Compliance with mining local content

I am a recently appointed chief operations officer at a limited liability company which primarily provides services to mining companies in Tanzania. Our company is 80% foreign-owned. With the recent amendments to the Mining (Local Content) Regulations (the Regulations), I am seeking your legal advice if our company is still complaint; and if not, what should we do to remain compliant?

AT, Singida 

We are aware of the recent amendments to the Regulations. We should tell you from the outset that, the amendments are not free from questions. Generally, the Regulations require contractors, licensees and subcontractors to give preference to indigenous Tanzanian companies (ITCs) for goods and services. Prior to the amendments, the Regulations provided that a non-ITC that desired to provide services or goods to mining companies was required to incorporate a company in Tanzania; operate it in Tanzania; and provide goods and services through a joint venture (JV) with an ITC that should hold at least 20% in the JV. With the amendments, there seems to be a 180-degree turn. The amendments provide that a non-ITC that seeks to provide goods and services to the mining sector should establish a JV with an existing ITC that is 100% locally-owned and operates within the same line of business as the goods or services to be supplied, and such ITC should hold at least 20% of equity participation in the JV. However, the JV requirement does not apply where the goods or services to be provided are exclusively reserved for ITCs that are wholly owned by Tanzanians.

As noted above, these amendments leave a number of issues. First, the definition of an ITC as a company incorporated in Tanzania with at least 20% of its equity owned by Tanzanians is not amended. This implies that ITCs with 20%/80% shareholding structure are still compliant. Second, the fact that the amendments require non-ITCs to provide goods or services through JVs with 100% local ITCs implies that ITCs under 20%/80% shareholding are still allowed, only that they do not qualify for JV arrangements. Other than this interpretation, there was no need to qualify the ITC that should form a JV with a non-ITC. An amendment to the definition of an ITC would have sufficed. Better drafting would have certainly assisted in clearing the air and we advise you to directly contact the Mining Commission for more guidance.