Proposals for Reform
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- P.O.Box 71271 Dar Es Salaam
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Are there any impending developments or proposals for reform?
The gas sector is now regulated by the Petroleum Act 2015, which came into force on 18th September 2015. It covers, among other things, the supply of gas and costs, conditions for shipping natural gas, conditions for re-gasification, approval for import, export and transit of gas, and determination of gas price.A natural gas policy setting out the legal and institutional framework for midstream and downstream activities in the oil and gas sectors was approved by Parliament on 10th October 2013. Salient features of the gas policy include:
“Creating a strong legal and institutional framework is crucial for the sustainable development of the oil and gas sectors in Tanzania.”
A revised model Production Sharing Agreement was released in November 2013. Some of the significant changes made to the fiscal terms include an increase in royalty payments to the government for offshore production from 5% to 7.5%, a signing bonus of not less than USD 2.5 million, and a production bonus of not less than USD 5 million which is payable to the government on commencement of production.
The Petroleum (Local Content) Regulations 2017 came into force on 5th May 2017. Key objectives under the policy are to enhance local capacity building and technology transfer, create employment opportunities for both skilled and unskilled Tanzanian citizens, encourage the procurement of local goods and services and maximize fabrication, welding, assembling and manufacturing works in Tanzania.
The final draft constitution, which was prepared by the Constitutional Assembly, was released to the general public in late 2014. The government then postponed a referendum on a new constitution that was planned for April 2015, pending the announcement of a new date by the National Electoral Commission, because of delays in registering voters.
Under the proposed revised (draft) Constitution, companies will be able to appeal against decisions of the Court of Appeal by filing a memorandum of appeal to the Supreme Court.
A draft National Land Policy was circulated for consultation with the stakeholders, as a revision of the National Land Policy 1995. The government seeks to ensure that:
The Ministry of Lands was understood in recent years to be researching the possibility of allowing villagers to retain some form of “equity” ownership in land after it is transferred to general land for investment purposes. However, this has not openly developed any further.
The Ministry of Industry and Trade’s proposal to develop a framework for merging EPZs and SEZs programmes in Tanzania was rejected by the government. Changes were however made to the economic zone laws to allow for the Export Processing Zones Authority to regulate both EPZ and SEZ programmes.
The government has sought to address the challenges in the electricity sector by preparing the Electricity Supply Industry (ESI) Reform Strategy and Roadmap for 2014 to 2025. The Cabinet approved the ESI Reform Strategy in June 2014.
One of the proposed short-term reforms is to separate the generation segment of the state utility company Tanzania Electricity Supply Company (TANESCO) from the rest of the company’s business activities. Independent power producers will be allowed to sell electricity directly to bulk off-takers, and wheeling charges will only be paid to the company responsible for transmission.
In the medium term, the distribution segment of TANESCO will also be separated from the transmission segment.
The government proposes in the long term that the distribution segment be separated from the rest of TANESCO and apportioned into several companies.
Power infrastructure, generation and distribution companies will also be allowed to list on the Dar es Salaam Stock Exchange in order to mobilise capital investment. The unbundling programme has been provided in the recently enacted Electricity (Market Re-organisation and Promotion of Competition) Regulations 2016.
As the Government seeks to move forward with its intention to develop the Stieglers Gorge Hydroelectric Dam within the Selous Game Reserve, the Rufiji Basin Development Authority (RUBADA) was dissolved in September 2017. As a consequence of the repeal of the Rufiji Basin Development Authority Act, all assets, interests, rights, privileges, liabilities or obligations vested in Rufiji Basin Development Authority will be vested in the Ministry responsible for development and planning.
RUBADA was tasked with the promotion, regulation, coordination and facilitation of sustainable long-term ecological and socio-economic development activities in the sectors of energy, agriculture, fisheries, forestry, tourism, mining, industry and transport in the Rufiji Basin.
The government introduced sweeping reforms in the mining sector through the enactment of the Natural Wealth and Resources (Permanent Sovereignty) Act 2017 and the Natural Wealth and Resources Contracts (Review and Re-negotiation of Unconscionable Terms) Act 2017, in addition to many alterations of existing law under the Written Laws (Miscellaneous Amendments) Act 2017. Some of the changes include the following:
Minimum non-dilutable 16% free carried interest in any mining company operating under a mining licence or special mining licence and the option for the government to increase this interest to an extent equivalent to the total tax expenditure incurred by the government in favour of the mining company (up to a limit of 50%). Renegotiation of mining contracts.
Review and approval by Parliament of any future mining contracts prior to finalisation.
Establishing a Mining Commission to regulate the mining industry, overhauling the requirements for the storage, transportation and beneficiation of raw minerals, and increasing royalty rates and government shareholding in mineral right holders.
It is expected that further reforms may follow as the government seeks to enforce greater control and increase revenue from the mining sector.
The Mining (Local Content) Regulations 2018, which came into force on 10th January 2018, impose detailed continuous obligations on a contractor, subcontractor, licensee, corporation or other allied entity carrying out a mining activity to ensure that local content is a component of the mining activities engaged in by that entity.
There must be at least a 5% equity participation of an indigenous Tanzanian company to qualify for a mining licence. A non-indigenous Tanzanian company which intends to provide mining goods or services must incorporate a joint venture company with an indigenous Tanzanian company and give that indigenous Tanzanian company an equity participation of at least 20%.
The government has begun construction of the first phase of the Standard Gauge Railway Project from Dar es Salaam to Morogoro. The Standard Gauge Railway will link Dar es Salaam to Mwanza, Kigoma as well as Rwanda and Burundi. The government intends to establish the Tanzania Railways Corporation, which will manage rail transport services and infrastructure, resulting in the dissolution of RAHCO and TRL.
There must be at least a 5% equity participation of an indigenous Tanzanian company to qualify for a mining licence. A non-indigenous Tanzanian company which intends to provide mining goods or services must incorporate a joint venture company with an indigenous Tanzanian company and give that indigenous Tanzanian company an equity participation of at least 20%.
The Petroleum Act 2015 is a law that came into force on 18th September 2015, which regulates the gas sector, including the supply of gas and costs, conditions for shipping natural gas, conditions for re-gasification, approval for import, export and transit of gas, and determination of gas price.
The salient features of the gas policy include the need for a strategic partnership with the Tanzanian Government through public-private partnership, the creation of optimum infrastructure to meet the supply of domestic demand, in addition to exports, and the need to prioritize the domestic market when supplying gas, but at the same time acknowledging the mutual interests of investors to export the gas.
The key objectives of the Petroleum (Local Content) Regulations 2017 are to enhance local capacity building and technology transfer, create employment opportunities for both skilled and unskilled Tanzanian citizens, encourage the procurement of local goods and services, and maximize fabrication, welding, assembling, and manufacturing works in Tanzania.
The proposed reform strategy for the electricity supply industry is the Electricity Supply Industry (ESI) Reform Strategy and Roadmap for 2014 to 2025. Some of the short-term reforms proposed include the separation of the generation segment of the state utility company Tanzania Electricity Supply Company (TANESCO) from the rest of the company's business activities, allowing independent power producers to sell electricity directly to bulk off-takers, and paying wheeling charges only to the company responsible for transmission.
The proposed changes to the land policy for foreign investors include a maximum term of 33 years for land allocation, compensating affected land surface rights by giving an equity share in the mining business for mining projects, and not allowing foreign entities to acquire village land through any means, including allocation, transmission, purchase or lease.
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