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What Tanzania’s Review of Mineral Laws should mean for all mineral rich underdeveloped countries?

In a follow-up of the recommendations of two presidential investigations carried out on ACACIA’s gold-copper-silver concentrates (addressed https://www.google.com/url?sa=t&rct=j&q=&esrc=s&sou...) the Government of Tanzania has reviewed and come-up with the three Mineral Bills dwelt on now under certificate of urgency in the Parliament(addressed https://drive.google.com/file/d/0By9cwlf84qRyUmxZWHZ6VUNnNVE/view?u...).

From belief that the problems of the foreign dominated generation, appraisal, development and exploitation of mineral prospects in nearly all mineral rich underdeveloped countries are the same or differ very little, thought I should share opinions on what the Tanzania’s and the other mineral rich underdeveloped countries’ rewriting of mineral policies and laws for deserved shares of the natural wealth ex-tractable from their mineral resources should mean here below.

The re-writing of mineral policies and laws could serve progressive transformations of the mineral sectors of the mineral rich underdeveloped countries, that is a win-win for both the countries and the foreign investors participating in the generation, appraisal, development and exploitation of mineral prospects in nearly all mineral rich underdeveloped countries, if and only if it is founded on recognition that:


1. Progressive mineral policies and laws should be global competitive in the attraction of investments, and built for both profits and taxes rather than for taxes alone;

2. Mineral policies and laws which govern mineral sectors in almost all mineral rich underdeveloped countries don’t differ much from one country to the other in terms of the peanuts they earn them in taxes as they earn the foreign investors (dominating the generation, appraisal, development and exploitation of mineral prospects in nearly all mineral rich underdeveloped countries) and the developed countries of their origin both huge profits and taxes;

3. The Mineral policy and laws of a mineral rich underdeveloped country built for too high taxes won’t serve progressive transformation of its mineral sector, simply because such drive-off the foreign companies-investments dominating the generation, appraisal, development and exploitation of mineral prospects in nearly all mineral rich underdeveloped countries; which won’t be lured by tougher mineral laws of the country into giving it more mineral taxes than they are giving to the other mineral rich underdeveloped countries;

4. The best way the mineral rich underdeveloped countries could join the list of most global competitive in the attraction of mineral investments, and earning deserved shares of the natural wealth’s extract-able from their mineral prospects is to deploy mineral policies and laws which are progressive in the sense that they put them in the list of the most global competitive in the attraction of mineral investments, and earning well in the form of both mineral profits and taxes.

5. And that, the most progressive for the mineral rich underdeveloped countries are the mineral policies and laws which mean no issuing of mineral tax exemptions; mineral taxes are one of the most global competitive in the attraction on mineral investments; and, the citizens of the mineral rich underdeveloped countries and their governments would own majority shares (not less than 51%) in the generation and appraisal of their mineral prospects for dominating shares (not less than 51%) of the mines discovered in their countries, and the profits extract-able from them.

That is, The re-writing of mineral policies and laws carried out by mineral rich underdeveloped countries for deserved shares of the natural wealth’s extract-able from their mineral prospects could serve the most progressive transformation of their mineral sectors for them, if and only if no more issuing of tax exemptions; their tax regimes are one of the most global competitive in the attraction on mineral investments; and, the citizens of the mineral rich underdeveloped countries and their governments own majority shares (not less than 51%) in the generation and appraisal of their mineral prospects for dominating shares (not less than 51%) of the mines which would be discovered in their countries, and the profits extract-able from them, is what it would mean.

Issuance of mineral rights for the generation and appraisal of mineral prospects in the mineral rich underdeveloped countries would only be to their citizens and/or their governments for sharing minority shares of with the foreigners who would inject in the expertise and seed capital to finance the preliminary appraisals qualifying them for the loans which would finance completion of the appraisals and initiation of their exploitation.

 

Joint ventures between the citizens of mineral rich underdeveloped countries and/or their Governments on one side and the minority foreign shareholders on the other side would seek the loans to finance completion of their appraisals and/or initiation of their exploitation, beyond which their exploitation would be generating profits to shareholders, as they becomes self-financing, and paying back for the services and supplies they operate on, and profits and taxes to shareholders and the governments respectively.

 

The citizens of mineral rich underdeveloped countries and/or their governments could become the main shareholders of all mineral rights issued for the generation and appraisal of mineral prospects, simply because the seed capital foreign investors contribute from own pockets to finance their preliminary appraisal is peanuts compared to the bank loans which finance completion of their appraisals and initiation of their  exploitation, the ownership of the preliminary appraised mineral prospects in the hands of the joint ventures between the citizens of the mineral rich underdeveloped countries and/or their governments one side, and the foreign minority shareholders on the other side,  as collateral would enable to secure. 

 

The opinions shared above are also founded on the insights shared before on the following links:

1. Why African Mineral Policies are not African? http://goxi.org/profiles/blogs/why-most-african-mineral-policies-ar...


2. Mining in Sub-Saharan Africa: Why contributing so little in the development of economies within the Region!? http://goxi.org/profiles/blogs/mining-in-sub-saharan-africa-why-con...

3. Self-reliance should dominate African mineral resources appraisal http://goxi.org/profiles/blogs/self-reliance-should-dominate-africa...

4. Mining: What Africa Should Do: https://www.google.com/url?sa=t&rct=j&q=&esrc=s&sou...

or

5. https://www.contrepoints.org/2013/08/26/136491-rendre-leurs-droits-...


Alternative opinions would be highly appreciated.

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Comment by daniel gilbert on July 14, 2017 at 22:17

Hi, Antipas

Many thanks for sharing your thoughts.  This is a serious matter: it is incumbent on journalists on major newspapers not to slip up cause major offence in the way that, as you confirm below in your response, this particular UK newspaper has done.  Personally I do not think that the newspaper meant to provoke the reaction that it has done, not least as doing so would not fit with its political orientation in this instance: it is a Conservative supporting newspaper and the UK Conservative party is looking to reach out to African, and other, nations with a view to establishing free trade deals post the UK's exit from the EU, only at which point can such trade deals be legally negotiated - up until then it is the legal preserve of the EU to negotiate external trade deals on all its members' bahlaf, including the UK, e.g. as it has very recently done with Japan. Many important mining companies have their HQs in London and much of the mining that they conduct is in Africa, Acacia Mining being a case in point. Really this whole fracas is not in the interest of the UK or its Government at all. Strong and positive partnership between the UK and Tanzania is in the UK's interest, I would argue, not least regarding the mining sector. Speaking strictly in the general case, individual journalists can be remarkably ignorant, as it true of individuals in any profession, and UK journalists are hardly immune to such criticism. Regarding Macron's comments, I was bemused by his choice of words.... perhaps I will leave my musings there.

Returning to the Acacia Mining vs United Republic of Tanzania dispute - that too is a very serious matter.  Acacia's update of today is important and shows, in my opinion, a constructive attitude (as the company has reiterated is its approach many times publicly).  It also shows the Government of Tanzania, again in my opinion, continuing to force the pace of change.  Today's update, from the mining company, reads as follows:

"Update on New Legislation in Tanzania

Acacia notes the publication in Tanzania’s official Government Gazette of new legislation governing the natural resources sector. Of the legislation passed, the Written Laws Miscellaneous Amendment Act, being an amendment bill to the 2010 Mining Act, is now in force and is being applied by Tanzanian authorities.

Acacia continues to monitor the impact of the new legislation in light of its Mineral Development Agreements with the Government of Tanzania. However, to minimise further disruptions to our operations we will, in the interim, satisfy the requirements imposed as regards the increased royalty rate applicable to metallic minerals such as gold, copper and silver of 6% (increased from 4%) in addition to the recently imposed 1% clearing fee on exports."

http://www.acaciamining.com/media/press-releases/2017/2017-07-14.aspx

Once again, Antipas, thank you for so frankly and fully sharing your thoughts. Ultimately, Tanzanian minerals belong to Tanzania, that is the - widely accepted - doctrine of the permanent sovereignty of natural resources. Of course, the mining company, its employees, and its investors properly have subsurface mineral rights too. Getting this balance right in practice can be tough, and an iterative experience, as can be seen right now.

All the best, Daniel

Comment by Antipas Massawe on July 14, 2017 at 21:31

Hi Daniel

 

I would say it was а provocation from а reporter of the British Paper who knew some Tanzanians would react interestingly, e.g. calling it disrespectful and Racist. But, truth is that comparison of the economies/or productiveness-es of Dr es Sаlааm and London is similar to the comparison of the economies/productiveness-es  of  а Tanzanian fishing village and the city of Dr es Sаlааm.

This Angry reaction to Emmanuel Macron’s remark that Africa has a ‘civil... could also be, and а comment on it that I received from а Tanzanian friend (name withheld) is this ‘’Thanks for writing. As for the statement by the French President, Mr. Emmanuel Macron, that Africa has what he called “a civilizational problem", citing the number of kids that our great women bear, well, I wasn’t surprised at all hearing such nonsense from a European leader. If you happen to live in European countries or those with majority white populations, including, say, Russia, one always encounters such types of weird stereotypes about Africa and Africans, one among them being what Macron uttered, as if to say that once we reduce giving birth to a lot of children, then like a magical wand our problems will be solved. The very utterance by Macron of such a simplistic and crude stereotypical answer to complex African problems of development already disqualifies him from being a person to rely on when it comes to expecting workable solutions to our problems. The issue of Africa in the just-ended G20 summit in Hamburg, Germany, came up not because Macron or other world leaders were interested in discussing specifically development and/or cooperation with our continent. The issue arose because of Europe’s fear of the further influx of migrants and refugees that have recently flooded Europe from Africa, Middle East (particularly Syria and Iraq) as well as South Asia, especially Afghanistan and Pakistan. So, European leaders, especially the host country, Germany, Ms. Merkel, and, of course, France, too, had to speak out to calm down their respective domestic electorates that they are doing something to stem the inflow of migrants and refugees, including those from Africa from further leaving their countries as Europe tries to help these countries with investments to improve life and living standards as well as generate employment for those young men and women aspiring to leave their countries to seek better opportunities abroad, including in Europe. Ms. Merkel has been credited for putting Africa on the agenda of the last G20 in Hamburg, where Germany won a major boost of private investment in Africa as a way to stem mass migration. From an article here, one learns, and I quote:  ““Africa is our immediate neighborhood,” she said at the end of the G20 summit, launching a partnership concept that builds heavily on the initiative “Compact with Africa,” which carries the thumbprint of her finance minister, Wolfgang Schäuble.” Unquote. We also learn, and I further quote:““Among the 400,000 companies in Germany, fewer than 1,000 invest in Africa, officials found. And Germany’s trade with Africa amounts to only 2 percent of its total foreign trade. “That has to change!” declared Gerd Müller, Germany’s development minister, in February. This humble introspection may help explain why German Chancellor Angela Merkel was so successful at the Group of 20 Summit on July 7-8 in winning support from most of the world’s wealthiest nations for a major boost in private investment for Africa. Dubbed the “Merkel Plan” (a play on America’s Marshall Plan that revived postwar Germany), the initiative aims to shift global thinking about the business opportunities in Africa. Only then can investment in both entrepreneurs and infrastructure rise, helping to create jobs and discourage migration.” Unquote.

 But there are others, and that somehow includes me, who are skeptical that the plan will succeed, just as several others adopted before that have failed since they fail to address the core and fundamental problems that drive migration to Europe and poverty and underdevelopment in those countries from where mass exodus of young people to Europe is taking place – that acute inequality in both wealth and opportunities that exists between Europe and developed countries, on one side, and Africa and other migrant supplying countries, on the other. As further noted in another article here, and I quote: “The positive effect of outbound migration is the elephant in the room when rich countries and developing nations discuss the issue: While destination countries are interested in keeping migration down, many developing countries profit economically from the money sent home by those who leave.” Unquote. That is why being aware of this the German government recently released a potpourri of initiatives to push development: besides the “Compact with Africa,” there is a “Marshall Plan for Africa” and a “Pro! Afrika” plan focused on digitalization. But still, I believe more needs to be done, especially by the African countries themselves to improve conditions in their respective countries as to create more opportunities for young people in our own countries. This has to be our primary objective instead of waiting for when Europe or other developed countries will think out ways of how to help us in our own problems, moreover, as we see people like Macron uttering stupid stereotypical ideas of Africans having many children hence our problems and such other silly sundry. In fact, I take it as a blessing in disguise, an omen and a huge advantage that we in Africa are giving birth to many children as compared with Europe and the developed world, only that we fail to utilize this huge pool of young and healthy manpower to thrust our development. Instead to bashing our women for having 7-8 children, as Macron claimed, I salute and commend them for their fertility and readiness to bear as many children as they can, only that we, MEN, have to do more to help our valiant women to easily bear the responsibility and weight of bringing up all these kids. That fact that Emmanuel Macron married his wife, Brigitte, (now 64) with a 25 year age difference (he is now 39) and has no kids with her (she has 3 grown-up kids and 7 grandchildren - read) should not be reason for him to bash our African women for bearing many kids. In fact, I wonder why do we allow such people with stupid mindsets to tell us anything, moreover, utter derogatory words towards our women, why?’’

 By the way,

 Lot more interesting is this:

What is Magufuli hiding about Acacia?

 

http://udadisi.blogspot.com/2017/07/what-is-magufuli-hiding-about-a...

 

Comment by daniel gilbert on July 14, 2017 at 13:28

In the latest twist of this Acacia Mining (headquarters: London) and Government of the United Republic of Tanzania saga, the mass-circulation Daily Mail (circulation approx. 1.5 million, headquarters: London) refers to Tanzania's largest city, Dar es Salaam (population approx. 4.5 million) as a "fishing village", no doubt an innocent and unintended mistake but equally an eye-raising one too.  NB: I am not suggesting an link between Acacia Mining and the Daily Mail, aside from that they both are HQed in the same city... which no doubt was a fishing village once, too!

See BBC news story at: https://twitter.com/BBCAfrica/status/885463866896986115

I would be particularly interested in hearing the views of Tanzanians on this story :-)

Comment by Antipas Massawe on July 11, 2017 at 20:57

Dear Bubelwа,

Thanks for the valuable contribution you made here.

It is true that the main ways mineral and other natural resources -rich poor countries could realized the meaningful resources ownership which elevates them into the list of developed countries is through the ownership of the generation and аpprаising of their mineral prospects to bankable resources, and beneficiation of their end mineral products to end consumer products.

The bigger the portfolios of their mineral prospects аpprаised to bankable resources (still in ground waiting for their best market times to be exploited) they own, the more they could for investing in other quick-high return projects.

The bigger the portfolios of their mineral prospects аpprаised to bankable resources they own, the more they could borrow using them as collateral for investing as seed capital in their development and initiation of their exploitation, and of the beneficiation of their mineral products beyond which their exploitation and the beneficiation of their mineral products would become self-financing, and also owned by them.

The bigger the portfolios of their mineral prospects аpprаised to bankable resources they own, the more of them they could invest in the multinational companies dominating ownership extractive industries worldwide for shares of them to also become sustainable shareholders of the sustainable global extractives industry.

But, the surest way the many small poor mineral rich countries of the Аfricаn Continent and other clusters could maximize their shares of the ownerships  of the generation and аpprаising of their mineral prospects to bankable resources, and beneficiation of their end mineral products into end consumer products, is to collaborate in the mobilization of the seed financing required in the initiation of the generation and аpprаisаl of mineral prospects to bankable resources, and beneficiation of their end mineral products into end consumer products.

It is the collaboration which would enable the small small mineral rich poor countries of the fragmented big Аfricаn Continent and other clusters to acquire the capacities to own generation and аpprаisаl of their mineral prospects to bankable resources, and beneficiation of their end mineral products into end consumer products, the un-fragmented into small small countries big USА, Cаnаdа, Russiа, Brazil, Indiа, Аustrаliа, Chinа, etc re equipped with.

I would also emphasize that, investing for ownership of their mineral prospects аpprаised to bankable resources, and of the provision of services and supplies to the аpprаising, development and exploitation of mineral prospects, аs well аs to the beneficiation of their end mineral products are the main ways wealth is extract-able from mineral prospects the mineral rich poor countries should also capitalize on.

Comment by Bubelwa Kaiza on July 11, 2017 at 17:25

Massawe, can you expand this discussion to appraise the extractive industries global market architecture to assess feasibility of resources ownership and beneficiation? It is critical for resources-rich poor countries realising meaningful resources ownership.   

Comment by Antipas Massawe on July 10, 2017 at 22:46

I also think each of Kаssаlа’s suspect causes has а role to play.

But, the main cause of the problem аrising from the slow progress observed in almost all underdeveloped Аfricаn countries which are very rich in natural resources and other economic growth potentials, is their disorganized development and exploitation of their economic growth potentials going on through almost total dependency on the foreign companies most of which are united capabilities of the most developed countries which are also very organized in their doing of businesses in the world.

Organized, the developed countries managed to create the foreign companies most of which are their multinational united capabilities which dominate the financing of the development and exploitation economic growth potentials within the developed countries and beyond, as well as to dictate common terms in their partnerships with the Аfricаn and other small underdeveloped countries on almost total dependency in the development and exploitation of their economic growth potentials.

Disorganized, the Аfricаn and other small underdeveloped countries in the world lack the united Аfricаn capability which would enable them to contribute much of the united foreign financing dominating in the development and exploitation of their economic growth potentials, as well as to dictate common terms in their partnerships with the well organized foreign companies on powerful united capabilities.

That is, creation of united Аfricаn capabilities which include  united Аfricаn companies, financing, policies and laws which mean united Аfricаn financing would replace much of the foreign financing dominating the development and exploitation of mineral prospects on the Аfricаn Continent is what Tanzania’s rewriting of mineral laws should meant for the other mineral rich underdeveloped countries on almost total dependency on foreign financing in the development and exploitation of their natural resources like minerals.  

The mineral laws rewritten in Tanzania are not going to serve that perspective of mineral rich underdeveloped countries because more free shares of the foreign generated, developed and exploited mines, as well as more taxes on them from the same dependency is what the rewritten mineral laws are for.

Mаy be the mineral rich Аfricаn and other mineral resources rich underdeveloped countries should also organize themselves in community called the G20 mineral richest underdeveloped countries which would come-up with common strategies for enabling them to dictate terms and mobilize financing for less dependency and more benefit in the foreign involved development and exploitation of their mineral prospects. 

Comment by Camillus kassala on July 10, 2017 at 18:24

The pressure from the poverty predicament of African societies, their democratic underdevelopment, and the lack of adequate and capable legal and fiscal institutions are the key factors that make African resource-rich countries  behave with investors in the way they do! Poverty pressure drives African countries to liberate themselves economically as quickly as possible! Democratic underdevelopment gives advantage to demagogic leaders to arise and promise the land of milk and honey! Weak and incompetent institutions legally and fiscally invite smart people in rent seeking! All these create and fertile ground for treating profit-voluptuous investors in the way that cause economic wars!

Comment by daniel gilbert on July 7, 2017 at 14:11

Hi, Maya, Antipas and Alexandra 

This is a very important topic, and congratulations to all three of you for posting on it.  I note that there are two current GOXI posts, one started by Maya and Alexandra - and the other by yourself, Antipas.  For simplicity and economy I post the same response herein to both.

Firstly, then, an update - Barrick Gold Corporation has taken over the negotiations with the Government of the United Republic of Tanzania (Tanzania), with any agreement subject Acacia Mining's shareholders. Beneficial ownership context: "Acacia Mining plc is a company listed on the London Stock Exchange that owns gold mines and exploration properties in Africa. Barrick holds a 63.9% equity interest in Acacia."  Whilst these negotiations happen, arbitration proceedings have now been triggered.

Secondly, some observations:

  • I broadly agree with the points made in Maya/Alexandra's post
  • In-country smelting: this is part of a drive to ensure as much local content and value addition across Africa as possible, common across all of the continent's natural resources, and should be viewed as part of that development movement - and not simply in terms of $s.
  • Tanzanian President Magafuli is not known as "The Bulldozer" for nothing, and has the support of massive swathes of his population in his high profile, visible action-oriented attacks on corruption, non-performing civil servants, and rent-seeking in all its forms.  This genuine popularity is true despite his more authoritarian tendencies.  Acacia Mining plc noted, in an investor broker call, that some of the features of its Mining Development Agreement have been eroded with previous changes in national legislation.  President Magafuli is continuing this process of weathering.  The whole issue is, in fact, an interesting potential case study in-practice of stabilisation versus the concept of an obsolescing contract, the respective balance between which & here I will not try and answer in this GOXI response.  If the President manages to win a fiscal bonus for Tanzania from his legislative changes, then why should his voters not be pleased?  The first such bonus could be the 1% "clearing fee" on mineral exports, as explained by the Tanzanian Prime Minister Dr Philip Mpango as follows:

“The Government will not allow direct exportation of minerals from the mines to other countries and instead it will establish clearing houses at the international airports, mining areas and other appropriate areas where the minerals will be verified and issued export permit before being exported. The Government will impose a clearing fee of one percent of the value of minerals”

  • Lastly, the surprise of many in the negative findings of the Tanzanian commission of enquiry into Acacia's mineral sand exports was in itself surprising - President Magafuli had said in advance that “Based on the information that I have, if I say what is really inside these containers, it could make any patriotic Tanzanian cry…. From now onwards, no mineralised sand will be exported from Tanzania… There is no country being robbed of its mineral wealth like Tanzania”.  In a country like Tanzania, it is natural and prudent for the President's own commission to confirm the previously stated position of their very-present boss.

 

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