THE NEW MINING (STATE PARTICIPATION) REGULATIONS, 2020 (REQUIRING NON-DILUTABLE FREE CARRIED INTEREST SHARES OF NOT LESS THAN 16% FOR THE GOVERNMENT OF THE UNITED REPUBLIC OF TANZANIA IN MINING COMPANIES)

Published by KKB Attorneys

The Government of the United Republic of Tanzania is taken to be the owner and custodian of all minerals in its land, and this position is taken from the irrebuttable notion from the Tanzania Laws that the entire control of all minerals in and under lands, rivers, streams throughout the entire territory of  Tanzania is property of the United Republic and shall be vested in the President in trust for the People of Tanzania. (see section 5-(1), The Mining Act, CAP 123 )

Hence from this notion, minerals belong to the Government and what is given to mining companies is merely the right to mine and use the minerals subject to licence granted by the Government. This is reflected under section 10 of the Mining Act CAP 123 that mandates state Participation in any mining activities done in the country.

The above law makes it mandatory for the Government to have non-dilutable free carried interest shares of not less than 16% depending on the type of mineral or level of investment. In addition to this, the Government shall be entitled to acquire upto 50% of the shares but with the total tax expenditure incurred by the Government in favour of the mining company.

What we should know about The New Regulations.

The new Mining (State Participation) Regulations, 2020 published on the 30th of October 2020 aims to cement on the above provision by elaborating and providing more on the Government participation in the mining activities, Regulation 4 for instance defines what exactly are these ‘non dilutable free carried interest shares’’ and these are explained as,

“…shares that do not decrease in value or percentage of ownership of a shareholder or loss of some percentage of equity which shall be treated as a special class of shares, in which case the holder share shall be entitled to the payment of dividend of a fixed amount in priority to another class or classes of shares.”

As per the Regulations, these shares are to exist throughout the lifetime of the mineral rights of the mining operations. Regulation 6 further describes on the level of investment detailed under Section 10 of the Mining Act CAP 213, and the determining the level shall depend on the following,

  • Capital investment
  • Mining technology involved
  • Profit
  • Total value of tax expenditure enjoyed by the mining Company

Further, Regulation 7 puts these acquired shares under the control of the Treasury, which shall have control in general over the shares, including mode of payments of its interests.

In general, the 5-page regulations exist to substantiate the state participation in the mining activities, how it will be done and who shall be in control of it and all in all aims to ensure that The United Republic of Tanzania enjoys its fair share of natural resources extracted from its Lands.

The stakeholders of these laws are Mining companies or corporations, as long as they engage in mining operations under a mining license as noted under Section 10 of the Mining Act CAP 123.