The Minister responsible for Minerals in Tanzania recently published Government Notice No. 749 of 2022 introducing various amendments to the Local Content Regulations of 2018. Below, we summarise some of the significant changes to the law.
The new regulations have redefined the term "contractor", widening it to encompass any person who has entered into a contract with a holder of a mineral right whether within or outside Tanzania. Under the 2018 Regulations, the definition of the term "contractor" was restricted to licence holders only. The new regulations have also widened the definition of "mining activities" to include any activity related to mining whether within or outside Tanzania. These amendments have widened the scope of persons required to comply with the local content regulations under the Mining Act and, in particular, afford clarity that anyone involved in the mining sector as a licence holder, contractor or subcontractor must comply with local content requirements and obligations.
The composition of the Local Content Committee has also been widened to include the Labour Commissioner, a representative of the immigration department and a representative of the Commissioner for Minerals. Prior to the amendment, the Local Content Committee comprised a chairperson and executive secretary as well as representatives from the labour department, Private Sector Foundation, Geological Survey of Tanzania and Head of Legal Services in the Ministry. The Local Content Committee is tasked with the responsibility to oversee implementation of local content requirements, including approvals of local content plans. The widening of the composition implies that there was recognition of a need to include closer scrutiny of compliance with local content requirements related to employment succession plans. Further, the inclusion of the Commissioner for Minerals signifies the intention of the Minister to be more closely involved in the process, because the Commissioner for Minerals plays an advisory role to the latter.
In terms of the new amendments, foreign companies seeking to provide goods or services must incorporate a company in Tanzania and enter into a joint venture with a local company. Prior to the amendments, foreign companies could provide the goods or services in association with a local company. The new regulations have thus specified the form of association acceptable under the law, in which case the provider of goods or services must be incorporated as a local entity which must in turn be in a joint venture with a wholly-owned local company.
The new regulations have also introduced conditions for sole sourcing of contracts. Previously, the obligation was limited to reporting to the Mining Commission. The new conditions introduced under the new regulations require that (i) there must have been issued an expression of interest and only one tenderer is suitable; and (ii) there is an urgent need for goods and services. The requirement to inform the Commission on sole sourcing and competitive sourcing of contracts exceeding US$100,000 continues to apply.
Another requirement introduced by the amendments to the regulations is to provide a prescribed format for submission of the quarterly local content performance reports which must be submitted within 14 days after the end of each quarter. Further, the period for submission of annual local content plans has been extended from 45 to 60 days from the beginning of each year. The amendment has also introduced a penalty of TZS10 million for failure to submit annual and quarterly local content plans. Where the penalty is not paid or there is continuance of breach, the contractor or subcontractor will be prohibited from bidding until there is compliance.
The role of developing a national policy on technological transfer that was previously carried out by the Mining Commission has been shifted to the Ministry of Minerals.
The amendments have also increased the penalty for non-compliance with local content to the higher of 5% of value of proceeds obtained from mining activity in respect of which the breach is committed, or TZS50 million. The breaches envisaged include undertaking mining activities without implementing local content requirements, failure to prepare local content plans, failure to inform the Mining Commission on contracts or purchase orders which are sole sourced (whose values exceed US$100,000) and failure to provide documents involved in the bidding process.
The amendments are reflective of the continuous efforts by the Ministry of Minerals to streamline local content compliance and requirements within the mining industry in Tanzania in line with national policy.
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Read the original publication at Dentons.