sharing in governance of extractive industries

"Tanzania mining regime still favourable"

From The Citizen: ttp://www.thecitizen.co.tz/news/4-national-news/3775-tanzania-mining-regime-still-favourable-survey.html

International confidence in Tanzania’s mining sector regime has not faltered despite initial fears that the implementation of new Mining Act 2010,to increase local participation in the industry,would repel foreign investors, a new report says.

The Survey of Mining Companies 2010 Update report released by the Canada-based Fraser Institute indicated that Tanzania was voted as the third country with an most attractive mining regime in Africa ahead of such countries as South Africa, Zambia, Namibia and the DR Congo, most of which overhauled their mining laws.

The country ranked in the middle of the survey index, at number 23, among the 51 countries surveyed globally.

About 70 per cent of mining executives and operational managers interviewed in the survey were upbeat about the country’s taxation regime, attitudes towards the mining industry, political stability and security on mines.

About 80 per cent were favourable with the taxation regime, while only 10 per cent said they would not pursue investments due to taxation. However about 35 per cent of miners and explorers considered the mining regime as getting more hostile compared to 65 per cent who considered the attitude as getting less hostile or not changing.

Tanzania enacted a new mining law, under a ‘certificate of urgency’ in April. The act sought to increase the integration of the mining sector with the rest of the economy, as well as increase the participation of Tanzanians in the sector.

In addition to increasing royalties for all minerals the Act also limited the granting of licences to mine for gemstones to Tanzanians only.

Investors criticised the new mining law saying it is more restrictive than its predecessor and is consistent with other recent legislation which seeks to concentrate a greater interest in the hands of Tanzanian nationals.

They said by enacting the new law the government was paying heed to xenophobic attitudes to foreign investors as well as responding to “misinformed social reaction against mining.”
But experts said it was not surprising the survey indicated an almost about-turn of investors perception of the country’s mining regime.

“The new law did not touch the existing mining contracts that have been a source of controversy for a long time. Definitely the current regime must be still favourable for investors because their interests are guaranteed,” said Prof Humphrey Mushi, an economist teaching at the University of Dar es Salaam.

As global commodity prices recovered, a number of mining jurisdictions took steps to increase both regulatory hurdles and taxation to increase their shares from mining.

Some of these steps included overhauling the whole mining laws like in Tanzania and in several other African countries, or increasing taxation like in Australia where the government imposed a Super Profit tax early this year. Miners considered these efforts by government as making mining more difficult and costly.

But Mr Mushi warned that the report’s gauging of favourability or unfavourability of mining regime should be taken into context as it does not paint the whole picture.

He said the report has been compiled after taking perspective of miners and explorer only whose interests do not necessarily coincide with the interest of Tanzanians. “It should not be taken to mean the current regime is already favourable to the country.”

“The new mining law has still not gone enough to address transparency issues and ensure the country will adequately benefit from mining. If regime in Botswana and South Africa are favourable, it is because they have immensely built economies of those countries,” Prof Mushi said.

In Africa Botswana was considered to have the best mining regime. In fact the country featured in the top ten countries with most favourable mining regimes globally.

According to the survey, the top 10 jurisdictions besides Botswana were the Canadian Provinces of Alberta, Quebec, Yukon, Saskatchewan, and Newfoundland-Labrador, the US States of Alaska and Nevada, along with Chile and Finland.

The scores for major African mining jurisdictions were; Botswana (79.3), Ghana (54.4), Tanzania (52.9), Namibia (50.4), Zambia (47.1), South Africa (39.6), DRC (29.6), and Zimbabwe (14.2).

The biggest change from the previous survey among jurisdictions once considered mining-friendly was Australia, which saw a dramatic decrease in the rankings of all of its provinces, an outcome which was attributed to negative reaction to its government’s proposed heavy Resources Super Profits Tax (RSPT). Although the tax was cancelled after the survey was conducted, the Institute notes that Australian miners still face significant tax increases:

The Institute’s 2010 Mid-Year Update is based on feedback received from executives representing 429 mineral exploration and development companies focusing on the investment climate of 51 leading mining jurisdictions around the world.

This year’s update is said to be especially significant in that it was conducted following the global recovery in commodity prices and the introduction of new regulatory hurdles and taxation in many jurisdictions.

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