Minimum GoT Shareholding Regulations Published
Section 10 of the Mining Act, R.E. 2019 (the Act) imposes a statutory obligation on mining firms in Tanzania to afford/grant the Government of Tanzania (GoT) a minimum of 16 percent non-dilutable free carried interest shares in the capital of a mining company in order to ensure Tanzanians have a share of their minerals. According to the Act, the non-dilutable free carried interest shares of the GoT can be raised by up to 50%.
The Mining (State Participation) Rules, 2020 were issued by the Minister for Minerals on October 30, 2020. The Regulations were written to provide more information about the GoT's non-dilutable free carried interest stock in a mining company, as well as the purchase and management of those shares. The Regulations specify that the overall amount of tax expenses enjoyed by a mining firm or an individual possessing a Mining License or Special Mining Licence by tax exemptions and reliefs will be used to assess the purchase of shares. What this means is that the higher the proportion of non-dilutable free carried interest shares the GoT is entitled to, the more tax benefits the mining business gets.
The Mining Committee, in coordination with the Treasury Registrar and TRA, shall weigh the money spent, mining technology involved, profit, and overall tax value of tax expenses enjoyed by the mining company when deciding the amount of investment made by a mining company for the purposes of GoT shareholding.
Furthermore, the GoT has the right to study tax expenses enjoyed by mining firms every two years in order to assess the amount of additional shares to be purchased by the GoT. As a result, the GoT's original minimum 16 percent shareholding can be raised every two years.
The Regulations give the GoT the right to be issued with a share certificate, to be registered as a member of the corporation, to engage in legislative meetings and governance, to view company records, to nominate a director, and to earn dividends after the GoT has obtained the free carried interest shares. Furthermore, the Regulations state that the GoT is entitled to a proportionate share of any equity, shareholding loan, or third-party loan repayments. It would be important to see how this is interpreted and applied.
The Treasury Registrar may also specify how benefit from non-dilutable free carried interest shares or other extra shares is charged to the government under the Regulations. The Treasury Registrar is expected to advise the mining companies in writing on the procedures for benefit payment before deciding the mode of payment to the GoT.
These Regulations include the long-awaited guidelines on how to apply the GoT's criteria for non-dilutable free carried interest shares in mining companies.