Warning lights are flashing
Tanzania loses status as preferred mining destination
Tanzania has overnight lost its status as miners’ preferred destination in Africa after sudden changes in legislation
Though new laws being enacted in Tanzania to increase the state’s share of mining profits are not draconian enough to cause an exodus of mining companies, they raise the risk of further arbitrary changes and will cap future capital flows into the country. The higher the risk, the higher the return needed to attract capital, which means some lower-returning projects will no longer go ahead. The new laws allow the state to renegotiate mining companies’ agreements and take a nondilutable 16% free carried interest in mining companies. Royalties on exports have also been increased. "While resource nationalism is not a new theme in the country, the nature, scale and manner of the recent changes have spooked the mining community and pose questions around the attractiveness of Tanzania’s business environment," says Ronak Gopaldas, RMB’s head of country risk. SP Angel analyst John Meyer says government’s motive might be to address corruption among authorities or it could be a populist measur...
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