract investors to mining and exploration activities as part of a strategic effort to reorient the country's mining sector in the region, the New Times reported.
On November 10, Francis Gatare, CEO of the Rwanda Mining, Gas and Oil Commission (RMB), announced the new incentives ahead of the African Mining Forum.
Gatare told a news conference: "We are excited about a new incentive scheme for exploration companies that allows for 10 years of losses to be carried forward.
This means that the company investing in the initial exploration can carry forward losses or expenses incurred during this period."
Gatare said the incentive is a new provision in the revised investment code aimed at attracting junior mining companies whose business model focuses on mineral exploration and then selling off their assets once the mineral is discovered.
This incentive will allow them to carry forward 10 years of losses.
That means they can write off those losses for as long as a decade because they generate little revenue and invest instead in exploration.
"We think this is very competitive globally and should attract so-called junior mining companies whose business model is focused on exploration," Gatare said.
Previously, exploration companies could only carry forward losses for five years.
In essence, every company must file tax returns every year, regardless of whether they make money or not.
For example, if a company invests £4m in exploration in 2020 and they have no revenue, that means they have lost £4m.
Let's say they keep investing, and after investing 10 million pounds, they don't start making money until the fifth year.
That means they can deduct the losses each year and redistribute them up to 10 years later.
Technically, it is not tax-exempt, but Gatare said it is a cost calculated investment.
Exploration activities in Rwanda remain generally unfunded.
This is because exploration is considered high-risk, medium-term and does not provide immediate returns, and there are only a few places where the industry can be perfected.
Financial institutions have been reluctant to invest in this sector because many argue and compare it to "speculation", the end result of which is often unpredictable.
Gatare stressed that the Government has a manual that identifies areas for exploration, mining development and the location of mineral deposits.
"As a government, we have carried out extensive exploration activities and collected geological information across the country, which has given us a great understanding of the existing potential.
These have been put together into an investment recommendation book."
Earlier, Gatare said the government did not have a full understanding of the franchising arrangements for where the minerals would be located, so it could not determine where to invest.
Bernard Nsanzimana, an expert on mineral management, said that despite Rwanda's efforts to attract companies to invest in the sector, there were still challenges in finding mineral resources.
"The new incentives will enable Rwanda to continue the process of promoting exploration activities that began in 2017 and help Rwanda obtain information on the distribution of [sufficient] deposits."
It will also be the basis on which the country attracts investors.
The new investment incentives come as Rwanda prepares to host the African Mining Forum, an online continental conference on mining, during which it plans to showcase investment opportunities.
Ahead of the forum, UK-based mining company TechMet said it would deploy an additional $20 million (19.5 billion Rwandese francs) to its Rwanda operations over the next two years, chief Executive Brian Menell said on Tuesday.
Menell, a prominent South African businessman with a reputation in mining, oil and gas, agriculture and banking, made the announcement in an online news conference.
His company owns a local company called Tinco, which operates tin and tungsten concessions in Rutongo and Nyakabingo in Rulindo District.
"We do have a plan, such as TechMet in Rwanda, to invest over $20 million over the next two and a half years to scale up the tin and tungsten mines that we're working with Tinco on," Menell said.
Still, many believe Africa accounts for a small share of global mining investment.
The same is true of trade, intellectual capital and technological development.
"So we will continue to play a catch-up game with the rest of the world," Gatare said.
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