MDAs legal regime in Tanzania: A comparative analysis

It is worth observing that, like Tanzania, there are several countries which have previously introduced measures aimed at benefiting more from their mineral or energy resources. For example, in the wake of ever-rising energy prices in early and mid-2000s, Bolivia, Ecuador and Venezuela claimed a right to a greater share in the profits of their natural resources.

The claim paved the way for the introduction of new tax measures requiring investors to pay higher taxes. In some instances, the investors’ private property was actually nationalised.

Thus, apart from enacting the Hydrocarbon Law (3058) in May 2005 requiring investors to alter their contracts and pay greater revenue taxes, the Bolivian govt issued a Supreme Decree in May 2006 nationalising the hydrocarbon sector.

The nationalisation raised government’s share of the sales from 50 to 82 per cent from the biggest fields.

Some developed countries with investors in their oil and gas sector also sought to benefit more from the rising energy prices of the early and mid 2000s.

In December 2005, the British government retrospectively increased the rate of tax for oil and gas producing companies in the North Sea to 50 per cent.

And in Canada, Alberta’s Finance Minister ordered a complete review of Alberta’s royalty and tax regimes with the goal of ensuring that Albertans received a fair share from the energy development through royalties, taxes and fees. The order was issued in 2007.

In Africa, Zambia in 2008 unilaterally cancelled the mining development agreements (MDAs). The Chamber of Mines of Zambia said all mining companies had accepted government’s request to renegotiate the MDAs and they were surprised when the Minister of Finance and National Planning, Ng’andu Magande, during his Budget address in Parliament announced new tax measures for the mining companies as they were still waiting for the committee to invite them to the negotiating table.

Major mining companies argued that the new tax measures could not apply to mining companies that had signed MDAs with the govt because the MDAs were still binding on the Republic of Zambia.

The global financial crisis affected Zambia in 2008 and did not spare mining companies operating in Zambia. The fall of copper prices resulted in serious operational difficulties for most mining companies operating in Zambia. Concerned about the continued loss of jobs.

In 2009, The government of Zambia decided to amend the 2008 fiscal regime, by giving mining companies the tax regime they wanted through their counter proposals.

In conclusion, the new mining laws are aimed at safeguarding the nation against international exploitation of its mineral resources.

These amendments have resulted in the government being entitled to own a stake to the mining projects operating in the country, as well as expansive powers to renegotiate existing mining contracts.

On the other hand, the new laws have also drastically changed the investment climate in the country, especially on how Tanzania is viewed by extractive companies.

Aisha Ally Sinda is an advocate. The views expressed here are solely the author’s in her private capacity.