Mining firms in Tanzania on the spot over royalty fees

Mining companies in Tanzania risk being denied transport permits to ferry their products if they have not adhered to section 18 of the country’s Mining Act of 2010 (and revised in 2017), which requires all producers pay royalty fees on the gross value of minerals produced.

The Tanzania Mining Commission set a deadline of September 15 to enforce the directive.

The issue came up when Tancoal Energy Ltd claimed that the law was punitive and would make its products expensive. However, the permanent secretary in the Ministry of Minerals, Simon Msanjila, told The EastAfrican that the royalty fees have been in effect since 2010 and other companies producing coal and other minerals were already applying it.

“Tancoal have been avoiding paying the fees all these years, despite expanding their coal exports portfolio to include clients outside the country," said Prof Msanjila adding, “It's about time they start paying as well.”

The law requires every authorised miner in Tanzania to pay royalty fees based on the gross value of their produce. The gross value is the market value of the minerals at the point of refining or sale.

Violation of the directive results in up to two years imprisonment, maximum Tsh10 million ($4,350) fine in the case of an individual, or Tsh50 million ($21,755) fine for a corporate.

Tancoal Energy Ltd is a joint venture between the state-run National Development Corporation of Tanzania and Intra Energy (T) Ltd, a subsidiary of publicly-listed Australian firm Intra Energy Corporation.

Tancoal is a major domestic supplier of Dangote Cement, Tanga Cement, Lake Cement, and Mbeya Cement. It also exports 25 per cent of its monthly coal output to cement and ceramics manufacturers in Kenya, Uganda and Rwanda.

The company claims its export competitiveness is limited by the “high transport costs” involved in hauling the coal from the Ngaka mine site near Lake Nyasa to the Indian Ocean seaport of Mtwara.