New laws and a crackdown on mining firms in Tanzania have slowed investment appetite in what has long been seen as one of Africa’s most attractive mining sector as companies assess the consequences of government efforts to claim a bigger slice of the pie.
Takeover bids and exploration plans have been cancelled and workers laid off. The share prices of many firms listed in Australia, Britain, South Africa and Canada with interests in Tanzania have halved as the value of their investments shrinks, Reuters reported.
This follows the passage of three laws in July including hike taxes on mineral exports, mandate a higher government stake in some mining operations and force the construction of local smelters to bring Tanzania higher up the mining food chain.
The regulations aim to stamp out what President John Magufuli, nicknamed “the Bulldozer”, has called years of corrupt practices and tax evasion that have robbed the country of revenue from a sector accounting for about four percent of GDP.
Many of the changes were first suggested by the political opposition and have proved wildly popular with voters in Tanzania, where GDP per capita is still only $880.
International investors are not happy, however, especially because the details remain unclear. Magufuli fired the minister of mining in May and he has not been replaced.
Junior explorer Manas Resources expected to complete its acquisition of the Victoria Gold Project from Cienega Sarl by early 2018, but the company told Reuters it may run out of time if there is no clarity soon.
“Because of the changes in legislation and the time being taken to implement new regulations, the sector has slowed down to a point where it is impacting exploration activities and our capacity to finalise the deal,” said Manas CEO Phil Reese.
The director of one minerals company said he is shutting his Tanzanian office because he believes the laws will make it illegal for him to recoup the cost of his many unsuccessful exploration projects against the few successful ones, and require him to share his valuable geological data with the government for free.
“There will be no nickel and gold exploration in Tanzania for the foreseeable future,” the head of another company said.