DRC - The new Mining Code and the law on subcontracting

In 2018, the DRC enacted a law revising the 2002 Mining Code to encourage the local processing of minerals. To further strengthen local processing, the authorities also adopted a law on subcontracting in 2017.

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The new Mining Code of 2018 is a clear effort by the Congolese government to boost the local economy by introducing new requirements aligned with the country's development objectives. The aim of the revised Code and Decree is to rebalance mining revenues in favor of the State, as the 2002 Mining Code and the 2003 Mining Decree were deemed insufficient to generate substantial revenue for national development. The new Congolese Mining Code reduces the duration of mining permits from 30 to 25 years and allows for renewal only once. The State's non-dilutive shareholding is increased from 5 to 101 TP3T and by an additional 51 TP3T with each renewal. Approximately 101 TP3T of mining company capital must be held by public administrations on behalf of citizens through a sovereign wealth fund.

The 2018 Code also provides for:
– An increase in royalties for iron and ferrous metals from 0.5 to 1%; ;
– An increase in royalties for non-ferrous metals and base metals from 2 to 3.5%; ;
– An increase in royalties for precious metals from 2.5 to 3.5%; ;
– The introduction of a royalty of 10% for strategic minerals (copper and cobalt).

Finally, the new Code introduced a tax of 50% on exceptional profits, that is, profits made when the price of a commodity is 25% higher than the price used in the feasibility study acceptable to the banks.

Law No. 17/001 of February 8, 2017, establishing the rules applicable to subcontracting in the private sector, makes subcontracting of ancillary and related activities of mining mandatory and reserves it, whatever its nature, to companies with majority Congolese capital in order to promote it and thus encourage the emergence of a middle class.

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Exceptions are provided for and may justify the use of a subcontractor that does not meet these criteria, for example, in the event of a lack of expertise within the Congolese territory. However, the law and its implementing decrees strictly regulate these exceptions.

The law subjects the awarding of subcontracts to a specific legal framework and provides numerous specific provisions for subcontractors, particularly regarding payment arrangements. Implementing decrees have supplemented the legal framework, sometimes exceeding its provisions, and have established a Regulatory Authority to which private sector subcontractors must pay fees based on the amounts invoiced to the main contractors.

The mining sector is capable of contributing to the realization of the government's vision of making the DRC an emerging country in socio-economic terms.

The adoption in 2018 of the revised mining code imposed new rules that emphasize transparency and good governance in the sector, as well as the consideration of "local content" and corporate social and environmental responsibility (CSR). Mines must contribute to the country's development and benefit the Congolese people.

In the cobalt sector, one of the applications of this code has focused on the artisanal sector which accounts for approximately 201,300 TEUs of cobalt production and includes some 200,000 artisanal miners.

By combining governance and CSR requirements, measures in favor of ethical cobalt have been taken, including the establishment of the Regulatory and Control Authority for Strategic Mineral Substances Markets (Arecoms), as well as the granting of the monopoly on the purchase of artisanal cobalt to the General Cobalt Company (EGC), a 100% subsidiary of Gécamines, launched at the end of March 2021. They aim to combat child labor, clean up the artisanal cobalt production and supply chain, structure the sector, and ensure good working conditions and remuneration for artisans.