THE government has ordered mining firms to adhere to the country's mining laws and regulations, and as well observe environmental protection requirements to avoid conflicts with the locals.
Minerals Deputy Minister Dr Stephen Kiruswa issued the order when he visited Paramount Ltd that owns 12 mining licences at Kimwat and Sonik villages in Longido District, Arusha Region to inspect mining activities.
Tanzania’s mining regulations saw a major overhaul over 2017-2019, during which the government introduced a number of new laws and amendments. This led to a period of elevated uncertainty for investors in the country. Since 2020, the government has been working to renegotiate terms of existing mines and projects in the country and sign new agreements which are in line with the regulations passed in 2017.
The International Monetary Fund (IMF) said that Tanzania’s economy is being harmed by the government’s “unpredictable and interventionist policies” in a report whose release the East African country has blocked.
Tanzania refused to authorize the publication of the report, the IMF said Wednesday in a statement on its website. The government’s spokesperson, Hassan Abbasi, didn’t answer a call to his mobile phone.
Tanzania’s economy has been rocked by a series of policy decisions by the administration of President John Magufuli, a leader whose nickname is the “bulldozer.” During his tenure, the government has imprisoned representatives of mining and mobile-phone companies involved in disputes with the state and demanded that gold producer Acacia Mining pay a tax bill of $190-billion, equivalent to two centuries of revenue. The company, owned by Barrick Gold, is now in talks with the State to resolve the dispute.
Stakeholders in the mining sector have warned that the new law which raised royalties tax from 4% to 6% on export of minerals could scare away investors. Investors in Tanzania’s mining sector have called for more government-private sector engagement to address gaps in the country’s mining law which are posing a threat to existing and new investments. The majority who are non-residents say the mining laws in the country are still unclear, hence need dialogue between the government and industry stakeholders to address the gaps.
The seemingly increasing trend towards nationalist thinking, combined with and likely driven by growing economic inequality, has resulted in several changes in mining and tax legislation in sub-Saharan Africa countries.
Herbert Smith Freehills Africa Group co-chair and partner Peter Leon says the recent and significant changes to mining regulations in various African States have caused concern that a “regional trend of resource nationalism may be emerging”.
White & Case partner Rebecca Campbell notes that her firm’s yearly mining survey of 2018 found that about 45.1% of respondents believe that the heightened risk of resource nationalism across Africa makes it difficult to justify investment. However, with about 42% saying that the risk was manageable and about 13% believing the potential returns outweighed the risks, investor sentiment towards African mining jurisdictions has not completely soured.
Despite the apparent appetite for investment, about 64.5% of survey respondents believe that political risk or “the possibility of government interference” is the chief obstacle. This assertion implies a growing sense of caution around trends in African mining legislation, though it has yet to devolve into outright pessimism.
Market research company BMI Research commodities analyst Diego Oliva-Velez believes the increased regulatory pressure by African governments is a result of steadily improving commodity prices and secondary causes associated with unique mixtures of economic and/or political factors.
DAR ES SALAAM – Tanzanian President John Magufuli on Wednesday appointed a chairperson and commissioners for the country's new miningcommission, paving the way for the issuance of new mining licences.
Africa's fourth-largest gold producer is seeking a bigger slice of the pie from its vast mineral resources by overhauling the fiscal and regulatory regime of its mining sector. Magufuli sent shock-waves through the mining community with a series of actions since his election in late 2015, which he says are aimed at distributing revenue to the Tanzanian people. In July last year, he suspended the issuance of all new mining licences until the new mining commission was in place.
Following the extensive amendments to the Mining Act, Cap.123 of the Laws of Tanzania (Act No. 14 of 2010) (the Mining Act) by the Tanzania Extractive Industries (Transparency and Accountability) Act, 2015 (TEIA) whereby a number of changes affected mineral rights holders, the Mining Act had two further amendments in 2017 as a result of a change in the Tanzanian government’s (Government) approach on the mining sector, amongst others.
The first round of amendments in 2017 were brought in terms of the Finance Act, 2017. These amendments increased the royalty rate from 4 to 6 per cent with respect to minerals exports such as gold, copper, silver and platinum. This increase has attracted some debate on how the change would affect the mining sector. In addition, the amendments introduced a clearing fee of 1 per cent (as a new requirement) on the value of all minerals exported outside Tanzania from 1 July 2017. Some stakeholders have argued that the increase in the royalty rate will have a negative impact on foreign investment in the sector.
The Mining Act (CAP. 123)
THE MINING (LOCAL CONTENT) REGULATIONS,2Ol8
The formulation of the Mineral Policy of Tanzania in 1997 and the Mining Act of 1998 boosted investment in the mining sector, which resulted into the opening of the following seven major gold mines: Golden Pride Mine in 1998; Geita Gold Mine in 2000; Bulyanhulu Gold Mine in 2001; North Mara Gold Mine in 2002; Buhemba Gold Mine in 2002; Tulawaka Gold Mine in 2005; and Buzwagi Gold Mine in 2009. These seven major gold mines boosted gold production from 1 ton of gold achieved in the 1990’s to over 50 tons in 2009.
Despite the above achievements, the public has been complaining that the mineral sector is not contributing enough to the national economy. Generally, the Government is expected to benefit from the operations of the major gold mines through payment of corporate tax, mineral royalty, local levies and other direct and indirect benefits. However, most of the major gold miners have not started paying corporate tax; instead they only pay royalties, local levies and other taxes. The public has therefore been suggesting that the Government should consider increasing royalty rates on minerals produced so as to boost Government revenue. This suggestion has also been shared by different committees formed by the Government to review the performance of the mineral sector (Kipokola’s Committee - 2004, Masha’s Committee - 2006, and Bomani’s Committee - 2008).
TMAA thought it necessary to study royalty forms and rates applicable in different countries so as to establish the best form and rate to be adopted in Tanzania for the ultimate goal of attaining a win-win situation.
On 8 June 2017, Tanzania’s Minister for Finance and Planning presented the 2017/18 budget. The related Finance Bill, 2017 was made publicly available on 13 June 2017. Following parliamentary approval, the Act received Presidential assent on 30 June 2017 and became effective on 1 July 2017.
This Alert is based on the Finance Act, 2017 which includes numerous amendments of tax and other laws not mentioned in the budget speech.
The key tax amendments under the Finance Act, 2017 include but not limited to:
• Zero-rating of Value-Added Tax (VAT) on the supply of ancillary transport services of goods in transit; and exemption from VAT of importation of an ambulance by a registered health facility other than a pharmacy, health laboratory or diagnostic center
• Exemption for registered education institutions from the Skills Development Levy (SDL)
• Changes affecting mining sector as a 1% inspection fee on export of minerals will come into effect on the date to be specified by the Minister
• Imposition of a 5% withholding tax (WHT) on payments relating to specified minerals supplied by a resident person
The full Tanzania Income Tax Act - Revised version, 2006.
In life there is always the paradox of plenty: if you possess a resource in plenty but do not have the technologies required to tap into and utilize these resources, you are at the mercy of those leaders in technology who call the shots and make new entrants toe the line, unless of course your entry spells a distinct advantage to those calling the shots.
Key players in sector to benefit from briefing in Tanzania. The Tanzania capital, Dar es Salaam, will play host to investors who want to tap into the country's vast oil and gas opportunities.