Tanzania Africa's third largest gold producer; government wants larger share
Sun Oct 29, 11:14 AM
ca.news.finance.yahoo.com
By Tom Maliti
DAR ES SALAAM, Tanzania (AP) - Tanzania has risen to Africa's third largest gold producer in less than a decade, and now this East African country's government wants to earn more from its privately controlled mining sector.
Mining companies say Tanzania achieved its status in record time because of investor-friendly policies after decades of state control and small-scale mining. Companies - which mine gold, diamonds and other gems, nickel and other metals - pay royalties but no corporate taxes until they have recouped their initial investment.
Critics, however, say that the mining companies pay low wages and cost thousands of jobs among small-scale miners, hurting local economies. They also say that Tanzania has seen comparatively little revenue go to the treasury even as gold prices have doubled since mining was liberalized here.
President Jakaya Kikwete has directed the Energy and Minerals Ministry to review mining policies and laws, but ministry officials and mining company representatives missed a self-imposed Sept. 30 deadline to conclude discussions.
"We are exploring what areas can be improved, what areas can be reviewed," said Deo Mwanyika, executive general manager for corporate and legal affairs at Barrick Gold Tanzania. The subsidiary of Canada's Barrick Gold Corp. (TSX:B) is the largest mining concern in Tanzania, with three gold mines and two other mining projects in the works.
Mwanyika added his company, which has operated in Tanzania for seven years, expected to begin turning a profit and paying corporate taxes in three years.
Chris Maina Peter, a professor of law at the University of Dar es Salaam, said that he believes a major factor in Kikwete's decision to review mining was the president's landslide victory in December 2005 polls.
"I think the new government was shocked by its own success in the elections ... It feels it has that legitimate duty to do something to assist the people," said Peter, who has specialized in investment law.
"People had been saying, 'Our natural resources are being stolen in broad daylight and what are you (the government) doing about it?' "
While Kikwete's ultimate goal is not yet clear, events in Tanzania seem to fit a global pattern. Russia has tried to assert more control over its oil and gas resources, and Venezuela and Bolivia have moved to curtail oil companies.
Tanzania, which gained independence from Britain in 1961, adopted socialism six years after independence. The government began liberalizing the economy in the early 1990s, a time when the collapse of the Soviet empire was leading many African countries to rethink their economic models.
A new mining policy, amended financial laws offering a slew of tax and investment incentives and a new Mining Act that parliament passed in 1997 and 1998 saw six large-scale gold mines opened in Tanzania between 1998 and today. Tanzania is now Africa's third largest gold producer - after South Africa and Ghana.
"It was just like a boom," said Sauda Kilumanga, public relations manager for Barrick Gold Tanzania.
South Africa's Anglogold Ashanti Ltd. and Australia's Resolute Mining also operate in Tanzania.
The companies are exempt from Tanzania's 20 per cent value-added tax on goods and products used exclusively for mining and can offset all equipment and machinery costs against their earnings.
The World Bank says that mining is one of Tanzania's fastest growing sectors. It makes up at least half of the country's foreign exchange earnings each year.
However, it makes up only 3.2 per cent of Tanzania's gross domestic product.
According to a Tanzania Chamber of Minerals and Energy brochure, mining companies paid US$68.9 million in royalties, taxes and other contributions to the Tanzanian Treasury in 2005, compared to $2.2 million in 1997. Between 1997 and 2005, the industry has paid a total of $255.5 million in taxes and royalties. According to the government, minerals worth $693 million were exported in 2004, compared to $45 million in 1995.
Nicholas Mgaya, a senior trade unionist in Tanzania, said that generally the mining companies are "fair" in their relations with workers, but complained wages were low.
"As compared to other parts of the world, the work in (Tanzania) is very difficult so the salary does not reflect the value of the product. Workers in Tanzanian mines are paid on average 160,000 to 300,000 shillings (US$128 to $240) a month," said Mgaya, deputy secretary general of the Trade Union Congress of Tanzania.
He said that South African mine workers are paid on average 10 times that.
Relations between the companies and the workers have at times been tense. When Bulyanhulu mine was opened in the mid-1990s by an Australian company, Sutton Resources, residents and activists in the area alleged that hundreds of thousands of small scale miners were forcibly displaced. The company denied the allegations and later sold its interests to Barrick Gold.
Tundu Lissu of Lawyers' Environmental Action Team said that independent research has shown that when small scale private mining thrived in Tanzania, it employed as many as 500,000 people and indirectly generated as many as 1.5 million jobs. Today, small scale mining only employs about 20,000 people and large scale mining employs about 8,400 people.
"The current state of our mining industry simply is too exploitative to be allowed to go on," Lissu said.
Mwanyika, of Barrick Gold Tanzania, said that even before the industry's talks with the government reach a conclusion, the firm has offered changes to its mining contract.
Barrick Gold began in July to make an annual payment of US$200,000 each to the three district councils in whose areas it owns mines. Mwanyika said the payments were aimed at improving the lives of those communities.
The company will also make an annual US$7-million payment to the Tanzanian treasury for three years, by which time Barrick Gold Tanzania is expected to start paying corporate taxes, Mwanyika said.
"The prospect for the mining industry in Tanzania is very, very bright if the government will be consistent and predictable," he said. |
