COUNTRY IN FOCUS •
Legislative framework The legislative framework for the mineral sector in Eritrea has been developed with the aim of attracting investment and recognises the risk associated with mining investments . These legislative changes include the ability of operators to develop any commercial discoveries within their exploration licence areas . Further , it provides the right to sell the product locally or export it , free of all duties and taxes , without requiring authorisation or involvement from other government agencies .
The application process is branded as being a simple “ one-stop ” licensing system enabling all the formalities for all types of licences for mining operations to be completed by a single government agency – the Ministry of Energy and Mines . The mining and taxation laws make provision for accelerated depreciation ( straight line method over 4 years ) of all capital and preproduction costs . It also allows for write-offs of exploration expenditure incurred anywhere in the country and carrying forward losses .
The tax system makes provision for no dividend tax and income tax from mining operations is at 38 % with a nominal rate of import duty ( 0.5 %) on all inputs necessary for mining operations . The normal royalty rates apply with an option for reduction , suspension or waiver of the royalty in appropriate circumstances . Royalty rates of 3.5 % for base metals and 5 % for precious metals along with free and unrestricted repatriation of earnings abroad in external accounts .
Infrastructure developments The government and foreign investors have embarked on a process of rehabilitating the infrastructure of the country . While conflict damaged roads are still in the process of being repaired or upgraded , the construction of new highways to connect major cities along the Red Sea coast have also made significant strides . The railway system is more than a century old and was extensively damaged and closed until recently . Portions of the railway infrastructure have been repaired , but service remains irregular . There is a steam train that runs outside Asmara , which is enjoyed by enthusiasts . The Eritrean airline is however still restricted from providing international routes .
The supply of power , water and telecommunications remains a challenge with a large degree of self-sufficiency required . Mining and agriculture are large contributors to the economy of Eritrea , with shipping also adding a growing portion . The expatriate community is responsible for a significant portion of the economy of Eritrea , with remittances being channelled back to families in the country , but at the same time illustrates the loss of talent from Eritrea .
It would be interesting to observe the development of the Eritrean mining sector and if the country is able to capitalise on the mining boom in the Middle East and North Africa , which is being driven by the opening of the Kingdom of Saudi Arabia and Egypt to foreign mining companies . •
Dr Nicolaas C Steenkamp is an independent consultant , specialising in geological , geotechnical and geometallurgical projects and mining project management . He has over two decades of industry experience with global exposure . ( ncs . contract @ gmail . com )
Dr Nicolaas C Steenkamp www . africanmining . co . za African Mining Publication African Mining African Mining • March 2024 • 13