The changes in Tanzania’s mining legislation over the past four years, combined with the tax disputes between government and some mining companies, have made international investors wary.

However, recent amendments to mining legislation show that the late President John Magufuli was attempting to address the concerns of foreign investors while protecting Tanzania’s interests. Magufuli’s passing should not have any short- to medium-term impacts on the strategy which Tanzania adopted under his leadership.

The initial changes to mining legislation resulted in a more restrictive operating environment and increased government control. Among the changes was the Natural Wealth and Resources (Permanent Sovereignty) Act of 2017, the Natural Wealth and Resources (Review and Re-Negotiation of Unconscionable terms) Act of 2017 and the Written Laws (Miscellaneous Amendments) Act of 2017.

“These laws essentially provided government with powers to review and require renegotiation of previous mining arrangements and agreements, concluded by government and mining companies,” says law firm Beech Veltman CEO Warren Beech.

“At the stroke of a pen, any stability arrangements that mining companies had, could be revoked and renegotiated.”

The changes also included stipulated minimum requirements for State participation with a free carried inte rest, and royalties were significantly increased.

Causes for concern among investors were the changes that required disputes to be addressed locally and denying international companies the right to refer disputes to international arbitration, while the Mining Regulation unilaterally cancelled retention licences issued prior to January 10, 2018.

“Retention licences are an important mechanism by which mining companies retain the right to mine, at a future date, in accordance with the mining company’s planned life-of-mine,” explains Beech.

“The cancellation of retention licences effectively meant that the mining companies were stripped of their right to mine vast reserves in the future,” he adds.

Another change is the requirement of mandatory listing of mining companies on the Dar es Salam Stock Exchange as a means of unlocking investment. If it is unable to facilitate capital raising, it can impact on prospecting and projects, as well as on the development of mines.

However, the amendments made in 2019 were an attempt to address investor concerns. The Mining Local Content Regulations, introduced in 2018, required companies to be 51%-owned by Tanzanian citizens.

This was amended to 20% in 2019, which, combined with other amendments, made it moderately easier for foreign companies to operate in Tanzania.

A focus of Magufuli during his election campaign was resource nationalism; this resulted in legislative changes aimed at implementing such polices upon his election.

Many measures were aimed at securing benefits through “mechanisms such as banning of exports of unprocessed ores, increasing royalties and increasing the beneficial interest in mining companies”.

Beech adds that “meeting the demands of resource nationalism often creates an unstable investment environment, which can be mitigated only by a very deliberate strategy to create stability through clear policies and mineral laws”.

A critical component is local beneficiation that attempts to ensure that value is retained in-country. Owing to this, the most recent gold refining plants are joint ventures between the State Mining Corporation and various external investors.

“This creates new investment opportunities which are lower risk than investment in operating mines,” he notes.

The emphasis on local beneficiation is not unique to Tanzania, as many African countries with vast mineral resources are also focusing on the importance of local beneficiation and supporting local beneficiation through direct intervention or various incentives.

“Local beneficiation is an imperative because it avoids ‘value leakage’ through beneficiation in other countries, where the particular mineral is driven up the value curve, without returning that value to the country of origin,” explains Beech.

While there is an increased focus on local beneficiation, constrained energy, water and infrastructure are likely to impact on the number of beneficiation plants that Tanzania can accommodate.

“The advantage of the new beneficiation plants; however, is that they are more energy efficient, and have the ability to refine gold to international levels,” says Beech.

While the legislative changes have altered Tanzania’s mining sector in various ways, its vast mineral resources, including minerals that are relevant to the growing green economy, ensure that the country continues to present opportunities to potential investors.

“It is hoped that the Tanzanian government moves towards stability on the application and interpretation of its mining laws so that investors can have a relatively certain basis on which to make their investments,” he concludes.