Year in review: Mining Law in Tanzania

All questions

Year in review

A noteworthy change in the mining sector over the past year  is through the Finance Act of 2024⁹ which has made notable changes in the Mining Act whereby mineral right holders or licensed dealers, unless otherwise specified in their agreements with the government, are now required to reserve a portion of gold for local processing, smelting, refining and trading. The Minister for Minerals will determine the reserved amount, which must be no less than 20 per cent. This amendment aims to boost the supply of gold to the Bank of Tanzania, which is now officially recognised as the statutory gold dealer. A royalty rate of 4 per cent applies to gold sold to the Bank of Tanzania. These changes are expected to enhance national gold and foreign currency reserves and support the growth of local refineries by ensuring a steady supply of gold. The Finance Act has also amended the Income Tax Act, introducing a 2 per cent final withholding tax on payments for purchase of industrial minerals other than salt and metallic minerals other than precious metals, supplied by a holder of primary mining license or artisanal miner. The purpose of the amendment is to expand the tax base.

Another development is that in a recent update on 6 October 2023, the Mining (State Participation) (Amendment) Regulations were published, amending the 2022 Mining (State Participation) Regulations. The Amendment introduces penalties for non-compliance, adding a new default provision. Mining companies or individuals with mining or special mining licences who fail to meet the regulations will face licence suspension or cancellation under Section 63 of the Mining Act. This amendment compliments the already existing State Participation Regulations applicable to all mining companies holding a mining licence or special mining licence. They provide clarity on the process of acquiring equity interest in existing mining entities and require these entities to initiate negotiations for joint venture arrangements that allow the government to acquire a shareholding in the mining venture. The government is also empowered to participate in mining activities by holding direct equity interests in mining ventures, including mineral beneficiation.

The equity interest can be composed of various forms, such as statutory allocation of shares, shares acquired through contributing reversionary mineral rights, shares acquired through quantification of tax expenditures enjoyed by the mining entity during its establishment, provided that the total government shares in such entity shall not exceed 50 per cent and shares negotiated and agreed upon between the government and the mining company. 

The State Participation Regulations also explicitly stipulate that the government shall be entitled to a minimum of 16 per cent non-dilutable free carried interest shares in the equity capital of any mining interest. Furthermore, the State Participation Regulations provide clarification that when determining the percentage of free carried interest shares allocated to the government beyond the initial 16 per cent, various factors will come into play. These factors include the contribution of the government to public infrastructure that supports the mining venture and specific infrastructure investments made by the government to facilitate the venture's feasibility. It is essential to emphasise that, except for the minimum 16 per cent free carried interest shares, which are protected against dilution, all other types of shares within this regulatory framework are regarded as ordinary shares.

Another noteworthy development in the mining sector is the introduction of the Mining (Corporate Social Responsibility) Regulations, Government Notice No. 409 of 2023 (Mining CSR Regulations). These regulations have introduced important changes for holders of various mineral licences.

Under the Mining CSR Regulations, mineral right holders are entrusted with the responsibility of formulating a comprehensive corporate social responsibility plan (CSR Plan) that is aimed at benefiting the host community where mining activities are conducted. This CSR Plan must be collaboratively developed and mutually agreed upon with the relevant local government authorities overseeing the area. Moreover, the Mining CSR Regulations also mandate that projects proposed by local government authorities must undergo deliberation by the ward development committees, with active participation from the mineral right holder.

Implementation by mineral right holders involves the allocation of funds for CSR projects, strict reporting of payments to project implementers, and the timely submission of quarterly and annual financial and project progress reports to the Mining Commission and relevant councils.

Tanzania has recently established a significant precedent regarding the duty of care for holders of mining licences or special mining licences towards project-affected persons (PAPs). The recent Court of Appeal judgment in the case of General Manager African Barrick Gold Mine Ltd. vs Chacha Kiguha and 5 Others (Civil Appeal No. 99 of 2019) [2024] TZCA 469, delivered on 14 June 2024,¹⁰ underscores the responsibilities and obligations of mining companies to ensure the well-being and protection of individuals and communities impacted by their operations.  The gist of the case was that the trial court, awarded 300 million Tanzanian shillings in damages to Chacha Kiguha, his wife, and their children, after finding that the mining company breached its duty of care by causing the respondents to contract diseases due to mining activities near their home. The respondents claimed they could not vacate the land due to inadequate compensation. The appellant argued they offered fair compensation, which was refused, and contested the court's findings on jurisdiction, causation and excessive damages. The trial court's decision was appealed on nine grounds, including errors in law and fact regarding duty of care, compensation and the assessment of damages. The Court of Appeal reviewed the appellant's argument that the respondents breached Section 96(2) of the Mining Act by constructing a house without consent, thereby negating the duty of care. The Court clarified the duty of care in tort law, emphasising the 'neighbour principle'. Despite agreeing that the respondents' construction was illegal under Section 96(2), the Court dismissed several grounds of appeal, noting the appellant still had a duty of care due to the proximity of the mining activities. The Court found insufficient evidence linking the illnesses to the mining but ruled the activities constituted a nuisance, warranting general damages. The Court reduced the damages from 300 million to 150 million Tanzanian shillings, considering the respondents' partial fault, and ordered the appellant to pay the damages with interest.

The Court’s decision clarifies that PAPs are not required to vacate their properties solely because a mining company holds a mining licence or special mining licence. The company must obtain surface rights from PAPs, who are not obligated to accept compensation approved by the chief government valuer. Additionally, even though PAPs cannot legally erect buildings in a mining area subject of a mineral without consent, the mining company must still exercise a duty of care towards them. This duty persists even if PAPs breach the provision by building without consent, creating uncertainty about the specific actions mining companies should take to mitigate harm, particularly given the inherent challenges of controlling the effects of blasting operations.

The case of Jephutar Musa Gumbala & Another v. Tanzoz Minerals Ltd (HC Civil Appeal No. 29 of 2022) in the High Court of Tanzania, Mwanza Sub-Registry, is another significant precedent that in particular covers the realm of procedural compliance for mining disputes. This case highlights the importance of adhering to procedural fairness, particularly in the context of quasi-judicial bodies like the Mining Commission, which adjudicates disputes under section 96(4) of the Mining Act. Here, the appellants contested the decision of the Mining Commission, which had ruled in favor of Tanzoz Minerals Ltd, arguing that during the hearing of the case in the Mining Commission, they were not granted a fair hearing, contrary to their constitutional rights. The appellants claimed that no proper hearing occurred, and that the Commission had relied on written submissions without following the necessary procedures for an oral hearing.

The High Court agreed with the appellants, emphasising the importance of adhering to principles of natural justice, including the right to be heard. The court cited multiple precedents underscoring that any decision made in violation of this fundamental right is null and void, regardless of the outcome. Consequently, the judgment and all subsequent orders of the Mining Commission were nullified, and the matter was remitted for a proper hearing in accordance with the law. 

Tanzania has demonstrated a commitment to shifting towards sustainable energy sources in an effort to match with the global movement towards cleaner energy alternatives. To wit, Tanzania is proactively implementing its power system master plan for 2020–2024, which emphasises the utilisation of renewable energy sources and which outlines the government's strategy to improve energy access and integrate more sustainable energy into the national mix. Additionally, the Ministry of Energy is working on a national renewable energy strategy and roadmap for the next 10 years. This strategy aims to harness Tanzania's abundant renewable resources and enhance the legal and institutional frameworks to support renewable energy investments. Importantly, Tanzania has also continued to push its existing supply chains for fossil fuels and LNG to continue supporting the country’s energy needs.