In 2016, Tanzania introduced the Mining (Minimum Shareholding and Public Offering) Regulations (GN No. 286), imposing an obligation on Special Mining Licence (SML) holders to list at least 30% of their shares on the Dar es Salaam Stock Exchange (DSE). At its core, the regulation aims to create more opportunities for Tanzanians to share in the nation’s mineral wealth, promoting broader ownership within the industry. Yet, while these regulations present a progressive vision for local involvement, they also pose significant questions for investors and stakeholders.
Local Ownership and Shareholding Requirements: A Balancing Act
The regulations set out an ambitious goal for SML holders, mandating that they list a portion of their shares on the DSE. “Local Shareholding” is defined as ownership by Tanzanian citizens or entities where Tanzanians hold at least 50% of the ordinary shares. Companies with SMLs as of the regulation’s start date were given a two-year compliance window, while those issued SMLs after are expected to meet this within one year. In essence, this rule enhances the role of Tanzanian citizens and companies in the mining sector, aligning with the government’s drive for national ownership.
Yet, there are ambiguities. For instance, the regulations don’t clearly specify when the listing should occur within that one-year period. This leaves companies navigating murky waters, as compliance with listing requirements can be administratively complex and time-sensitive.
Waiver Provision: Redundancy or Safety Net?
A unique provision allows the Minister for Energy and Minerals, in consultation with the Capital Markets and Securities Authority (CMSA), to waive the minimum local shareholding requirement if the SML holder’s public offering fails. While this waiver might seem helpful, it doesn’t exempt the company from the obligation to list on the DSE. This redundancy could create challenges, particularly for companies struggling to attract local investment despite a genuine attempt to comply.
It’s also worth noting that the regulation permits companies jointly owned by Tanzanians and foreigners to purchase shares, provided Tanzanians hold no less than 50% of the issued share capital. This opens doors for partnerships and may incentivize joint ventures within the local mining industry, potentially boosting local investment appeal.
Free Carried Interest: An Overlooked Factor?
An area of potential friction lies in the relationship between the 30% local shareholding requirement and the government’s Free Carried Interest, as outlined in the Mining Development Agreement. The ambiguity here raises questions for investors, as it remains unclear how these obligations interact. Investors might view this as a layering of obligations that could complicate compliance, especially for those unfamiliar with Tanzania’s unique mining framework.
Implications for Tanzania’s Mining Sector
These regulations clearly underline the government’s commitment to fostering Tanzanian ownership in the mining industry, which aligns with national economic goals. However, without clear guidelines on the timing for listing and the impact on existing government interests, these requirements could dampen investor enthusiasm. Striking a balance between ownership regulations and creating a favorable environment for investors will be essential for the long-term health of Tanzania’s mining sector.
Tanzania has a significant opportunity to build on these regulations by clarifying compliance pathways and engaging investors with clearer, less redundant requirements. The promise of local ownership is indeed compelling, but it must be carefully managed to avoid deterring investors who can bring expertise, capital, and development to Tanzania’s resource-rich land.
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