Briefing Note: Local Content Regulations Following Amedments To The Tanzanian Mining Act, 2010

In this month's briefing, we provide the highlights of the Local Content Regulations (the Regulations) issued recently. The Regulations follow the amendments of the Mining Act, 2010 through the Written Laws (Misc. Amendments) Act, Act No. 7 of 2017 which introduced the local content requirements.

This briefing covers the following key provisions:

  1. Establishment of a Local Content Committee

The Regulations establish a Local Content Committee (the Committee) which shall, among others, be responsible for overseeing compliance and implementation of the Regulations. The Committee has powers to set the minimum standards of local content requirements, monitor and audit compliance of local content requirements and prepare guidelines to include targets and formats for the local content plans. 2. Adherence to the local content regulations

The Regulations impose the obligation to ensure local content provisions are adhered to by the contractor, subcontractor, licensee, any other allied entity (the Contractor) and the Corporation. The Corporation is defined in the Regulations as an entity to be established or designated as such for the purposes of holding control of the Government's mineral assets. We understand this includes Free Carried Interest (FCI) to be given to the Government by holders of mining and special mining licences. 3. Ownership by indigenous Tanzanian company

The Regulations provide that an indigenous Tanzanian company (Tanzanian Company) means a company incorporated under the Companies Act of Tanzania where at least 51% is owned by Tanzanian citizens, where Tanzanian citizens hold at least 80% of the executive and senior management positions and Tanzanians occupy 100% of non-managerial and other positions. A Tanzanian Company shall be given first preference when mining licences are granted. Our understanding of this provision is that if there is a Tanzanian Company and a non-indigenous Tanzanian company (Foreign Company) competing, the mining licence shall be granted to the Tanzanian Company. The Regulations further provide that at least 5% of the participating interest in a company applying for a mining licence shall be held by a Tanzanian Company. We are of the view that this seems to apply to companies applying for mining licences only, as opposed to those applying for a special mining licences. Furthermore it does not seem to apply retrospectively i.e. the existing mining companies may not be required to comply with this minimum shareholding requirement. It also presumes that the 5% shall be owned by a Tanzanian Company as opposed to a Tanzanian individual. The 5% ownership by a Tanzanian Company is separate from the ownership by the Corporation. Therefore, a Tanzanian Company shall own not less than 5% of the equity in a mining company while the Corporation (meaning the Government controlled entity) shall own the agreed FCI which shall not be less than 16%. The Minister is entitled to vary the percentage to be held by the indigenous Tanzanian Company if the latter cannot satisfy the requirement of 5% participation. The Minister for Minerals shall determine the persons qualified to hold the 5% equity in the company applying for a mining licence. Although the Regulations are unclear on this aspect, we understand that the Minister has the authority to select or approve the persons who can hold the 5% equity. The Regulations empower the Minister to vary the minimum shareholding requirement if the Tanzanian Company is unable to satisfy the requirement of 5% equity participation. The Regulations provide that the interest of a Tanzanian Company shall not be transferable to a Foreign Company. 4. Provision of services by a Foreign Company

The Regulations provide that every Foreign Company which wishes to provide services to the Contractor shall incorporate a joint venture (JV) company in which Tanzanians hold not less than 25% of the equity. 5. Submission of a plan

The Contractor shall before commencing mining activities submit a plan to the Mining Commission (the Commission) specifying the role and responsibilities of Tanzanians, their equity participation and the strategy for transfer of technology and know-how to Tanzanians. The Regulations define mining activities to mean an...

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