Tanzania Mining Industry: Revenues, Resentment and Overregulation?

Tuesday, 21 July 2009

Page 5 of 6 What Reforms Make Sense? There is no question that Tanzania’s mining sector needs some kind of reform. Bomani’s long list of proposals is populated by both good and bad ideas. Instituting as many new taxes as have been suggested, at a time when the government is finally about to start making good money and the industry needs encouragement to maintain momentum, is simply a bad idea, and even more so in the context of the global financial crisis. From ICMM’s Tanzania case study: “The objective assessment from investors is that the tax regime in Tanzanian (as is also the case of Ghana) still represents a significant deterrent to investment relative to the similar regimes of countries that compete for the same investments.” So if anything, it might be a good idea to lower taxes, at least for exploration and prospecting, which Bomani does support. Granting generous allowances up front to attract investment that will pay off in the long run as Tanzania has done is a common strategy in the mining sector. Tanzanians must understand that the “up front” period is not over yet. It has taken Ghana several decades to begin reaping the kind of rewards from its gold mining industry that Tanzanians are demanding to see after just ten years in business. AGA records show that the company has yet to turn a profit on its Geita operation. Between 2000 and 2008, Geita made USD1.82bn in revenue and sustained USD1.83bn in costs, which included about USD170m in taxes. It is expected that AGA will begin to pay income tax in 2011 once it starts actually making some money. One area that should be reformed is the lack of contract transparency, to improve both public trust and stability for investors. Bomani proposes making contract terms available by law to the public and National Assembly. The ICMM recommends that contracts also be standardised, not negotiated privately on ad hoc terms. A standard, transparent taxation system can make it easier for the government to navigate its revenue collection role. This is a much better way to begin addressing the revenue question than Bomani’s suggestion that the government take a management stake in the country’s major mines. “Due to lack of ownership by the government in the mineral sector the government has failed to know the exact amount of minerals harvested, tax and expenditure,” the report says. But the government has already attempted and failed to manage several mines in the past, and lacks the capacity to do so now. There are other ways of monitoring performance and revenue, which could start with the government hiring credible auditing firms and becoming a full fledged member of EITI. Another area that must be dealt with is artisanal mining: Individual Tanzanian miners have been displaced, but they have also caused harm to themselves and the environment by working with cheap chemicals and unsafe tools. Bomani wants government support to improve these conditions, but others say this kind of mining is unsustainable. Rather than go the route of so many ill-fated aid programs that support inefficient enterprise based on social concerns, the government could spend money on creating safe jobs for these workers in other sectors. Focus on development of other sectors would also avoid over-reliance on one industry, a classic symptom of the resource course. << Start < Prev 1 2 3 4 5 6 Next > End >>