Extractive Industry Changes Ahead: Tanzania tax body shelves plans to review mining and gas contracts

Tanzania Tax Authority - Rished Bade
Tanzania Tax Authority – Rished Bade

Tanzania’s tax authority has scrapped plans to review mining and gas contracts, after its announcement of the move last week rattled investors in the east African country’s rich gold and natural gas resources.

The Tanzania Revenue Authority (TRA) said last week it was seeking technical assistance to renegotiate mining development agreements (MSAs) and energy production sharing agreements (PSAs). This threatened to duplicate work by the Energy and Minerals Ministry, which earlier this year said it was in talks with miners to alter deals to give the state more revenue.

‘After our internal consultations with stakeholders, we found that there is no need to do any renegotiations and as such we have withdrawn the tender for expression of interest,’ the tax authority’s commissioner general, Rished Bade, told Reuters. He did not say why policy had changed. A source at the finance ministry who declined to be identified said the government had decided the tax authority’s work would duplicate that of the mines ministry.

Investors in Tanzania, Africa’s fourth biggest gold miner which has plans to develop huge new gas finds, have complained of shifting goal posts in contracts with the state. In the tender advertisement posted on its website on Thursday, the TRA said the main objective of the contract review was ‘to secure for the country an enhanced and fair share from the extraction of non-renewable natural resource.’

Mining and energy companies in Tanzania said they have come under increased regulatory pressure in the past few years as the government seeks to increase its share of revenues. Experts say the government, which last year tightened terms on new gas contracts, is under popular pressure to spread wealth swiftly from recent gas finds made in the poor east African country, even though it remains years away from big gas exports.

Ami Mpungwe, chairman of the Tanzania Chamber of Minerals and Energy, said the pressure felt by companies was taking its toll on the industries and investment. ‘As a result of sustained policy, legal, fiscal and regulatory uncertainties and unpredictability, exploration activities and expenditure have significantly scaled down and the mining industry is on the decline,’ he said.

In May, Tanzania received five bids for just half of the eight oil and gas blocks it offered in its latest bidding round. The country has 46.5 trillion cubic feet (tcf) of proven natural gas reserves, and expects exploration off its southern coast will result in more finds. Tanzania has so far signed at least 25 PSAs with about 17 international energy companies, including BG Group, Statoil, Brazil’s Petrobras, Royal Dutch Shell, Exxon Mobil and Mubadala Petroleum.

Miners operating in the country include the African Barrick Gold, AngloGold Ashanti, Petra Diamonds Ltd and Richland Resources Ltd.

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