Tanzania: Magufuli's Major Decisions Yield Good Results

SEVERAL major decisions made by President John Magufuli, as his administration finishes five years in power, have brought about positive impacts not only on the mining sector, but also on the protection of the country's natural resources in general.

One of such milestone decisions initiated by President Magufuli's administration is the coming of the Mining (Local Content), Regulations, 2018 included in the Written Laws (Miscellaneous Amendments), Act No 7 of 2017, following the amendments of the Mining Act, 2010.

Section 10(1) of the Act, as revised in 2018, states that in any mining operations under a mining licence or special mining licence, the government shall have not less than 16 per cent non-dilutable free carried interest shares in the capital of a mining company, depending on the type of minerals and level of investment.

Subsection (2) states: "In addition to the free carried interest shares, the government shall be entitled to acquire, in total, up to 50 percent of the shares of the mining company commensurate with the total tax expenditures incurred by the government in favour of the mining company."

Whereas Subsection (3) stipulates that acquisition by the government of shares in the company shall be determined by the total value of the tax expenditure enjoyed by the mining company.

President Magufuli was sworn in as President of the United Republic of Tanzania on November 5, 2015, after he emerged the winner of the general election on October 25, 2015.

He scooped 8,882,935 votes (equivalent to 58.46 percent) of the total votes. He was declared the winner under the ruling CCM.

After his nomination on July 21, 2015, as the CCM presidential candidate for the 2015 general election, one of his priorities he marketed during the presidential campaign was the mineral sector.

He promised to take actions to further promote the mining sector and increase its contribution to the GDP.

According to the CCM 2015/20 electoral manifesto, the ruling party directs the government to take further decisions, notably combining and managing a system for overseeing mining operations, collecting data and monitoring mining revenue for raising government revenue.

Other issues related to the establishment and implementation of effective strategies to attract investment capital in the mining sector, particularly rare earth elements (REE) and encourage industrial production and marketing.

The government has also put in place significant infrastructure such as electricity, telecommunications networks, water, roads through the public-private partnership (PPP) in areas likely to establish new major mines and improve censing and a management system for mining licences.

Other areas to be worked on include strengthening the National Mining Corporation (Stamico), to be fully involved in the exploration, extraction and service activities in the mining sector on behalf of the government and all Tanzanians.

Furthermore, to continue building the capacity of the Geological Agency of Tanzania to achieve the highest levels of data collection and geological information that will accelerate the exploration and acquisition of mineral resources in the country.

Besides this to continue building the Tanzania Minerals Review Agency's capacity and the Regional Mining Offices to strengthen themselves in monitoring and regulating the production and trade in mining activities in the country, thus increasing the profitability of the mining sector in the economy.

Another action related to managing and encouraging investment in mining activities to boost the sector's contribution to GDP is to develop and implement specific strategies that will reduce or eliminate mining exports and illegal mining activities in the country.

Other issues include developing and implementing specific strategies that will enable the Tanzanite market in the country to be more resilient and thus maximize the benefits derived from those minerals found in Tanzania alone and enable small-scale miners to self-invest through the mineral sector.

After taking the country's highest office, President Magufuli's administration initiated the amendments of the Mining Act, 2010, followed by the introductions of the Mining (Local Content) Regulations, 2018.

These Regulations were enacted following the Amendments of the Mining Act, 2010.

These Regulations have to be followed by contractors to ensure local content rules are adhered to all persons or companies involved in the mining sector.

Following the amendments of the Mining Act, a committee has been established to oversee the implementation of the Regulations in the mining sector in Tanzania.

These Regulations clearly state that priority has to be given to qualified Tanzanians in employment and in job training, among other things.

Furthermore, the Regulations provide that preference has to be given to local service providers and goods which are manufactured locally.

Companies which will be given priority in the grant of mining licences are indigenous Tanzanian companies.

According to the Regulations, legal services have to be provided only by local legal practitioners or local law firms, while insurance and financial services used by these companies should be local ones only.

The Mining (Local Content) Regulations, 2018 also provides that Tanzanian companies which are indigenous must hold an equity participation of at least 20 percent in mandatory joint venture arrangements for the supply of goods and services which will be required.

It is stated further that the indigenous Tanzanian companies are required to have at least 5 percent equity participation in a mining company.

Failure to comply with the Regulations attracts heavy criminal and administrative sanctions, notably fines up to $5m (over 10bn/-).

When dissolving the 11th sitting of Parliament in Dodoma on June 16, 2020, President Magufuli highlighted several achievements and major revolutions attained in the mining sector, notably the establishment of Ministry of Minerals and the control of export and transportation of raw minerals outside the country.

Another reform includes the introduction of mining markets in each region and increase the participation of small-scale miners in the mining sector.

More importantly, the Head of State recalled that in July 2017, the National Assembly passed the Natural Wealth and Resources (Permanent Sovereignty) Act, 2017.

The Act has for the first time enabled Tanzanians to own their resources through legal powers.

The Act also resulted in the establishment of Twiga Minerals Company, which the government of the United Republic of Tanzania owns 16 percent and Barrick Company 84 percent of the shares and provision of $100m compensation paid by Barrick out of $300m the company agreed to pay.

President Magufuli's responses to grievances in the protection of the country's natural resources also saw the construction of a 25km wall in Mirerani Mine, a project which the government implemented, thanks to the proposal by the Parliamentary Special Committee formed to probe into Tanzanite mineral losses.

As a result of such various steps, President Magufuli is on record as the mining sector in 2019 grew by 17.7 per cent, followed by the construction sector which grew by 14.1 per cent.

In addition, he said revenue from the mining sector had also increased.

For example, in the 2018/19 fiscal year 346bn/-was collected from 194bn/-in 2016/17.

In 2019/20, about 470bn/-will be collected, whereas as of April 2020 alone, 58bn/-was collected.

Other achievements attained in the mining sector are the issuance of 221 mining licences, four mining licences (smelting), and other four mining licences (refining).

In addition, President Magufuri said his government had allocated 38,567 hectares to small-scale miners and trained 10,338 small-scale miners.

Several things that we have to be proud of that have been implemented by the fifth phase government under President Magufuli of which various leaders, include what Prime Minister Kassim Majaliwa, revealed in many places through public meetings, the media and various documents.

In his concluding address in Parliament in Dodoma, Mr Majaliwa pointed out that amendments to the Mining Act was done parallel to the establishment of 28 markets and 12 centres in the mining area, thus increasing revenue collection, reducing illegal trade and exporting minerals.

The PM is also on record by disclosing that from March to September, 2019 at least 4,680.28km worth 432.49bn/- was generated with the government collecting 30.27bn/-.

During Minister for Finance and Planning, Dr Philip Mpango's presentation of the 2020/21 general budget, he pointed out that the amendments to the law had facilitated negotiations between the government and all major mining companies with the aim of acquiring 16 per cent of state shares.

In addition, the minister said the government had successfully established 28 markets and 25 mining centres in the country, as well as completion of the construction of four centres in Bukoba, Handeni, Bariadi, and Musoma and two exemplary gold refineries of Lwamgasa and Katente.

He also mentioned the completion of the construction of the one-stop centre in Mirerani, he said, as well as the improvement of mining control and the completion of the construction of a 25km wall around Tanzanite Mine at Mirerani.

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