The first-come-first-serve method previously used has opened the sector up to extensive rent-seeking
By ELLENI ARAYA
The Ministry of Mines (MoM) is working on a number of reforms, in order to change the mineral exploration licensing. The licensing for gemstone exploration may also be temporarily suspended.
The reforms, which will award licenses competitively for each concession, will be a deviation from previous times when applicants were treated on a first-come-first-serve basis. The Ministry will also organise a committee comprised of relevant experts to compare the merits of applications before granting a license.
Sisay Ayalew, director of Mining License & Administration directorate at the Ministry announced the impending changes during an annual performance meeting, held at the Ghion Hotel, on August 6 – 7, 2013. These reforms, to come in two or three directives, are designed to be a measure against companies that are either not serious about mining or using their exploration licenses to start production. The Ministry has issued 207 exploration licenses thus far.
Complaints that most companies taking exploration licenses were brokers looking to sell off their concession rights at a higher price, or exploiters, came from regional heads. This was during the discussions chaired by Sinknesh Ejigu, the minister of Mines, and Tolosa Shagi, the state minister.
“Some of the companies just sit at their offices in Addis Abeba and only fly in when informed that we will come in to supervise,” Maereg Haddish, head of the Tigray Mining & Energy Agency, stated during the meeting. “They do not even know the location of the site they were given license to explore, but rather take advantage of duty-free privileges.”
Unable to properly weed out such companies due to a scarcity of experts, the MoM suspended giving out exploration licenses in November 2011, stating that it will first focus on supervising those already licensed.
The ban was only lifted in March of this year, albeit leaving regional bureau heads questioning whether the capacity constraints had been adequately addressed.
It was in answer to these concerns that Ministry officials discussed the impending reforms.
Previously, the Ministry adhered to a lax first-come-first-serve policy, citing the need to attract investors to the nascent industry. This will soon change, however.
“We will review all the applications submitted on a monthly basis and only give licenses to the one with the most plausible business plan to make it more competitive,” announced Sisay during the meeting. “Even if there is only a single applicant, he must first pass the minimum requirements, in order to get the license.”
Officials at the Ministry declined to disclose what the minimum requirements would be before the directive is issued in the next few weeks.
“It will suffice to say that the requirements will put into consideration the financial and technical capacity of the company. This will include whether it has the appropriate equipment for the specific mineral it intends to explore,” Tolosa, told Fortune.
The reforms, however, fall short of banning brokers, as was the wish of many regional bureau heads.
Maereg from Tigray, citing a company that used its exploration license to import and resell 90 laptops duty-free, called for a ban on brokers with no serious intent of exploration. Such companies are simply rent-seeking.
Related story: http://addisfortune.net/articles/artisan-miner-amendment-reduces-license-period-to-two-years/
“There are around five really big mining companies in the world. They usually come to invest only after making sure that the laws of the country are stable and after assessing whether or not the companies already in the country have had any results,” Tolosa told those attending the meeting.
He said that the Ministry would continue supervising those companies now showing an interest, until it could prove itself for those companies.
The meeting also discussed problems related to gemstone explorations.
Many regional bureau heads had complained that companies taking exploration license sometimes covertly enter production and sell minerals through contraband means. This is particularly complex to detect with gemstone production, since simple tools can be used to mine large amounts, unlike gold which requires heavy equipment.
Stating that the Ministry and regions must not license what they cannot supervise, Sinkenesh called on all officials and regional bureau heads attending the meeting to no longer give exploration licenses to companies.
Currently there are two companies – Orbis International and Mineral Development Share Company – whose licenses are pending. Etenesh Mining has been given a mining license for three areas of the Amhara region, where it is currently producing opals.
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