The Minister Responsible for Minerals in Tanzania recently issued Government Notice No. 749 of 2022 introducing various amendments to the Local Content Regulations 2018. Below we summarize some of the significant changes to the law.
The new regulations have redefined the term ‘contractor‘, broadening it to encompass anyone who has entered into a contract with a holder of a mineral right, whether inside or outside Tanzania. Under the 2018 Regulations, the definition of “entrepreneur” was limited to licensees only. The new regulations also expanded the definition of “mining activities” to include any activity related to mining, whether inside or outside Tanzania. These amendments expanded the range of persons required to comply with local content regulations under the Mining Act and, in particular, clarified that anyone involved in mining as a licensee, contractor or contractor must comply with local content requirements and obligations. .
Membership of the Local Content Committee has also been expanded to include the Commissioner of Labor, a representative from the Department of Immigration and a representative from the Commissioner of Minerals. Prior to the amendment, the local content committee consisted of a chairperson and an executive secretary as well as representatives from the Department of Labour, the Private Sector Foundation, the Geological Survey of Tanzania and the Chief Legal Officer of the ministry. The Local Content Committee is responsible for overseeing the implementation of local content requirements, including local content plan approvals. The broadening of membership implies that it was recognized that there was a need to include a more in-depth examination of compliance with local content requirements related to employment succession plans. Furthermore, the inclusion of the Minerals Commissioner signifies the intention of the Minister to be more closely involved in the process, as the Minerals Commissioner plays an advisory role to the latter.
Under 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 goods or services in association with a local company. The new regulations have thus clarified the form of association acceptable by law, in which case the supplier of goods or services must be incorporated as a local entity which must in turn be a joint venture with a local company owned in 100%.
The new regulations also introduced conditions for the award of contracts to a sole supplier. Previously, the obligation was limited to reporting to the Mining Commission. The new conditions introduced under the new regulations require that (i) an expression of interest has been issued and only one bidder is suitable; and (ii) there is an urgent need for goods and services. The obligation to inform the Commission on exclusive sourcing and competitive sourcing for contracts above US$100,000 continues to apply.
Another requirement introduced by the rule changes is to provide a prescribed format for the submission of quarterly local content performance reports which must be submitted within 14 days of the end of each quarter. In addition, the submission period for annual local content plans has been extended from 45 to 60 days from the start of each year. The amendment also introduced a penalty of TZS 10 million for failure to submit annual and quarterly local content plans. In the event of non-payment of the penalty or persistence of the breach, the contractor or subcontractor will be prohibited from bidding until there is compliance.
The role of formulating a national technology transfer policy that was previously entrusted to the Commission des Mines has been transferred to the Ministry of Mines.
The amendments also increased the penalty for non-compliance with local content to the greater of 5% of the value of proceeds from the mining activity in respect of which the violation is committed, or TZS 50 million. The failures contemplated include undertaking mining activities without enforcing local content requirements, failure to prepare local content plans, failure to notify the Mining Commission of sole source contracts or purchase orders (including value exceeds USD 100,000) and failure to provide the documents involved in the bidding process.
The changes reflect the ongoing efforts of the Ministry of Mines to streamline compliance and local content requirements within the mining industry in Tanzania in line with national policy.