We are blameless, says Chinese mining firm

Dar es Salaam. The Chinese company at the centre of a brewing row with government over the $3 billion (Sh6.8 trillion) Mchuchuma and Liganga projects has reacted to last week’s threat by the Minerals minister to revoke its lucrative contract.

Tanzania China International Mineral Resource Ltd (TCIMRL) appeared to fault the government for not providing tax incentives to ensure the implementation of the project it described as “risky”.

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

Mr Biteko also said in Dodoma that TCIMRL owes the government $375,000 in royalties.

But TCIMRL deputy chief executive officer Eric Mwingira told The Citizen that the project, whose contract was signed in 2011, would be up and running by now had the government not dilly-dallied and endorsed tax incentives.

He said Mchuchuma would be producing electricity after three and half years of construction, while Liganga would be nearing completion this year after four years of implementation.

In November 2018, the Chinese company revealed it was being held back by the Treasury’s bureaucratic bungling in approving incentives negotiated with the government way back in 2015.

The company won the tender for the mega project with potential to create 5,000 direct jobs and 30,000 indirect labour opportunities in 2010, but its roll-out has been beset by red tape to date.

According to Mr Mwingira, the company was only asking for a 10-year tax relief for a project whose lifespan stretches between 50 and 100 years.

He said among other things, the company was seeking tax incentives on import duty on cargo to be imported for the construction work, as well as incentives on spare parts and machinery. It was also asking for tax relief on fuel.

The Chinese firm’s parent company, Sichuan Hongda (Group) Limited (SHG), discharged its part of the contract by carrying out geological exploration, environmental and social impact assessment study, valuation for purposes of compensation of people affected by the project, research and development for smelting technology to a tune of about $70 million.

“The capitalised exploration cost consumed a lot of resources because of the complexity of mineralogical constitution when it comes to separation of titanium from iron ore and design for industrial complex for power generation for iron and steel industry,” said Mr Mwingira.

He said that on that basis, TCIMRL applied for and was granted two Special Mining Licences (SML) for both Liganga Iron Ore and Mchuchuma Coal project.

Immediately after the granting of the licence, TCIMRL started negotiations with the government in 2014 through the National Investment Steering Committee (NISC) on granting of investment incentives for the Mchuchuma and Liganga projects, in accordance with the provisions of Tanzania Investment Act (CAP. 38).

“After concerted negotiations, the Performance Contract was signed in June 2014, which provided for some investment incentives for the project.”

After further negotiations, the government introduced to Parliament an amendment to the Tanzania Investment Act CAP 38 through the Finance Act, 2015 in which they introduced the ‘Special Strategic Investor Status’, where the Finance Act 2015 amended section 20 of the Tanzania Investment Act by adding subsection (5) to (9), with a view to accommodating incentives of such nature.

The Finance Act 2015 was signed into law and according to the amendment, government may identify and grant Special Strategic Investment Status to projects that have a minimum investment capital of not less than $300 million, and investment capital transaction that is undertaken through a registered local financial and insurance institutions. He noted that after the developments, TCIMRL attended various meetings with NISC that lead to the signing of an Addendum to the performance contract on September 21, 2015.

However to date, he said, the Ministry of Finance and Planning was yet to publish the granted investment incentives approved by NISC and enshrined in the two signed performance contracts in the Government Gazette to make them legally operational as required by law.

“We have been following up with the government, in meetings and letters but so far nothing has happened and we can’t drop the incentives because the projects are very risky and we can only hope that matters will open up soon as we have spent about $70 million and continue to lose,” he said.

He added that if the incentives had been endorsed as planned, Mchuchuma Power Plant construction would have been completed three and a half years ago, producing electricity, while Liganga Ore’s four-year construction period would have been 90 per cent completed.

On the minister’s allegations that TCIMRL owes the government $375,000 in royalties, he said the firm could not (legally) pay royalties because it had not yet started mining activities. But the firm has been paying annual licence fees for the two licences.

Contacted for comment on the incentives issue, Tanzania Investment Centre (TIC) planning and research manager Tibende Njoku said the project was not yet in their docket because it had not reached the stage for investment. And the Commissioner for Minerals, Mr Mulabwa David declined to comment on the matter because it was not under his docket. Instead, he directed any queries with regards to the matter to the NDC.

Efforts to get information from the NDC also proved futile as they said the issue of the incentives was supposed to be dealt with by the ministry.