Tanzania Mining Report Q1 2009
Business Monitor International, March 2009, Pages: 53
This Tanzania Mining Report provides industry professionals and strategists, corporate analysts, mining associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Tanzania's mining industry.
Major reforms to the legislation covering Tanzania’s mining sector are expected in an amended Mining Act that should be tabled in parliament in April 2009, according to local newspaper The Guardian. A development that could have far-reaching implications for the country’s mining sector, the momentum for reform, has come from a presidential select committee on mining contracts that recommended in July 2008 that the government should own a 10% stake in all mining companies operating within the country.
The Guardian reported the main findings of the Mining Contract Review Committee as follows: Mining royalties on metals should be increased to 5%, from 3%, and tax relief on fuel imports for gold mines should be stopped. The royalties on rough diamonds and gemstones, such as tanzanite, should increase to 7%, from 5%, while that for cut and polished stones should rise to 3%, from zero. A fuel tax should also be levied on mining companies with the money to be spent on road building. Lastly, the committee also recommended that royalties from the mining sector should be calculated on gross value, not net back value. The Guardian also reported that the government had lost around US$200mn due to tax exemptions granted to foreign companies.
The 12-member presidential review committee, chaired by Judge Mark Bomani, began its assessment of Tanzania’s mining sector in November 2007. It has also proposed the establishment of a Minerals Authority charged with the responsibility of supervising all mining activities in the country. This new body would replace the current Mining Advisory Committee.
The National Assembly began discussing the Committee’s report in October 2008, according to Tanzania’s Guardian newspaper, The Parliamentary Committee on Mining quickly requested that the government stop selling its shares in mining companies, stating that no mine should be wholly foreignowned, and that government shares should be supervised by the State Mining Corporation (STAMICO). The publisher will monitor the situation closely as the amendments to the 1998 Mining Act are drafted and brought to the National Assembly. As with many other African countries, there is a case to be made for national governments to claim a greater share of mineral wealth to help with their development. At the same time, they must be careful not to negate existing contracts with in-country mine operators which are crucial to the country’s stated aims of boosting its mining industry over the medium term.
The mining industry of Tanzania is relatively small in terms of value but its importance is highlighted by the fact that mining earns a substantially significant share of the export revenues for the country. At the present time, the mining sector contributes around 2.3% to annual GDP, but the government wishes to expand this to 10% by 2025.
Traditionally, gold and diamond production has been the mainstay of mining production for the country. The nation is the third largest gold producer in Africa behind South Africa and Ghana and ranks among the top producers of diamonds in the world. In recent times, another metal that is catching the spotlight is uranium – with a significant number of deposits being identified in Tanzania. Besides these, coloured gemstones are also mined extensively in the country.
Following trade liberalisation in the 1990s, the mining industry has been growing rapidly in Tanzania. Characterised by large-scale mechanised mines owned primarily by foreign entities, the industry is burdened by several negatives. Topping the list is the lack of a good infrastructural system that discourages potential investment in the industry. Adherence to safety and environmental standards in mining is also abysmal. Further, procedural delays substantially increase the cost of business. Nonetheless, with the government making fervent attempts at streamlining the management of resources in the country, prospects look bright for its mining industry. Also, discovery of substantial uranium deposits has been successful in diverting the focus of the international community to Tanzania – which translates into strong possibilities of much-needed capital inflows into the country.
The aforementioned Mining Act (1998) is the principal legislation that governs the application and grant of mineral rights and trading of minerals. The government of Tanzania is also in the process of reviewing and amending its mining laws to make the system aligned with the needs of the local communities of the country. In a significant development, the Tanzanian government launched the ‘Mining Cadastral Information Management System’ to revamp the contract allocation process, and for tracking of exploration and mining licence and permit holders.
In March 2008, the IMF described the outlook for the Tanzanian economy, which depends primarily on agriculture, tourism, and mining, as ‘positive’ for the 2008-09 fiscal year, although the authorities would need to tackle inflation and reduce public spending because of uncertainties around future levels of donor funding. Independent analysts said the mining sector would make a positive contribution with new projects coming on-stream and international gold prices on the rise, but that the outlook for agriculture was less clear-cut. The Tanzanian government, meanwhile, had forecast GDP growth of 7.8% in 2008, up from 7.3% in 2007. Speaking in January 2009, President Jakaya Kiwete said that in 2008 GDP growth was probably 7.7% and also announced that the GDP growth forecast for 2009 had been revised down from 8% to 7.3%.
Industry Forecast
Tanzania’s mineral industry, particularly gold mining, is likely to grow in the near future. With increased production from the North Mara Mine and the development of projects such as Buckreef and Tulawaka, According to the publisher forecasts, the mining industry in Tanzania is expected to grow at an average of 11.92% % through 2008-2013. The industry is estimated to reach a value of US$0.53bn by 2013, contributing around 1.5% to the nation’s GDP.
Executive Summary
Industry Trends And Developments
- Overview
- Table: Mines In Tanzania
Latest Developments
- Regulatory Structure And Developments
Key Projects
- Gold
- Nickel
- Uranium
- Diamonds
- Coal
Mining Business Environment
- Regional Overview – Africa
- Table: Africa Mining Business Environment Ranking
- Limits Of Potential Returns
Risks To Realisation Of Returns
- Legal Issues
- Labour Force
- Table: Labour Force Quality
Market Orientation
- Table: Inflows Of Foreign Direct Investment To Tanzania, 2001-2006
- Table: Inflows Of Foreign Direct Investment To Selected Middle East And Africa Countries, 2004-2006
Political Environment
Industry Forecast Scenario
Metals Price Outlook
- Table: Stock Levels At London Metals Exchange Warehouses (tonnes)
Global Industry Overview
- Regional Analysis
- Tanzania – Mining Industry Forecast
- Table: Tanzania Mining Industry, 2005-2012
- Competitive Landscape
- Table: Tanzania Mining – Key Players
Company Monitor
- IMX Resources
- Midlands Minerals Tanzania
- Barrick Gold
- De Beers (Williamson Diamonds)
Appendices
Appendix A: Global Assumptions
- Global
- Table: Global Assumptions, 2007-2013
- Economic Activity
- Table: Global And Regional Real GDP Growth, 2006-2012 (% change y-o-y)
- Table: Developed States’ Real GDP Growth, 2008-2010
- Table: Emerging Markets’ Real GDP Growth, 2008-2010
- Monetary Policy
- Table: Developed Market Exchange Rates, 2006-2010 (average)
- Table: Emerging Market Exchange Rates, 2006-2010 (average)
- Commodities
Appendix B: Business Environment Methodology
- Ratings Overview
- Table: Mining Business Environment Indicators
- Table: Weighting Of Components
- IMX Resources,
- Midlands Minerals Tanzania,
- Barrick Gold,
- De Beers (Williamson Diamonds)
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