Tanzania lays down the law on local participation in mining sector

Date: Feb 8, 2018
The mining industry in Tanzania is adopting a wait-and-see approach following the government’s sweeping changes to mining regulations, aimed, in part, at ensuring sovereign ownership of the country’s natural resources.

Over the past 12 to 18 months – and as recently as last month – there has been significant movement in the mining regulatory landscape.

“This is driven largely by the government’s objective of ensuring that Tanzania and its citizens benefit from the country’s mineral wealth, which will have significant implications for holders of mining licences and those involved in providing goods and services to those licence holders,” says law firm Bowmans Dar es Salaam office partner Chris Green.
He states that the new regulatory environment, signed into law in July 2017, has left the mining industry treading water.

“We are not seeing any significant new investment in the mining space in Tanzania and companies with existing operations are adopting a cautious approach to further investment and are having to consider how best to ensure the continued viability of existing operations.”

One of the biggest changes is that all holders of special mining rights – meaning major mines – are, by law, required to list on the Dar es Salaam Stock Exchange and ensure that 30% of shares are placed in the hands of Tanzanian citizens.

Another important change, he says, is that, in future, when government and a rights holder are negotiating the terms of a mining development agreement, government must have a 16% carried interest in the project.

“Existing agreements have not been overlooked. Government has brought into play a mechanism to notify any rights holder that it wants to renegotiate the terms of an agreement to deal with so-called ‘unconscionable provisions’,” Green says.

The definition of such a provision is broad and could include any aspect of an agreement that runs against government’s ambition of ensuring sovereign ownership of Tanzania’s mineral resources.

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