The mining sector, one of Tanzania’s most important sectors from a total exports perspective, has “tremendous potential”, says strategic advisory firm Africa Practice associate director Dr Margarita Dimova.

“As a source of government revenue, mining is expected to make a more considerable contribution for the 2019/20 fiscal year, compared with 2018/19, as Tanzania is aiming to collect TSh470.9-billion – an increase of more than 50%.”

She notes that, although the revamping of the industry under President John Magufuli’s administration initially sent shockwaves through the investment community, his leadership and its broader influence could create a more equitable environment.

Dimova points to extensive amendments made to the Mining Act through the introduction of the Tanzania Extractive Industries (Transparency and Accountability) Act in 2015.

Some of the amendments include the increased royalty rate from 4% to 6% for exports such as gold, copper, silver and platinum; and government being entitled to acquire up to 50% of shares in a mining company, proportional with the quantified value of tax expenditures incurred by government in favour of the mining company.

The Mining Act has also been amended by including provisions regarding local content.

“Like any transition, the immediate process is likely to cause some teething problems in the industry,” says Dimova.

However, “once all the enforcement mechanisms are understood, clarified and in place, greater stability in the operating environment should ultimately help investors to develop assets and comply with the new terms of business”, she adds.

Dimova explains that the changes created an expectation that a larger portion of the capital generated by the sector would remain in the country. The broader objective was to ensure value addition – a priority of the Tanzanian government.

“In the medium term, we can expect beneficiation to be embedded in the country’s mining regulatory framework. What may change is that some minerals may secure exemptions to support investment in their extraction.”

She adds that this signals government’s aiming to take an increasingly active role in the sector and that local-content requirements are also expected to be boosted.

Meanwhile, Africa Practice expects more integration across the entire value chain in Tanzania, as well as increased investment in production capacity and greater emphasis on artisanal and small-scale mining.

“These activities will primarily be driven by government’s agenda and, from what Africa Practice has seen so far, leading miners are prepared to adhere to these requirements,” notes Dimova.

Further, the highly publicised dispute between the Tanzanian government and mining group Acacia Mining dented investors’ perceptions of the operating environment in the country.

However, Barrick Gold’s acquisition of Acacia in October marked the end of the “challenging episode”.

She comments that “there is hope to see a new chapter in Barrick Gold’s and other mining companies’ relationship with government”.

The acquisition was almost concurrent with government’s deadline for mining companies to comply with 18 of the Mining Act’s terms regarding royalty-fee payments.

Government has, with the exception of Tancoal Energy, reported compliance across the board. This indicates that mining companies and government are inching towards a functional working relationship.

Dimova says that Africa Practice is looking forward to working with Tanzania-focused mining clients as the sector adopts and adapts to the new regulatory framework. In the run-up to the October 2020 Presidential elections, the firm can also offer support with mapping out likely scenarios and turbulent episodes.

“We are also actively growing our company’s sustainability branch, which could make an excellent contribution to mining companies. We remain committed to facilitating productive fora for discussion at the nexus of the private sector and government,” she concludes.