AMENDMENTS TO TANZANIA’S MINING (LOCAL CONTENT) REGULATIONS

By Chris Green Wednesday, February 20, 2019
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The changes to Tanzania’s Mining Act in 2017, supplemented by the Mining (Local Content) Regulations, 2018 (Local Content Regulations), introduced a new local content regime for Tanzanian mines and their contractors/ suppliers and other allied entities (Stakeholders).

This regime requires, among other things, that Stakeholders must maintain minimum levels of Tanzanian employees, use Tanzanian-licensed service providers and give preference to Tanzanian-incorporated suppliers who meet certain thresholds of ownership by Tanzanian citizens.

The Mining (Local Content) (Amendments) Regulations, 2019 (and Amendment Regulations) have amended the Local Content Regulations with effect from
8 February 2019. The key changes introduced by the Amendment Regulations are summarised below.

Indigenous Tanzanian companies face less stringent local ownership requirements

In terms of the Local Content Regulations, among other things (i) an indigenous Tanzanian company shall be given first preference in the grant of a mining licence and (ii) a non-indigenous Tanzanian company which intends to provide goods or services in the mining sector in Tanzania is required to incorporate a joint venture company with an indigenous Tanzanian company, which shall hold an equity interest of at least 20% in such joint venture.

The Local Content Regulations (as amended by the Amendment Regulations) now require that a minimum of 20% of a company’s shares must be held by Tanzanian citizens for that company to qualify as an indigenous Tanzanian company. This has been significantly reduced  from the previous 51% minimum requirement under the Local Content Regulations prior to the amendment. 

The other requirements for an entity to qualify as an indigenous Tanzanian company have not changed (i.e. the company must still be incorporated in Tanzania and Tanzanian citizens must hold at least 80% of the company’s executive and senior management positions and 100% of its non-managerial and other positions).

Use of Tanzanian banks and financial institutions

As well as requiring stakeholders to transact business only through banks in Tanzania, the Local Content Regulations require a Stakeholder wanting financial services with respect to a mining activity to only retain the services of a Tanzanian financial institution or organisation, unless the Mining Commission approves the use of a foreign financial institution or organisation. The Amendment Regulations have clarified the meaning of ‘Tanzanian’ and ‘foreign’ for these purposes, by reference to the definitions in Tanzania’s main banking legislation (the Banking and Financial Institutions Act, 2006).

The original Local Content Regulations required a Stakeholder to also maintain a bank account with an 'indigenous Tanzanian bank' which was majority Tanzanian owned. The Amendment Regulations now require Stakeholders to maintain bank accounts with a Tanzanian bank that has at least 20% Tanzanian shareholding. 

Extension of timeframes for approval of local content plans

Stakeholders must submit local content plans, in a prescribed form, to the Mining Commission, which will decide to approve or reject these plans after hearing the recommendations of its Local Content Committee.

The Local Content Regulations set deadlines for the Mining Commission and Local Content Committee to acknowledge receipt of, review and communicate decisions on local content plans, and the Amendment Regulations have extended these timeframes. These amendments are likely driven by the fact that the Mining Commission and the Local Content Committee sit periodically and comprise both full-time and part-time members and thus lack the capacity to deal with the volume of local content plans submitted to them.

The Amendment Regulations also remove a provision in the Local Content Regulations that provided for ‘deemed’ approval of a local content plan after
50 days where the Commission failed to notify a Stakeholder of an outcome in that period of time. As a result, there is now uncertainty regarding the repercussions if the Commission fails to act within the prescribed timeframes to either approve or reject a local content plan.

Stakeholder engagement on minimum local content levels

The First Schedule to the Local Content Regulations sets out minimum local content thresholds that Stakeholders should achieve in hiring Tanzanian citizens and for local procurement spend on supplies of goods and services.

The Local Content Regulations empower the Minister of Minerals, in consultation with the Mining Commission, to prescribe further minimum local content levels to supplement those in the First Schedule of the Local Content Regulations. However, the Amendment Regulations add that the Minister of Minerals should, when doing so, consult to ensure that the views of Stakeholders have been sought.

While uncertainties with respect to the implementation of the local content regime remain, the Mining Commission, the Local Content Committee and the Ministry of Minerals have been seeking, and accommodating, Stakeholder engagement in this regard and, in our view, the Amendment Regulations represent a positive development in the Tanzanian mining space arising from such engagement.