Tanzania Mining Industry: Revenues, Resentment and Overregulation?

Tuesday, 21 July 2009

Page 4 of 6 Socioeconomic Jurisdiction For this reason, simply raising taxes on mining companies will do little to improve the situation in Tanzania. Although it has not made much press, the Bomani Commission also recommends that the social responsibilities of government and mining companies be clearly defined and enforced. This is where real progress could be made, if the Tanzanian public’s focus can be somehow pried away from the traditional view that “rapacious” mining companies must be made to pay up. The government must be accountable for providing a workable business environment and tending to the needs of its own citizens, including especially workforce education. Mining companies can then be held accountable for their part, which should include a degree of corporate social responsibility (CSR) spending, local procurement and hiring requirements, strict environmental practices and building relationships with the communities where they operate. Pricewaterhouse Coopers have even come up with a way to monitor mining companies’ half of this relationship, called the Total Tax Contribution Framework. The firm hopes to extend this research to low income countries soon.    But “mining companies cannot do this on their own,” says ICMM’s Diez. “It’s not just about building bridges and building schools and hospitals, it is about getting the right people talking to each other.” This is the only way to build lasting linkages between the mining sector and the broader economy. And here, Tanzanians have a valid complaint. They say Barrick, more so than any other mining company that has operated in the country, maintains an arrogant top-down approach to CSR: Willing to throw money at problems, but unwilling to cultivate working relationships with locals. Barrick’s defense on the North Mara pollution charges is that locals broke into its premises and stole plastic lining meant to keep chemicals out of the groundwater. This could very well be true, given the amount of animosity that locals harbor toward Barrick for what they see as its callous invasion of their backyard. (When contacted for comment, Barrick’s Tanzanian spokesman said he was too busy dealing with the North Mara fallout to speak with us.) Tanzania will not shed its socialist mindset anytime soon, and with that comes some unspoken rules. For any foreign company to be successful there, it must acclimate to the personal side of Tanzanian business. At the same time, Tanzania’s leaders could do more to support only reasonable demands, and educate the public when it takes a myopic stance. New Investment Needed Results of an international mining study carried out by Oxford Policy Management (OPM) were presented at the ICMM’s May forum in Dar. OPM collected data from AGA and Barrick on five of their gold mines, plus a new mine under exploration by IAMGold, crunched the numbers and concluded: These six mines plan to increase gold production and exports by around 50% to 60% in the next six to ten years, increased profit from which will hike total mining tax payments to the government by almost 300% to about USD280m per annum, under the current taxation scheme. This level of production, if continued long-term, will require these companies to invest an additional USD2.3bn in their existing mines just to stay in business through to 2034. Contributions from current mines will begin to decline around 2018. To sustain Tanzania’s gold mining industry at its current level of growth into the long term, an additional two to three mines the size of AGA’s Geita will be necessary. Tanzania is not on track to meet these goals. “The mining policy and conditions of investment in Tanzania have failed to attract sufficient exploration. No new large gold mines are planned to be opened in the next five years,” says Barber, explaining further: “The gold mining sector should have a pyramid structure, capped by a handful of large mines, then underlain by tens of medium and hundreds of small scale formal mining operations. Tanzania only has large mines. The reason for this is that these are the only operations that can be economically developed due to the difficulty and high cost of doing business in the country.” That high cost of doing business is underpinned by a xenophobia that Tanzania cannot seem to shake, no matter how much the country stands to profit from foreign investment. Much of Tanzania’s skepticism is directed at Kenya: Tanzanians have long resented living in the shadow of Kenya’s strong economy, and tried to insulate themselves from Kenyan competition. The fear of being overrun or exploited has come to apply to most outsiders. The Dutch government recently threatened to revoke millions in aid to Tanzania because of the country’s mistreatment of foreign investors. Overall, Tanzania’s way of thinking and approach to business remains stubbornly parochial. Barber observes: "There seems to be little general realization of what economics are about and how to attract meaningful investment into the country. It has to be accepted that there is an international marketplace, and to attract investors you have to make it easy and trouble free." << Start < Prev 1 2 3 4 5 6 Next > End >>