Tanzania Mining Industry: Revenues, Resentment and Overregulation?

Tuesday, 21 July 2009

Page 3 of 6 Between Corruption and Transparency For mining companies, Tanzania’s messy attempt at democracy presents a giant headache. Extractive industries are accustomed to doing business in African countries where the political problem is blatant corruption. In a failed state like the DRC for example, all a company need do is hire good security and pay off the few right people and the path forward is paved for them. That is not to say the mining industry prefers corruption to democratic transparency, as is often suggested. None of these companies mind working in the US or Australia. And large steps have been taken in recent years that demonstrate a commitment to transparency by the mining industry. Major companies have supported the Extractive Industries Transparency Initiative (EITI), and the Publish What You Pay campaign has made some headway. Fernanda Diez, communications director for ICMM, says the organisation was set up to conduct research and public relations in the late 1990s because mining companies realised they needed to do more to restore their international image: “Companies are realising there is a much greater societal expectation of them, and that companies have a responsibility to be good corporate citizens.” Diez likes the term “enlightened self-interest.” She also says: “Our [member] companies are far more comfortable dealing with transparent governments.” Transparency provides predictability, a prized commodity for mining companies making long-term investments. Barrick and AGA are both members of the ICMM. Both are also public companies required by law to audit and publish their financial records. As for Tanzania, according to the ICMM’s 2007 Tanzania case study, “corruption continues to be a prominent feature of the Tanzanian public sector.” Transparency International’s Corruption Perception Index for 2008 puts Tanzania at 102 out 180, with 180 being the most corrupt country. Other mining destinations in Africa score much better: Botswana is ranked 36, and Ghana 67. Kikwete’s government has made an effort to cut down on major scandals. Two former MPs were charged in November 2008 for their role in hiring the British firm Alex Stewart Assayers with no open tender to audit gold mining company activities in Tanzania from 2003 to 2007 at an outrageous rate of about USD1m a month. (Needless to say the auditing itself was less than professional.) The country’s new Prevention and Combating of Corruption Bureau has also prosecuted cases linked to the Bank of Tanzania’s external payment arrears (EPA) account embezzlement scandal with fervor. Generally, Tanzanian corruption no longer comes in huge doses, or in the DRC mold. There is no one person to pay off, but rather an enormous and inefficient bureaucracy to face, with leakages and bits of corruption at various points along the way. Hence the two-year wait time for a prospecting license, many of which are handed out to ruling party insiders anyway for speculative purposes. The government is also notoriously bad at revenue collection, and known to mismanage the taxes it does collect. It is not clear where the USD100m a year in mining revenue has gone, as social services have not been improved nor infrastructure developed. << Start < Prev 1 2 3 4 5 6 Next > End >>