Updater – Amendment to the Mining Local Content

Key amendments to the Mining (Local Content)Regulations of 2018as passed in February,2019.

Legislations The Banking and Financial Institutions Act, 2006(Banking Act); the Mining Act, 2010; the Mining (Local Content) Regulations, 2018(Local Content Regulations);and the Mining (Local Content) (Amendments) Regulations, 2019(Amendments Regulations). Applies to all applicants and holders of minerals and their service providers i.e. contractors, subcontractors and any other person engaged directly or indirectly in mining activities.

The Local Content Regulations came into force in January 2018 and it imposed local content requirements to persons regulated by the Mining Act, 2010. Whilst most companies are still in the process undertaking the necessary processes in order to comply with the Local Content Regulations,in January 2019, the Amendments Regulations were passed and are now in force. In our view, the Amendments Regulations have provided a positive outcome and have to some extent easedthe process of complying with the local content requirements.

High-levelreview of the key amendments:

1.Banking Services

The Local Content Regulationsprovidedthat, a contractor, subcontractor, licensee or other allied entity (the Contractors) must maintain a bank account with an indigenous Tanzanian bank and transact business through banks in Tanzania.An indigenousTanzanian bank was defined as a bank in which Tanzanians are majority shareholders. Since most banks in Tanzania have foreigners as majority shareholders, this requirement mandated that most banks in Tanzania should be restructuredto-become majority Tanzanian owned or let go of their customers operating in the mining sector i.e. the Contractors. This (in our view) would have left most Contractors with limited access to banks in Tanzania. The Amendments Regulationshave now amended the Local Content Regulations that, the Contractors are required to maintaina bank account with a Tanzanian bank and transactbusiness through banks in the country. Further to that, a Tanzanian bank means a bank that has not less than twenty percent of Tanzanian shareholding.

2.Financial Services

In relation to financial services content, the Local Content Regulationsrequire the Contractors that require financial services with respect to a mining activity to retain only the services of a Tanzanian financial institution or organization. Subject to obtaining a prior written approval of the Mining Commission, the Contractors can retain the services of a foreign financial institution. The Local Content Regulationsdid not define ‘Tanzanian or foreign financial institution’.

The Amendments Regulationshave added that the definitions of Tanzanian financial institution and foreign financial institution are as set out in theBanking Act.The Banking Act defines the “financial institution” asan entity engaged in the business of banking, but limited as to size, locations served, or permitted activities, as prescribed by the Bank or required by the terms and conditions of its licence. Based on the foregoing, it is our interpretationthat a Tanzanian financial institution means the financial institution which has been licensedby the Bank of Tanzaniaand a foreignfinancial institution means a financial institution which is not registered or licenced by the Bank of Tanzania.

3. Approvalof Local Content Plans

The Local Content Committee was required to communicate its recommendations to the Mining Commission within 25 working days; this period has been extended to 60 working days. Further to that, if satisfied with the local content plan, the Mining Commission shall approve it and communicate its decision to the applicant within 30 working days instead of 7 working days. The Mining Commission’s decision not to approve a local content plan shall also be communicated within 30 working days as opposed to 7 working days.Non-communication by the Mining Commission of its approval on the local content plan submitted or regarding the revised local content plan after the expiry of 50 working days will no longer mean that the local content plan has been approved; instead an applicant shall have to wait until the same is specifically communicated to them.

4. An indigenousTanzanian Company

The Local Content Regulations defined an indigenous Tanzanian Company as a company incorporated under the Companies Act of Tanzanian in which at least fifty one percent of its equity is owned by Tanzanians citizens, 80% of its executive and senior management positions are held by Tanzanians and 100% of managerial and other positions occupied by Tanzanians. The Amendments Regulations has now reduced the minimum percent from fifty one to twenty percent butretaining the 80-100% ratio.

We assist our clients to;
(a)prepare local content plans;
(b)undertake an internal local content audit and of your service providers;
(c)restructure and advise on restructuring options;
(d)register their local content plans;
(e)train their staff on local content requirements; and
(f)connect with local service providers for partnership purposes.

Disclaimer

The views expressed in this paper are those of the author only and should not be considered as an official interpretation, defamatory or interference of any legislation, laws or policies of any country including Tanzania. The content of this article should not under any circumstances be reproducedor used without the express written consent of the author. Also, it should not be relied upon without obtaining further legal adviceand we accept no liability for any loss occasioned or suffered due to the contents of this article.