Mbalam iron project revenue outlook, not optimal-Study

A study by the Columbia Center on Sustainable Investment (Columbia Centre for sustainable development), has highlighted that MSUR, the base of the mining convention signed between Cameroon and Camiron which is a subsidiary of the Australian mining Junior Sundance Resources, the prospects of income for the country are not optimal due to the different models adopted.

The independent expert of the CCSI Nicolas Meanling, who worked on this report at the request of the Cameroonian Coalition, published several points of this convention in relation to tax revenues which deserved improvements that would allow the Government of Cameroon to reap more revenue again an unacceptable condition for the project.

"The model suggests a high rate of return for the internal project and public revenues within the range of the world average.

It could however be argued that the project should benefit from being the first large-scale mining investment in the country, with the ability to unlock other mining projects in the region through strong provisions relating to the sharing of infrastructures in the convention", explained Mr Meanling.

He noted, however, three points deserving special consideration. First, the study noted that Cameroon had a regressive tax regime where public revenue drop and project incomes rise.

Then, the analysis considered that the decision to exempt the project from tax for five years and the allocation of the royalties to the value of mine output will result in significant losses in terms of revenue.

Taking into account the rate of internal return which, according to the estimate, are high (26%), these incentives have only a minor impact on the quality of the investment.

Finally, the study suggested that the allocation of the royalties to the value of the mine output and the possibility to postpone losses is favorable to potential miscalculations.

The Government of Cameroon must ensure that the tax authorities have the appropriate administrative capacity to oversee these operations. The Government could increase its revenue without pushing the future potential investors in the mining sector by introducing a tax on the pension of resources.

The question aroused strong reaction from Cameroonian parliamentarians during the return of the study. Some of them were confused, at a time where Cameroon has recently adopted a law of incentive to investment, which precisely gives tax benefits. In their eyes, it is hard to waive this statutory provision, which was in the context with specific mining conventions.

Total tax revenues, not updated for Cameroon, expected to reach 4.97 billion $ of which 67% generated from the levying of the tax on the companies and 20% by royalties.

A risky situation with regards to current developments in several African countries. In Zambia, for example, the Government plans to reduce taxes on corporations, and to increase the rate of royalties (royalty production) more controllable according to its officials.

Other countries such as South Africa have preferred to strengthen the Government's involvement in mining projects to benefit from a maximum return on investment