The rules of the game are set to change completely for mining companies in Rwanda if a proposed law is enacted.

The firms will no longer have access to limitless swathes of land as the law proposes demarcation of the country into mining blocks of 400 hectares each. These would be allocated to both firms with mining concessions and new entrants.

The draft law on Mines and Quarries Exploitation, tabled before parliament recently, is aimed at attracting new investors, increasing efficiency and improving value addition to boost revenues from minerals.

The law, which comes at a time when the government is under pressure to prove its mineral wealth, will make it easier for it to monitor investor activity.

Minister of State in charge of Mining at the Ministry of Natural Resources Evode Imena told The EastAfrican that with the demarcation, “Each block will be independent —we will have the right to take any block the investor is not using. And for each block, investors will pay surface fees and provide a report so as to avoid having companies apply for multiple blocks that they don’t use.”

According to Mr Imena, an ongoing minerals certification scheme and the mineral tagging mechanism will reduce speculation and smuggling of minerals and strengthen traceability.

READ: Miners now protest stringent tagging process

“We cannot ignore that at one point in time, mining in Rwanda was mainly a trading based business, but due to reforms introduced by the government now it is an extracting business,” he said.

Since 2011, the government has been putting pressure on private companies with big concessions to increase their investment or lose the contracts. At the same time, it has been awarding licences to new companies. As a result, in 2012, investment in the sector hit a record $46.8 million.

But investors have expressed concern about plans by the government to demarcate the mining sites. “Demarcating will not be helpful for companies with long-term business plans,” said Jean Malic Kalima, regional director for Wolfram Mining and Processing Ltd, a leading exporter of minerals.

Mr Kalima, who is also the head of the Rwanda Mining Association, said the introduction of a royalty tax on minerals, which is also contained in the draft law, would increase the cost of doing business.

Like Ghana and Tanzania, which have been reviewing mineral royalty rates, Rwanda is introducing a royalty tax on different types of minerals — at four per cent of the value of extracted minerals on basic metals and six per cent on both precious metals and precious stones.

Kenya in August last year increased royalties on gold to five per cent of gross sales value, up from 2.5-3 per cent. For rare earth, niobium and titanium ores, royalties rose to 10 per cent of gross sales value from three per cent previously.

Royalty rates for other extracted minerals vary between one per cent and 12 per cent. Tanzania, Africa’s fourth-largest gold producer, passed new mining legislation in 2010 to raise royalty payments on gold exports to four per cent of gross value from three per cent of netback value.

Article 44 of the draft law states that in the event the company fails to make payment of any royalties within the prescribed period, it shall pay interest of 10 per cent per month on the late payment.

And should the holder of a mineral licence fail to pay royalties for three consecutive months, the government may prohibit the sale of any mineral in the firm’s possession until all outstanding royalties have been paid.

“It will be difficult to afford it because it is an advance payment before you export,” Mr Kalima said, calling for a review of the law.

But investors have also expressed concern about article 16, Chapter 3 of the draft law, which requires that “the holder of an exploration licence shall submit to the minister not later than 90 calendar days after the end of each year of the licence... any monies required to be spent under the provisions of the licence and which are not so spent, or shall, on failure to give justified reasons for this shortfall, be a debt due to the government recoverable in a court of competent jurisdiction.”

Investors say this clause makes them vulnerable to penalties as exploration does not always lead to mineral discovery. The government maintains that such a clause will ensure investors implement their business plans.

Currently, Rwanda’s mining sector remains largely dominated by artisanal and small-scale miners with approximately 35,000 people employed in the sector.

It earned an estimated $225.7 million from mining exports in 2013, nearly double the $111 million brought in from sales of tea and coffee.

The increase was largely driven by coltan, whose value increased by 136.5 per cent and 115.4 per cent in volume to reach 2466.02 tonnes from 1144.68 tonnes in 2012.

The 2013 export figure is the highest ever for the sector, though in 2014, it is expected to grow to $265 million on account of increased investments in the sector.