The Tanzanian government submitted three bills to parliament on Thursday that would allow it to force mining and energy companies to renegotiate their contracts, the latest in a string of moves that have alarmed foreign investors.
It was not immediately clear how the proposed renegotiation of contracts would affect a planned $30 billion gas project, or the troubled mining sector, which generates about 3.5 percent of Tanzania’s gross domestic product.
Businesses have complained that they feel President John Magufuli is unfairly squeezing them through a strict interpretation of tax laws, increased fines and demands they rapidly list on the local stock exchange. [nL8N1DQ1OO]
Magufuli says the reforms will increase transparency and revenues and that the companies have not been paying their fair share of taxes, charges they strongly deny.
The bills, expected to be fast-tracked, will affect multinationals and follow the recommendations of a committee investigating the East African country’s gold industry.
The committee called for an urgent overhaul of the country’s mining, gas and fiscal codes.
The three bills cover natural resources contracts, sovereignty and amend existing laws and would allow the government to renegotiate or dissolve contracts.
Companies that could be affected include BG Group, part of Royal Dutch Shell, Exxon Mobil, Statoil and Ophir Energy.
They plan to build a $30 billion liquefied natural gas (LNG) export terminal in partnership with state-run Tanzania Petroleum Development Corp.
The bill on natural wealth and resources reads: “Where the government has served notice of intention to renegotiate the arrangement or agreement … and the other party fails to agree to renegotiate the unconscionable terms or no agreement is reached … such terms shall cease to have effect and shall be treated as having been expunged.”
It defines “unconscionable terms” as anything that is “contrary to good conscience and the enforceability of which jeopardises the interests of the people” of Tanzania.
The parliamentary session has been extended for several days to allow lawmakers to study the bills and approve them, National Assembly Speaker Job Ndugai said.
Tanzania is Africa’s fourth-largest gold producer and has made vast natural gas discoveries but remains one of the poorest countries in the world.
Mining companies that could be affected by the proposed law changes include AngloGold Ashanti, Acacia Mining Plc and Petra Diamonds.
Acacia, which has most of its operations in Tanzania, has been a particular target of Magufuli’s ire. Its share price has nearly halved since March 3, when the government banned it from exporting minerals in a row over taxes. [nL8N1JC1OP]
Acacia and AngloGold said they were studying the legislation. Acacia also said talks with the government on the export ban were “yet to begin”.
Credit: CNBC Africa