Set at 10%, the mining royalty rate in force in the DRC remains the highest
The mining governance of the Democratic Republic of Congo DRC is strongly challenged by several international organizations working in this sector.
According to the March 2022 report published by the Extractive Industries Transparency Initiative
(EITI), setting the mining royalty rate at 10%, the Democratic Republic of Congo has the highest rate in the world.
The rise and fall of cobalt prices may have challenged some governments and companies.
After the price hike between 2016 and 2017, the DRC government increased the royalty rate from 2% to 3.5% and then to 10%, as part of a major revision of the country’s mining code.
Some other governments also increased royalties on cobalt, but shortly thereafter the price of cobalt fell again. None of these governments then reduced the rates to take account of the lower price.
Mining operators in the DRC then faced the highest cobalt royalty rate in the world and, according to a 2018 analysis comparing the DRC to six other major mining countries, the country proposes a tax rate highest average workforce overall.
However, the actual taxes paid by businesses may have been much lower due to various tax planning measures employed by businesses.
Because royalties are such a large part of the DRC’s overall mining tax regime, the latter is highly regressive: the tax burden as a share of corporate profits rises when the price falls.
Under these conditions, experts in this sector are examining whether high royalty rates make sense and whether another type of royalty, a variable royalty, can be effective.
