Tanzania: Tanzania Briefing: New Local Content Submission Guidelines And Integrity Pledge Regulations

In this briefing, we summarise the key provisions in the Integrity Pledge Regulations and the Local Content Submission Guidelines.

Introduction

On 13 July 2018, the following new mining regulations and guidelines were issued in Tanzania:

  • Mining (Integrity Pledge) Regulations 2018 (Integrity Pledge Regulations)
  • Mining Commission (Guideline for Submission of Local Content Plan) 2018 (Local Content Submission Guidelines)

Integrity Pledge Regulations

The Integrity Pledge Regulations are made under section 106(3) of the Mining Act 2010. This section states that the Minister of Minerals "shall make regulations guiding compliance with the integrity pledge". Some of the key provisions in the Integrity Pledge Regulations are as follows:

  • Application – The Integrity Pledge Regulations apply to persons who are undertaking prospecting and mining activities (a Mineral Right Holder). Whilst the 'application provision' limits the Integrity Pledge Regulations to Mineral Rights Holders only, some of the provisions of the Integrity Pledge Regulations seem to extend to subcontractors and any other person engaged in undertaking mining activities (a Mining Sector Stakeholder).
  • Signing of Integrity Pledges – A Mineral Right Holder must submit an executed integrity pledge to the Mining Commission. The Integrity Pledge Regulations provide a prescribed format of the integrity pledge. Also, the Mineral Right Holder is responsible for ensuring that its sub-contractors and any other person engaged in the Mineral Right Holder's mining activities complies with the executed integrity pledge.
  • Objectives of Integrity Pledges – One of the objectives of integrity pledges is to reinforce corporate governance, integrity, transparency and accountability in the daily operational processes and procedures of companies and businesses involved in the mining industry.
  • Code of Conduct – Mineral Right Holders and Mining Sector Stakeholders are now required to establish and maintain a compliance programme throughout the term of the relevant licence, which includes: a written code of conduct, policies and procedures, training, awareness campaigns and education and notification of government's investigation or legal proceedings. It remains unclear whether the words in italics imply that the Mineral Right Holder and the Mining Sector Stakeholder are now required to publicize/publish investigations against them regarding their failure to comply with the integrity pledge.

Also, Mineral Right Holders and Mining Sector Stakeholders are required to develop, implement and distribute a written code of conduct to the person to whom it applies. Our understanding is that, the code of conduct will contain guidelines of how the employees, agents, contractors, sub-contractors etc. who work with the Mineral Right Holders should behave and transact business in a manner which does not breach the integrity pledge.

There are further obligations stipulated under regulation 9 of the Integrity Pledge Regulations, including but not limited to:

  • conducting mining operations and activities with the utmost integrity;
  • desisting from engaging in any arrangement that undermines or is prejudicial to Tanzania's financial, monetary and tax systems as well as Tanzania's economic policies and national security;
  • maintaining satisfactory and effective insurance coverage against losses and damage to the environment, individuals and properties; and
  • ensuring a full compliance with Tanzanian laws, regulations, rules and policies.
  • Specific penalties for malpractice – If a Mineral Right Holder engages in malpractice, it may be liable to pay a minimum fine of TZS 100 million (approx. USD 44,000) or serve a minimum custodial sentence of 10 years. "Malpractice" includes tax evasion, double taxation, under or overpricing, transfer pricing and corruption. There are other additional penalties which may be imposed against the Mineral Right Holder for failure to comply with the Integrity Pledge Regulations, which include suspension or cancellation of its mineral right, payment of fines and other penalties stipulated under other Tanzanian laws.
  • Compliance deadline – Mineral Rights Holders must ensure that they make arrangements to the satisfaction of the Mining Commission as necessary in order to comply with the Integrity Pledge Regulations within three months from 13 July 2018 (i.e. by 13 October 2018).

Local Content Submission Guidelines

The Local Content Submission Guidelines are made under regulation 6(2)(b) of the Mining (Local Content) Regulations 2018. This regulation states that the Local Content Committee "shall prepare guidelines, to include targets and formats for local content plans and reporting". Some of the key provisions in the Local Content Submission Guidelines are as follows:

  • Application – The Local Content Submission Guidelines apply to all applicants of mineral rights and holders of prospecting, mining, special mining, processing, smelting and refining licences, including their contractors, sub-contractors or other allied entity engaged in mining activities (Stakeholders).
  • Declaration – When a local content plan is submitted to the Mining Commission, it must contain declarations from the Stakeholder that, first consideration and preference shall be given to goods and services procured and manufactured in Tanzania and those meeting the specifications of the mining industry. The prescribed format of declaration that is required is stipulated in the Local Content Submission Guidelines.
  • Required particulars – Stakeholders are required to provide a lot of information when they submit local content plans to the Mining Commission, including but not limited to:
    • tax clearance certificates from the Tanzania Revenue Authority;
    • passport copies of foreign directors as well as copies of their residence and work permits (if any);
    • audited financial reports from the last 3 years;
    • company profile;
    • company website; and
    • the name, business address and ID documents of the main contact person.
  • Sub-plans – Stakeholders are required to include sub-plans in the local content plans to be submitted to the Mining Commission. Amongst other issues, the sub-plans are supposed to cover issues relating to the provision of banking and financial services, legal services and research and development. The prescribed formats of the sub-plans are stipulated in the Local Content Submission Guidelines.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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