PRIVATE SECTOR FEDERATION

IVUGURU RWA RY’AMATEGEKO HAGAMIJWE GUTEZA IMBERE ISHORAMARI MUNGANDA PRIVATE SECTOR FEDERATION CHAMBER OF INDUSTRY Private Sector Federation

The Rwanda Mining Association

•  Privatization was carried out and enabled acquisition of mining concessions by private companies; Modern mining law in place • various ministerial orders (on-going) • mining policy (2010) Ministerial Regulations No. 001/MINICOM/2011 of 10 March 2011 fighting smuggling in Mineral trading (to implement traceability);  Ministerial Regulations No.002//2012/MINIRENA of 28/03/2012 on the Regional Certification Mechanism for Minerals.

 Law on taxing minerals (Royalty Tax Law)  New Mining Law (Draft form) provides longer period for Contracts  Law Nº 24/2010 of 28/05/2010 modifying and complementing Law n° 16/2005 of 18/08/2005 on direct taxes on income

Private Sector Federation

Economic Impact of the Sector

• Mining sector is the 2 nd export earner of foreign currency; • In 2011 & 2012, it generated USD $162 million (from 9,697 tones of exported minerals) and USD $136.3 million (7,609 tones) respectively; • Around 120,000 people make a living by the sector; • GoR Targets of the mining sector: The sector to be generating USD $400 million by 2017 ; • The GoR is investing heavily in exploration researches.

Private Sector Federation

MINERAL TRANSPARENCY INITIATIVES IN RWANDA

• The mineral tagging system in Rwanda: This is being jointly implemented by RNRA/GMD with ITRI (International Tin Research Institute) Tin Supply Chain Initiative (iTSCi/ITRI): since September 2010; • Full compliance: With standards/regulations of Rwandan mineral supply chain, OECD & CFS requirements, Dodd-Frank Act with associated SEC rules and UN Security Council Recommendations; • ICGLR Certification Mechanism for Minerals in Rwanda: for compliance with regional requirements of mineral supply chain.

Rwanda is the first country in the region to issue this certificate.

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CHALLENGES

 The current initiatives (iTSCi/ITRI & ICGLR/RCM) are being implemented on the same mining operators, sometimes this is seen as a duplication of initiatives; e.g. mine site, inspection/baseline studies & audit of mineral traders, etc;  They all have expensive implementation costs: ton; costs: 500 + 200 USD per  There is a need for harmonization of audit standards and other technical operations of iTSCi and ICGLR/RCM to reduce the costs and avoid audit fatigue that mining operators in Rwanda can be subject to in near future;  Royalty Fees of 4% are high in addition to other costs;  Withholding Tax of 15% on informal suppliers (even arrears).

Private Sector Federation

Construction Association

• Withholding tax of 15% on materials bought from traders with TIN number in RRA; • There many suppliers and cooperatives without TIN number; • This is a challenges to construction companies and others because about 40% of materials are supplied such cirmstances, e.g, bricks, sand, gravel, stone, timber, etc,… and yet suppliers pay taxes in their respective districts; and • So, Construction companies end up paying taxes that shouldn’t be attributed to them without a mechanicm to retrieve it.

Recommendation

• Regulations should be used to have all suppliers to have TIN numbers; and • If the 15% WHT is to be paid the the district related taxes should be deducted.

Private Sector Federation

Penalties on Tax Declaration

Penalties on delayes Tax Declaration

• Law N° 01/2012 of 03/02/2012 published in the Official Gazzette n°13 of 26/03/2012 in its article n°12 provides that anyone who delays to make Tax Declaration, must pay a penalty of 60% of the due taxes; • Recommendation: These penalties are heavy. It should be as it used to be before when the penalty was at 10% pursuant to article 61 of Law N°25/2005 of 04/012/2005 on taxes, simply because the business person may also encounter a challenge of delayed payments.

Private Sector Federation

Penalties on Delays

Penalties on uncompleted works

• Law modifying the law n°12/2007 on public tenders [ublished in the Official Gazzette n°16 of 22/04/2013 in its article 51 provides that anyone who wins and executes a tender is deducted 1 out of 1,000 (1°/000) per day of delay of the total value of that tender (the previous law stated that the value would be based on the remaining work – which was fair).

• * CONTRACT MANAGEMENT ISSUES: BERNADETTE TO EXPLAIN • Recommendation: Back to the previous Law in its article 109 of law n°12/2007 based on the remaining work delays can be as a result of a simple genuine issue.

Example:

• A Company that completes constructing a road a small portion remains – the penalty shouldn’t be based on even the completed portion.

• A building may be completed and only a minor installation is remaining (that requires imported equipment).

• The government should not rush into nullifying related contracts because it also faces losses.

Private Sector Federation

Manufacturing Association

Positives

• The Parliament has a good track record in bringing out laws which provide an enabling business environment.

• Law no. 38/2012 of 20/12/2012 modifying and complementing Law no.25/2005 of 4/12/2005 on Tax procedures is a good law. Article 10 of this Law fixes the onus of VAT payment on Public tenders on the Public Institutions rather than the Selling Company. This has made a major positive impact on the fund flow of the Selling Companies. Before, the Selling Companies had to pay VAT on Public Tenders even though the payment has not been received from the Public Institution.

• Law no.37/2012 of 9/11/2012 Establishing Value Added Tax: Simplification of the VAT Law in general and use of electronic billing machines as per Article 24 of the Law are steps taken in right direction.

Private Sector Federation

Positive Elements

 A law will serve its purpose, only if it is implemented in its true letter and spirit. In the implementation front several institutions of the Executive branch has been exemplary; like the Immigration Department, Customs Wing of RRA etc. The simplification of visa regime and customs clearance revolutionary.

procedures have been

Private Sector Federation

Negatives Elements

• Lack of proper consultations: Many a times laws are introduced without prior consultations with relevant stake holders, which leads to avoidable revisions and amendments to correct the previous versions. In the interim, business is subjected to losses. The subject committees of the Parliament can take the lead in the consultation process.

• Interpretation issues: There are several cases where the interpretations differ while considering the same law in different languages.

• Monitoring the intended effects: While the lawmakers do their part, the implementation of the laws is not done in the true spirit of the law in certain cases. A classic example is the Law on ban of Plastics. Though strictly implemented for local manufacturing industries, could not be implemented on the same level on imported products, thus creating an unfair competition. Parliament can think of evolving a monitoring mechanism in the implementation of the laws enacted.

Private Sector Federation

MURAKOZE!

THANK YOU!

Private Sector Federation