Tanzania provides one of the most attractive investment environments in Africa following its embrace of open-market economic policies starting in the mid 1990’s. Privatisation of state industries, investment incentives and a liberalised foreign exchange controls have all contributed to its success in attracting foreign investment in the last twenty years. Given the country’s rich endowment of mineral resources principally gold, diamonds, gemstones and more recently nickel and uranium, mining has been one of the main sectors to have benefited from Government reform and investment incentives.
Key economic factors that make mining investment attractive in Tanzania are:
• Globally competitive tax and regulatory regime for mining investors.
• Accelerated and simplified handling of investment proposals.
• Technical staff trained in various disciplines associated with mining.
• An abundant supply of labour.
• A peaceful working environment free of confrontations, ethnic strife and labour disputes.
• Well-established mining services industry
As well as favourable political and economic factors, Tanzania is a large relatively unexplored country for a variety of mineral commodities in varied geological settings.
Mining Sector – Government policy and operation
Government policy on mineral Exploration and mining in Tanzania is governed by the Mining Act No. 15 of 2010 (“Mining Act) and associated regulations. the Mining (Mineral Rights) Regulations, 2010; the Mining (Environmental Management and Protection) Regulations; the Mining (Safety, Occupational Health and Environment Protection) Regulations, 2010; the Mining (Environmental Protection for Small Scale Mining) Regulations, 2010; the Mining (Mineral Beneficiation) Regulations, 2010; the Mining (Mineral Trading) Regulations, 2010; and the Mining (Radioactive Minerals) Regulations, 2010. Specific provisions relating to the mining industry are also contained in the Environmental Management Act, 2004, the Income Tax Act, 2004 (which sets out a special regime for the mining sector) and the Tanzania Investment Act, 1997 which contains provisions that prohibit expropriation without due process of law that guarantees fair compensation, profit and capital repatriation and as well as access to international arbitral process.
Tanzanian Government policy stresses the role of private led mineral development while acknowledging the role of Government as being in regulating, promoting and facilitating this activity. The Mining Act sets out the legal and regulatory framework by which companies and individuals can obtain mineral rights, conduct exploration activity and develop mines. The salient points of the Mining Act in regard to mineral right tenure are:
• Exploration mineral rights comprise Prospecting Licences (PL), Gemstone Prospecting Licence (GPL), and Primary Prospecting Licences (PPL). While mining mineral rights comprise Special Mining Licence (SML); Mining Licence (ML); Gemstone Mining Licence (GML); and Primary Mining Licence (PML). Taken together all these mineral rights accommodate exploration and mining activity by all participants from small scale artisanal miners to large companies.
• Mineral rights are allocated following the end of the application process laid down in the regulations. Where there are more than one applicant for an area, the Government may put the area out to tender. There are transparent procedures for allocation, transfer and termination of mineral rights. Security of tenure is guaranteed with seamless transition from exploration mineral rights to mining mineral rights contingent on preparation of feasibility study and meeting environmental regulations. Termination of a mineral right may only be for reason of default and the licencee is entitled to specific notice of an intention to terminate with a period allowed to rectify the default before termination is implemented.
There is a special fiscal regime for mining companies and most of the provisions come principally under the Income Tax Act (2006) which sets out the fiscal and tax regime that applies to the exploration and mining industry in Tanzania. The main provisions applicable to both domestic and foreign exploration and mining companies are:
• Corporate tax rate not exceeding 30%
• Mining royalties of 4% for gold and other metallic minerals, 5% for uranium, gemstones & diamonds and 3% for other minerals. Royalty is levied on gross back value i.e. the market value of minerals at the point of refining or sale or in the case of consumption within Tanzania, at the point of delivery within Tanzania.
• Exemption of import duty on equipment and essential materials up to the first anniversary of the start of production; thereafter a 5% cap on these taxes applies
• Depreciation allowances of 80% on capital expenditure
• No restrictions on repatriation of profits from mining operations
Holding of mineral rights by foreign companies in Tanzania
Typically, foreign mineral exploration companies hold their mineral rights as Prospecting Licences (PLs) which have been granted to them by the Ministry of Energy and Minerals (the Ministry) under the terms of the Mining Act or indirectly through joint venture or option agreements with local companies and individuals who already hold the PLs. PLs have a maximum area of 300 square kilometres and are valid for a period of up to 11 years during which time they have to be renewed after four years from grant and again for two subsequent periods of 3 and 2 years respectively. After this period of 9 years the PL may renewed for another 2 year period in order to complete a feasibility study if applicable. There is a requirement to relinquish 50% of the PL area at each renewal. Annual rents and required exploration expenditure amounts on PLs are laid down by Government regulation and can be amended from time to time . Following the expiry of a Prospecting Licence where a mineral deposit has been delineated but for which economic extraction is not yet viable, a company can apply to the Ministry for a Retention Licence which has an initial grant period of five years and can be renewed for a further five years . The grant and renewal of a Retention Licence is contingent on meeting Tanzanian Government requirements in adequately demonstrating the case for postponement of applying for a mining right.
Prospecting Licences can be seamlessly converted to Mining Licences or Special Mining Licences (projects with in excess of $100 million capital expenditure requirement) following production of a positive feasibility study and contingent on the holder meeting other criteria e.g. implementation of appropriate environmental impact studies. Mining Licences are issued for a period of 10 years or “life of mine” whichever is shorter while Special Mining Licences are issued for the life-of-mine period specified in the feasibility study.
Special Mining Licences will be the subject of a comprehensive Mining Development Agreement with the Government and provide for the negotiation of a free carried interest by the state.
Other Mineral Rights
Exploration and Mining rights relating to Gemstones and Primary Mining and Prospecting Licences are designed for Tanzanian nationals (dominantly small scale miners) and have their own specific terms attached. Issue of Primary Prospecting Licences and Primary Mining Licences is confined to Tanzanian nationals and have been created to accommodate the small scale artisanal mining communities that are found throughout the gold mining areas of the Country. These primary mineral rights which cover maximum areas of 10 hectares each take precedence over subsequently issued PLs and access to these areas for exploration is by private arrangement with the owners.
More detailed information on the Tanzanian Government policy in regard to minerals, relevant legislation and regulation can be found on the Ministry of Energy & Minerals (Tanzania) website https://mem.go.tz/. General Information on Tanzania can be accessed through the Tanzanian Government website: http://www.tanzania.go.tz