Tanzania Set for Bigger Slice of Mining Pie
By Sebastian Mrindoko/Image Source: TanzaniaInvest
TANZANIA aims to increase earnings from her mineral resources thanks to major reforms to the mining sector under President John Magufuli leadership in his first five-year term in office.
The government passed sweeping new laws in the mining sector in 2017 to ensure that the country maximizes the benefits from its wealth of natural resources.
It banned export of unprocessed ores in March 2017, and enacted the Finance Act, which imposes a one per cent clearing fee on all minerals exported from Tanzania.
A few days later, President Magufuli signed three bills into law that among other things, require the government to own at least a 16 per cent stake in mining projects, increase royalty taxes on gold and other minerals, provide the government with the right to dissolve or renegotiate contracts for natural resources, and reject international arbitration for natural resource disputes.
“The country has been short-changed and continues to be cheated out of the muchneeded revenue that would greatly boost our health sector, infrastructure and others,” he told a public rally at his home village in Chato District in Geita Region. Rewards for the tough stance did not take long.
In January this year the government struck a deal with a mining giant, Barrick Gold – whereby it agreed to make a 300 million US dollar payment to Tanzania as part of an agreement to resolve tax and revenue sharing disputes over its three gold mines in the country.
Under the deal, the mining company handed to the government 16 per cent stake in its three gold mines – Bulyanhulu, North Mara and Buzwagi mines and agreed to share 50 per cent of economic benefits of its mining operations in Tanzania.
Other measures in the mining sector included establishment of 31 big mineral trading hubs and 39 small ones at district level and the construction of a 24-km Mirerani perimeter wall around Tanzanite mine in Mirerani, Manyara Region to curb theft and smuggling of the precious stones.
And results from the reforms have not been mean. The sector is growing at an impressive pace and its earnings swelling. Presenting the 2020/21 government budget in Parliament last June, the Minister for Finance and Planning, Dr Phillip Mpango said mineral revenue collection had surged from 196bn/- in 2015/16 to 470bn/- from July 2019 to April 2020.
Annual revenue from the sector surged to 528.24bn/- in the 2019/20 financial year up from 207.92bn/- in 2015/16 financial year, according to official statistics. The government allocated more areas for small scale miners, provided training that considers modern current technology, capital and licences to boost mining production.
President John Magufuli has said his government would continue to put an enabling environment in the mining sector in order to attract more investments and create new millionaires.
To illustrate how Tanzania was receiving a small share of mining proceedings President Magufuli said in 2016 big mining companies got 17587.15 kg of minerals with the value 1.4trl/- but the government was paid 53.81bn/- only in royalty.
He added that by May this year, the production doubled to 21652.77kg. He said the minerals produced valued 2.2trl/- and the government received 130.64bn/- in royalty. “We have been able to get this amount of money because of good management of the sector, we are looking forward to continuing bringing more changes,” he noted.
He added that small scale miners sold 337.482kg of minerals at 22.5bn/- in 2016 and the government received 1.2bn/- in loyalty. Three years later, the same small scale miners produced and sold 4656.29kg of minerals valued 375.5bn/- and the government received 22.5bn/- in royalty.
“That is why I always tell people that Tanzania is rich, we are not poor, we have everything to make us rich,” he noted. “We have managed to collect enough money from this sector in the few years after major reforms. The question is how much we have lost before we made these changes?” he queried.
“I would like to challenge those who are contesting for leadership posts that what they are going to do in case they are elected to power. We must understand the importance of this sector in the country’s economic development.”
It is recorded that the decisions and changes made by Dr Magufuli’s administration have brought positive impacts not only to the mining sector, but also to the protection of the country’s natural resources in general.
Through the 2015/2020 election manifesto, the ruling CCM directs the government to take further decisions, notably combining and managing a system for overseeing mining operations, collecting data and monitoring mining revenues for broader raising purposes of government revenue.
Other issues related to establishment and implementation of effective strategies to attract investment capital in the Mining Sector, particularly Rare Earth Elements (REE) and encourage industrial production and marketing.
The government had also to put in place significant infrastructure such as electricity, telephone, water, roads through the Public-Private Partnership (PPP) in areas likely to be the establishment of new major mines and improve censing and management system for mining licences.