Tanzania: Liganga, Mchuchuma Iron Ore, Coal Deals for Review

Dar es Salaam — The government is reviewing the contracts for Mchuchuma and Liganga projects to align them with the amended natural wealth and resources laws.

The ministry of Trade, Industry and Investment's deputy permanent secretary, Rudovoik Ndurie, told The Citizen in an interview that all strategic projects in the extractives sector - including those in the mining, gas and oil sectors - are undergoing reviews.

"This is after the government enacted the new laws in the extractives sector and implementation of the directives given by Parliament to align all natural resources contracts with the new laws," he said.

Answering a question on whether the government is in new negotiations with the Tanzania China International Mineral Resource Ltd (TCIMRL), he said he was not aware if that were happening.

However, he said he was aware that last year the government planned to appoint a negotiation team to revisit terms that were different from the initial contracts.

Earlier, the TCIMRL chief executive officer, Eric Mwingira, told The Citizen that they were in new negotiations with the government.

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This was after the $3 billion (Sh6.8 trillion) Mchuchuma and Liganga projects had taken at least nine years to take off.

"The company has invested a lot in the project, and what we can do is wait for the government to make a decision," he said.

He explained that they were currently in talks with some government officials who had been appointed to oversee the matter.

However, he declined to mention what was being discussed on the grounds that it was still too early to make the discussion public.

The Liganga iron ore and the Mchuchuma coal mining and power projects, worth $3 billion, were expected to be implemented by TCIMRL beginning in 2016.

TCIMRL expected to invest $1.8 billion in Liganga to establish an iron ore mine and iron and steel complex to produce one million tonnes per year of iron and steel products, as well as vanadium pentoxide and titanium dioxide.

The Mchuchuma project includes the construction of a 600MW coal-fired power station, of which 250MW would be used by the iron plant, while the remaining 350MW would be fed to the national grid.

Reports state that, in February last year, Minerals minister Doto Biteko issued a 30-day ultimatum to the National Development Corporation (NDC) to "rectify mistakes" in the mining contract - or the licence would be revoked.

But TCIMRL had told The Citizen that the project - whose contract was signed in 2011 - would be up and running by now had the government not dilly-dallied in endorsing tax incentives requests.

He said Mchuchuma would be producing electricity after three-and-half-years of construction, while Liganga would be nearing completion this year after four years of implementation.

In November 2018, the Chinese company revealed that it was being held back by the Treasury delaying approval of incentives negotiated with the government in 2015.

The company won the tender for the mega-project that has the potential to create 5,000 direct jobs and 30,000 indirect ones in 2010. But its roll-out has been beset by red tape to-date.

According to Mr Mwingira, the company was only asking for a 10-year tax relief for a project whose lifespan stretches to between 50 and 100 years.

He said that, among other things, the company was seeking tax incentives on import duty on goods to be imported for the construction work, as well as incentives on spare parts and machinery. It was also asking for tax relief on fuel.

The Chinese firm's parent company, Sichuan Hongda Group Ltd (SHG), discharged its part of the contract by carrying out geological exploration, environmental and social impact assessment, valuation for purposes of compensation of people affected by the project, research, as well as development for smelting technology to the tune of about $70 million.

"The capitalised exploration cost consumed a lot of resources because of the complexity of the mineralogical constitution - when it comes to separation of titanium from iron ore - and design for industrial complex for power generation for iron and steel industry," said Mr Mwingira.

Immediately after the granting of the licence, TCIMRL started negotiations with the government of Tanzania in 2014 through the National Investment Steering Committee (NISC) on the granting of investment incentives for the Mchuchuma and Liganga projects, in accordance with the provisions of the Tanzania Investment Act (CAP. 38).

"After concerted negotiations, a Performance Contract was signed in June 2014, which provided for some investment incentives for the project."

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