Dalberg explains how the company helps guide the Tanzanian government to upgrade its social development and infrastructure.
Dalberg was founded in 2001. What are the key focus areas of the company in Tanzania?
Dalberg considers itself both a global and local company. Under the company’s partnership-based system, every country’s operation is semi-autonomous. In Tanzania we have had a presence for about five years, but we only set up our office this year, mainly operating in a number of development sectors including agriculture, education, finance and health.
I recently joined to lead the work of a new business entity (D. Implement), looking at moving from strategy into implementation. In the program that I lead, we are supporting the government to deliver in a more effective and efficient manner with a focus on the agricultural sector where there have been some significant investments, but without a major transformation in the sector. Our work involves supporting coordination of Ministries that are involved in the agriculture sector and further working closely with government counterparts at a regional level to enhance the delivery of programs. We are currently working in the Mwanza region, and will be expanding into two other regions in the next year.
Dalberg was involved in developing a strategy to help meet energy targets last year. How well developed is Tanzania’s infrastructure?
Energy and electricity present a big challenge for mining. The industry is a big consumer of electricity, and running on diesel significantly raises costs. For example, many mining companies will opt to put part of their processing line on diesel generated power to ensure stability and the utmost availability of the process line and eliminate the lost time that it would take to start up the line or repair an inadvertent breakdown of equipment in the event of interrupted power supply. In the last two years, there have been very positive improvements and the government is setting itself up to deliver energy even better. There are a few big gas projects which will deliver more electricity to the country and there is a lot of opportunity with coal that is locally available.
It would definitely be an interesting debate and approach to see how mining companies can contribute to the efforts of the government in these areas with a purpose of ensuring that the projects are fast tracked given that they will be one of the key beneficiaries.
Do you foresee any improvements in port infrastructure?
In reference to the Dar port, there has been a lot of focus by the new government to ‘get things right’ and recalibrate its operations to become more beneficial to the country. While this process has been seen to potentially slow down clearing processes, the current challenges are all in the interests of setting up a port that can serve the country and general East African region even better in the very near future. The DRC and Zambia, for example, are key users of the port.
At this stage, not all mining companies use the port. For examples, mines in the northern part of the country may choose to use Mombasa, which could be closer. None the less, there is vast opportunity for local businesses to get involved within the mining supply chain, even when logistics are run through the Mombasa port.
Tanzania is currently implementing its mission to become a middle-income country through industrialization. With this vision, there is a lot of opportunity for the country and region to make more and more use of the port, in particular for the export of manufactured goods. Even so, it is a great moment for the mining and extractive industry in general to consider how to deepen their local content programs within the country to support the industrialization drive in a manner that creates meaningful and sustainable jobs and access to commodities.
How well is the government balancing the interests of investors with those of the country, particularly in relation to tax?
It should be noted that there are number of new laws and regulations within the fiscal ecosystem. A lot of debate has been generated around how beneficial and supportive they are to investment. In my opinion, the Mineral Development Agreements signed by companies should be structured within the law and observed by both parties, however, if countries choose to recall them, then this could be a move that affects future investor confidence.
When compared to other countries, the royalties are not astronomical, although they could be structured better. Ghana has a good structure: a 4% royalty, with 1% retained in a local development trust. In Tanzania, local councils and communities’ direct benefit is limited to service levies, which in many ways have to respond to the needs of the wider district council as opposed to the ‘direct impact’ villages.
There are different schools of thought over social investments from mining, and whether companies should invest themselves or simply comply with regulations and pay all their dues allowing the government to make all the social investments. A general principle that I believe in is that companies would create more sustainable programs if they were to partner with the government.
Looking to the future, how can Dalberg fit into the government’s social development strategies?
Dalberg’s work naturally lends itself to helping our clients create models and solutions for difficult social development challenges. In the near future, mining will not be a huge direct employer; the industry is mechanizing and optimizing in the face of low commodity prices. Most of the jobs will result from multiplier effects on related industries. Dalberg has in-depth experience on topics such as job creation, which we can use to develop effective economic development strategies that are coordinated with the national government’s 5-year development plan. We can also work alongside local government authorities and mining companies to build consensus on a comprehensive strategy, and help convert the strategy into a working solution.