Dodoma, Tanzania — September 30, 2024
In a significant move to bolster foreign reserves, Tanzania’s mining regulator has directed all mining firms and gold traders to allocate 20% of their gold for sale to the Central Bank of Tanzania (BoT). The directive, announced by the Tanzania Mining Commission, will take effect on October 1, 2024, under a newly enacted mining law.
The Central Bank began purchasing gold from local traders and miners in the last financial year, which ended in June, as part of efforts to diversify its foreign reserves. The measure comes amid growing concerns over the depreciation of the local currency, the Tanzanian shilling.
In the 12 months leading up to June 2024, the BoT acquired 418 kg of gold, and the bank aims to purchase 6 metric tons in the current financial year. The move is seen as a critical step in strengthening Tanzania’s economic resilience.
“This directive supports the central bank’s objectives to shore up foreign reserves while ensuring the sustainability of the country’s mineral resources,” the Commission said in a statement issued late on Friday.
Gold Refinery Channels
Under the new rules, miners and traders will submit the reserved gold to two major mineral refineries: Eye of Africa Ltd in Dodoma, the nation’s capital, and Mwanza Precious Metals Refinery Ltd, located in Mwanza, a city in the northern part of the country. These refineries will facilitate the purchase and processing of gold before it is transferred to the Central Bank.
“All payments will be processed according to the Bank of Tanzania’s arrangements,” the statement added, although specific details on pricing were not provided.
Strengthening Foreign Reserves
Tanzania’s foreign exchange reserves stood at $5.29 billion at the end of July 2024, enough to cover approximately 4.3 months of projected imports of goods and services. The purchase of gold is intended to provide a buffer against economic shocks and stabilize the country’s currency, which has faced mounting depreciation pressures in recent months.
The new directive is expected to create a steady supply of gold for the central bank while promoting local beneficiation through refining facilities. Analysts believe this could also encourage miners and traders to formalize their operations, as the directive imposes stricter compliance standards.
This policy is part of Tanzania’s broader efforts to maximize benefits from its natural resources and ensure that the wealth generated by the mining sector contributes to the national economy.
A Boost for the Mining Sector
Tanzania is Africa’s fourth-largest gold producer, and gold exports are a vital source of foreign exchange. With rising global gold prices and increased domestic production, this directive is poised to impact the sector significantly, particularly for small and medium-scale miners.The move to reserve gold for the Central Bank marks another step in Tanzania’s drive to assert greater control over its mineral wealth and enhance its fiscal stability.
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