MINING LOCAL CONTENT REGULATIONS FOLLOWING THE AMENDMENTS OF THE TANZANIA MINING ACT OF 2010 IS EFFECTIVE FROM 4TH APRIL 2018.

The Mining Local Content Regulations came into being due to the amendments of the Mining Act Cap 123 of 2010 through the Written Laws (Misc. Amendments) Act, Act No. 7 of 2017 which brought about the local content requirements.
The Regulations became effective from 4th April 2018. The Mining Local Content Regulations was established so as to promote the maximazation of value-addition and job creation through the use of local expertise, goods and service, businesses and financing in the mining industry, to develop local capacities in the mining industry value chain through education skills transfer and expertise development and to increase the capability and international competitiveness of domestic business amongst others.
In order to attain the goals set, the Mining Local Content Regulations provides for the following guidelines:

1. ESTABLISHMENTS OF A LOCAL CONTENT COMMITTEE.
   • The Local Content Committee has been established by the Regulations.
   • The Committee shall be responsible for overseeing the implementation of the regulations so as to ensure a
     measurable and continuous growth in local content in all mining activities.
   • The Committee also has powers to set the minimum standards of local content requirements, to make appropriate
     recommendations for the smooth implementation of the Regulations, to monitor and audit the local content
     and to undertake public education.
2. LOCAL CONTENT REQUIREMENT.
   • The Regulations set mandatory obligations to contractors, subcontractors, licensee, the corporation or other allied entities to ensure that local content provisions are adhered to.
   • The Regulations defines the term corporation to mean the entity to be established or designated as such for
     the purpose of holding control of Government mineral assets.
3. INTERESTS OF TANZANIAN CITIZEN IN MINING OPERATIONS.
   • The Regulations defines an indigenous Tanzanian company to mean a company incorporated under the Companies Act with atleast 51% of its equity owned by a citizen or citizens of Tanzania or Tanzanian citizens holding at least 80%
     of executive and senior management positions and 100% percent of non-managerial and other positions.
   • A Tanzanian company shall be given first preference in the grant of a mining license with respect to mining activities as long as the said Tanzanian company fulfills the specified conditions provided in the Regulations. This
     is to say that in case there are two companies, one Tanzanian and another foreign company, competing
     to obtain a mining license then the mining shall be granted to the Tanzanian Company.
   • It is further provided that at least 5% of the participation of an indigenous Tanzanian company other than the corporation to be qualified for grant of a mining license. It should be noted that this requirement only applies
     to companies applying for mining licenses as opposed to those applying for special mining licenses. Furthermore
     it should be noted that this requirement shall not apply retrospectively in the sense that the existing
     mining companies may not be required to adhere with the minimum shareholding requirement.
   • The Minister has the discretion to vary the required 5% to be held by the indigenous Tanzanian company if
     that Tanzanian company does not meet the 5% equity requirement.
   • Minister shall determine the persons qualified to hold the 5% equity in the company applying for mining license.
   • The Regulation is not very precise here but we understand that the Minister shall exercise this authority
     upon the persons who can hold the 5% equity.
   • The Regulations prohibits any transfer of Interest from an indigenous Tanzanian company arising from a mining
     license to a non-Indigenous Tanzanian company.
4. PROVISION OF SERVICES BY A NON-INDIGENOUS COMPANY.
   • The Regulations also provides that for a non-indigenous Tanzanian company which intend to provide goods or
     services to a contractor, a subcontractor, licensee, the corporation or other allied entity within Tanzania
     that non indigenous Tanzanian company shall incorporate a joint venture company with an indigenous Tanzanian
     company and afford that Indigenous Tanzanian company an equity participation of at least 25%.
5. SETTING UP A LOCAL OFFICE.
   • The regulations requires a contractor, subcontractor, licensee or other allied entity as far as practicable,
     before carrying out any work or activity in the mining industry to set up a project office within the
     district where the project is located.
6. SUBMISSION OF A PLAN.
   • A contractor shall before the commencement of the mining activities submit to the Commission specifying the
     role and responsibilities of the indigenous Tanzanian company, equity participation of the indigenous
     Tanzanian company and a strategy for the transfer of technology and know-how to the indeginous Tanzanian
     company.
   • Mining activities are defined as any activity engaged within and outside Tanzania related to the exploration
     for, development and production of minerals, the acquisition of data, mining and extraction or mining
     of minerals, storage, transportation and decommissioning and the planning design, construction, installation,
     operations and use of any facility for the purpose of the mining operations.
7. SUBMISSION OF LOCAL CONTENT PLAN FOR APPROVAL.
   • A contractor, subcontractor, licensee or other allied entity shall when making application to undertake mining activity prepare and submit a local content plan for approval by the commission.
   • The contractor shall submit a long term local content plan which corresponds with the work programme that accompanies the application and an annual local content plan in respect of each year.
   • The Commission shall within seven (7) working days of the receipt of a local content plan acknowledgement receipt
     and submit the local content plan to the committee. The regulations further states that the committee shall within
     twenty-five (25) working days of the receipt of the local content plan review and assess the plan and inform
     the commission in writing of the recommendations of the committee on whether or not the plan complies with the
     Regulations and whether it should be approved or rejected.
   • If the commission approves the local content plan it shall communicate its decision to the applicant within seven
     (7) working days of the approval of the recommendations of the committee. If the commission fails to issue its
     response within the prescribed time the plan shall be deemed approved upon the lapse of fifty (50) working days
     from the date of submission of the Plan.
   • If the commission rejects the plan the applicant shall revise the plan taking into account the recommendations of
     the commission and within fourteen (14) working days submit the revised local content plan to the commission.
8. CONTENT OF THE LOCAL CONTENT PLAN.
   • The plan submitted to the commission shall contain a detailed provisions to ensure that first consideration is given to services provided within the country and goods manufactured in the country where the goods meet the specifications
     of the mining industry as established by the standards authority or by other international acceptable
     standards. The Regulations also state that Tanzanians shall be given first priority for employment and
     adequate provision is made for the training of Tanzanians on the intended job.
   • The plan shall also include a clause relating to how the contractor intends to guarantee the use of locally
     manufactured goods where the goods meet specifications of the mining industry.
   • The local content plan shall also be in accordance with the employment and Labour Relations Act. The plan
     must have the following sub-plan:
     1. an employment and training sub-plan;
     2. a research and development sub-plan;
     3. a technology Transfer sub-plan;
     4. a legal services sub-plan; and
     5. financial services sub-plan.
9. MINIMUM LOCAL CONTENT LEVELS.
   • The regulations stipulate that the local content levels that shall be observed by the contractor. The Regulations
     further stipulates in the 1st schedule that the commission has she discretion to determine the applicable
     local content levels to be achieved taking into consideration of the work programme.
10. BIDDING.
    • The contractor, subcontractors, licensee or other allied entity shall set up and implement a bidding process
      for the acquisition of goods and services to give preference to indigenous Tanzanian companies.
    • That the contractor shall not award a contract based solemly on the principle of the lowest bidder. The regulations further states where an indigenous Tanzanian company has the capacity to execute a job, that indigenous
      Tanzanian company shall not be disqualified exclusively on the basis of the lowest financial bidder.
    • If the total value of the bid by a qualified indigenous Tanzanian company does not exceed the lowest bid by more than 10%
      the contract shall be awarded to that indigenous Tanzanian company.
    • When evaluating the bids, the bids are considered to be equal, the bid containing the highest level of local
      content shall be selected.
    • Where a non-indigenous Tanzanian company is required to provide goods and services to a contractor, the former
      shall incorporate a company in Tanzania and shall where practicable provide the foods and services in
      association with a Tanzanian Company.
    • The Commission shall establish bid evaluation guidelines in accordance with applicable Laws and Regulations
      for ensuring that there is annual progression of the local content objectives of the regulations are
      met.
    • In support of the foregoing the Regulations mention the document to be submitted to the commission before:
      1. Issuing pre-qualification notification to the prospective bidders;
      2. Request for proposals or request for quotations; and
      3. Before awarding of a contract or purchase order to the selected bidder.
    • The Commission shall confirm that each document submitted is satisfactory or otherwise provide written
      comments on the submitted document during the bidding process within fourteen (14) working days of
      the receipt of the document where the Commission fails to respond with the prescribed time the submission
      shall be deemed approved.
11. REVIEW OF CONTRACT.
    • The Commission shall in its discretion review the contractor’s contracts and it shall within seven (7) working
      days of commencement of a quarter of the year, advice the contractor which of its contracts shall be
      reviewed by the Commission.
12. SUBMISSION OF CONTRACTS.
    • A contractor shall inform the Commission in writing of each proposed contract or purchase order related to
      the mining activities which is to be sole sourced or where it is to be sourced by a competitive bidding
      procedure that is estimated to be in excess of the Shilling equivalent of One Hundred Thousand United
      States Dollars ($100,000).
    • The Regulation also requires the Contractor to submit the following documents to the Commission for approval:
      1. Advertisements relating to expression of interest;
      2. Request for proposals;
      3. Pre-qualifications criteria;
      4. Technical bid documents;
      5. Technical evaluation criteria; and
      6. Any other information requested by the omission to enable the Commission determine that the local
         content requirements have been complied with.
    • The Commission shall within ten (10) working days of receipt of the documents, communicate its decision to
      the Contractor and within ten (10) working days the documents shall be deemed approved.
13. SUBMISSION OF QUARTERLY FORECASTS.
    • The Contractor shall not later than the 1st day of each quarter submit to the Commission a list of
      1. Contract of Purchase Orders; and
      2. Contracts or Purchase Orders estimated to exceed the equivalent of One Hundred Thousand United States
         Dollars ($100,000).
14. EMPLOYMENT AND TRAINING SUB-PLAN.
    • The employment and training sub-plan shall include a forecast of the hiring and training needs of the contractor
      mentioning specification of skills needed and the anticipated skill shortages in the local workforce,
      the specific training requirements and the anticipated expenditure that will be incurred by the contractor
      in implementing the Sub-Plan as forecasted.
    • The Sub-Plan shall also specify the time frame within which the contractor will provide employment opportunities
      for the Tanzanian workforce for each phase of the Mining activity so as the enable members of the Tanzanian
      workforce prepare for such opportunities and efforts made and procedures adopted for the accelerated
      training of Tanzanians.
    • The Contractor shall provide to the Commission a quarterly report on employment and training activities for
      the reporting period together with a comparative analysis of the Sub-Plan and the employment and training
      activities to monitor compliance.
    • Where Tanzanians are not employed because of lack of expertise, the contractor shall ensure, to the satisfaction of the Commission that every reasonable effort is made to provide training to Tanzanians in that field locally or abroad.
    • The Contractor shall submit to the Commission a succession plan for any employment position that is occupied by a non-Tanzanian
      to ensure that the minimum local content levels specified in the Regulations are met. The succession
      plan shall make provision for and require Tanzanians to understudy the requirements of the position held
      by a non-Tanzanian for a period determined by the Commission on a case by case basis after which the
      position occupied by the non-Tanzanian shall be assumed by the Tanzanian citizen.
    • The Regulations requires the contractors to employ only Tanzanians in junior level or middle level positions. The terms junior or middle level positions includes the position of foremen, supervisor or any corresponding position designated as such.
15. PROGRAMME FOR RESEARCH AND RESEARCH DEVELOPMENT SUB-PLAN.
    • After the grant of mining licence and before the commencement of Mining activities, the Contractor shall submit a programme for research, development and budget to the Commission for the promotion of education, practical attachments, training and research and development in the country in relation to its overall work programme and activities.
    • This Sub-Plan shall be submitted to the Commission in respect to mining activity and shall outline a revolving
      3-5 year programme for mining related research and development initiatives to be undertaken in the country,
      provide details of the expected expenditure that will be made in implementing the sub-plan and provide
      for public calls for proposals for research and development initiatives associated with the activities
      of the Contractor and criteria for selecting proposals which qualify for support.
    • The Contractor is required to update this Sub-Plan annually and submit it to the Commission for review and approval.
16. TECHNOLOGY TRANSFER PROGRAMMES AND REPORTING.
    • The Commission shall, after consultation with the Planning Commission, relevant Ministries Government Departments and Agencies develop and publish the national policy for technology transfer with respect to the mining industry.
    • The contractor shall support and carry out a programme in accordance with the national plan on technology transfer and priorities for the promotion of technology transfer to Tanzanians in relation to mining industry.
    • The technology sub-plan shall include a programme of planned initiatives aimed at promoting the effective transfer of technologies from the contractor to a Tanzanian indigenous Company or Citizens.
    • The regulations requires contractors to support and facilitate technology transfer as regards the formation of joint ventures, partnering of licensing agreement between indigenous Tanzanian companies or citizens and foreign contractors and service companies or supply companies.
    • The contractor shall submit annually to the Commission a technology transfer report stating the technology
      transfer initiatives being pursued and the results in relation to the technology transfer sub-plan.
17. USE OF INSURANCE, LEGAL AND FINANCIAL SERVICES.
    • The contractor shall comply with the provisions of the Insurance Act. Insurable risks relating to Mining
      activity in the country shall be insured through an indigenous reinsurance broker. Approval shall be
      required prior to a person obtaining offshore insurance services. The insurance commission shall ensure
      that local capacity has been fully exhausted.
    • The contractor engaged in the mining activities that requires legal services in the country shall retain
      only the services of a Tanzanian legal practitioner or a firm of Tanzanian legal practitioners whose
      principal office is located in Tanzania. This sub-plan shall be submitted to the Commission and shall
      include a comprehensive report on legal service utilized in the preceding six (6) months by expenditure,
      forecast of legal services required during the ensuing six (6) months where applicable and the projected
      expenditure for the services and annual legal services budget for the ensuing year quoted in Tanzanian
      Shillings and United States Dollars.
    • The Contractor shall retain the services of a Tanzanian financial institution for providing financial services with respect to mining activity and the commission is empowered to approve use of a foreign financialinstitution. The contractor shall prepare a financial sub-plan which shall specify the financial services utilized and expenditure in the preceding six (6) months the forecast of financial services required in ensuring six (6) months, the projected expenditure for the financial services and the list of financial services utilized in the preceding six (6) months.
18. USE OF BANK ACCOUNT.
    • A Contractor shall maintain a bank account with an indigenous Tanzanian bank and transact business through
      banks in the country. An indigenous bank means a bank which is 100% owned by Tanzanians or a majority
      shareholding is made up of Tanzanians.
    • This means that Tanzanian banks which have foreigners as majority shareholders should re-structure their shareholding so they can retain mining companies as their clients.
19. COMMON QUALIFICATION SYSTEM.
    • The Commission shall in consultation with stakeholder in the mining industry establish a common qualification
      system.
    • The Commission shall manage the common qualification system in accordance with the Regulations.
    • The common qualification system shall save as the sole system for the registration and pre-qualification
      of local content in the mining industry. The common qualification system shall be used for verification
      of contractors’ capacities and capabilities, the evaluation of application of local content submitted
      by a contractor, the tracking and monitoring of performance and provision of feedback and ranking and
      categorization of mining service companies based on capabilities and local content.
20. MONITORING, COMPLIANCE AND ENFORCEMENT.
    • The Commission may issue guidelines to provide for a system requiring documents under the regulations to
      be filed electronically.
    • The Commission shall in consultation with relevant institutions, issue guidelines for compliance by a contractor
      in respect of requirement and targets for growth of research and development of the mining industry,
      minimum standards, facilities, personal and technology for training, investment in or setting up a facility,
      factory production unit or other operation in Tanzania etc.
    • The Commission shall monitor and investigate the activities of each contractor to ensure the achievement
      of the purpose of the regulations within the framework of the national policy on local content. The Commission
      also has powers to launch investigations to ensure that the Tanzanian companies principle is not diluted
      by the operation of a front or bid rigging and canalization are in the procurement process.
    • Front means to deceive or believe in a particular manner intended to conceal the fact that a company is not
      a Tanzanian company.
21. OFFENCES AND PENALTIES.
    • The Regulations provide that a person who submits a plan, return or report which is false commits an offence
      and upon conviction shall be fined between Tanzania Shillings Fifty Million to Tanzania Shillings Five
      Hundred Million (TZS.50,00,000 to TZS. 500,000,000) and/ or imprisonment of a term between two (2) to
      five (5) years.
    • A Tanzania citizen who acts as a front or connives with a foreign citizen or company to deceive the Commission
      as representing a Tanzanian company to meet the local content requirements, commits an offence and can
      be fined between Tanzanian Shillings One Hundred Million to Tanzania Shillings Two Hundred Fifty Million
      (TZS. 100,000,000 to TZS. 250,000,000) and/ or imprisonment of a term between one (1) to five (5) years.
    • A person who fails to support and carry out a programme for technology transfer in terms of forming Joint
      Ventures or partnering of licensing agreements between Tanzanians and foreign contractors, service providers
      and supplier, ensure that its partners report local content information, communicate local content policies,procedures
      and obligations is liable to pay the Commission a penalty of Tanzania Shillings One Hundred Million (TZS.100,000,000)
      in the first instance and a further penalty of 5% for each day during which the contravention continues.
    • A Contractor who fails to observe the local content requirement, fails to submit or satisfy the local content
      plan or fails to inform the Commission of each proposed contract or purchase order shall pay the Commission
      a penalty of 5% of the value of the proceeds of the mining activities or United State Dollars Five Million
      (US$ 5,000,000), whichever is greater and further liable for cancellation of the contract in respect
      of the mining activity.
    • Failure to pay an imposed penalty shall be considered as a debt owed to the Republic and recoverable by the
      Commission under Summary Procedure as stipulated under Order XXXV of the Civil Procedure Code [Cap. 33]
      of the laws of Tanzania.
22. COMPLIANCE WITH THE REGULATIONS.
    • Within three (3) months after coming into force of the Regulations, the Contractor engaged in the mining
      activities shall make arrangements and plan as necessary for complying with the Regulations.

It should be noted that apart from the amendment of the Mining Act of 2010 to incorporate the Mining Local Content Regulations, Tanzania is still undergoing the process of legislative reforms especially in the energy and mining sector to say the least in order to ensure that the indigenous Tanzanians are directly involved in the exploration process so as to realise
the benefits of the natural resources available in the country.

FURTHER INFORMATION:

This editorial is intended to give you a general over view of the Law. If you would like further information on any issue
raised in this column, please contact.

Patrick Sanga 
Partner
E: p.sanga@vemmaattorneys.co.tz
M: +255 686 999 993

Haika-Belinda Macha
Partner
E: hb.macha@vemmaattorneys.co.tz
M: +255 688 305 999