Congolese Plans to Tax Miners in Francs to Cut Dollar Use

Democratic Republic of Congo Prime Minister Matata Ponyo said his government plans to tax mining companies in local currency in an attempt to “drastically reduce” dollarization in the economy within three years.

The DRC franc has been stable for four years and “we don’t have any justification for people to pay taxes in U.S. dollars,” Ponyo said in an interview on Oct. 11 in Washington, speaking through an interpreter. “We are in the process to de-dollarize our economy and bring people to use the local currency more and more.”

Hyper-inflation in the 1990s, when consumer prices rose almost 10,000 percent, prompted the government to collect taxes in dollars. The DRC franc has been little changed against the dollar this year and Ponyo said the government is targeting “exceptional” inflation of less than 1 percent. The economy is more than 50 percent dollarized, the prime minister said.

The economy may expand about 8 percent this year and more in 2014, led by the mining industry, Ponyo said. The government is also seeking to increase investments in agriculture and is working with experts from Harvard University to set up “agro-industry centers,” he said.

New Mining

Congo’s government is seeking to increase revenue from the recent expansion of its mining industry. Mining and oil account for 32 percent of the country’s economic output, according to the central bank. The government plans to raise its free stake in new mining projects to 15 percent from 5 percent, Chantal Bashizi, the vice president of the commission revising the mining code, said Oct. 10.

The IMF lowered Congo’s economic growth projections this year to 6.2 percent from 8.1 percent. The economy may grow 10.5 percent next year and 10.3 percent in 2015, according to IMF estimates compiled by Bloomberg.

The Washington-based lender canceled a $532 million loan to Congo late last year after the African country failed to publish sufficient detail about a 2011 asset sale by state-owned copper miner Gecamines to a company associated with Israeli billionaire Dan Gertler.

Gecamines is currently in talks with Gertler’s Fleurette Group about selling its 20 percent stake in Kamoto Copper Co., which is controlled by Glencore Xtstrata Plc and may become Congo’s biggest copper producer next year.

Full Transparency

“The will of President Kabila is that we should have full transparency in the mining sector, in the hydrocarbon sector and in the forestry sector,’ the prime minister said, referring to Congolese President Joseph Kabila. ‘‘There is a decree that I have signed that clearly states that there is no sale in the mining sector that can be undertaken without abiding by’’ regulatory rules, he said.

Transparency International ranked the country the 168th most corrupt nation in the world out of 183 countries surveyed in its 2011 annual report.

Ponyo, an economist who was Congo’s finance minister before becoming premier in 2012, said the government has tried its best ‘‘to resolve the issue for which the program was interrupted.’’ The government aims ‘‘to restart with the International Monetary Fund,’’ he said.

The government will wait for the outcome of a national dialogue that may lead to a cabinet reshuffle before deciding whether to submit a request for an IMF program, Ponyo said, declining to speculate whether he would remain prime minister. ‘‘This is a delicate question that is for the head of state’’ to answer, he said.

To contact the reporter on this story: Alaa Shahine in Washington at asalha@bloomberg.net

To contact the editors responsible for this story: Andrew J. Barden at barden@bloomberg.net; Nasreen Seria at nseria@bloomberg.net

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