Why Rwanda mining registered record growth despite Covid-19

The development, according to the board, is impressive looking at the challenges the 60,000-member sector faced as the world battled the Covid-19 pandemic throughout 2020. 

The sector is the second-largest export revenue earner in the country, just behind tourism. However, experts believe that the sector needs accelerated production to drive the country’s economic recovery in the medium term. 

Much as Rwanda seeks to become a regional mineral hub for processing and trading, the Covid-19 crisis remains, in many ways, unprecedented. 

While governments work together in search of therapies and vaccines, the ongoing impact on the mining sector remains uncertain. Reports suggest that it will have long-term ramifications, and that the industry must continue to adjust to the evolving reality.

The New Times' Edwin Ashimwe spoke to the RMB Chief Operating Officer, Ivan Twagirashema to get a pulse on how Covid-19 is affecting demand for commodities, supply chains and operating models.

Excerpts:

Would you like to start by giving a brief update of the sector, especially following a major setback in operations due to Covid-19 restrictions?

Mining is a very important sector for a country's economy. It is one of the major export revenue earners. 2020 was very challenging but in the end it turned out better than expected.

Export revenues grew up to seven hundred and thirty-three million dollars ($733M) which is impressive looking at the challenges the mining sector faced.

Production also increased despite mineral price fluctuations at the international market, but in the end, there was a silver lining around Covid-19 particularly in the second half of 2020 when some sections of the international economy resumed operations.

Speaking of the profits recorded, what were the main contributors?

The nature of Rwanda’s mining sector was an advantage because small to medium operations were eager enough to rebound in operations and supply the minerals required to the international market when others were shutting down.

There is no doubt that the mining sector continues to play a significant role in the country’s economic recovery through import of foreign capital (Foreign Direct Investment), royalty tax, export revenue and job creation (currently the mining sector is employing over 60,000 people which is a good number and we are targeting to increase it).

To get productivity to increase, there was a plan to identify new measures that could be put in place to have additional momentum in the sector. What are some of the identified measures?

Some of the reforms put in place include streamlining the nature of licenses and acquisition of licenses.

We created new licenses that did not exist before, particularly those that are focused on processing and value addition but also we delineated exploration and mining licenses, creating small scale licenses, medium scale licenses, and large scale licenses.

Through this, we can differentiate requirements for them so that we can create space for everyone who is keen to invest in the value chain mining sector.

There are also a number of initiatives created especially tax incentives that are associated with input and investment in equipment since we know that to professionalise the mining sector we need to invest in modern mining equipment, new technologies and knowledge.

We introduced reforms geared towards incentivizing companies to go into mineral exploration because we know exploration is considered as a high-risk business and the investor does not make profit during exploration, but the Government has given a 10-year tax carry-forward period for any expenses that are incurred during exploration phase so that they can be recovered when production starts.

Another reform is putting effort in mineral diversification which is why we have been looking for new minerals particularly gold, gemstones, and some new discoveries being made in beryllium, Lithium and associated battery minerals.

Lastly, consolidation of potential but scattered small scale mining licenses into a big bloc for which the government can find capable investors to operate with locals to boost production.

What are some of the lessons learnt from the Covid-19 pandemic?

In general, Covid-19 has left lessons of building local capabilities in different areas and the mining sector is no exception.

Local industrialisation for local supply of mining consumables such mining equipment and explosives is a key resilient strategy to focus.

Strengthening local capacities is another solution in dealing with shortage of foreign investment.

The introduction of new mining technologies and modern machinery where the circumstances do not allow labor intensive was also a lesson learnt.

But even before the pandemic we had already started working on building local capacities.

There are already mining schools both in the University of Rwanda and IPRCs. We are also engaging investors to invest in local production of mining equipment among other solutions. So, it’s just a matter of time.

What would you say is the current state of resumption, in terms of activities in various companies? And how does this reflect the potential in recovery?

Apart from a few sectors that are still in lockdown, mining activities have resumed in different mining areas and resumed to their normality in terms of productions and employment.

This was mainly stimulated by a good trend of mineral prices on the International market.

What do you bank on for the optimism of post Covid recovery?

There is hope because when you look at the international mineral market trend, you can notice a significant increase of 3Ts prices.

3Ts prices have increased to above 30% since January. This is good news for a country like Rwanda that is among top producers of 3Ts.

Rwanda is also investing in value addition which is a good strategy to deal with mineral price fluctuation.