Ethiopia has an abundance of natural resources, including gold, potash, gemstones and tantalum. Land and natural resources are owned by the people and state of Ethiopia:1 according to Article 89(5) of the Constitution of the Federal Democratic Republic of Ethiopia, the government is the custodian of natural resources and has the responsibility of ensuring that they are used for the benefit of the people. For this reason, development and extraction of natural resources is only possible with the approval and concession of the federal or regional government of Ethiopia, depending on the type of natural resource and scale of the mining activity.2 The major laws of the mining sector in Ethiopia are the Mining Operations Proclamation No.678/2010, the Mining Operation (amendment) Proclamation No. 816/2013 and Mining Operation Council of Ministers Regulation No.423/2018.
The mining sector is an area where the government intends to attract more foreign direct investment. In order to attract investors to large-scale mining, the government is considering ways of improving the regulatory framework in the sector, including simplifying the process for applying for and obtaining exploration and exploitation licenses. To this end, the Ministry of Mines and Petroleum (MoMP) has recently introduced a mining cadaster portal.
The previous application process
This article compares the application process with the MoMP before and after the introduction of the mining cadaster portal. Before going into more detail on the recently introduced portal, it is important to explain the general requirements for the application of an exploration license, which must be obtained before acquiring a mining license. An applicant for an exploration license is required to complete a hard-copy application form prepared and provided by the MoMP. In addition to completing the form, the applicant is also required to submit documents relevant for the evaluation of the application provided under the law.
The MoMP requires all necessary documents to be submitted in hard copy. Once the application has been reviewed, the MoMP may provide comments on the proposed work program or geographic coordinates or on any of the submitted documents, if it has any. Acquiring information on mapping requires that applicants visit the Geological Survey of Ethiopia before determining the coordinates of the potential application. The whole process was complicated and time consuming.
In addition to this, it was mandatory to incorporate an entity (in the form of a branch or a subsidiary) in Ethiopia to submit an application. The problem with this requirement was that other ministries or government agencies which are directly or indirectly responsible for the registration of mining companies failed to properly understand the difference between requirements for other investment sectors and laws specifically applicable to the mining sector. For instance, there is a minimum capital requirement provided in the investment law for areas of investments other than mining and petroleum. Foreign investors intending to invest in the mining sector were wrongly required to comply with the minimum capital requirement.
Introduction of the mining cadaster portal
With the introduction of the mining cadaster portal, all communication with the MoMP is online (instead of written communication as was the norm before), and this – to an extent – has simplified the application process as the applicant is required to upload documents onto the portal. Applicants are no longer required to visit the Geological Survey of Ethiopia to acquire mapping information and identify coordinates open for application as the information is available on the cadaster portal. Under the new system, once an online application is submitted, the MoMP will examine the application and provide their comments online to the applicant’s account.
With the introduction of this system, applicants can now create an account from anywhere in the world and process an application provided they have all the necessary documents. Although it will not completely waive the requirement for having an entity at an early stage of the application (i.e. before acquiring an exploration license), investors will not be required to set up a company from the outset. The requirement to have a presence will come into effect at the final stage of the license application process (once an application for an exploration license is approved by the MoMP). Accordingly, foreign companies can use their offshore corporate documents to submit an application without necessarily establishing an entity in Ethiopia. Once the application is reviewed and approved by the relevant department within the MoMP, the applicant will be required to incorporate a company (preferably a branch) in Ethiopia to which the license can be issued.
The cadaster portal is a recent development and the MoMP is still improving the system, but once it begins to function smoothly, it should greatly reduce the amount of time spent on processing mining applications and accurately issue licenses on a first come, first served basis. It will also create room for coordinated management of the mining sector between regional states and the federal government.
1 Article 40(3) of the FDRE Constitution
2 Article 52 of proclamation 678/2010 renumbered as Article 54 by the Amendment Proclamation no.816/2013.
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