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Opinion: Recent legislative reforms in Tanzania will ensure locals benefit from natural resources

"How Tanzania can avoid the resource curse"

The discoveries of rich oil and gas reserves in the deep sea off Tanzania’s rugged coastline in 2010 and 2012 opened up a new spectrum of possibilities. If properly managed the new revenue streams could raise the living standards of the population as a whole. Income from royalties would supplement tax revenues and allow the state to expand and deepen health, education and housing services.  As seen elsewhere, properly harvesting revenues could also stimulate the economy in ways that prove a boon to large and small enterprises, which in turn would create more jobs...

In general, the cumulative effect of these policy and legislative reforms is that the role of the state in governing investments in the extractive sector in Tanzania has been gradually strengthened, from the laissez-faire approach of early colonial times to the detailed legislation of recent years. It now covers a broad spectrum of issues including regulations for employment conditions, the environment, taxation, local content and CSR. While the legislative reforms have been designed to increase the benefits and control of natural resources by the state and citizens, some consider them as imposing excessive control and regulation, and creating uncertainty and limited security for private investors. This could ultimately affect future petroleum exploration prospects in the country...

The reforms in resource governance are expected to boost revenue through more transparency in tax payments and other forms of revenue from the extractives. Other revenue flows depend on FDIs into the sector and production lead times, which are often long for major mining and natural gas projects. The level of FDIs and the speed of resource transformation will determine the extent to which the extractives will generate the resources needed to finance large infrastructure projects, reduce the debt sustainability risk, and support the achievement of Tanzania’s development goals.