Tanzanian government may cancel Sh7 trillion deal

Dar es Salaam. Controversy surrounding the $3 billion (Sh6.8 trillion) Liganga-Mchuchuma integrated iron ore and power project took a new twist yesterday, with the government signaling intent to cancel the licence held by a Chinese company.

Minerals minister Doto Biteko issued a 30-day ultimatum to the National Development Corporation (NDC) to “rectify mistakes” in the mining agreement or the licence will be revoked.

It was the strongest warning yet by the minister on the project whose implementation has stalled for years over tax and other operational reliefs granted to the Chinese miner by President Jakaya Kikwete’s administration.

The project is jointly implemented by NDC and Sichuan Hongda Group through a local venture called Tanzania China International Mineral Resources Limited (TCIMRL).

In November 2018, the Chinese company eying the iron ore to steel project revealed it was being held back by treasury’s delay to approve incentives negotiated with the government in 2015.

The company won the tender for the mammoth project with the potential to create 5,000 direct jobs and 30,000 indirect ones in 2010, but its rollout has been beset by bureaucratic delays to date.

Speaking yesterday at a press conference in Dodoma, Mr Biteko said the Mchuchuma-Liganga licence was troubling them and should be resolved forthwith.

“This Mchuchuma-Liganga licence is among those that are shaming this nation, it has been in the news for years but nothing has so far been done,” he said.

He added: “It is high time they were issued with a default notice because it is unethical to take strict measures on the public for defaulting while licences being owned by the government and their partners do nothing.”

At the briefing of his ministry’s efforts to clean up the sector, the minister said mining licences jointly held by the government through its own institutions and foreign partners needed to be cleaned.

However when reached for comment, an NDC official who requested for anonymity because he was not the agency’s spokesperson said they were surprised by the development as no notice to that effect had been served to them.

According to the official, NDC like any other government institutions, did not enter any agreements without the Attorney General’s approval.

“It is true a few months back the government directed government institutions to renegotiate its contracts but the warning to revoke the Mchuchuma-Liganga licence in 30 days is news to us,” he said.

Mr Biteko said there were numerous investors ready to invest in the stalled Mchuchuma-Liganga project. The minister declared that he would be ready to shoulder the burden on the licence which has accumulated an unpaid royalty of $375,000 (over Sh840 million).

Efforts to reach the Chinese company for reaction yesterday were futile.

But in a paid up advertisement in the media last year, Sichuan Hongda Group suggested misleading information on the accruing benefits in the mining of iron ore was to blame for the teething delays.

It said the negotiated investment incentives were critical to the establishment of the strategic project that has been sold as possibly Tanzania’s industrial turning point. “As a serious investor and having spent considerable resources in development and implementation of the project, Sichuan Hongda, is still committed to implementing this project despite recurring challenges both locally and globally,” read the statement. The company said it was issuing the statement to clear the air on information that has been released relating to the manner in which the project was formulated.

Mchuchuma is said to have 428 million tonnes of coal while Liganga has 128 million tonnes of iron and the Chinese company has drawn an integrated mining and exploitation plan that include generation of 600MW of electricity. The firms will additionally process all the minerals locally to separate titanium and vanadium from iron ore, it said.

The Liganga-Mchuchuma project has for many years been listed as a strategic national development investment but was last year dropped from the list by finance minister Philip Mpango. TCIMRL was expected to invest $1.8 billion to establish an iron ore mine and iron and steel complex to produce 1 million tonnes of iron per year and steel products, vanadium pentoxide and titanium dioxide

Its power plant would be run by coal, with 250MW used for the industry and 350MW connected to the national grid.