COUNTRY IN FOCUS
fees and participation in all cash distributions made by the
mines and Twiga. An annual true-up mechanism will ensure the
maintenance of the 50/50 split,” says Bristow.
A regulatory overhaul
Concerns were raised by mining companies back in 2017,
two years after Magufuli came to power, when there was a
regulatory overhaul that included substantial amendments
to the legal and institutional frameworks governing mineral
resource extraction. According to Phiri, the most notable
changes were made to the institutional structure, resource
contracts, the fiscal regime and mineral licensing requirements.
“Tanzania’s mineral resources were now held in a trust by the
President on behalf of the citizens. Before ownership was
vested in the country as a whole. Regardless, any mineral or
petroleum agreement needs to be submitted to the National
Assembly, which now has the authority to review and require
the renegotiation of any existing or future agreement,”
explains Phiri.
In February 2019 government eased some of the earlier drastic
regulations. The most noteworthy amendment included the
lowering of the local content prescription from 51% equity in a
mining venture to only 20%. With this, the government hoped
to attract more mining-related foreign direct investment inflows,
which started drying up as more mining companies took flight,
the tighter Magufuli turned the screws. Despite these important
changes, uncertainty remains, and, in the meantime, Tanzania
has been put on the backburner by a host of exploration and
development companies.
Too many changes are never good, and in fact, has created
uncertainty in many African mining jurisdictions, which often
results in a dearth of new mining projects. According to Claude
Baissac, CEO at consultancy firm Eunomix, it is the continuous
reviews, changes and debates that never stop, and scares
investors. “Investors never know what to expect. To exacerbate
matters, policy changes are normally radical, and it happens
suddenly. It’s usually for political reasons like declining support,
a crushing debt crisis, or not favouring mining companies
because they had close links to the previous regime. New
government normally starts issuing licenses to companies
aligned to them. These changes, of course, always take place
The 2017 regulatory overhaul included an integrity pledge
that obliged companies to reduce environmental and
community impact. Furthermore, it stated that companies
should refrain from actions that undermine the country’s
national security or tax system. “The pledge received fierce
criticism and created uncertainly by the incorrect wording and
could be interpreted as mandatory. Fears were compounded
by perceptions that non-compliance could constitute a breach
of a company’s mining license prescriptions which could
lead to it being suspended or revoked,” says Phiri. Reports in
August last year indicated that the Tanzanian government was
also considering revoking undeveloped exploration rights and
re-awarding the areas.
Companies like Amani Gold has been willing to take on the risk, and commission exploration projects in remote Tanzania.
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African Mining January 2020
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