Q&A – 23 October 2023

Minimum Local Shareholding for Mineral Right Holders

I am a newly appointed Chief Operations Officer of a certain mining company incorporated abroad. Our company is planning to extend its mining activities to Tanzania. In conducting our remote due diligence prior to coming to Tanzania, we came across the Mining (Minimum Shareholding and Public Offering) Regulations, 2016 which require mineral right holders to offer a minimum of 30% to Tanzanian nationals by listing such shares with the Dar es Salaam Stock Exchange (DSE). We are concerned with this requirement of the law. We seek your guidance on whether this requirement applies to every mineral right holder.
MM, Cape Town

We are aware of this requirement which stems from section 126 of the Mining Act, Cap. 123 [R.E. 2019]. Under this provision, the Minister for Minerals, in consultation with holders of Special Mining Licences (SMLs), is required to make regulations prescribing the minimum shareholding requirement and procedure for selling shares to Tanzanian nationals, in accordance with the provisions of the Capital Market and Securities Act, through listing with the stock exchange. In exercising these powers, in 2016, the Minister promulgated the Mining (Minimum Shareholding and Public Offering) Regulations (the Regulations).

In terms of regulation 4 of the Regulations, the minimum shareholding for SML holders is 30% of the total issued and paid up shares. Besides, the minimum shareholding requirement should be maintained as an ongoing obligation throughout the licence period. However, in the case where an SML holder fails to secure the minimum local shareholding due to an unsuccessful public offer, the Minister may, upon application by the holder of a licence and recommendation of the Capital Market and Securities Authority, grant a waiver to the holder from the minimum shareholding requirement. It is noteworthy that following the introduction of the mandatory state participation requirement, the minimum shareholding requirement does not apply where an SML holder has entered into an agreement with the Government of Tanzania and the agreement provides for: non-dilutable free carried interest (FCI) shares to the Government in the mining company’s capital; and economic benefits sharing arrangement.

Of interest is that issuance of FCI shares is mandatory to holders of mining and special mining licences depending on the level of investment and type of minerals. This would imply that the minimum shareholding requirement is contingent upon failure to issue FCI shares to the Government. As such, be advised that first, the minimum shareholding requirement applies to SML holders only; secondly, a waiver can be granted by the Minister if the holder of a licence fails to secure the minimum local shareholding due to an unsuccessful public offer; and thirdly, the requirement does not apply if the SML holder has issued FCI shares to Government of Tanzania. In case you still need more clarification, we advise you to engage directly with the Mining Commission for specific advice regarding the requirement.

Dispute Resolution in land matters

Three years ago, my fellow accountants and I secured a space where we could locate our offices for purposes of providing audit services to various customers. Upon completing the transaction, we immediately started constructing our office building. Given that the place was unsurveyed, we only relied on the seller’s warrant that he was the true and rightful owner of the place. Unfortunately, things appear not to be going well on our side. It has come to our attention that such land did not belong to the seller, and rather to someone else. We have been advised that we can submit this dispute to arbitration, and not the Court which we thought is the only place we can seek and obtain remedies. We are concerned if this is proper and legally tenable. Kindly guide us.
GK, Mwanza

Parties to any agreement are free to choose terms and conditions to be included in their agreement provided that such terms and conditions are not contrary to the applicable law. One of the things the contracting parties can agree upon is the way their future differences/disputes should be resolved and by which body. In this regard, parties can choose to submit their dispute to Court or arbitration or resolve the same amicably through negotiations and discussions.

It is important to note that the parties, having initially agreed on a certain mode of resolving their dispute, can agree to resolve such dispute through a different mode. That is, having initially agreed to submit the future dispute to Court, the relevant parties can decide to submit the dispute that has arisen to arbitration. This implies that the parties can agree otherwise upon occurrence of a dispute which was initially agreed to be submitted to Court or arbitration.

However, it should be noted that not all disputes can be submitted to arbitration. This is especially for areas where the law specifically gives exclusive jurisdiction to Courts or certain tribunals to resolve certain disputes. One of these laws is the law governing land matters in Mainland Tanzania. In terms of section 167(1) of the Land Act, Cap. 113 [R.E. 2019] (the Act), only selected bodies, that is, Court of Appeal; the High Court; the District Land and Housing Tribunal; Ward Tribunals; and Village Land Councils are vested with exclusive jurisdiction to hear and determine all manner of disputes, actions and proceedings concerning land.

With this legal position, parties cannot agree to submit a land dispute to arbitration, for land disputes are not arbitrable in Tanzania. Submitting such kind of dispute which touches on the land ownership to arbitration would be in total contravention of the applicable law, that is, the Land Act. It is important to note further that in terms of section 181 of the Act, if any law provides differently from what the Land Act provides for with regard to land matters, the Land Act prevails over such other law. This means that if there is any law that allows any other body other than those listed under the Land Act to resolve land disputes, such law cannot prevail over the Land Act. In any case, we are not aware of such a law. In case you need further guidance, we advise you to liaise with your attorney.