Debate is raging in Tanzania on whether government has signed watertight agreements with foreign companies to ensure the country reaps maximum benefits from its vast natural gas resources.
This comes after the Tanzania Revenue Authority (TRA) revealed plans to review all contracts signed with investors in the natural gas and mining sectors before making a hasty retreat and shelving the idea, following an uproar by foreign companies operating in the country.
The TRA in early September put out notice seeking technical assistance to renegotiate mining development agreements (MSAs) and energy production sharing agreements (PSAs) signed with multinationals.
“The main objective of the proposed renegotiation is to secure an enhanced and fair share of revenue from the extraction of nonrenewable natural resources with a significant inherent resource rent that requires a mix of different tax instruments to be effectively captured,” the TRA said in a statement.
Following the TRA’s decision to shelve the renegotiation exercise, experts are questioning whether the MSAs and PSAs government signed with companies operating in the country will ensure fair benefits for the Tanzanian people.
Fears that the country might have been “duped” into some of the agreements were given credence after it emerged that, in terms of an agreement signed with Norwegian company Statoil, Tanzania will receive between 30% and 50% of the proceeds, while the company will keep the rest.
Statoil, with its partner, ExxonMobil, is one of the key players in Tanzania’s natural gas industry, where it has made offshore natural gas discoveries in excess of three-trillion cubic feet.
“What is needed in Tanzania is transparency. The contracts must be made public and Parliament must approve all the contracts. That is the transformation we need to ensure that our country benefits from its resources,” says opposition legislator Zitto Kabwe, who is also the shadow Finance Minister.
He adds that, although Tanzania, East Africa’s second-largest economy, is on the precipice of an economic revolution with the recent discoveries of gas, the country risks losing much of the new-found wealth to foreign companies.
In efforts to safeguard it natural minerals, the authorities in Tanzania are in the process of enacting new laws and policies for the mining and oil and gas sectors.
Tanzania has signed at least 25 PSAs with 17 international energy companies, including Statoil, BG Group, Petrobras, Royal Dutch Shell, Exxon Mobil and Mubadala Petroleum.
Miners operating in the country include African Barrick Gold, AngloGold Ashanti, Petra Diamonds and Richland Resources.