Photographer: Brendon Thorne/Bloomberg

Tanzanian Parliament Enacts Resources Law Castigated by Industry

  • Act entitles state to acquire up to 50% of mining companies
  • President overhauling mining industry to fund development plan

Tanzania’s parliament enacted the third law this week to overhaul the country’s natural-resources industries, ignoring a lobby group’s warning that the legislation will inhibit investment.

The Written Laws Act, was passed by lawmakers late on Tuesday, according to a statement posted on the chief government spokesman’s Twitter account. Its provisions include granting the government stakes of at least 16 percent in mining companies operating in the East African country, with the option to acquire up to 50 percent.

“The nature, scale and manner of the recent changes have spooked the mining community and poses questions around the attractiveness of Tanzania’s business environment,” Rand Merchant Bank analyst Ronak Gopaldas said in an emailed response to questions. “With the relationship between the mining community and government already strained, the latest bills have fuelled uncertainty and added to a growing list of investor concerns.”

Tanzanian President John Magufuli is overhauling the country’s natural-resources industry to ensure the government gets a greater share of revenue from its raw materials and help finance his plan to industrialize sub-Saharan Africa’s sixth-biggest economy. The country has transport and utilities projects worth at least $19 billion in the pipeline, according to PricewaterhouseCoopers LLP.

Infrastructure Spending

Last month, the Finance Ministry said it will spend at least 1.8 trillion shillings ($807 million) in the next fiscal year on projects including building a standard-gauge railway and upgrading its main port in Dar es Salaam.

The Tanzania Chamber of Minerals and Energy had warned in a submission to parliament that the legislation would make Tanzania an “unattractive destination for mining investment.” The law was the third passed in two days, after the approval on Monday of acts that assert the state’s sovereignty over mineral rights and enable the government to renegotiate contracts with mining and energy companies.

“The proposed legislation isn’t providing sufficient rights, nor the framework shareholders and investors expect when investing in the exploration and production sector,” the Oil & Gas Association of Tanzania said in a letter sent to lawmakers before they began debating the legislation. “Sanctity of contracts, a competitive stable fiscal framework and international arbitration are a keystone to the investment decisions.”

In March, Magufuli banned exports of metal concentrates and ordered an audit to identify loopholes that he said result in income losses. Two months later, the president fired Mines Minister Sospeter Muhongo after a probe found mineral shipments had been understated. On Tuesday, he ordered a halt to new mining permits as well as the renewal of existing ones.

Tanzania is the continent’s third-biggest gold producer, with companies including AngloGold Ashanti Ltd. and Acacia Mining Plc extracting the metal, and also produces copper, iron, zinc and diamonds. It also holds about 55 trillion cubic feet of natural gas reserves that are being developed for export by companies including Statoil ASA and BG Group Plc.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE