Tanzania law changes could impact political risk claims

Tanzania’s parliament has passed two laws this month allowing the government to renegotiate contracts with mining and energy companies.

The approved bills dealt with state sovereignty over mineral wealth and contracts containing what could be considered “unconscionable terms”.

The changes to the Mining Act and the new legislation covering the resource sector will allow the government to renegotiate or dissolve contracts.

According to reports from Reuters, Tanzanian president John Magufuli said the reforms would increase transparency and revenues; he also claimed that companies had not been paying their “fair share of taxes”, which firms operating in the country firmly deny.

The Tanzania law changes will impact firms like UK-listed Acacia Mining, and Canadian firm Barrick Gold.

There is no word on how these new laws will impact the $30bn gas processing plant project launched late last year, in which the Tanzanian government has partnered with oil industry investors.

At the Clyde & Co event ‘Renewables in Africa – understanding and managing risk’ held earlier today under Chatham House rules, it was suggested that political risk claims may be triggered, and also the new laws could impede firms from obtaining political risk coverage for the operations in the country.

The energy sector’s main lobby group, Tanzania Chamber of Minerals and Energy, said that the changes are liable to have a material impact on almost every area of the mining industry and on all stakeholders to the industry.

The group added: “The Chamber is concerned at the lack of stakeholder consultation prior to the publication of this proposed legislation, and the short notice set aside for consultation.”