State Participation In Mining Operations In Tanzania: Tanzania Mining Law

• Published date: 06 April 2022
• Subject Matter: Energy and Natural Resources, Mining
• Law Firm: Shikana Group
• Author: Shikana Law Group

On October 30 2020, the Minister of Minerals promulgated the Mining (State participation) Regulation Government Notice No. 939 of 2020 which essentially sought to give effect to section 4 and 10 of the Mining Act CAP 123 R.E 2019 which provides for the state participation in mining operations.

The Regulation provides for the 16% of non-dilutable free carried interest shares that the Government of Tanzania shall have in any mining operations under a mining license or special mining license and the government has the right to acquire more shares up to 50% of the share capital of a mining company

Regulation 4 provides for the nature of non-dilutable free carried interest shares which is defined under section 4 of the Mining Act to mean the "interest derived from holding shares of which the holder enjoys all the rights of a shareholder but has no obligation to subscribe or contribute equity capital for the shares." These shares shall be treated as a special class of shares and the shareholder shall be entitled to dividend and the shares shall not decrease in value or percentage of ownership.

In accordance to Regulation 5(1), the Government through the Treasury Registrar shall acquire not less than 16% of the non-dilutable free carried interest shares in the capital of a mining company or any person holding a mining license or special mining license. Furthermore, Regulation 5(2) provides that the government can acquire up to 50% of shares in a mining company. The acquisition of the 50% shares shall be determined by the total value of the tax expenditures enjoyed by the mining company or a person holding mining license or special mining license through tax exemptions and reliefs.

The Government is vested with an obligation to review tax expenditures enjoyed by the mining company in every two years after the commencement of the Regulation so as to determine the number of shares to be acquired by the Government. This provision is quite puzzling as one wonders what the point of providing tax incentives is if those same tax incentives provided can be transformed into actual shares in the Company. So by virtue of regulation 5 (2) one can say that there are in fact no tax incentives in the mining sector.

Regulation 6 stipulates that the Mining Commission, the office of the Treasury Registrar together with Tanzania Revenue Authority shall deliberate and determine the level of investment made by the mining company on which the Government shall be entitled to acquire...