sharing in governance of extractive industries
Dar res Salaam, Tanzania – 13th April, 2017: Tanzania mining stakeholders are fully aware and apparently commend His Excellency President John Magufuli together with the Government agile steps taken to undertake comprehensive appraisal of copper concentrate extracted and exported from Tanzania for smelting in Japan, China or Germany. The President’s intervention suitably and timely coincides with the country’s EITI compliance status. It actually sends correct signals to the EITI validation exercise Tanzania is currently undergoing.
Tanzanians are indeed confident of the two high level expert panels constituted – 1). the geologists, chemists and scientists experts committee; and 2). the economists public policy and lawyers experts committee. It is Tanzanians’ expectation that the findings duly and timely reported by the respective committees to the President will rejuvenate such otherwise fading citizens’ hopes of one day seeing mining revenues lifting them from poverty. When the Government recovers 50% of mining revenue stashed away in undeclared revenue from copper concentrate, it equally amounts to increased Government capacity and effect to spend more on and for social services provision, and development budgets. It is Government spending on the duo that takes people to realize their collective vision of reaping benefits from their mineral resources.
However, that being done, Tanzanians privy to the mining companies’ financials have the opinion that mining revenue mask shadow may not be over yet. Issues such as deferred Corporate Income Tax (CIT); perennial ‘loss-making’ declarations by mining companies; non availability in the public domain of mining companies’ financials for the period between 1998 and 2007; and payments and management of royalties during the period between 1998 and 2007 cast a shadow, which leaves a lot to be desired.
It is from the foregoing paragraph that we the Coalition of Tanzania Civil Society Members of global EITI Association (TEICS) composed of 28 Civil Society Organizations (CSOs) advise the Government to extend audit of mining revenue so as to encompass and address:-
Issue # 1: Deferred Corporate Income Tax (CIT)
Neither large scale gold mining companies except two nor large scale Tanzanite mining companies had until 30th June 2014 paid corporate income tax on the ground that despite making profits lately, their respective MDAs’ stabilization clauses allow them to use the profits to recuperate the huge losses the companies incurred during the initial investment phase. We advise the Government to audit those companies so as to recover all CIT in arrears.
Issue # 2: Perennial ‘loss-making’ declarations by mining companies
Amongst the mining companies there are ones claiming to incur losses perennially despite staying in business for more than five years. Some of those companies have respective Mining Development Agreements (MDAs) and started mining business operations in Tanzania 19 years ago. Going by international best practices, those companies would be required to pay at least 5% of their respective turnover after five years of consecutive loss-making. We advise the Government to identify and audit those companies so as to recover the overdue amount calculated as summation of 5% of annual turnover for entire period past initial five years of mining operations.
Issue # 3: Non availability in the public domain of mining companies’ financial information for the period between 1998 and 2007
The financial information of mining companies were since 2008/09 onwards guaranteed accessibility and availability in the public domain (for scrutiny) because of the Extractive Industries Transparency Initiative (EITI) requirement. Tanzania is the EITI implementing country since 2009. The Tanzania EITI (TEITI) governing committee decided the mining companies and Government to start disclosing 2008/09 fiscal year data onwards, thus leaving the 1998/99 – 2007/08 fiscal years financial information in total darkness, and therefore escaping public scrutiny. We advise the Government and TEITI Committee to recall and subject 1998/99 – 2007/08 to EITI scrutiny.
Issue # 4: Payment and management of royalties during the 1998/99 – 2007 fiscal years’ period
The first TEITI report (2011) indicated murky management of royalties received by Ministry of Energy and Minerals (MEM). Despite improvement thereafter, the 2008/09 fiscal year reported US$17million receivable royalties as either being unrecorded or spent without following proper procedures, sending strong signal that the situation could be worse for the preceding fiscal years (1998/99 – 2007/08). We strongly advise the Government to conduct thorough investigation or audit of the royalty receivable monies for 1998/99 – 2007/08 fiscal years.
Issued and signed on behalf of TEICS members today, 13th April 2017, by
Notes to Editors
Government action on export of copper concentrate
On the 11th April 2017 His Excellency President John Magufuli constituted, swore-in and assigned the second expert team to undertake comprehensive evaluation and appraisal of copper concentrate exported by Multinational Enterprises from Tanzania to Japan, China and Germany for smelting. The team will analyse the quantity, quality, price, monetary value, government revenue duly collected, relevant laws regulating export of copper concentrate, annual freight quantity, and various types and quantities of minerals recovered from smelting of copper concentrate since 1998, when foreign mining operations started in Tanzania, up to 2017.
Earlier on the President had constituted, swore-in and assigned a team of geologists, chemists and scientists to conduct scientific investigation, evaluation and analysis of minerals contained in the containerized cargo of copper concentrate [276 (8ft x 8.5ft x 40ft) containers] interjected in the Tanzania Ports Authority (TPA) yard during freight clearance, before shipping the stuff to Germany. The team would work and report back to the President in 20 days.
The Government had on the 3rd March 2017 banned export of copper concentrate shipped to Japan, China or Germany for smelting, until comprehensive investigation of the stuff was undertaken.
Background to TEICS
TEICS is the Coalition of Tanzania Civil Society Members of global EITI Association composed of 28 member organisations.
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