Contributed By Houda & Partners
Senegal’s subsoil contains a wide variety of mineral resources: iron, gold, copper, lithium, chromium, alumina phosphates, ceramic and industrial clays (attapulgite), limestone, ornamental stones (marble, granite, etc), heavy minerals (ilmenite, zircon, rutile), extra-siliceous sands (glass-making sand), manganese, diatomaceous earth, sand and rock salt, etc.
Senegal boasts significant mining potential, but only phosphates and their derivatives (acids and fertilisers), construction materials (stone bricks, cement, clay, aggregates, gypsum, sand and gravel) have so far dominated the sector.
Gold is also attracting interest from foreign companies.
The legal system is based on civil law.
The main national sources of mining legislation are the following:
The main international and regional sources are the following:
The mineral substances contained in the soil and subsoil of the territory, its territorial waters and its continental shelf, are the property of the State. However, the holders of mining titles acquire ownership of the mineral substances they extract.
The State of Senegal, through the Ministry of Mines and Geology, grants all the mining titles and regulates the mining sector. At the exploitation phase, the State of Senegal is granted 10% free of shares interest in the share capital of the exploitation company throughout the life of the mine. Generally, the State also chooses two members of the board of directors of the exploitation company. The State, in addition to its free-of-charge participation, may negotiate for itself or the national private sector for an additional stake of up to 25% in the share capital of the exploitation company.
Article 25-1 of the Constitution provides that “Natural resources belong to the people. They are used to improve their living conditions. The exploitation and management of natural resources must be transparent and in a way that generates economic growth, promotes the well-being of the general population and is environmentally sustainable. The exploitation and management of natural resources must be transparent and generate economic growth, promote the well-being of the general population and be ecologically sustainable. The State and local authorities have an obligation to ensure the preservation of land resources”.
Mineral rights derive from the Mining Code and are prospecting, exploration and exploitation.
The granting of a mineral right generally precedes the signing of a mining convention between the holder of the mining title and the State of Senegal.
Only the exploitation permit confers a real property right distinct from the ownership of the land, registered as such and liable to mortgage.
The granting authority is national. More precisely, the Minister of Mines and Geology, through a ministerial order, grants exploration title. Exploitation titles are granted by Presidential decrees. Prospecting authorisations are delivered by the competent mining administration.
Mineral rights are granted by an Act (Ministerial order or Presidential decree).
Term Lengths and Renewals
Rights to Progress from Exploration to Exploitation
The exploration permit confers on its holder the right to an exploitation permit subject to compliance with the legislative and regulatory provisions in force, and if it has provided proof during the period of validity of the exploration permit of the existence of an economically exploitable deposit within the area requested.
The holder of the exploration permit may at any time request the transition to exploitation in the event of the discovery of one or more economically exploitable deposits under the conditions set out in the Mining Code. The holder must have fulfilled all of its work and expenditure obligations under its exploration licence.
Any discovery of an economically exploitable deposit by the holder of a mining exploration permit gives an exclusive right, in the event of an application for exploitation before the expiry of the permit, to the granting of a mining exploitation permit covering the perimeter of the said discovery.
The mining permit may be withdrawn by the competent authority after a three-month formal notice from the permit holder has remained unsuccessful under the conditions and in the cases provided for by the applicable regulations and the permit.
The exploration permit and the exploitation permit can be transferred subject to the prior authorisation of the Ministry of Mines. The exploration permit cannot be transferred in its first period of validity (before the first renewal).
The following are also subject to prior authorisation by the Minister of Mines:
Environmental provisions in the mining sector are framed at the national level by Law 15-1-2001 on the Environmental Code and Decree No 2001-282 of 12 April 2001 on the application of the Environmental Code, as well as Law No 2016-32 of 8 November 2016 on the Mining Code and its implementing decree – Decree No 2017-459 of 20 March 2017.
Environmental impact study
Any applicant for an exploration permit, mining permit, authorisation to open and operate a quarry or authorisation to operate a small mine must, prior to the start of its activities, carry out, at its own expense, an environmental impact assessment and the implementation of the environmental management plan, in accordance with the Environmental Code and the related decrees and orders.
Article R9 of the implementing decree specifies that “Any first-class facility which, because of its size, the nature of its activities or its impact on the natural environment, is likely to harm the environment, must be the subject of a prior impact study to assess the direct or indirect impact of the said facility on the ecological balance of the site environment.
The preliminary impact study shall be prepared and submitted by the applicant. It shall be at the applicant’s expense and shall be carried out by a research firm approved by the Minister of the Environment.
The environmental impact study leading to a certificate of authorisation called an environmental certificate of conformity is mainly regulated by the 2001 Environmental Code in Articles L48 to L53 as well as the implementing Decree in Articles R38 to R43.
More specifically, Article L49 of the Code states that the impact study is part of an existing authorisation, approval or concession procedure; the main actors involved in the environmental impact study procedure are the developer and the competent authorities.
The impact study is prepared by the developer and submitted to the Ministry of the Environment, which issues a certificate of authorisation after receiving technical advice from the Directorate of the Environment and Classified Establishments.
The implementing decree gives more precision on the timeline because it adds in its Article R38 that “The impact studies governed by this decree are carried out prior to any administrative authorisation required for the realisation of the envisaged activity”.
The other texts and laws applicable to the environmental impact study are:
The search for, exploitation, processing, packaging, transport and marketing of ores and radioactive substances are subject to special agreements with the State, in accordance with a model agreement established by regulation and specifying, in particular, the radiation protection and radioactive waste management measures applicable to these activities, as well as the safety measures concerning the use, transfer and marketing of radioactive substances, in accordance with the legislative and regulatory texts and the State’s international commitments in this area.
Research and/or exploitation activities of radioactive ores and substances are authorised subject to the licensee obtaining a favourable opinion from the Senegalese Authority for Radiation Protection and Nuclear Safety (ARSN) concerning the related environmental monitoring and radiological protection plans and programmes.
The activities of research and/or exploitation of ores and radioactive substances are authorised subject to the licensee obtaining the permit receiving a favourable opinion from the ARSN on the related environmental monitoring and radiological protection plans and programmes.
Any holder of a mining title is required to rehabilitate the sites covered by its mining title and any holder of an exploration permit, an authorisation to open and operate a permanent quarry, an authorisation to operate a small mine, a mining permit and a production-sharing contract is required to open and fund a trust account with a specialised public institution designated by the State. Notwithstanding the obligations arising above, any holder of an exploration permit, a permanent quarry opening and operation permit, a small mine operation permit, a mining permit and a production sharing contract is required to open and fund a trust account with a specialised public institution designated by the State.
This account is intended for the constitution of a fund to cover the costs of implementing the environmental management plan. The modalities for the operation and funding of this fund are set by decree.
Mining titles issued in classified forest areas pursuant to the Forestry Code must comply with the provisions of the Forestry Code.
Protection zones may be established by order of the Minister in charge of mines, within which prospecting, research and mining of mineral substances is prohibited. These zones are intended to ensure the protection of buildings, roads, engineering structures and remains uncovered during work and wherever they are necessary in the general interest.
The Mining Code provides that the authorisation to open and operate a public or private quarry is issued by the mining administration after consultation with the competent administrative authorities and the local communities concerned. The environmental impact study includes a “public inquiry” section.
More generally, the local authorities and communities are consulted. Pursuant to the provisions of Article 101 of the Mining Code, any holder of a mining title is required, both inside and outside the perimeter that has been allocated to him, to compensate the State or any other person for damage and harm resulting from mining operations and caused by himself or by companies working on his behalf.
Compensation for material and certain damage caused to the owners or occupants of land subject to an occupation permit issued under the provisions of this Decree is determined:
If, for any reason, an agreement has not been reached within six months of the date of entry into force of the decree or order authorising the occupation of the land between the holder of the mining title and the holders of land rights or the commune or communes concerned, the beneficiary of the occupation authorisation is authorised by the Minister in charge of Mines to occupy the land in question in return for the deposit in the coffers of a public accountant of a provisional indemnity, the amount of which is determined by the aforementioned commission and fixed by the Minister in charge of Mines until an agreement can be obtained or the competent court has rendered its decision.
The sums deposited in excess of the indemnity granted shall be returned to the beneficiary of the occupation permit.
Pursuant to the provisions of Article 91 of the Mining Code, any occupation of land may, if necessary, be declared to be in the public interest under the same conditions and according to the same rules as for expropriation in the public interest.
The granting of a mining permit is equivalent to a declaration of public utility for the occupation of the land necessary for the execution of the work and activities involved in the operation.
In this case, the permit holder is obliged to relocate the expropriated populations under the same conditions.
It is mandatory to obtain the certificate of authorisation following the environmental impact assessment before starting the exploration or mining phase.
To the authors’ knowledge, there are no specially protected communities in Senegal.
Holders of mining titles, production sharing contracts or service contracts participate on the basis of annual financial commitments in a local development support fund intended to contribute to the economic and social development of local communities located in the areas where mining companies operate.
The actions to be carried out must be defined in a local development plan consistent with any existing national local development plan and in consultation with the populations and the administrative and local authorities. This local development plan must integrate women’s empowerment projects.
For holders of mining titles, production sharing contracts or service contracts in the exploitation phase, the annual amount of these financial commitments is 0.5% of the annual turnover before tax.
For holders of mining titles, production sharing contracts or service contracts in the research and development phase, the annual amount of these financial commitments is negotiated and specified in the agreements and protocols.
The methods of supplying and using the fund’s resources are specified in the agreements and protocols concluded between the State and the holders of mining titles.
Mining title holders must contribute, on the basis of a memorandum of understanding concluded with the Minister in charge of Mines, to institutional support for the ongoing training of personnel, and for the promotion and development of the mining sector in Senegal.
Health and Safety
Any legal entity carrying out prospecting, research or exploitation of mineral substances under the provisions of the Code is required to carry out such work in accordance with the legislation on health and work, so as to guarantee the safety of persons and property.
The health and safety rules applicable to prospecting, exploration, research and exploitation work, in particular in quarries, plants and laboratories, as well as the safety rules relating to transport, storage and use of explosives and dangerous products are set by decree.
Any accident occurring during a mining operation as well as any identified danger must be immediately brought to the attention of the Minister in charge of mines and the competent administrative authority, the regional labour and social security inspector and the public prosecutor. Any holder of a mining title shall comply with the preventive measures decreed by the competent administration in matters of public safety, health and safety of workers, preservation of its deposits, of underground water, of buildings and public roads.
The holders of mining titles and their subcontractors are required to:
Decrees may determine, according to economic, demographic and social needs, the possibilities of hiring mining title holders and their subcontractors.
They may, with a view to the full employment of the national workforce, prohibit or limit the hiring of foreign workers for certain professions or certain levels of professional qualification.
All mining title holders are required to comply with the principles and requirements of the Extractive Industries Transparency Initiative (EITI), including:
The mining administration collects, preserves and disseminates documentation on the soil and subsoil of the national territory.
Duly mandated sworn agents of the mining administration have free access to all prospecting, research or exploitation work carried out under the provisions of the Code, in order to control the conditions relating to safety, hygiene and the technical conditions for carrying out mining operations.
The holders of mining titles are obliged to provide these agents with every facility enabling them to access the work, information, data and documents on the state of the exploitation or research work.
As part of the mining administration’s control of mining operations, it is empowered to have the accounts, facilities, infrastructure, systems and processes of any mining titleholder audited, including by an independent firm. Such audits must be conducted in accordance with internationally accepted standards and procedures and must not interfere with the proper conduct of mining operations.
Many companies in the mining sector have begun to rehabilitate mining and exploration sites, in particular. They have also set up CSR departments. More and more companies are beginning to obtain environmental certifications from certified recognised organisations.
In addition, many villages have been relocated to a new commune and these relocations have gone well.
The government of Senegal is developing a transparency framework. A project of the Climate Action Transparency Initiative (l’Initiative pour la Transparence de l’Action Climatique – ICAT) has led to the proposal of a national Measurement, Reporting and Verification (MRV) system and the preparation of a roadmap for its implementation.
To the authors’ knowledge, there is no specific legislation on global warming yet. The Mining Code provides, for the moment, only the environmental provisions mentioned above.
To the authors’ knowledge, there is no specific legislation on sustainable development initiatives yet. The Mining Code provides, for the moment, only the environmental provisions mentioned above.
To the authors’ knowledge, there are no governmental or legislative initiatives related to the increasing demand for so-called energy- transition minerals in Senegal.
General Information on the Tax System
Mining companies are taxpayers like other companies resident in Senegal. As such, they are subject to the General Tax Code and to all taxes, duties and fees provided for by that Code unless exempted by their mining agreement signed with the State of Senegal or other texts. However, the latest Mining Code adopted with Law No 2016-32 of 8 November 2016, and the mining agreements signed between each mining company and the State, have provided for other taxes and duties specific to the sector, as well as an arsenal of tax and customs advantages depending on whether the mining company is in the exploration or exploitation phase. With the new reform of 2016, the tax benefits are provided for in the mining conventions and the general tax code.
In the exploration phase the new mining conventions generally provide for an exemption from VAT, local economic contribution, property tax on built and unbuilt property and tax on debt income. The general tax code provides for an exemption from the flat-rate contribution payable by the employer and the flat-rate minimum tax on companies. During the investment phase, most of these exemptions are renewed, sometimes with a time limit. A system of exemption from non-community customs duties and taxes is also provided for, as well as a system of temporary admission for materials and equipment useful for exploration.
During the exploitation phase, the advantages granted are reduced. Thus, the title holder is exempt, for a period of three years from the issuance of the mining title, from the property tax on built-up property excluding residential buildings and unbuilt buildings, from the flat-rate contribution payable by the employer as well as from the local economic contribution from the date of the first notified production. These companies can also benefit from the tax credit for investment allowing them to deduct 40% of the amount of their investment with a ceiling of 50%.
Payment of Duties and Royalties by the Mining Company
Mining companies are required to pay fixed entry fees upon the granting, extension or renewal of a mining title, in addition to the royalties payable annually or quarterly during the course of operations. The amount of the fixed entry fee varies according to the type of title held by the company. Its amount varies between XOF50,000 and XOF10 million.
The Mining Code provides for two types of royalties: an annual surface royalty and a mining royalty. The first depends on the area occupied and the nature of the mining title and is paid upon issuance and each renewal. The second covers all mining operations except those covered by production-sharing contracts. It is now paid quarterly and its rates vary according to the mineral substances.
Taxation of Foreign Investors
In principle, foreign investors are taxed according to Senegalese law in the same way as local companies, under reserve if a tax treaty on the avoidance of double taxation exists between Senegal and their country of residence. However, the mining permit must be held by a Senegalese company.
Tax reductions are provided for companies that make an investment in Senegal of at least XOF100 million, but mining operations as defined by the Mining Code are excluded from this tax regime. Consequently, tax incentives are limited to tax exemptions available to mining companies and the deduction of a large part of the expenses incurred by the company within the limits provided for by Senegalese law.
In addition, the mining conventions generally guarantee mining companies a customs and tax stabilisation regime during the research phase and during the exploitation phase.
This stabilisation generally covers the fiscal and customs conditions of the operation. However, provisions relating to human rights, health, safety, employment, hygiene, environmental and social aspects and all related duties, taxes and fees are excluded from the scope of stabilisation. It should be recalled that changes to the regime of the stability beneficiary are not applicable to it unless it requests and adopts the new provisions in their entirety.
In case of transfer of the mining title, taxes such as registration fees of 5% on the transfer amount are payable, as well as land registration fees of 1% (0.8%+0.2%) of the value at which the mining title is transferred, or the market value.
Fixed fees of about XOF30,000 are added.
If the company realises a capital gain on the transfer, it will be subject to corporate income tax (30%) and real estate capital gains tax (10%) on the profit realised. However, if the transferor is domiciled in Senegal, the capital gains tax paid can be deducted from the income tax payable and carried forward for three years (three successive fiscal years) without being refunded.
Where the transfer is made through a company located outside the jurisdiction, the ordinary law regime is, in principle, applicable, subject to the existence of a double taxation treaty which determines the rules for taxation of the capital gain realised by the foreign company.
Senegal’s subsoil contains a wide variety of mineral resources. However, to date, only gold, phosphates and their derivatives (acids and fertilisers), construction materials (stone bricks, cement, clay, aggregates, gypsum, sand and gravel) and mineralised sands are exploited industrially.
The country has created a favourable investment climate through a clear and transparent legislative and regulatory framework, formalised by a Mining Code dating from 2016. Special advantages are granted during the research phase and during the exploitation period; general state guarantees are given (prohibition of expropriation or requisition except in cases of force majeure or public utility, free choice of partners, suppliers and subcontractors, opening of foreign currency bank accounts, the exclusive right to exploit and freely dispose of the substances for which the particular mining permit has been granted, etc).
The Senegalese market offers opportunities to international companies in the mining sector insofar as there is a lack of local expertise in certain areas; local subcontractors are therefore very open to partnerships with foreign companies that can provide them with a certain know-how.
The holders of mining titles are subject to the exchange regulations in force in Senegal. As a result, the constitution of foreign investments in a West African Economic and Monetary Union (WAEMU) member state and the transfer of investments between non-residents are free. These operations are subject to declaration for statistical purposes to the Directorate in charge of External Finance and to the BCEAO, in the case of direct investments.
Any liquidation of foreign investments, direct or otherwise, which is between non-residents and residents, must be reported to the authorised intermediary in charge of the settlement, with the supporting documents of the liquidation.
Senegal has signed a number of bilateral agreements on investment promotion and protection, which offer broader benefits than the Investment Code, to investors who are nationals of the states, parties and foreigners.
Investors, regardless of their nationality, enjoy the same treatment as Senegalese natural or legal persons, and are subject to the same duties and obligations under the laws of Senegal, subject to reciprocity and without prejudice to measures that may concern all foreign nationals or result from the provisions of treaties or agreements to which the Republic of Senegal is a party.
The main sources of finance include equity and debt financing. With regard to debt financing, this can be secured or unsecured and can be provided by both domestic and international banks, investment funds and investment companies, subject to compliance with the applicable foreign exchange legislation.
The Conseil Régional de l’Epargne Publique et des Marchés Financiers (Regional Council for Public Savings and Financial Markets) is the regulatory and supervisory body of the WAEMU Regional Financial Market, created on 3 July 1996, by a convention signed by the seven states of the WAEMU, to which Guinea Bissau was added on 7 July 1997 after its accession to the Union’s franc zone.
Its main mission is to organise and control public offerings on the one hand, and to authorise and control the participants in the regional financial market, on the other.
The Regional Council shall be responsible for i) the organisation of public offerings, ii) the authorisation and control of market structures and commercial players, and iii) control of the regularity of stock exchange operations. The Regional Council shall issue the provisions applicable to i) public offerings and, in particular, stock exchange transactions and other investment products; and ii) the conditions of exercise of market structures and commercial actors.
It should be noted that the stock market in the WAEMU is not yet in an ascending phase. It is still developing. Bond issuance in the mining sector remains low. On the BRVM website, none of the mining companies currently in operation are listed on the BRVM as issuers.
Organisation for the Harmonisation of Corporate Law in Africa (OHADA) law on securities, whose rules also apply to Senegal, offers a wide range of securities that can be put in place in the context of financing projects.
In Senegal, the mining sector offers significant potential for private investors. With the exception of phosphates, gold, zircon and industrial limestone, the mining potential is largely under-exploited.
The Senegalese subsoil shows many indications or deposits of useful substances or minerals, which leaves room for the entry of new private investors in the sector. Interest in Senegal’s heavy mineral sands has grown rapidly in view of the various opportunities they offer. The sand dunes along the Atlantic coastline are indeed important deposits of industrial minerals such as zircon, titaniferous and ilmenite.
The eastern part of the country is rich in mineral resources, some of which are currently being exploited. Mining prospecting and geological mapping have revealed the following metallic and non-metallic minerals: platinum, chromium, silver, manganese, industrial clays and ornamental stones, etc.
Eastern Senegal also contains important reserves of good-quality marble, estimated at several million cubic metres. These marbles, of which there are up to six varieties, are located mainly in Ndébou, Bandafassi and Ibel.
Senegal has made major commitments to increase the production and use of clean energy. The Gas-to-Power 2018 strategy aims to reduce national energy dependence on oil and coal by encouraging investment in gas as a transitional fuel in the energy transition. Several projects are underway to support Senegal’s energy ambitions, including the Great Ahmeyim Turtle (GTA) natural gas project and the Cap des Biches gas plant. Senegal has also begun to invest in renewable energy with the largest wind farm in West Africa, the Taiba N’Diaye Wind Farm (PETN), which became operational in 2020.
The authors see initiatives towards energy transition in the energy sector, although not yet in the mining sector.
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