August 11, 2009 / 11:48 AM / 10 years ago

Tanzania seeks government shareholding in new mines law

DAR ES SALAAM (Reuters) - Tanzania plans to include a clause in its new mining law allowing the government to own shares in firms extracting what it considers strategic minerals, its energy and minerals minister said on Tuesday.

Mineworkers underground at Harmony Gold Mine's Cooke shaft near Johannesburg, South Africa, September 22, 2005. REUTERS/Mike Hutchings

The mining sector is Tanzania’s second largest foreign exchange earner after tourism, having earned $1.08 billion in 2008, up from $983 million a year before.

The east African nation is due to revise the mining law passed in 1998, later this year. The law will also compel mining firms to buy goods and services locally when they are available.

Critics have long complained that benefits from the lucrative sector were not benefiting the common citizen.

The law currently allows the government to hold no less than 25 percent in companies mining gemstones like diamond, tanzanite and rubies, but is silent on other minerals.

“In the new law....The government will have the authority to take shareholding even if it is 10 or 15 percent in minerals that the government deems strategic. That is better than having none at all,” William Ngeleja told reporters at a minining sector meeting.

Ngeleja said the move would not apply retrospectively to existing companies, adding the government would decide on a case-by-case basis what mineral it considered strategic.

“It is not something automatic, for example, gold to us is strategic, so let’s have some shares in the mining company,” he said.

Tanzania is Africa’s third largest gold producer. The precious metal dominates its mining sector, but there is increasing interest in the extraction of metals like uranium oxide and nickel. It expects to start mining uranium oxide by 2011.

It also has iron ore and coal, which have attracted investor interest.

The new law will introduce guidance on the amount of compensation paid to people displaced by mines. It also aims to increase royalties paid on minerals like gold and diamonds.

Ngeleja said it would guide how to equitably distribute the gains from the minerals to the country’s population of 40 million people.

“It cannot be that only those who live in mineral-rich areas benefit. If you say so you could cause conflict in the country,” he added.

International companies which operate in Tanzania include Resolute Mining of Australia, Canada’s Barrick and AngloGold Ashanti of South Africa.

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