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Quantum leap forward in the mining sector
2006-07-19 09:07:52
By Editor
One of the key reasons why South Africa is an economic powerhouse on the continent is not wholly explained by its cosmic endowment in mineral resources.
To the contrary, put aside its past apartheid political dispensation, its mineral wealth had been exploited since times of yore in a manner that ensured benefits eddied within the economy.
Famed capitalists such as the late Cecil Rhodes made mammoth fortunes by mining Kimberley diamonds, but a great deal of the resulting wealth, in addition to the later discovery of gold in the interior, were maintained to fuel and oil its economy.
A similar trend is true a bout the history of U.S.A’s development.
All immigrants without exception found so called ’a new continent’ rich in natural resources, but were categorically exploited to develop America.
Apparently, since 1997 when we adopted a new but controversial mining policy and its corresponding Act, we were over-ambitious in trying to attract foreign direct investment (FDI) into mining sector.
Little or no attention was paid to establishing a flexible institutional arrangement that would ensure least 50 per cent of the ensuing mineral proceeds are retained.
Aware of Tanzania’s over-generous Mining Act, foreign mining companies zealously exploited its weakness at the expense of national economic interests to levels which can never entice any faculty of logic.
For instance, going by last year’s United Nations Conference on Trade and Development (UNCTAD), the four major gold mining companies in Tanzania minted about USD801m for the period 1997-2002, yet only USD60m accrued to Tanzania may be as royalties.
Putting it in perspective, for every unit of gold mined, USD80.1 flies out of the economy and only USD6 is retained. Under whatever pretexts, this sort of business is bad, if not mad!
Some provisions in the Act are extremely ridiculous. For instance, no one of any of the major gold mining companies has committed huge stakes in undertaking mineral exploration.
All of them displaced small-scale local miners, meaning someone else had already determined availability of mineral deposits free of charge.
The best that new companies have done is to verify concentration of the deposits. This means mining starts from day one after commissioning.
So, what is the logic of five years tax holidays, duty-free fuel and the provision granting 30 per cent corporate tax after a company has recovered investment costs?
Who audits the actual investment costs and why should depreciation on capital be pegged at 100 per cent?
We are raising some of these controversial issues aware that last week talks were launched between the government and representatives of the major mining companies to ponder on how mineral proceeds could be equitably shared out.
It’s no use becoming argumentative that something somewhere went wrong, and that a corrective measure is imperative. It is a public’s wish that a win-win situation would come out of the talks.
The deal should convince future generations that once upon a time, Tanzania has vast mineral resources whose domestic economic impact can be audited.
The outgoing Kenyan Ambassador to Tanzania, Muburi Muita, has been quotes by the media as saying that Tanzania has the potential to be an economic giant in the East African region if resource utilization trickled down to the grassroots.
Without doubt our government will need his sentiments to the benefit of the majority of Tanzanians.
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