Stakeholders in the mining sector have warned that the new law which raised royalties tax from 4% to 6% on export of minerals could scare away investors. Investors in Tanzania’s mining sector have called for more government-private sector engagement to address gaps in the country’s mining law which are posing a threat to existing and new investments. The majority who are non-residents say the mining laws in the country are still unclear, hence need dialogue between the government and industry stakeholders to address the gaps.
The investors say though the country is blessed with abundant natural resources, it will be of no value to the economy if it does not translate to investments, warning that the new law could hurt the sectors’ contribution to the economy. President John Magufuli enacted the country’s’ new mining law in July last year, sending shock-waves across the industry.
The new law raised royalties tax from four per cent (4%) to six per cent (6%) on the export of minerals such as gold, copper, platinum and silver. The law also gives the government the right to terminate and renegotiate mining contracts and removed the right to international arbitration.
“We must benefit from our God-given minerals,” President Magufuli said at an event in Tanzania last year. Miners in the country who held a two days forum in Dar es Salaam (July 26 -27), at the Hyatt Regency, have however expressed displeasure towards the law saying it will discourage investment in the country if it is not better communicated and discussed with the sector ’s stakeholders.
“The government needs to create some kind of dialogue with the mining community in order to better communicate these laws to them,” the miners said at the event organized by African Influence Exchange.
“With proper dialogue with these investors, the country stands a high chance of benefiting and propelling itself to a middle-income economy by 2030 as is the vision of the current administration,” they said.
The event which brought together lawyers, tax consultants and miners created an opportunity for stakeholders to discuss the country’s mining law, local content policy and tax regime, and give recommendations on how better to communicate the law. The government has been at loggerheads with a section of investors after the new law came into effect.
Among them is Tanzania’s largest miner ― Barrick Gold Corp., Acacia mining’s majority owner. The company was rattled when the government ordered a ban on export of Gold and Copper concentrates in March 2017, to push for a construction of a domestic smelter. The two have been locked in months of negotiation over mining contracts with the government accusing Acacia of tax evasion in 2016.
In June this year, another company-Exxon Mobil announced it is looking for a buyer for its 35 per cent stake in its deepwater block 2 gas field off the coast of Tanzania, as it focuses on a bigger project in neighbouring Mozambique. The company decried delays in implementing the project due to lack of proper infrastructure and regulation in the country.
Barrick Gold is also in talks with a Chinese investor to sell its mines in the northern part of the country. The company’s performance has dwindled since the ban on exports of raw minerals.
Tanzania has for decades had a robust mining sector contributing billions to the country’s Gross Domestic Product (GDP). According to the National Bureau of Statistics, third quarter 2017 report, the value added to the mining sector in Tanzania increased to TZS 489.4 billion from TZS 405.0 billion in the corresponding quarter of 2016, a 20.8 per cent growth.
The growth was attributed to an increase in gas production, diamond and coal. Gas production increased to meet the demand for gas-fired power generation in the country. Gas consumption has increased to an average 13 million cubic feet per day. Diamond production increased on account of mining operation done on areas of high mineral concentration as well as the use of high-quality processing plant. “Coal production increased in the quarter under review on account of the government ban on coal imports,” the bureau report notes.
It will be interesting to wait for new statistics of 2018-2019 to see how much the sector contributed to the GDP, especially after the newly enacted mining law came into effect.