Why are we not benefiting from mining despite years of reforms?

23Jan 2019
By Financial Times Reporter
DAR ES SALAAM
Financial Times
Why are we not benefiting from mining despite years of reforms?
  • PARADOX OF PLENTY President John Magufuli yesterday sought answers from top government officials and private sector players on why Tanzania is yet to see the real benefits of its vast mineral wealth

WHY is mineral-rich Tanzania still not benefiting from its vast natural resource wealth, despite massive reforms made by the government to the sector? That's the burning question nagging on President John Magufuli's mind.

President John Magufuli.

The president sought answers yesterday from top government officials and private sector players in the country's mining industry as he seeks to avoid the proverbial "resource curse" or paradox of plenty.

 

The paradox of plenty refers to the paradox that countries with an abundance of natural resources such as fossil fuels and minerals tend to have less economic growth and worse development outcomes than countries with fewer natural resources.

 

Magufuli broke protocol yesterday and took charge of a meeting that brought together top government officials, bankers and small-scale miners to ask 12 tough questions on the challenges facing the country's mining sector.

 

The president cut off the newly-appointed Minister for Minerals, Doto Biteko, from making a speech and interrupted proceedings to pose his questions.

 

"I've come here today to listen to views and challenges of mining stakeholders ... I don't want to listen to a speech from the (mining) minister outlining successes in passing new mining legislation and revenue collection figures," Magufuli said to cheers from artisanal miners at the conference held in Dar es Salaam.

 

"I want to hear from you - mining stakeholders - and I want you to speak openly."

 

After listening to presentations from representatives of the Federation of Miners Association of Tanzania (FEMATA) and the Tanzania Bankers' Association (TBA), the president took charge of the meeting and posed the following questions:

 

 

1. Why is Tanzania not benefitting from its mining sector?

 

The president's question comes as Tanzania passed a string of laws and regulations in 2017, which ushered in sweeping changes to the country's mining code as the government seeks a bigger share of revenues from the sector.

 

Magufuli has publicly accused large-scale mining companies of not paying their fair share of taxes and has urged the Tanzania Revenue Authority (TRA) to crack down on tax evasion in the sector.

 

In his quest for tighter regulation of the sector, the president has appointed three mining ministers in three years and has made it clear that he will not hesitate to make further cabinet changes in future in the portfolio until he was satisfied with the management of the country's natural resources.

 

2. Why is Tanzania not one of the biggest exporters of minerals in Africa?

 

The president noted that a recent World Bank report shows that Tanzania was not the leading exporters of minerals even among East African countries, despite the country's vast mineral wealth.

 

3. Why are minerals being smuggled from Tanzania?

 

"You heard the recent incident where gold was being smuggled from Tanzania under police escort. Why are our police officers escorting smuggled minerals," Magufuli queried.

 

4. Why isn't TRA collecting taxes?

 

President Magufuli said he was still not satisfied by tax collection from the mining sector and said he expected answers from the Commissioner General of TRA, Charles Kichere, who was also present at yesterday's meeting.

 

5. Why are mining commissioners unable to curb mineral smuggling?

 

"These mining commissioners located at different parts of the country are experts in geology. Why are minerals being smuggled from their areas under their watch while they haven't even missed a single month's salary?" The presidents inquired.

 

6. What are RCs and DCs doing?

 

The president demanded to know what regional commissioners (RCs) and district commissioners (DCs) were doing to ensure taxes from gold and other mining activities were collected in their areas of jurisdiction.

 

7. How efficient is the Mining Commission?

 

Magufuli demanded to know what the Mining Commission was doing to control the mineral business. The commission was set up in April 2018 following the overhaul of the legal and regulatory framework of the country's mining sector.

 

8. Why are tin mining activities unregulated?

 

The president noted that tin was being mined in Kyela District and the minerals were being smuggled to across the border to other countries.

"Why is tin being mined ... but there is no market in the country for the mineral and it is being smuggled to a neighbouring country?" He remarked.

 

9. Why is tanzanite smuggling still rampant?

 

The president inaugurated a 24-kilometre perimeter wall around the tanzanite-mining area of Merelani in April 2018. Magufuli had ordered the army to build the wall as an attempt to curb rampant smuggling of the precious gemstone.

"Despite building the wall, why are tanzanite gemstones still being smuggled out of the country?" He queried.

 

10. Why are there no mineral trading centres in Tanzania?

 

"Why don't we have trading centres for gold and other minerals in Tanzania? What are the Bank of Tanzania (BoT), cabinet ministers and permanent secretaries doing about this?" He said.

"We don't have markets where small-scale miners can sell their minerals and this forces them to smuggle their minerals across our borders in search of markets."

 

11. Why hasn't BoT established a gold reserve?

 

"Apart from holding reserves of US dollars, many countries also hold gold reserves to protect their currencies. The BoT has top experts such as PhD holders and professors, but why don't they see the importance of establishing a gold reserve at the central bank?" He said.

Magufuli last week ordered the central bank should start buying the country’s gold to curb smuggling and build reserves to stabilise the currency.

 

12. Why do mineral traders evade tax?

 

Magufuli said both local and foreign mineral traders dodge taxes and he demanded to know why the traders were reluctant to comply with taxes.

 

As the self-appointed chairman of the meeting, Magufuli invited mining stakeholders to openly give their views on problems affecting the sector.

 

A small-scale tanzanite miner told the president that foreign traders, including Chinese nationals, were behind smuggling of the purple-blue gemstone that is found only in Tanzania.

 

Tanzania, which is Africa’s fourth-largest gold producer, has huge reserves of over 260 minerals.

 

The president noted that the mining sector was not contributing enough to gross domestic product (GDP) or economic output.

 

“I want us to discuss challenges facing this sector so that we can come up with tangible solutions,” Magufuli told mining stakeholders.

 

“The mining sector currently contributes only 4.5 per cent of the country’s GDP. We want the contribution of the sector to reach 10 per cent or above so that the sovereignty of Tanzanians can be reflected in the mining sector.”