The recent changes to the Mining Act in Tanzania have significant ramifications for service providers to the Tanzanian mining industry (Service Providers). Urgent legal advice should be sought to ensure compliance with the new legislation.
Pursuant to the Written Laws (Miscellaneous Amendments) Act 2017 (as published in the Gazette No. 27, Volume 98 dated 7 July 2017) a wide variety of changes were made to the Tanzanian Mining Act 2010.
New local content requirements:
The new local content provisions that have been introduced are of particular importance to Service Providers. The new section 102 (1) provides as follows:
"(1) A mineral right holder shall give preference to goods which are produced or available in Tanzania and services which are rendered by Tanzanian citizens and or local companies."
This effectively introduces a new legal obligation under mining companies to ensure that preference is given to Tanzanian citizens and local companies.
The relevant definition of "local companies" for this purpose is: "a company or subsidiary company incorporated under the Companies Act, which is one hundred percent owned by a Tanzanian citizen or a company that is in a joint venture partnership with a Tanzanian citizen or citizens whose participating shares are not less than fifty one percent".
Accordingly in order to satisfy the definition of local company for the purposes of this new legislation – a non-Tanzanian company must enter into a joint venture arrangement – with at least a 51% interest held by Tanzanian citizens.
Section 102 (2) and (3) goes on to provide:
"(2) Where goods required by the mineral right holder are not available in Tanzania, the goods shall be provided by a local company which has entered into a joint venture with a foreign company.
(3) The local company referred to in subsection (2) shall own share of at least twenty five percent in the joint venture or otherwise as provided for in the regulations."
In circumstances where the relevant goods or services (whilst the legislation refers to goods only – we believe the likely intention was for this to also encompass services) are not available in-country, these can be provided by a majority non-Tanzanian owned company provided it has a local partner company holding at least a 25% interest.
Reporting requirements:
To ensure compliance with these new legislative provisions, every mineral right holder must prepare and submit to the Mining Commission a procurement plan indicating the proposed use of services, works, goods and services in Tanzania. The procurement plan must be for a period of at least 5 years.
Within sixty days of the end of each calendar year, every mineral right holder must submit to the Mining Commission a report detailing its achievements in utilizing Tanzanian goods and services during that calendar year.
Next steps:
Clyde & Co have already been instructed by a number of major Service Providers who are seeking to restructure their ownership arrangements to ensure compliance with this new regime.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.