BANK of Tanzania (BoT) has purchased at least 7kg of gold from small-scale, medium-scale, and large-scale miners between October 1st and 4th, 2024. This initiative is part of a strategic effort to support the expansion of the mining industry and bolster the country's foreign exchange reserves.

In July of last year, the government authorized the central bank to act as the statutory gold dealer, a move aimed at enhancing the growth of the national gold reserve. Since initiating gold purchases from local miners last financial year, which ended in June, the BoT has acquired a total of 418 kg of gold at competitive world market prices.

Joshua Mganga, a financial analyst at the BoT, disclosed this here yesterday when speaking during the ongoing 7th edition of the Geita International Mining Technology Exhibition.

He mentioned that the central bank faced several challenges while implementing this initiative, particularly after transitioning from purchasing gold through the government to directly engaging with local markets.

“At first, we purchased gold from the government, but we later decided to penetrate the local gold market, where we encountered difficulties that frustrated the exercise,” he explained.

Mganga elaborated on these challenges, noting that many local gold sellers expressed concerns over insufficient capital to maintain surplus gold for sale to the BoT while also exporting to external markets. Additionally, he mentioned that sellers enjoyed tax benefits when exporting their commodities, making domestic sales less attractive.

In response, the government has been urged to eliminate certain nuisance taxes that hindered local gold dealers and companies. Recent developments have introduced more favourable tax policies, which have played a crucial role in overcoming these challenges.

Improved local gold market flow is expected as a result of new government policies, including a 20 percent gold purchase obligation as outlined in Section 59 of the Mining Act (Cap 123) and other incentives for small-scale mining. These measures are anticipated to significantly increase Tanzania’s gold production in the future.

Key regulatory amendments include the exemption of the 1 percent inspection fee and a reduction of the royalty rate from 6 percent to 2 percent on gold supplied to the BoT. These changes aim to incentivize gold supply to the central bank, thereby enhancing the national gold reserve and addressing the US dollar shortage in Tanzania.

Under the new regulations, local gold mining companies and registered individual miners can now claim input tax when trading with the BoT, as the relevant tax has been zero-rated.

Deputy Prime Minister Dr Doto Biteko, speaking at the Expo, encouraged gold sellers across the country to sell their products directly to the BoT, ensuring prompt payment and optimal value for their gold.

The mining regulator has directed all mining firms and traders exporting gold to allocate at least 20 percent of their commodity for sale to the central bank to diversify its foreign reserves.

Miners and traders are required to submit the reserved gold to two mineral refineries: Eye of Africa Ltd in Dodoma and Mwanza Precious Metal Refinery Ltd in Mwanza.

Gold is one of Tanzania's most valuable exports, and this approach not only strengthens the BoT's reserve assets but also fosters growth and sustainability within the local gold industry.

The recognition of the BoT as the statutory gold dealer aims to align the BoT Act with the Mining Act by addressing existing ambiguities and enhancing gold purchases to ensure the growth of the national gold reserve.

Gold accounts for approximately one-third of Tanzania’s exports and is regarded as one of its most significant currency stabilization export products, constituting around 25 percent of the country's exports during the financial year 2021/22.