The Oil and Gas Revenues Management Act, Chapter 328 of the Laws of Tanzania, R.E. 2023, is a crucial piece of legislation that establishes a comprehensive framework for the governance of revenues from Tanzania’s oil and gas sector. Enacted to ensure transparency, accountability, and prudent financial management, the Act provides the legal foundation for the administration of the Oil and Gas Fund and the fiscal rules that guide its operation.
Key Administrative and Institutional Roles
The Act defines specific roles for key government and parastatal institutions, ensuring a clear separation of powers and responsibilities in the management of oil and gas revenues.
- Minister of Finance: The Minister is entrusted with the overall policy formulation and supervision of the Fund. This includes managing the revenue in accordance with the Act and formulating broad investment strategies for the Revenue Saving Account.
- Bank of Tanzania (BoT): The BoT serves as the operational manager of the Fund. Its functions include opening and managing the Fund’s accounts, implementing the investment strategies on a daily basis, setting risk limits, and reporting the Fund’s performance to the Minister. The BoT is also responsible for maintaining proper books of accounts and publishing an audited report in the official Gazette and on its website.
- Tanzania Revenue Authority (TRA) & National Oil Company (NOC): These two bodies are the primary collectors of oil and gas revenues. The TRA is responsible for assessing and collecting taxes and levies, while the NOC handles non-tax revenues. Surface rentals, signature bonuses, and training fees are retained by the NOC to support the development of the oil and gas subsector.
- Portfolio Investment Advisory Board: The Act establishes this five-person Board to advise the Minister on the investment strategy for the Revenue Saving Account. This is a crucial function, as their advice must consider the benefit of both current and future generations, and broader economic conditions.
The Oil and Gas Fund: Structure and Objectives
The cornerstone of the Act is the establishment of the Oil and Gas Fund, which is a two-tiered system designed for both immediate fiscal management and long-term savings. The Fund’s objectives are clear and far-reaching:
- Maintaining fiscal and macroeconomic stability.
- Guaranteeing financing for investment in the oil and gas sector.
- Enhancing social and economic development.
- Safeguarding resources for future generations.
- The Fund consists of a Revenue Holding Account, which receives all revenues, and a Revenue Saving Account, which receives revenues transferred from the holding account.
Fiscal Rules: A Framework for Prudent Spending
To prevent the common “resource curse,” where resource-rich nations experience economic volatility and poor governance, the Act imposes stringent fiscal rules.
- Budgetary Allocation: In any fiscal year, a maximum of 3% of the GDP can be transferred from the Revenue Holding Account to the Consolidated Fund for budgetary use. Importantly, at least 60% of this amount must be used for strategic development expenditure, with a particular focus on human capital development in science and technology.
- Saving Mechanism: Any oil and gas revenue that exceeds 3% of the GDP is automatically transferred to the Revenue Saving Account. This ensures that windfalls are saved rather than spent, protecting the economy from inflation and creating a long-term resource base.
- Stability and Borrowing: The Act allows for drawing from the Revenue Saving Account to offset budget shortfalls if designated revenues fall below 3% of the GDP. If the saving account is insufficient, the government may borrow to cover the shortfall.
Transparency and Accountability
The Act places a strong emphasis on transparency and accountability to build public trust and ensure revenues are managed for the public good.
- Public Reporting: The Minister is required to publish records of oil and gas revenues and expenditures in the Gazette and on the government’s website.
- Parliamentary Oversight: The records of the Fund are subject to parliamentary oversight. The Minister is required to lay the Fund’s audited accounts before the National Assembly.
- Audits: The Controller and Auditor-General must conduct quarterly audits of the Fund’s reports submitted by the Board and the Governor of the BoT.
Offences and Legal Supremacy
The Act includes severe penalties for offenses related to the misuse of the Fund, underlining the government’s commitment to fighting corruption. Misappropriation of proceeds, fraud, and the use of information for personal benefit are considered offenses, punishable by significant fines or long prison sentences. Furthermore, the Act explicitly states that its provisions shall prevail over any other written law concerning the management of oil and gas revenues in the event of an inconsistency.
The author Sunday Ndamugoba is a partner at RIVE&Co. He is reachable at sunday@rive.co.tz
Disclaimer: This article provides general information and does not constitute legal advice. Regulatory fees and requirements are subject to change. Readers should seek professional legal counsel before undertaking any licensing or fund establishment process.