Tanzania’s Vision 2025 prioritizes economic growth through its mining industry.
SM: Last year, the ministry achieved a lot in terms of controlling and auditing production. We have also raised revenue collection to a surplus of 30 billion TZS after changing the royalty rate, which was previously 3% of the net profit, to 4% of the gross value, according to the Mining Act of 2010. We have also managed to control and minimize smuggling, especially of gold and tanzanite, by putting security measures in place at airports and other important borders. Through these measures, we have managed to recover 15 billion TZS worth of minerals.
What steps is the government taking to encourage local participation in the industry and ensure surrounding communities benefit from mining activities?
SM: Corporate social responsibility has improved a lot in the past year. AngloGold Ashanti, for example, which operates the Geita gold mine, has invested in the Geita region, constructing a water reservoir and distribution system in the region from Lake Victoria to the community. They have invested almost $6 million into the community. At one of African Barrick Gold’s assets, North Mara, they have reallocated a school close to the mine and built two new schools, a hospital, water systems and road improvements. Both are paying service levies to the local authorizes, which allow local authorities to maintain the services that they provide.
Last year was tough for the mining operators; we were tough on our side trying to see what was happening on the ground after the change of leadership at the ministry. We came in with a different vision and we are trying to fulfill the mining industry’s promises to the community. In the past year, they have improved their relationships with the community and taxes have been paid on time.
What do you foresee as the potential role of mining in the national economy?
SM: Mining’s contribution to GDP has risen to 3.5% in 2012-2013 from 2.8% last year because the revenue collected increased. Mining is also contributing 50% to foreign exchange and we are looking to raise the bar up to 10% contribution to GDP by 2025 as the new mines start paying corporate taxes.
Going forward, in the gold sector, we do not have serious investment in terms of exploration. The big mines have cut their exploration budgets. African Barrick Gold used to finance $40 million in expansion projects, but now has cut its budget down to $18 million. The ministry is working to sit down with exploration companies to evaluate and analyze their performance to see how much money is being put in so we can have at least indications of the future growth of the industry. In minerals other than gold we have seen many more investments, such as the Dutwa nickel project, the Xstrata-Barrick Kabanga nickel project and interest in iron ore.
What steps is the government putting into place to foster long-term growth in the mining sector?
SM: At the moment we are trying to strengthen the state-mining corporation, STAMICO. We are investing into their assets; we have the Buhemba gold project near North Mara and we also have a joint venture project, Buckreef, in Geita. Through STAMICO, we are on the ground and working to develop the capacity and the capability of the industry to continue exploration and to build up primary data to help investors. We are also investing in the Geological Survey of Tanzania to equip them with technology. They just finished an airborne survey across the country and they are doing mapping of new areas, such as Singida and Dodoma in the central part of the country.
Furthermore, in the past year, the president has created two deputy minister positions within the ministry, to focus one on minerals and one on energy. This shows commitment from the government to put more focus on the sectors and move things in the right direction.
How is the government supporting small-scale miners to increase their contributions to the sector?
SM: Most mining projects are started by the smaller companies. They play an important role and we encourage the growth of small and medium-scale miners. We have formulated an association for small-scale miners and we are trying to raise awareness and educate them in the modern way of doing business. We are trying to pass on knowledge so that they can open to the capital markets, access funds and engage in workable joint ventures. We have a few companies that have engaged in this new model: a copper project in Mpanda, for example, has entered into a joint venture with a foreign company and they are doing very well.
What efforts are being undertaken to improve infrastructure development to facilitate mining projects?
SM: The government has a massive electricity project going on across the country. In the past one year we have raised the bar from 18% of the population with access to electricity up to 23% today. Our target is to reach 30% by 2015. For the Kabanga nickel project, which requires 40 MW, we have a project in place to connect that area to the national grid. We are also investing a lot in power generation using natural gas, constructing a pipeline from Mtwara to Dar es Salaam where we will be producing almost 400 MW from natural gas. We are also extending our road network to access the major mining areas, such as the central line going to Geita and Shinyanga, where there are many mining projects located. We also have a project underway to modify our rail line to standard gauge to have more capacity to carry tonnage.
Do you have a final message for our audience at African Mining Indaba about Tanzania as a mining destination?
SM: Tanzania is growing very fast in the region and it has the potential to become one of its largest economies in the near future with the discovery of natural gas and the big mining projects coming up. If you look at the level of FDI in the country in comparison to others in the region, it is a clear indication of where we are going. We have good policies that attract investors and we are working to harmonize the tax and legal regimes to create an environment conducive for investment. Our Vision 2025 is to transform the country into a middle-income country. We welcome investors to come to Tanzania. We are creating jobs, developing our workforce and trying to grow the economy by putting in capital.
This interview was conducted as part of the research conducted on African mining jurisdictions by Global Business Reports (GBR) as part of our partnership with African Mining Indaba LLC. The aim of this partnership is the production of the single most comprehensive intelligence report on the continent’s mineral sector. The Official Mining in Africa Country Investment Guide, will be launched next February 2014, as the only official publication providing country-specific information at Africa’s top mining event, the 2014 Investing in Africa Mining Indaba™ held in Cape Town, South Africa.