In 2017, Tanzania’s government embarked on a comprehensive restructuring of the country’s mining sector through the introduction of several new policies, laws and regulations. While these changes are aimed at giving the government greater control over Tanzania’s natural resources sector, and ensuring that Tanzanian citizens benefit from the country’s mineral wealth, they have also had a profound impact on the country’s natural resource sector and overall investment environment.
 
Published in January 2018, the Mining (Local Content) Regulations, in particular, are having widespread repercussions across a wide range of Tanzania’s economic sectors.

Ostensibly aimed at encouraging the increased participation of indigenous companies in Tanzania’s mining sector, these new regulations impose onerous local content requirements on all companies operating in the sector, requiring them to increase their use of local businesses, goods and services.

Despite being well intentioned, these new requirements are expected to have a profound impact on foreign-owned banks, insurance companies, and law firms that are operating in the country; particularly with regards the way in which they conduct business with companies operating in the mining sector.

In the short term, these new regulations are exacerbating an already unpredictable operating environment, and have the potential to have a longer term negative impact on Tanzania’s economic growth potential and ability to attract foreign investment.

Impact Points

  • In January 2018, the government introduced new legislation limiting the involvement of foreign banks in Tanzania’s mining sector, in an attempt to increase the share of mining profits that remained in the country and gain more oversight and control over the mining sector’s finances.
  • However, Tanzania’s banking sector remains relatively underdeveloped and is unlikely to be able to adequately support the extractives sector in the immediate future, further increasing uncertainty in both the country’s mining and financial sectors.
  • Ultimately, these regulatory changes are exacerbating Tanzania’s increasingly uncertain investment environment, and will continue to act as detractors to foreign investment.