November 24, 2017

Tanzania’s mining legislative changes poses investment risk- World Bank

President John Magufuli has met with Prof John Thornton, Chairman of Barrick Gold

The World Bank is very concerned about the effect of recent regulatory changes in Tanzania on private sector investment, which is vital for the country’s economic growth.

“There appears to have been an overall deterioration in business sentiment, due to the perceived risks resulting from the unpredictability of policy actions related to the Government’s intensified efforts to collect revenue and to its anti-corruption drive, which has delayed payment of Government arrears to suppliers and contractors and VAT refunds,” the World Bank said in a November update.

The World Bank also acknowledged some of the positive steps taken by Tanzanian President, John Magufuli, to modernise the state – he is 18 months into a 10-year plan to transform the country into a semi-industrialised economy by 2025 – there is tacit warning that recent legislative changes will do harm.

Three pieces of legislation, ratified in Tanzania’s parliament in short order during July, have given Magufuli’s administration the right to take a free-carried 16% stake in mining companies in compensation for previously unpaid taxes, and the option of buying up to a 50% threshold. Royalties on revenue have also been jacked up to 6% from 4% previously, while a 1% clearing fee on exports has been imposed.

The ban on the concentrate exports of UK-listed Acacia Mining, meanwhile, is premised on two presidential reports that claim the company under-declared the value of the concentrate over a period of years worth tens of billions of dollars in unpaid taxes – a claim the company has dismissed as an economic impossibility.

Tanzania’s economic growth has softened, with the rate declining to 6.8% in the first half of 2017, compared to the figure of 7.7% recorded in the same period in 2016, said the World Bank. Still, the Tanzanian economy remains one of the strongest performers in the region.

The World Bank recommends a number of steps if Tanzania is to realise its industrialisation goals including the acceleration in payments in VAT returns which are long overdue.

Source: All Africa.com

 

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