Tanzania Mandates Domestic Refining: 20% of Gold Output to Be Sold Locally

Tanzania’s government has introduced a bold policy requiring large-scale gold miners and traders to refine and sell at least 20% of their gold output domestically, primarily to the Bank of Tanzania (BoT). The policy aims to bolster foreign exchange reserves, stabilize the national currency, and foster domestic value addition within the mining sector.

Why It Matters

• Strengthening Reserves: Following the shilling’s depreciation, BoT began purchasing gold to diversify its foreign reserve portfolio. In the 12 months before June 2024, the bank acquired 418 kg of gold, with a target of 6 metric tons in the current fiscal year.

• Natural Resource Value Addition: Mandating local refining directs significant value into Tanzania’s economy by channeling proceeds through local institutions. Miners are required to deliver gold to refineries in Dodoma and Mwanza.

Policy Details

• Applicability: Applies to large-scale miners and traders; artisanal miners are also increasingly impacted under updated regulations.

• Refinery Mandate: Designated refineries include Eye of Africa Ltd (Dodoma) and Mwanza Precious Metals Refinery Ltd (Mwanza).

• Effective Date: Enforced since October 1, 2024, under amended mining legislation.

Incentives & Support Measures

• Reduced Royalties & VAT Relief: The government has slashed royalty rates (from 6% to 4%), lifted inspection fees, and zero-rated VAT to incentivize compliance.

• Fast Payments & Loans: BoT promises rapid payment within 24 hours and has provided a loan guarantee fund to help smaller traders meet policy requirements.

Early Impacts

• Economic Contribution: Mining’s share of GDP reached 10.1% in 2024, thanks to structural reforms and increased domestic processing.

• Boosted Transparency: Mandatory local refining improves accountability and helps curb illicit gold exports, which cost Tanzania billions annually.

Risks & Criticisms

1. Enforcement Challenges

Remote goldfields, weak oversight, and ongoing smuggling pose significant barriers to consistent enforcement, particularly in artisanal mining sectors.

2. Potential Overreach

Comparing Zimbabwe’s rigid gold policies, excessive central control on gold may suppress production or deter investment if bureaucratic hoops grow too heavy.

3. Uneven Benefits

While large miners benefit from incentives, small-scale miners risk being squeezed, especially when working through middlemen amid high licensing costs.

Broader Implications

• Currency Stability: Continued gold inflows could buffer the shilling and support import financing in an unstable forex environment.

• Industry Formalization: By channeling gold through local refineries, Tanzania strengthens institutional frameworks and enhances its sectoral reputation.

• Economic Diversification: The policy supports Tanzania’s broader vision to ensure local value capture and reduce reliance on raw exports.

What’s Next?

• Monitoring Implementation: Authorities must scale up monitoring, enforce compliance, and punish violations to make the policy meaningful.

• Strengthening Value-Addition: Developing advanced refining, assay labs, and financing infrastructure will broaden the economic benefits.

• Addressing Informality: Ensuring artisanal miners are included through cooperatives, access to credit, and formal channels is vital to equitable growth.