On 3 July 2017, the National Assembly enacted the Natural Wealth and Resources (Permanent Sovereignty) Act 2017 and the Natural Wealth and Resources Contracts (Review and Re-Negotiation of Unconscionable Terms) Act 2017. The Written Laws (Miscellaneous Amendments) Act 2017, which amends several laws, was enacted on 4 July 2017. All these laws are now in force.
The Natural Wealth and Resources (Permanent Sovereignty) Act 2017
The Act proclaims that the people, through the Government, have permanent sovereignty over all natural wealth and resources. The Act further provides that natural wealth and resources shall be inalienable and always remain the property of the People, and held in trust by the President on behalf of the People. In this regard, authorisation granted for extraction, exploitation or acquisition shall ensure that the Government obtains an equitable stake in the venture and the People acquire stakes in the venture.
It is now a mandatory requirement that beneficiation must be done locally. Similarly, all earnings from disposal or dealings in natural resources must be retained with Tanzanian banks and it is unlawful to keep such earnings in banks outside Tanzania unless it’s repatriation of distributed profits.
All arrangement for exploitation of natural resources must be under Tanzanian laws and all disputes to be adjudicated in Tanzania. In addition, the National Assembly has been given mandate to review such arrangements or agreements. Moreover, the Act vests the Minister with powers to make Regulations prescribing the code of conduct for investors and minimum guidelines for inspection, monitoring and evaluation of investments.
The Natural Wealth and Resources Contracts (Review and Re-negotiation of Unconscionable Terms) Act 2017
Defines ‘unconscionable term’ as any term in the arrangement or agreement on natural wealth and resources which is contrary to good conscience and the enforceability of which jeopardises or is likely to jeopardise the interests of the People of Tanzania. The Act enumerates instances of terms that may be deemed to be unconscionable to include terms: restricting the right of the State to exercise authority over foreign investment; inequitable and onerous to the state; restricts periodic review of arrangement or agreement which purports to last for life time; securing preferential treatment designed to create a separate legal regime to be applied discriminatorily for the benefit of a particular investor; subjecting the State to the jurisdiction of foreign laws and fora; undermining the effectiveness of State measures to protect the environment or the use of environment friendly technology.
The Act vests the National Assembly with powers to review any arrangements or agreement, both existing and new, relating to natural wealth and resources. All new arrangements or agreements must be reported in the next National Assembly sitting (within the first six days). If when report submitted, National Assembly finds that the arrangement or agreement contains unconscionable terms, it may, by resolution, advise the Government to initiate re-negotiation of the arrangement or agreement with a view to rectifying such unconscionable terms. After National Assembly so resolves, the government must serve, within 30 days, the other party a notice of intention to renegotiate such unconscionable terms. This notice shall state nature of the unconscionable terms and intention to expunge (remove) the term if renegotiation is not concluded within a specified term. Maximum time to renegotiate (unless time extended on mutual agreement) is 90 days from date of service of notice. Where no agreement is reached, such unconscionable term shall cease to have effect and be expunged by operation of the law.
The Written Laws (Miscellaneous Amendments) Act 2017, amends the Mining Act 2010
This primarily changes the Mining Act 2010, with very few non substantial amendments to the Petroleum Act. It states that all minerals property vested in the President in trust for the People and that the Government has a lien over any mining material, substance, product or associated products.
Further, mineral rights are not to be granted to Companies without a physical and postal address in Tanzania for purpose of serving notices or Companies that are not incorporated in Tanzania under Companies Act.
Holders of Mining License or Special Mining License must now cede minimum 16% free carried interests (non dilutable) to the Government. In addition, the Government can acquire up to 50% of the shares commensurate with the total tax expenditures incurred by the Government in favour of the mining company.
The Act establishes a power new body, the Mining Commission whose functions are very wide and include: issue licenses under the Mining Act; regulate and monitor the mining industry and mining operations in Tanzania; resolve disputes arising out of mining operations or activities; carry out inspections or investigations on health and safety issues related to mining operations or activities; advise the Government on, and ensure compliance with all applicable laws and regulations related to the health and safety of persons involved in mining operations or activities; monitor and audit environmental management, environmental budget and expenditure for progressive rehabilitation and mine closure; examine and monitor implementation of feasibility reports; mining programs and plans; annual mining performance reports; and environmental management plans and reports of mining companies; secure a firm basis of comprehensive data collection on national mineral resources and technologies of exploration and exploitation for national decision making; issue, suspend and revoke exploration and exploitation licences and permits.
A Mines Resident Officer is to also now be stationed in every mine site to monitor day to day production process, verify records, access to mineral storage facility inside mine, oversight over mineral removals and transportation to Government Minerals Warehouse.
The Act establishes the National Gold and Gemstone Reserve which will collect all royalties in paid in kind, impounded minerals to be deposited and Government purchased minerals to be kept. There will also be an establishment of Government Minerals Warehouse which shall be a Central custodian of all the metallic minerals and gemstones won by mineral rights holders in Tanzania.
Special Mining Licence now also requires Cabinet approval before issuance, with changes in royalty for gold, copper, gemstones, silver, diamonds from 5 to 6%. License holder are now obliged to construct a secure storage facility for storing of won raw minerals and access to the raw minerals can only be procured from joint authorisation by an appointed official of the mining company and the Mines Resident Officer with special log book. Won minerals to be stored at the mine for not more than five days before they are moved to the Government Minerals Warehouse to await disposal for home refining, authorized mineral dealers or, where so permitted, for export. Raw minerals shall now only be removed from the mine under the supervision of the Government and shall be kept secured in the Government Minerals Warehouse.
All won raw minerals shall be mined, sorted and valued in the presence of Mines Resident Officer, an Officer from TRA and relevant institutions of state organs. The Government can under this Act reject valuation of minerals and can buy the minerals at the declared value. Further, all minerals won from the mines shall be beneficiated within the United Republic and no permits to be issued for export of raw minerals. This law states that stabilisation clauses shall be specific and time bound and no life time stabilisation is henceforth allowed. Tax exemptions to be quantified with an option to convert quantified values of tax to convert into equity in mining company.