Extractive Industries Related Bills: The Tanzania CSO Extractive Industry Working Group Position

In June 16th of 2015, the Government of Tanzania tabled before the parliament three bills related to extractive industries among others under certificate of urgencies. The bills are: The Tanzania Extractive Industries (Transparency and Accountability) Act 2015, The Oil and Gas Revenue Management Act 2015 and the Petroleum Act 2015. To this effect, We the undersigned Civil Society Organizations (CSOs) upon receiving the copies convened and deliberated on the bills in Dares Salaam from June, 21-23rd, 2015 aiming at providing inputs for improvement of the proposed legislations with national interests at the fore.
We, therefore highly COMMEND the government for its efforts and determination to manage this national wealth effectively and strategically for the benefit of the current and future generations of this country. We UNDERSCORE the fact that, in the overall, the three bills have many positive aspects to safeguard national interests in tandem with encouraging investment in the sector; ensuring transparency and maintaining macro-economic stability.
We are CONCERNED about the rushed process to pass these important pieces of legislation while the need to have these legislations was never a new knowledge to the government. We take a serious note of the fact that this is becoming a government practice as it was the case with the Mining Act 2010. Nevertheless, it is critically important that the government gets the legislations right.
We APPEAL to the members of Parliament to diligently scrutinize the bills despite the fact that election fever is beginning to override other priorities.

1.1 Draft Petroleum Act, 2015

While the bill sets up a sophisticated institutional structure for the managing the petroleum sector, designed potentially to promote checks and balances and specialization among the different functions necessary in order to manage the sector effectively; there are several sections that risk creating administrative overlap, confusion, or distorting the incentives of these public institutions to optimally manage the sector. Most importantly, the unclear use of the word “exclusive” in relation to National Oil Company’s powers in Sections 10(2) and 45 creates a risk of conflicting interpretations and accountability challenges. While such a system can confer certain advantages in terms of empowering the NOC to learn the business and chart its own partnership strategies, it also carries the risk that the selection of partners will be driven more by the NOC’s commercial interest than the overall national interest. This is inconsistent with the spirit of the National Gas Policy and the 2014 draft Petroleum Policy.
Furthermore, it is critically important that the bill makes provisions that require publication of key information to enhance transparency of the petroleum sector. These may include but not limited to: bidding documents pre-qualification criteria, a list of pre-qualified companies, bid criteria, list of bidders, the winning bid, a bid evaluation report justifying the winning bid based on the criteria. Full text contracts, along with their amendments and annexes, and beneficial ownership of license holders, Environmental impact assessments, environmental management plans and annual reports and local content plans and reports.

1.2 Oil and Gas Revenue Management Act 2015
The proposed legislation contains very important provisions to ensure prudent management of revenues accruing from oil and gas extraction; maintain fiscal and macroeconomic stability and aligning strategic investment with medium to long term development priorities, hence, sustainable development. However, the proposed fiscal rules do not guarantee inter-generational equity in terms of saving a proportion of the revenues for future generation as provided in the Natural Gas Policy 2013.
Limiting the funding for strategic development expenditure to 60% of funds transferred to consolidated account may undermine requirements for such investments when the absorption capacity warrants spending 100% or more of the transfer to consolidated account from the Fund. Further, the proposed law lacks clarity on the maintenance of fiscal deficit (Section 17. (1)(b). For more clarity, the provision ought to be improved to ensure that maintenance of fiscal deficit takes into consideration the timing of revenue flow (excluding designated oil and gas revenues) from such a time when revenues attain a level of at least the set cap of 3% of GDP when revenues fall permanently bellow the cap.
While the proposed law intends to ensure availability of funds for investment by the National Oil Company (NOC), tying funds of the NOC to 0.1% of GD does not necessarily guarantee a share of revenues that is appropriate given its objectives and or its capacity to spend. To avoid potential challenge of either underfunding or overfunding of NOC, the government may consider funding through Consolidated Account based on the NOC’s medium to long term investment plan.

1.3 Tanzania Extractive Industries (Transparency and Accountability) Act 2015
The proposed law intends to strengthen Tanzania’s commitments to revenue transparency and accountability which kicked off since joining the EIITI global movement in 2009.We noted that since then TEITI Multi stakeholder Group (Operations) has been done through a Memorandum of Understanding, without any legislation. This being the case the coming of the bill is highly welcome. The proposed law now provides legal basis for the enforcement of commitments on transparency as well as promoting effective citizen participation and awareness of resources governance in extractive industry.
However we need to raise our concerns that this law intends to make the committee government entity reporting to the Minister thereby lacking independence. We call upon the government to ensure that the governing body (TEITI MSG) retains its autonomy and independence, retain its capability to nominate its own members, raise its own material and human resources as well as ensure protection from political interference for optimal performance.
CALL UPON DECISION MAKERS to show leadership in ensuring the legislation is done in a prudent, inclusive, transparent and participatory manner with the national interest at heart.

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