info@abenry.co.tz
+255 2129461 / 2129462

Single Blog Title

This is a single blog caption

Amendment of the mining act and its impacts to the mining industry in Tanzania

The Mining Act was passed and came into force in 2010. The said Mining Act repealed the Mining Act of 1998. The purpose of Mining Act, 2010 was to provide substantial provisions that regulate the law relating to prospecting for minerals, mining, processing and dealing in minerals, granting, renewal and termination of mineral rights, payment of royalties, fees, charges and any other relevant matters.

In 2015 the government enacted the Tanzania Extractive Industries (Transparency & Accountability) Act. The legislation introduced a number of consequential amendments to the Mining Act with some effects to the mining right holders. The Act established the Tanzania Mining Audit Agency with powers among others to advice the government on matter relating to mining sector.

In addition, the Act raised the Initial capital investment for primary mining license to USD 5 million from the previous which was less than US$100,000 or its equivalent in Tanzanian shillings. Also, the Act reduced the period of Mining Development Agreement (MDA) from the previous period which depended on the life time of the mine to the maximum of ten years.

However, in 2017 the Mining Act, 2010 was amended by the Finance Act, 2017. The Finance Act increased the royalty rate from 4% to 6% to some of the minerals such as gold, copper, silver and platinum exports. This increase has raised opposition from stakeholders in the mining sector.

Further, the Finance Act, 2017 has also introduced a clearing fee of 1% as a new requirement on the value of all minerals exported outside Tanzania from 1st July, 2017. Such an increase has been argued by most of stakeholders that will have a severe impact on the foreign investment in the industry.

Meanwhile, in July 2017 the government further amended the Mining Act, 2010 through the Written Laws (Miscellaneous Amendments) Act, 2017. The Miscellaneous Amendments Act came as a result of recommendations to the government which was laid down by the President Committee which was established to investigate on the export of mineral concentrates sands.

The Amendments changed the shareholding structure to all mining operations under a Mining License or Special Mining License to give the Government at least a 16% free carried interest in the capital of the mining company. Nonetheless, the Government shall be entitled to acquire, in total, up to 50% of the shares in a mining company, proportional with the quantified value of tax expenditures incurred by the Government in favour of the mining company.

The Amendments also establish the Mining Commission which replace the Mining Advisory Board, the Commission shall have perpetual succession with more functions than the previous Board. The Commission apart from advisory functions have the following functions;

to supervise and regulate the proper and effective carrying out of provisions of the Act, to regulate and monitor the mining industry and operations, to ensure orderly exploitation and exploration of minerals as well as utilization. Further, the Commission has the power to resolve disputes arising from mining activities and to carry out inspection and investigations on safety issues.

Additionally, the Amendments provides for ways of handling concentrates where the government shall have lien in all mineral concentrates and the mineral shall be secured within the mines which will be prescribed by the regulations. The Commission is empowered to analyse and value the concentrates thereafter be processed within Tanzania. So, for those companies which used to transport the concentrates abroad for processing will not be allowed to do so. This is a new provision added to the Mining Act by the miscellaneous amendments.

Moreover, the Mining Act has been amended by including a provision which requires the mineral right holder to buy goods which are produced in Tanzania or the service rendered local citizens. Further to that the mineral right holder is required to submit to the Commission a procurement plan of five years indicating the local services which will be used in insurance, financial/ legal, security services, cooking and catering services.

Nonetheless, the mineral right holder under the amendment is required to comply with the requirement of lodging the integrity pledge which will bound them to conduct mining operation with utmost integrity, to refrain to engage in any manner prejudicial to the country’s economy. The provision imposes a threat to those who fails to comply with integrity pledge where their license will be cancelled and the government will exercise the right of take over facilities.

Furthermore, the government passed new legislations namely, The Natural Wealth and Contracts (Review and Re-negotiation of Unconscionable Terms) Act of 2017, and The Natural Wealth and Resources (Permanent Sovereignty) Act 2017 which have impacts on the mining sector.

The   Natural Wealth and Contracts (Review and Re-negotiation of Unconscionable Terms), Act has impacts to the mining sector especially the producers of minerals and concentrates because it allows the government to review and re-negotiate agreements entered prior to the Act.  According to the provision of that law the government may re-negotiate with the Mining Company on the terms of the agreement which seems to be unconscionable such as terms that restrict the State sovereignty over its natural resources etc.

Immediately it is unclear on how the proposed re-negotiation of contracts would affect mining projects and the mining sector in general, which generates about 3.5 percent of Tanzania’s gross domestic product.

The Natural Wealth & Resources (Permanent Sovereignty) Act, has impact on the mining sector. The Act introduced the requirement of settling disputes especially those relate to the extraction, exploitation, acquisition or use of natural wealth and resources to be settled within Tanzania. Before passing of this law parties were free to choose the governing law and the jurisdiction within which a dispute will be entertained when arises.

 

Leave a Reply