Local Companies Gain Competitiveness within Tanzania’s Mining Service Sector

Alongside the well-reputed international players, several home-grown local companies are consistently proving themselves to be competitive, offering additional advantages such as greater expertise in business culture and environment.

By Catherine Howe

Many major international companies servicing the mining sector have a footprint in Tanzania; widely recognized brands either have subsidiaries in the country or, when it comes to equipment and machinery or other products, some have selected distributors. For example, Bell Equipment is dealt exclusively through Mining Agriculture and Construction Services (MACS), which also distributes Liebherr, Terex Finlay, Cummins Engines and Class.

Although conditions are becoming somewhat more favourable, the amount of exploration over the last few years has been very small due to limited investor appetite, and production companies mostly focusing on keeping production costs down. “[When gold prices rose earlier in 2016] many of the juniors started getting quite excited, and there were a lot of enquiries coming through, and a few small jobs coming around,” said Darren Smit, managing director at Bamboo Rock Drilling.

Established in 2010, Bamboo Rock Drilling is a Tanzania-based East African drilling business, offering services to the mining and exploration industry, including drilling and blasting services, and underground and surface exploration. Major clients include Shanta Gold, Acacia, Magnis Resources, Panda Hill mining and Lake Victoria Gold, alongside many juniors over the years. Smit continued: “When the gold price dropped again, the excitement died and several of the projects have stalled again – it is unclear whether this is due to the gold price dropping again, or lack of success in raising funds. For the last three to four years it has become quite tough, and has become increasingly competitive over the years. Opportunities are scarce, but we have managed to keep ourselves busy.”

Adverse conditions affecting mining companies are also having repercussions through all associated industries. With respect to poor truck sales due to a more tentative approach from investors, CFAO Motors’ CEO Eric Potin stated: “Last month we invoiced eight new trucks to Coca Cola – our competitor congratulated us for these sales in this environment, but we usually sell 40 to 80 a year. Many firms are going into short-term rental because rental companies are renting used cars… This shows that people are calculating their expenses on a monthly basis rather than thinking long term. What we are selling at the moment is mostly our Suzuki vehicle, as they are more affordable.”

Because of the maturity of the sector, it follows that the capabilities of local companies in associated industries have grown and developed in order to be competitive, although this may not always be widely recognized. “There is still a habit with mining companies of believing third world countries are not capable, and sourcing skills and services from overseas,” stated Zully Mohamed, managing director at Radiowave, a Tanzanian company specializing in wireless communications, and Utrack, offering customized solutions for vehicle tracking, fleet management and cargo tracking. “Mining and exploration companies and all those affiliated should rest assured that whatever they can get overseas they can also get locally. The service providers these days have really grown – we work very closely with our suppliers overseas, and our employees receive full training so we can deliver those solutions locally. Clients can also get local warranty.”

The company has recently signed an agreement to go global with an international drilling company, following four years working closely together. “We will now be exporting our local Tanzanian services to all their other sites worldwide,” Mohamed added.

Companies such as Coastal Steel Industries (CSI), which has had a presence in Africa for over 25 years, are able to tackle large-scale projects, having grown their capabilities and reputation in Tanzania over the years. CSI Electrical is currently working on Dar Es Salaam electrification improvements under the Japanese company Takaoka Engineering, and has recently been awarded the electro-mechanical erection works associated with the 240MW Kinyerezi 2 Combined Cycle Gas Power Plant working under Toshiba Plant Systems and Services Co for the project developer Sumitomo.

The benefits of partnering with local companies are clear from a logistics and cost perspective, and in terms of having a partner that can easily navigate the market and business environment. However, competing for opportunities with international companies nevertheless remains a challenge, as articulated by Dhruv Jog, director at Advent Construction: “Unfortunately there has not been a very rigid framework in the past for the protection of local construction companies. A lot of the large government sector projects have been diverted to Chinese construction companies, which had a very unhealthy effect on the industry. It took away a lot of opportunities from the local sector, which in Tanzania was a large one.”

Advent construction was the first, and for four years the only, ISO-certified construction company in Tanzania, and is even now the only construction company to be certified to 9001:2015 standards. Citing the excellent quality of service at competitive costs, Jog continued, “This seems now to have struck a chord with key decision-makers, and Tanzanian construction companies are being given more preference than they were previously. Two of the biggest problems the country has faced have been unemployment and poverty, and the easiest way to fix this is to ensure Tanzanian businesses, employing Tanzanian people, have as much work as possible. In a break from the past, the new government appears to be very serious about promoting local businesses, and Advent Construction is very excited about this and grateful for the change in trend.”

From a service perspective, Tanzania is extremely well set up in terms of capabilities and competitiveness. Alongside the well-reputed international players, several home-grown local companies are consistently proving themselves to be competitive, offering additional advantages such as greater expertise in business culture and environment.

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