sharing in governance of extractive industries

"Tanzania mining regime still not favourable"

From The Citizen: http://www.thecitizen.co.tz/news/4-national-news/3812-chamber-dispu...

By Damas Kanyabwoya

Tanzania’s mining regime is still not favourable to foreign investors because of unpredictability of policies, the Tanzania Chamber of Minerals and Energy said yesterday.

The chamber was reacting to findings of a survey entitled Survey of Mining Cmpanies:2010 Mid-year Update that showed that most miners still regarded the mining environment as “favourable” despite the enactment of the new law that was vehemently opposed by investors as “distorted” and would "hinder further growth of the mining sector".

The report prepared by the Canada-based Fraser Institute says Tanzania was voted the country with the third most attractive mining regime in Africa ahead of South Africa, Zambia, Namibia and Democratic Republic of Congo.

Tanzania was No. 23, among the 51 countries surveyed globally. Botswana was ranked first in Africa, and featured in the top 10 countries globally.

About 70 per cent of the mining executives and operational managers interviewed in the survey were impressed with Tanzania’s taxation regime, attitude towards the mining industry, political stability and security in the mines.

The chamber’s executive secretary Mr Emmanuel Jengo said investors have been scared by the government’s habit of frequently reviewing and changing mining legislation, which is dangerous for “long-term, capital intensive investments” like in mining.

And some investors have even already taken their investments to somewhere else. He said IAM Gold, a Canada-based gold firm that had wanted to invest at the Buckreef project in Mwanza, shifted its investments to Burkina Fasso.

He said the contents of the legislations might not matter much, but when investors study the laws and decide to invest they would prefer the same laws remained for the duration of the projects.

“Investors want to be sure that mining polices will not change from one day to the other. The nature of investments in mining demands that,” he noted.

He added: “Mining investors take loans of millions of dollars and come to invest here in projects that will take many years before they make profit, is it not natural that they would want to see the goal posts not moved each time the government deems so?” he queried.

Explaining further he said the Mining Act 2010 was just the last nail in the coffin. Attempts to change taxation regimes and even the mining legislation started more than five years ago, after much public outcry to the effect that the country was not benefiting from the mining revenues.

In 2004 the government formed the Kipokola Mineral Review Policy Committee to review the mining regime and come up with recommendations that would be used to improve future legislations.

Two committees followed, the Masha Mining Agreements Review Committee and the Bomani Presidential Commission on the Mineral Sector published in 2006 and 2008 respectively. This was later followed by the review of the mining policy and the enactment of the new mining act in April 2010.

The new act increased both the royalty on minerals and ensures a government stake in future mining projects.
Is it necessary to review mining laws?
Mr Jengo said it was not necessary for the country to change mining legislations for it to benefit from mining investments in the country. The new mining act, he said, put more emphasis on monetary terms, to ensure more Tanzanians, whether individuals or the government, benefited more from mining sales or “revenues” especially now that gold prices are very high.
“But that is the wrong approach. Benefits from mining are accrued from the positive effects to the general economy, through “linkages” or relations that mining form with other sectors of the economy,” he said.
He said if Botswana and South Africa benefited from mining it was because the respective governments took steps to ensure mining helped the growth of their economies.
But the Tanzanian government has not done that much.

“With the huge electricity power potential the government could have earned millions of dollars monthly by selling power to mines through Tanesco, for example, but that does not happen,” he said.

He noted that only few mines get power from the national grid and that power is highly unreliable.
Benefits of static laws
Having static mining policy increases regime predictability this attracts more investors and creates the critical mass that can work well to propel the economic growth.

“When you have enough miners it is easier to attract investors who can build industries for heavy mining machines and equipments and so forth and these help to create employment,” he noted.

Tanzania currently produces about 50 million tonnes of gold annually which are worth about $1 billion. It is Africa’s fourth largest gold producer after South Africa, Ghana, and Mali. It also produces other minerals and gemstones such as diamonds, tanzanite, and coal and has also reserves for nickel and uranium.

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