Tanzania Can Renegotiate Energy and Mining Contracts As New Legislation Passed

The government of Tanzania can now forcefully commence renegotiate of existing contracts with both mining and oil companies undertaking exploration and production in the country after the parliament passed two laws namely the Natural Wealth and Resources (Permanent Sovereignty) and the Natural Wealth and Resources Contracts (Review and Re-negotiation of Unconscionable Terms) bills yesterday.

“Parliament has passed two (laws) legislation – the Natural Wealth and Resources (Permanent Sovereignty) and the Natural Wealth and Resources Contracts (Review and Re-negotiation of Unconscionable Terms) bills,” the state-run Tanzania Information Services said in a statement.

The passing went ahead despite the Tanzania Chamber of Minerals and Energy calling for more consultations with all stakeholders that would have otherwise allowed consideration of the proposed changes, to make detailed comments and submissions. This submission the chamber said would have allowed the Government assess and take the submissions into account before these bills were debated in Parliament.

“The Chamber is concerned at the lack of stakeholder consultation prior to the publication of this proposed legislation, and the short notice set aside for consultation, given the material impact it will have on almost every area of the mining industry and on all stakeholders in the industry, including local communities, employees, local suppliers, local contractors and investors,” the chamber said in a statement.

Tanzania has on the other side said the new legislation increase transparency in the sectors as well as result to more revenue for the government.

Another third law that will seek to amend the country’s Mining & Petroleum Act is on the floor of Parliament and is likely to be passed by Friday.

Among those likely to be hit hardest include Acacia Mining which has already seen a ban to all its exports after findings of the Presidential Committee’s investigation into the export of gold/copper concentrates which were presented to the President of Tanzania H.E. Dr. John P. Magufuli in May found out that the company had not fully declared all of the minerals contained in the concentrates.

Mining companies in Tanzania also have to cope with another approval by Parliament in  the new Finance Act, which will imposed a 1% clearing fee on the value of all minerals exported from the country from the 1st July 2017.

“We fear that Tanzania, once a relative haven of stability and sense in African mining, will continue down a self-destructive path that began with TanzaniteOne, transforming into yet another African basket case,” said UK based market analyst Shore Capital following the passing of the bills.

“Whilst we understand that the process primarily affects the mining sector, some of the provisions of the legislation extend to the oil and gas sector, a sector that is crucial to the country’s stated desire to become a middle-income country and to the success of the 2016/17-2020/21 National Five-Year Development Plan. In passing these bills, Parliament and the Government of Tanzania have expressed a desire to review the terms of mining contracts that may have been necessary at the time but which now may strike observers as ‘unconscionable’, a review that we trust shall be balanced by the need to provide contractual and investment stability to the rest of the natural resources sector,” said Swala Oil & Gas (Tanzania) PLC CEO Dr. David Mestres Ridge.

It is expected that President Maghufuli will assent to the bills to become law as he is largely viewed as the force behind the quick passing.

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