Tanzania’s New Mining Laws Dampening Investor Sentiment, Experts Say

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New laws governing Tanzania’s mining industry are dampening investor sentiment, experts have said. This is according to a team of researchers from multinational professional services network, PricewaterhouseCoopers (PwC).

Tanzania recently introduced regulatory changes for the country’s mining sector, which appear to have dampened investor sentiment. Some of these regulatory changes are a new income tax regime introduced in 2016, increased royalty rates and a new ‘clearance fee’ charged on the export of minerals.

Other reforms include restrictions on VAT input credit in relation to the export of unprocessed ore and new local content requirements.

Not all of these laws have been well received.

Last year, Tanzania’s government subjected its mining laws to widespread reforms, which sparked legal suits abroad.

Acacia Mining, a leading player in the industry, took the Tanzanian government to the London international court of arbitration in 2017 at the height of its dispute over its gold mining projects in the country.

Meanwhile, neighbouring Kenya is at loggerheads with a company known as Cortec Mining at the International Centre for Settlement of Investment Disputes (ICSID). The firm is seeking $5 billion in compensation for the cancellation of its mining licence. Prior to the dispute, Cortec Mining had been awarded a license for the development of minerals in Kenya’s titanium-rich Mrima Hills in the country’s Kwale County.

PwC, which has a presence in 34 Africa countries with an office footprint covering 66 offices, has implied that such reforms that affect investors may sometimes do more harm than good.

In an analysis titled ‘PwC South Africa Mine Report’ for the 2018 financial year, the professional services network has warned of the effects policy changes may have on a country’s mining sector.

“These changes have not come about in isolation as a number of jurisdictions in Africa have introduced more severe regulatory regimes, but it does appear that Tanzania may have gone further than most,” PwC said in a recent statement.

Tanzania’s mining industry seemed to be in a state of upheaval mid-last year after the country’s President, Tanzania’s President, John Magufuli fired his mining minister, Sospeter Muhongo in May 2017. This was after receiving a report into whether mining companies were under-declaring the value of their exports. Muhongo was later replaced by Lawyer and State official, Angellah Kariuki.

From as early as July 2017, the Government of Tanzania has introduced significant regulatory reforms to the mining industry. For instance, on 13 July 2018, Tanzania’s Mining Ministry issued regulations on a mining industry law dubbed the ‘integrity pledge’, which serves to promote integrity, accountability and proper management of anti-corruption programmes, for adoption by the corporate community operating in the mining industry.

According to UK-based multinational law firm, Herbert Smith Freehills, most major mining companies operating in Tanzania have already made a formal and concrete expression of commitment to abide by such ethical business practices.

While these reforms are well-meaning, it has been implied that strong-arming foreign and domestic investors with other different, impractical or bureaucratic rules may have a knock-on effect. African governments have therefore been advised to tread carefully with regard to such matters so as not to scare off investors.

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