Impact Of The Amendments To The Mining Local Content Regulations On Banking Operations

In this month's Finance Briefing we review the effects of the amendments to the Mining (Local Content) Regulations, 2018 on the operations of commercial banks in Tanzania.

On 8 February 2019, the Mining (Local Content) (Amendment) Regulations, 2019 (the Amendment Regulations) were passed, which amend the Mining (Local Content) Regulations, 2018 (the Regulations). The Amendment Regulations amend the Regulations in a number of ways, but in particular there is one significant change that affects the banking sector.

In our finance briefing of January 2018, we looked at regulation 36 of the Regulations which stated that "a contractor, subcontractor, licensee or other allied entity shall maintain a bank account with an indigenous Tanzanian bank and transact business through banks in the country". The Regulations defined an 'indigenous Tanzanian bank' as a bank that has one hundred percent Tanzanian shareholding or not less than a majority Tanzanian shareholding.

Contractors, subcontractors and licensees, are defined as persons / entities that have entered into mining agreements with Tanzania, third parties to whom such persons have entered into mining contracts for mining operations, and persons granted licences to undertake mining operations, respectively. For the purposes of this Finance Briefing, we use the term 'Contractors' to mean contractors, subcontractors, licensees and other allied entities.

The Amendment Regulations, among other things, reduce how stringent the banking requirements were, as not many banks operating in Tanzania fall under the definition of...