Briefing on the recent introduction of the Mining (Local Content) Regulations.

1. Mining
January 2018
Briefing
Local Content Regulations
In this month's briefing, we provide the highlights of the
Local Content Regulations (the Regulations) issued
recently. The Regulations follow the amendments of the
Mining Act, 2010 through the Written Laws (Misc.
Amendments) Act, Act No. 7 of 2017 which introduced
the local content requirements.
This briefing covers the following key provisions:
 Establishment of a Local Content Committee;
 Adherence to the local content regulations;
 Ownership by an indigenous Tanzanian company;
 Provision of services by a Foreign Company;
 Submission of a plan;
 Setting up of a project office;
 Approval of a local content plan;
 Content of the local content plan;
 Minimum local content requirements and local
content reporting;
 Bidding;
 Review and approval of contracts and submission
of quarterly forecasts;
 Employment and training sub-plan and succession
plan;
 Programme for research and research
development sub-plan;
 Technology transfer programmes and reporting;
 Use of insurance, legal and financial services;
 Use of bank accounts;
 Common Qualification System;
 Monitoring, compliance and enforcement;
 Offences and penalties; and
 Compliance with the regulations.
1. Establishment of a Local Content Committee
 The Regulations establish a Local Content
Committee (the Committee) which shall, among
others, be responsible for overseeing compliance
and implementation of the Regulations.
 The Committee has powers to set the minimum
standards of local content requirements, monitor and
audit compliance of local content requirements and
prepare guidelines to include targets and formats for
the local content plans.
2. Adherence to the local content regulations
 The Regulations impose the obligation to ensure local
content provisions are adhered to by the contractor,
subcontractor, licensee, any other allied entity (the
Contractor) and the Corporation.
 The Corporation is defined in the Regulations as an
entity to be established or designated as such for the
purposes of holding control of the Government's
mineral assets. We understand this includes Free
Carried Interest (FCI) to be given to the Government
by holders of mining and special mining licences.
3. Ownership by indigenous Tanzanian company
 The Regulations provide that an indigenous
Tanzanian company (Tanzanian Company) means a
company incorporated under the Companies Act of
Tanzania where at least 51% is owned by Tanzanian
citizens, where Tanzanian citizens hold at least 80%
of the executive and senior management positions
and Tanzanians occupy 100% of non-managerial and
other positions.
 A Tanzanian Company shall be given first preference
when mining licences are granted. Our understanding
of this provision is that if there is a Tanzanian
Company and a non-indigenous Tanzanian company
(Foreign Company) competing, the mining licence
shall be granted to the Tanzanian Company.
 The Regulations further provide that at least 5% of
the participating interest in a company applying for a
mining licence shall be held by a Tanzanian
Company. We are of the view that this seems to
apply to companies applying for mining licences
only, as opposed to those applying for a special
mining licences.

2. Furthermore it does not seem to apply
retrospectively i.e. the existing mining companies
may not be required to comply with this minimum
shareholding requirement. It also presumes that the
5% shall be owned by a Tanzanian Company as
opposed to a Tanzanian individual.
 The 5% ownership by a Tanzanian Company is
separate from the ownership by the Corporation.
Therefore, a Tanzanian Company shall own not
less than 5% of the equity in a mining company
while the Corporation (meaning the Government
controlled entity) shall own the agreed FCI which
shall not be less than 16%.
 The Minister is entitled to vary the percentage to
be held by the indigenous Tanzanian Company if
the latter cannot satisfy the requirement of 5%
participation.
 The Minister for Minerals shall determine the
persons qualified to hold the 5% equity in the
company applying for a mining licence. Although
the Regulations are unclear on this aspect, we
understand that the Minister has the authority to
select or approve the persons who can hold the 5%
equity.
 The Regulations empower the Minister to vary the
minimum shareholding requirement if the
Tanzanian Company is unable to satisfy the
requirement of 5% equity participation.
 The Regulations provide that the interest of a
Tanzanian Company shall not be transferable to a
Foreign Company.
4. Provision of services by a Foreign Company
 The Regulations provide that every Foreign
Company which wishes to provide services to the
Contractor shall incorporate a joint venture (JV)
company in which Tanzanians hold not less than
25% of the equity.
5. Submission of a plan
 The Contractor shall before commencing mining
activities submit a plan to the Mining Commission
(the Commission) specifying the role and
responsibilities of Tanzanians, their equity
participation and the strategy for transfer of
technology and know-how to Tanzanians.
 The Regulations define mining activities to mean
an activity engaged within and outside Tanzania
which relates to exploration, development and
production of minerals, acquisition of data, mining
and extraction of minerals, storage, transportation
and decommissioning, and the planning, design,
construction, installation, operation and use of any
facility for the purpose of mining operations.
6. Setting up of a project office
 The Regulations state that as far as practicable
before carrying out any work, the Contractor shall
set up a project office within the district where the
mining project is located.
 We are of the view that, the use of the words 'as far
as practicable' brings a presumption that the
Contractor may opt not to set up a project office if
it considers that it is not practicable to do so. If it
doesn't set up an office, the Commission may
inquire on the reasons thereof.
7. Approval of a local content plan
 The Contractor shall submit to the Commission
their long-term local content plans which
corresponds to the work programme, and an annual
local content plan (the Plan).
 The Commission shall within 7 working days
acknowledge receipt of the Plan and submit it to
the Committee for review and approval. The
Regulations further state that, the Committee shall
within 25 working days review and assess the Plan.
It shall then send its recommendations to the
Commission on whether or not the Plan complies
with the Regulations and whether it should be
approved or rejected.
 If the Commission approves the Plan, it shall send
its approval to the applicant within 7 working days
from the date of receiving approval
recommendations from the Committee. If the
Commission fails to issue its response with the
prescribed time, the Plan shall be deemed approved
upon the lapse of 50 working days from the date of
submission of the Plan.
 If the Plan is rejected, the applicant shall within 14
days re-submit the amended Plan taking into
account the recommendations by the Commission.

3. 8. Content of the local content plan
 The Plan shall give preference to local services
and goods manufactured in Tanzania provided that
the same meet internationally acceptable standards
or those set by the Tanzania Bureau of Standards.
The Regulations state that Tanzanians shall be
given first priority for employment and an
adequate provision should be made for training of
Tanzanians.
 The Plan shall also include a provision relating to
how the Contractor intends to guarantee the use of
locally manufactured goods which meet the
required specifications in the mining industry.
 The local content plan must have the following
sub-plans (a) employment and training, (b)
research and development, (c) technology transfer,
(d) legal services and (e) financial services.
9. Minimum local content requirements and local content
reporting
 The Regulations specify the local content levels
which shall be observed by the Contractor. In
addition to the local content levels stipulated in the
1st Schedule of the Regulations, the Commission
has the discretion to determine the applicable local
content levels to be achieved taking into
consideration the work programme.
 The Contractor shall within 45 days on
commencement of each year submit to the
Commission an Annual Local Content
Performance Report (the Report) which shall cover
its projects and activities for the year under
review. The report shall be in a prescribed format
and shall specify a category of expenditure of the
local content on both current and cumulative cost
basis and show the employment achievement in
terms of hours worked by Tanzanians and
foreigners, their job positions and remuneration.
 The Commission shall review the Report to ensure
compliance with the Regulations. The Commission
shall have access to the Contractor's facilities,
documents and information as may be required.
 The Contractor shall also ensure that its local
content policies, procedures and obligations are
published on its website and that the same are
communicated to the persons engaged by the
Contractor in its mining activities.
10. Bidding
 The Contractor shall set up a bidding process for
acquisition of goods and services which gives
preference to Tanzanians. The Contractors shall not
award a contract based solely on the lowest bidder
and a Tanzanian Company shall not be disqualified
because it is not the lowest financial bidder.
 If the total value of the bid by a qualified
Tanzanian Company does not exceed the lowest bid
by more than 10%, the contract shall be awarded to
the Tanzanian Company. When evaluating the bids
which are considered to be equal, the bid
containing the highest level of local content shall
be selected.
 If a Foreign Company is required to provide goods
and services to the Contractor, the former shall
incorporate a company in Tanzania and shall,
where practicable, provide the goods and services
in association with a Tanzanian Company.
 The Commission shall establish bid evaluation
guidelines to ensure that there is an annual
progression of the local content objectives.
 Further to the foregoing, the Regulations list
documents to be provided to the Commission
before (a) issuing pre-qualification notification to
the prospective bidders, (b) request for proposals or
request for quotations and (c) before awarding of a
contract or purchase order to the selected bidder.
 Upon receiving the foregoing documents, the
Commission shall, within 14 working days, inform
the Contractor whether or not the documents
submitted are satisfactory. If the Commission fails
to respond within the prescribed time, the
submission shall be deemed approved.
11. Review and approval of contracts and submission of
quarterly forecasts
 The Contractor shall apply for the Commission's
approval on proposed contracts or purchase orders
in excess of US$ 100,000, which are to be sole
sourced or sourced competitively. The Commission
shall communicate its decision to the Contractor
within 10 working days and if it fails to do so
within the prescribed time, the Commission shall
be deemed to have issued its approval.

4.  The Contractor shall submit to the Commission no
later than the 1st day of each quarter, any contract
or purchase orders to be sole sourced and those
which are estimated to exceed US$ 100,000 and
intended to be tendered for or executed in the next
quarter.
 The Commission shall in its discretion review the
Contractor's contracts and it shall within 7 working
days of commencement of a quarter of the year,
advice the Contractor which of its contracts shall
be reviewed by the Commission.
12. Employment and training sub-plan and succession plan
 This sub-plan shall include a forecast of the hiring
and training needs of the Contractor while
specifying skills needed and skill shortages in the
Tanzanian workforce, specific training
requirements and anticipated expenditure to be
incurred by the Contractor in employing and
training Tanzanians.
 The sub-plan shall also contain a timeframe within
which the Contractor shall provide employment to
Tanzanians for each phase of the mining activities
and efforts made for accelerated training of
Tanzanians.
 The Contractor shall provide to the Commission
quarterly reports in relation to employment and
training activities, comparative analysis of the sub-
plan and actual employment and training activities
to monitor compliance and the number of
Tanzanians employed during the respective quarter
and their job descriptions.
 If Tanzanians are not employed due to a lack of
expertise, the Contractor shall ensure that every
reasonable effort is made to provide training to
Tanzanians in that field.
 The Contractor shall submit to the Commission a
succession plan for employment positions which
are occupied by non-Tanzanians to ensure that the
minimum local content levels specified in the
Regulations are met. The succession plan shall
provide for and require Tanzanians to understudy
the requirements of the position held by non-
Tanzanians for a period to be determined by the
Commission and after the specified period, the
position shall be assumed by a Tanzanian.
 The Regulations require that all junior and middle
positions e.g. foreman, supervisor shall be held by
Tanzanians only.
13. Programme for research and research development sub-
plan
 Upon being granted a mining licence and before
commencing mining activities, the Contractor shall
submit a programme for research, development and
budget to the Commission for promotion of
education, practical attachments, trainings, research
and development in relation to the overall work
programme activities.
 This sub-plan shall outline a revolving 3 to 5 year
programme for mining relating to research and
development initiatives, expected infrastructure for
implementation of the sub-plan, public calls for
proposals for research and development initiatives
and criteria for selecting proposals which qualify
for support.
 The Contractor is required to update this sub-plan
annually and submit it to the Commission for
review and approval.
14. Technology transfer programmes and reporting
 The Commission shall, after consultation with the
relevant Government departments, develop and
publish the national policy for technology transfer
applicable to the mining industry.
 The Contractor shall support and carry out the
programme in accordance to the national plan on
technology transfer for the promotion of
technology transfer to Tanzania.
 The technology sub-plan shall include a
programme of planned initiatives aimed at
promoting the effective transfer of technologies
from the Contractor to Tanzanian Companies or
Tanzanians.
 The Regulations further provide that the Contractor
shall support and facilitate technology transfer by
forming JVs, partnering of licensing arrangements
between Tanzanians and Foreign Contractors,
suppliers and service providers.
 The Contractor shall submit annually to the
Commission, a technology transfer report stating
the technology transfer initiatives being pursued
and the results in relation to the technology transfer
sub-plan.

5. 15. Use of insurance, legal and financial services
 The Contractor shall comply with the local
insurance laws. Insurable risks in the mining
activities shall be insured through an indigenous
brokerage firm or an indigenous reinsurance
broker. Approval shall be required prior to a
person obtaining offshore insurance services. The
Insurance Commission shall ensure that local
capacity has been fully exhausted prior to issuing
the approval.
 The Contractor shall retain a Tanzanian legal
practitioner or a firm of Tanzanian legal
practitioners whose principal office is located in
Tanzania for offering legal services. The legal
services sub-plan shall be submitted to the
Commission and shall include a comprehensive
report on legal services utilised in the preceding
six months and relevant expenditure, forecast of
legal services required during the ensuing six
months, the projected expenditure for the services
and annual legal services budget for the ensuing
year.
 The Contractor shall retain the services of a
Tanzanian financial institution for providing
financial services with respect to a mining activity
and the Commission is empowered to approve use
of a foreign financial institution. The Contractor
shall prepare a financial services sub-plan which
shall specify the financial services utilised and
expenditure in the preceding six months, the
forecast of financial services required in ensuing
six months, the projected expenditure for the
financial services and the list of financial services
utilised in the preceding six months.
16. Use of bank accounts
 The Contractor shall maintain a bank account with
an indigenous Tanzanian bank and transact
business through banks in Tanzania. An
indigenous bank means a bank which is 100%
owned by Tanzanians or a majority shareholding is
made up of Tanzanians.
 This may require Tanzanian banks which have
foreigners as majority shareholders to re-structure
their shareholding so they can retain mining
companies as their clients.
17. Common Qualification System (the System)
 The Commission shall set up the System with the
objective of acting as a sole system for registration
and pre-qualification of local content in the mining
industry.
 The System shall be used for verification of the
contractors' capacities and capabilities, evaluation
of application of local content, tracking and
monitoring of performance and provision of
feedback and ranking and categorisation of mining
service companies.
18. Monitoring, compliance and enforcement
 The Commission may issue guidelines allowing the
reporting requirements as specified in the
Regulations to be done electronically.
 The Commission shall also establish review
guidelines and procedures for effective
implementation of the Regulations which shall
include requirements and targets for growth of
research and development of the mining industry,
minimum standards, facilities, personnel and
technology for training, investment in or setting up
a facility, factory, production unit or other
operation in Tanzania etc.
 The Commission has the power to initiate an
investigation into an activity by the Contractor for
the purpose of monitoring the implementation of
the Regulations within the framework of the
national policy and local content. This includes the
Commission's power to launch an investigation to
ensure that the Tanzanian company principle is not
diluted by the operation of a Front or bid rigging
and canalisation are avoided in the procurement
process.
 'Front' means to deceive or behave in a particular
manner intended to conceal the fact that a company
is not a Tanzanian company.
19. Offences and penalties
 The Regulations provide that a person who submits
a plan, return or report which is false commits an
offence and upon conviction shall be fined between
Tshs. 50 and 500 million and/or imprisonment of a
term between 2 to 5 years.

6.  A citizen who acts as a Front or connives with a
foreign citizen or company to deceive the
Commission as representing a Tanzanian company
to achieve the local content requirements, commits
an offence and can be fined between Tshs. 100 and
250 million and/or imprisonment between 1 to 5
years.
 A person who fails to support and carry out a
programme for technology transfer according to
the national plan, support and facilitate technology
transfer in terms of forming JVs or partnering of
licensing agreements between Tanzanians and
foreign contactors, service providers and suppliers,
ensure that its partners report local content
information, communicate local content policies,
procedures and obligations is liable to pay the
Commission a penalty of Tshs. 100 million in the
first instance and a further penalty of 5% for each
day during which the contravention continues.
 A Contractor who fails to observe the local content
requirement, fails to submit or satisfy the local
content plan or fails to inform the Commission of
each proposed contract or purchase order shall pay
the Commission a penalty of 5% of the value of
the proceedings from the mining activities or US$
5 million, whichever is greater and further liable
for cancellation of the contract in respect of the
mining activity.
 Failure to pay an imposed penalty shall be
considered as a debt owed to the Republic and
recoverable by the Commission under summary
procedure.
20. Compliance with the Regulations
 Within 3 months after coming into force of the
Regulations, the Contractor engaged in the mining
activity shall make arrangements and plan as
necessary for complying with the Regulations.
It is worth noting that, apart from the Local
Content Regulations, the following regulations
have been enacted:
 The Mining (Mineral Beneficiation) Regulations,
2018 which repeals the Mineral Beneficiation
regulations of 2010.
 The Mining (Audit and Inspection of Records)
Regulations, 2018.
 The Executive Agency (Geological Survey
Agency) (Disestablishment) Order, 2018.
 The Mining (Geological Survey) Regulations,
2018.
 The Mining (Mineral Rights) Regulations, 2018
which repeals the Mineral Rights regulations of
2010.
 The Mining (Radioactive Minerals) Regulations,
2018 which repeals the Radioactive Minerals
Regulations of 2010.
 The Executive Agency (Tanzania Mineral Audit
Agency) (Disestablishment) Order, 2018.
 The Mining (Minerals And Mineral Concentrates
Trading) Regulations, 2018.

7. Contact us
This monthly briefing is prepared for clients and contacts of Clyde & Co
operating in the mining sector in Tanzania. We aim to keep our clients
abreast of developments in the sector as they happen and if you have any
questions on the issues raised above please contact us using the details
provided:
Peter Kasanda
Partner, Dar es Salaam
E: peter.kasanda@clydeco.com
T: +255 767 850 056
Amalia Lui
Senior Associate, Dar es Salaam
E: amalia.lui@clydeco.com
T: +255 768 983 026
Amreen Ayub
Associate, Dar es Salaam
E: Amreen.Ayub@clydeco.com
T: +255 76 898 3032
Clyde & Co Tanzania
11th Floor, Golden Jubilee Towers
Ohio Street, P.O. Box 80512
Dar es Salaam, Tanzania.
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