Why $3bn Mchuchuma, Liganga projects have stalled

By  Rosemary Mirondo Business Reporter Mwananchi Communications Ltd

What you need to know:

• Almost 14 years have passed since the Chinese  firm Sichuan Hongda Group Limited was awarded the tender to develop the Liganga iron ore-to-steel project but since then little has been achieved

Dar es Salaam. Almost 14 years have passed since the Chinese  firm Sichuan Hongda Group Limited was awarded a tender to develop the over $3 billion (Sh6.8 trillion) Liganga iron ore-to-steel project but since then, little has been achieved.

Despite being mentioned as one of the government’s key priority areas each time that the Industry and Trade ministry presents its budget in Parliament, the situation on the ground looks different.

It was in apparent response to such a situation that when she graced the inauguration of an assembling plant for trucks and tipper vehicles at Kigamboni in Dar es Salaam earlier this month that President Samia Suluhu Hassan directed her lieutenants expeditiously find an investor for the twin Liganga Iron Ore and Mchuchuma Coal projects.

That came after she was informed at the event that to assemble a truck, one need over 2,400 spare parts and other raw materials, including steel which were largely being imported.

The President directed the ministries of Industry and Trade as well as that of the President’s Office (Planning and Investments) to expeditiously find an investor for the two projects.

“You need to expedite the selection of the most suitable investor to commence iron production for factories such as this one. Let’s swiftly conclude this matter to secure the iron,” she said.

And, requesting Parliament to endorse a total of Sh110.8 billion for the Industry and Trade ministry for the financial year 2024/25, all Dr Kijaji said about the project was that it remains one of the government’s priorities and noted that so far the National Development Corporation (NDC) has made significant progress in completing compensation payments to residents affected by the Mchuchuma and Liganga Integrated Project.

But while the project remains high on the government’s agenda, what is also true is that nothing has really moved with regards to finding an investor.

The Tanzania China International Mineral Resource Ltd. (TCIMRL), which is spearheading the $3 billion project on behalf of its parent company, Sichuan Hongda Group Limited (SHG), says though it still holds a valid contract for its development, there were still issues of tax incentives that the government has not yet gazetted.

The TCIMRL Deputy CEO, Mr Eric Mwingira, said the Ministry of Finance and Planning was yet to publish the granted investment incentives approved by the government and enshrined in the two signed performance contracts in the Government Gazette to make them legally operational as required by law.

He said the project has taken a long time, and the government, through the National Investment Steering Committee (NISC), approved the tax incentives they sought, but it is yet to work on them and gazette them as legal.

“The project contract was signed in 2011 and investors are calling on the government to endorse the tax incentives, including ten years of relief, for the project that will run for between 50 and 100 years,” he said.

But the government has a different view of the entire situation.

The Deputy Minister for Industries and Trade, Mr Exaud Kigahe, said Tanzania was ready and willing to see the project taking shape.

He, however, it was actually the investor that was delaying the process.

“The challenge we are facing is that the major investors do not come to the negotiation meetings,” he said.

But according to Mr Mwingira, the investor was seeking tax incentives on the cargo or materials to be imported for construction, as well as incentives on spare parts and machinery, as well as tax relief on fuel.

He noted however that much as the negotiations continue, there is great indication that the government will accept their requests. “Initially, the negotiations were under the government negotiating team, but currently, they have been moved to a committee under the Permanent Secretary in the Ministry of Industries and Trade,” he said.

Explaining, he said that the mother company, Sichuan Hongda Group Limited (SHG), discharged its part of the contract by carrying out the geological exploration and environmental and social impact assessment, valuation for purposes of compensation of the project-affected people, research, and development for smelting technology to the tune of about $70 million.

“The capitalised exploration cost consumed a lot of resources because of the complexity of the mineralogical constitution when it comes to the separation of titanium from iron ore and design for an industrial complex. He said that based on the developments, TCIMRL applied for and was granted two Special Mining Licenses (SML) for both the Liganga Iron Ore and Mchuchuma Coal projects.