CAG report reveals $147 million loss from mining license cancellations

According to the CAG’s Annual General Report on the Audit of the Central Government, the disputes arose after the government, in 2017, revoked the retention licenses of 12 mineral rights holders under amendments made to the Mining Act, 2010.

Three companies pursued legal action at the International Centre for Settlement of Investment Disputes (ICSID), forcing the government into settlements totaling $147 million.

As of the time of the audit, $117 million had already been paid, with an outstanding balance of $30 million.

The audit identifies the retroactive application of the amended Mining Act as the main cause of the financial fallout.

While the amendments were intended to strengthen Tanzania’s sovereignty over its natural wealth, their application to existing contracts created legal exposure.

“The root cause of the legal disputes and liabilities was the retroactive implementation of the 2017 amendments, which invalidated previously granted retention licenses,” the report states.

Under Section 10 of the amended Mining Act, the government is entitled to a minimum 16 percent non-dilutable free carried interest in mining companies, with the right to acquire up to 50 percent ownership, proportionate to tax incentives granted.

Furthermore, Section 11 gives the state the right to revisit and renegotiate “unconscionable terms” in earlier contracts under the Natural Wealth and Resources Contracts Review Act.

However, the retroactive enforcement of these provisions led to breach-of-contract claims by investors, undermining the stability of Tanzania’s investment environment.

The CAG warns that the settlements represent nugatory expenditures—public funds paid out without any tangible benefit to the government—and urges caution in future policy decisions affecting international contracts.

“To avoid similar losses in the future, amendments to mining laws should not be applied retroactively. Instead, reforms should be prospective, to ensure legal certainty and protect investors’ rights,” the CAG advises.

While Tanzania has taken bold steps in recent years to increase its share of benefits from the mining sector, the report highlights the importance of balancing resource nationalism with contractual stability.

The country has previously won praise for renegotiating deals with major mining firms, but this latest revelation raises concerns about the financial and reputational costs of abrupt policy shifts.

The CAG calls for improved legal oversight and a more strategic approach to mining reforms to minimize fiscal risk and encourage long-term investment.

“Legal certainty and respect for existing agreements are key pillars in attracting and retaining investment in the extractives sector,” the report concludes.

As Tanzania continues to develop its vast mineral wealth, the challenge remains: how to secure fair returns for the nation without compromising the rule of law or deterring investors.