Tanzanite miner at the Mererani mine in northern Tanzania. The country
has relaxed the mining sector regulations. FILE PHOTO | NMG
Tanzania has relaxed the mining sector regulations that require local companies to own controlling stake in multinationals.
Once
seen as too ambitious, the Mining Sector Regulations 2018 required
Tanzanian companies to have at least 51 per cent stake in mining firms
while multinationals were to partner with their locally owned
institutions.
The regulations and the Mining Act
amendments, which were part of mineral sector reforms, were meant to
give the government a bigger share of the mining sector pie.
Additionally, they sought to boost the participation of Tanzanian nationals and firms in multinationals’ operations.
But a year later, further amendments have seen procedural ownership percentage reduced to 20 per cent.
Analysts
say that Tanzania, though endowed with abundant minerals, still feels
little impact on its revenue collection or even on lives of most
Tanzanians over the years.
The new Mining (Local Content) (Amendments) Regulations, 2019
reduced ownership restriction for local mining firms and financial
institutions’ preference.
Indigenous Tanzanian companies, under the amended regulations, now have to own a minimum 20 per cent equity.
The
Mining Regulations on Local Content (2018) defined an indigenous
Tanzanian company as one “incorporated under the Companies Act that (a)
has at least 51 per cent of its equity owned by a citizen or citizens of
Tanzania; and (b) has Tanzanian citizens holding at least 80 per cent
of executive and senior management positions and one hundred per cent of
non-managerial and other positions.”
Miners have welcomed the amendment, saying it will make the mining industry vibrant.
“Many
local companies, be they contractors, sub contractors, licensees, do
not have the capital and capacity needed to bring about development in
the mining activities,” said Mbwaike Mahyenga one of the miners in
Mwanza.
“As much as we find it hard to admit that we
run short in that respect, things such as machinery are expensive for
some local companies.”
The Mining Regulations on Local
Content (2019), which came into effect on February 8, opened the gates
for more local commercial banks to participate in mining activities.
The
new regulations slightly reduced the stringent banking requirements, as
not many banks operating in Tanzania fall under the definition of
“indigenous Tanzanian banks.”
The word ‘indigenous’ was
deleted, allowing mining companies and all other entities involved in
the sector to maintain bank accounts in a Tanzanian bank with not less
than 20 per cent Tanzanian shareholders.
Amendment of
regulation 36 (2) states that, “For the purpose of this regulation,
‘Tanzanian Bank’ means a bank that has 100 per cent Tanzanian or not
less than 20 per cent of Tanzanian shareholding.”
Keeping
the local content spirit as previous regulations, the Mining
Regulations on Local Content (2019) still affects international banks
like Barclays, Standard Chartered Plc, Stanbic Bank and First National
Bank Tanzania Ltd — which is 100 per cent owned by the First Rand Group —
a large financial services provider based in South Africa. Other banks
are KCB Bank, Commercial Bank of Africa and Access Bank Plc.
Economists
say that it is a welcome move since the new regulations will allow more
local banks, which are not wholly Tanzanian-owned to provide services
to the sector.
Before the new rules — both old and the
amended mining local content regulations — mining firms were allowed to
have bank accounts abroad and repatriate some of their profits, which
the government felt was weakening the local currency.
The
calls for changes in the mining laws were partly due to claims that
some miners, especially multinationals, were evading tax.
The
new structure seeks to establish even participation in mining
activities by local entities including contractors, subcontractors,
insurance companies and financial institutions.
Early
last month, parliament of Tanzania approved a Bill designed to relieve
small-scale miners of the burden of paying withholding tax of 5 per cent
and 18 per cent value added tax, leaving the holders of a primary
licence with a 7 per cent tax obligation only.
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