by Ben Taylor
Gold reserve boosted
President Samia Suluhu Hassan announced in October 2024 that the Bank of Tanzania (BOT) has set aside TSh 1tn for a domestic gold purchase programme aimed at boosting the country’s gold reserves.
The intention is to address foreign currency shortages, which have been a major obstacle to the development of various sectors, including mining.
She emphasized that the implementation of this program is already underway, with amendments made to the Mining Act under Section 59, requiring license holders and mineral traders to sell 20% of their gold production to the BOT.
President Samia also revealed that the central bank is offering attractive incentives under the program, including royalty fees reduced from 6% to 4%, eliminating inspection fees and providing zero-rated VAT.
In addition to the gold purchase program, the President announced that the government has allocated TSh 250bn as part of a loan guarantee scheme to support mineral buyers, enabling them to borrow and operate more effectively. “All of this is to ensure that the mining sector grows, and that a certain percentage of wealth remains in the country as a future guarantee,” the President explained.
She further emphasised the importance of the mining sector to Tanzania’s economy, highlighting its role in improving the lives of citizens and contributing significantly to the nation’s foreign currency earnings. “Last year, the mining sector contributed approximately 56% of all foreign exchange earnings,” she said, “making it the leading sector in this regard.”
Chairman of the Federation of Miners Associations of Tanzania (FEMATA), John Bina, said when the gold purchase programme was introduced, there was some concern, but that miners’ leaders and the government have already resolved the issue. “Throughout the BOT programme, we have been actively involved with miners nationwide. We have reached a consensus to sell 20 per cent of our mineral resources to BOT as a demonstration of our patriotism,” he said. (Daily News)
Date announced for auctioning oil and gas blocks
Tanzania is set to auction 26 petroleum exploration blocks in its 5th licensing round in March 2025. The Deputy Permanent Secretary of the Ministry of Energy, Dr James Mataragio, disclosed this in Cape Town, South Africa, on November 5, 2024, while delivering a presentation on Tanzania’s oil and gas sector overview and investment opportunities at the African Energy Week. 23 of the blocks are offshore in the Indian Ocean, while three are located in Lake Tanganyika.
Further, Dr Mataragio highlighted the government’s efforts to ensure a successful licensing round. In this regard, he mentioned that the country is in the final stages of reviewing the Model Production Sharing Agreement, among other tools, to make contractual and fiscal terms more attractive. He explained that the terms that have been improved to attract more investment include the royalty rate, cost recovery limit, profit oil/gas split, state participation, rental fees, bonuses, and taxes.
Hydro-power capacity drives shift away from gas-fired power generation
With four turbines (of nine that are planned) now in operation at the Julius Nyerere Hydroelectric Power Plant (JNHPP) – at Stielger’s Gorge on the Rufiji river – the government has clearly indicated its intention to move away from the use of natural gas to generate electricity. The immediate casualty was the Songas power plant at Ubungo, Dar es Salaam, where a power purchase agreement was not renewed. A previous interim power purchase agreement was allowed to expire at the end of October 2024.
Songas has been a government partner for 20 years, with figures from its website indicating that it generated 190 megawatts (MW) of electricity, using gas from the Songo Songo gas reserves and selling all the electricity it produced to Tanesco.
The company, in which the government of Tanzania holds a 46% stake, through its Tanesco, Tanzania Petroleum Development Corporation (TPDC) and Tanzania Development Finance Company Limited (TDFL), also processes and transports natural gas to other power generators and industrial customers.
“The Songas power plant has ceased production as of October 31 and is safe and secure,” Songas managing director, Mr Anael Samuel, told The Citizen newspaper. “Songas will continue discussing the next steps with the government of Tanzania, Tanesco and other key stakeholders including the current staff employed by Songas,” he added.
“The government’s decision not to continue with this contract is to protect the country’s broader interests,” said Tanesco in a statement. “Therefore, the government, through the Ministry of Energy and Tanesco, will continue to oversee the electricity sub-sector to ensure a high-quality, sustainable and reliable electricity supply.” It assured consumers that the current electricity generation exceeds the available demand after the recent increase in the electricity generated by JNHPP to the national grid.
Tanzania’s electricity generation has increased from 1,695MW in 2021/22 to 2,373MW in 2023/24, with a target of reaching 4,915MW by 2025/26, according to the Minister of State in the President’s Officer for Planning and Investment, Prof Kitila Mkumbo, who on Friday presented next year’s government plan to the Parliament. He said that current electricity demand stands at 1,767MW, leaving a considerable surplus.
It is expected that Songas will respond to the situation by claiming about $90 million (about TSh 250 billion) from Tanesco in outstanding payments. There are also a number of existing claims between Songas and the government relating to disputed past payments and tax liabilities.