Dar es Salaam. The government of Tanzania has denied reports that it is moving towards nationalising mining firms after it passed new laws that ensure its sovereignty over natural resources.
South Africa-based Mining Review Africa on Wednesday published an article that claimed that the spirit of the recent laws passed by Parliament of Tanzania signals that the ongoing disputes between the government and foreign mining companies is moving towards nationalisation and the non-enforcement of any international arbitration awards in local Tanzanian courts.
However, government spokesman Hassan Abbasi told The Citizen in the city on Wednesday that there was no such intention but the laws only seek to make sure that Tanzanians benefit from the extractive industry.
“The laws are not intended to lay the ground for nationalisation but seek to ensure the sovereign ownership of natural resources and this is in conformity with international principles,” said Dr Abbasi.
“The government of Tanzania will continue attracting and protecting investors in the mining and other sectors so long as they adhere to the laws and regulations,” he added.
Tanzania Parliament passed three laws in July that, among other things, hike taxes on mineral exports, mandate a higher government stake in some mining operations and force the construction of local smelters to bring Tanzania higher up the mining value chain.
The Natural Wealth and Resources (Permanent Sovereignty)] Act, 2017; The Natural Wealth and Resources Contracts (Review and Re-Negotiation of Unconscionable Terms)] Act, 2017; and The Written Laws (Miscellaneous Amendments)] Act, 2017 aim to stamp out what President John Magufuli has called years of corrupt practices and tax evasion that have robbed the country of revenue from the lucrative sector.
Slow flow of investment
However, the new laws accompanied by a crackdown on mining firms in Tanzania have slowed fresh investment in what has long been seen as one of Africa’s brightest mining prospects as companies assess the consequences.
Junior explorer Manas Resources expected to complete its acquisition of the Victoria Gold Project from Cienega Sarl by early 2018, but the company told Reuters it may run out of time if there is no clarity soon.
“Because of the changes in legislation and the time being taken to implement new regulations, the sector has slowed down to a point where it is impacting exploration activities and our capacity to finalise the deal,” said Manas CEO Phil Reese.
The Mining Review Africa’s article states that the textual essence of the new laws revolve around the notion that Tanzania’s domestic law is to be supreme over any international dispute or arbitration decision, as Tanzanian sovereignty is considered to be of utmost importance.
It said the laws also take retroactive effect on existing mining contracts.
The Natural Wealth and Resources (Permanent Sovereignty) Act, 2017 Part III, Article 11 (1) specifically states, “permanent sovereignty over natural wealth and resources shall not be a subject of proceedings in any foreign court or tribunal.”
Article 11 (2) goes on to declare that “disputes arising from extraction, exploitation or acquisition and use of natural wealth and resources shall be adjudicated by judicial bodies or other organs established in the United Republic and accordance with laws of Tanzania.”
“These particular provisions essentially give the government complete autonomy to dictate the current tone of ongoing discussions and re-negotiations they are conducting with mining companies, regardless of any interference by an international body decision,” stated the article.
“Tanzania’s new laws are conventionally written from a prospective point of view, and the retroactive wording of these laws signals that nationalisation is being planned by the government and could be imminent,” the authors added.
“The freezing of various assets controlled by foreign companies has already occurred, and now the ratified retroactive laws allow the government to return to old mining contracts and renegotiate the terms, as outlined in Part III of The Natural Wealth and Resources Contracts (Review and Re-Negotiation of Unconscionable Terms) Act, 2017.
“This will ultimately ensue complete or partial nationalisation, as renegotiation will occur on the government’s terms, allowing the state to take a major ownership stake in resource companies,” the article claimed.