Newton Mthethwa (NM), African Mining Brief speaks to Ami Mpungwe (AM), the current chairperson of Tanzania Chamber of Mines and Energy (TCME), and a former diplomat who is now heavily involved in the mining sector in Tanzania and beyond.
NM: Could you please give a brief overview of Tanzania’s mining sector and how it compares to other African countries?
AM: Tanzania’s mining sector is still in its infancy, having picked up in the late 90s when it took a growth trajectory that was higher compared to any other time in the country’s history. The rise of the sector was a result of the then President Mkapa’s mining policy interventions, including the Mineral Policy and Mining Act of 1997 and 1998 respectively. In the gold sub-sector, for instance, these policies catapulted Tanzania from zero to number 3 net exporter of gold in Africa.
However, this situation is slightly different now, as the mining sector is facing a number of challenges. Just like in other countries, it has been affected by the combined slump in the commodity prices and consumption in China, have negatively impacted on the mining industry, and slowed down one of the key contributors to the Tanzania’s economy. In addition to global factors, domestic factors have also affected the growth of the once vibrant and promising sector, and these factors include issues such as policy, legal, fiscal and regulatory uncertainty and unpredictability as well as, deterioration in safe and security around mining areas and governance of the sector in general, over time.
Due to some of these challenges the gold sector has moved to number 4 in the continent, and thus reducing the chances for meeting Tanzania’s development vision 2025. The Vision’s plan for the sector to contribute 10% towards the national GDP by 2025 from the current 2.5%, shall therefore, simply remain an interesting conversation but certainly not achievable, unless comprehensive corrective intervention is immediately effected.
The combination of above factors have largely and unfortunately contributed to the declining competitive business environment. In addition, the policy makers, largely driven by populism, could not comprehend the key issues affecting the sector, and that has led to a number of fiscal and regulatory policy reviews – and we currently have the most edited mining policy and the most audited books of accounts of all the businesses in Tanzania, largely driven by a narrative that the mining companies and industry in Tanzania, do not contribute their fair share to the Tanzanian economy!!
NM. What needs to be done to turn around the fortunes of the once promising sector?
AM. Both TCME and individual companies have and, we are still calling for an urgent, strategic conversation between the government and all stakeholders on challenges affecting the mining sector. We need to honestly debate on how these challenges can be addressed in order to trigger turn-around and stimulate accelerate the growth of the mining sector. The timing is perfect for such an undertaking, as world-wide, the mining industry is beginning to notice a positive up-turn. Tanzania needs to immediately ride with such a positive global up-turn which, unfortunately, has a very limited window and the world has no shortage of competitive, resource rich investment destinations. If Tanzania misses the boat now, it may take years before the onset of next positive wave. In addition to its own contribution, the sector has a huge potential to unlock other areas of the economy, alleviating poverty, creating substantial employment as well as superseding the expectations of Vision 2025.
NM: Does the contribution of the mining sector to the national economy and social development meet the expectations of the government & the people?
AM: The general global consensus when it comes to extractive minerals, as well as the general feeling amongst many locals is that multinational companies are taking over “our mineral resource” and “us the indigenous people are not benefiting from these resources” – and in some cases doggy politicians have ridden on this not so true notion for their own personal agendas, and some even argued that we rather leave the minerals on the ground, unexploited, until the country is able to mine the resources on its own, without resorting to foreign capital!. The narrative simply focuses on tax revenues as it neglects consideration for wider and more strategic contributions of the mining industry!
The narrative, certainly does not consider the tremendous benefits that have gone to the national economy, far beyond the fiscal contributions as well as the many uplifting and transformative benefits that go to the communities around mining areas. It is a fact that the mining sector has contributed tremendously to the development of social and economic infrastructure as mostly mining happens in the remote locations of the country- roads, schools, clinics and many other associated infrastructure have been built as result of these mining operations. The mining sector has contributed to the growth of other sectors of the economy, including local procurement and other service providers, many of them also being formalized into the national tax net for the first time, as a result of their transactions with the formalized mining industry business.
For a long time, the gold sub-sector became the number one forex earner for the country- contributing to over 50%, only recently to have been replaced by tourism.
NM: What needs to be done to gain the trust of the indigenous communities?
AM: Despite the contribution of the sector towards the infrastructure development, community upliftment as well as providing employment to the local communities- the stigma still remains.
In order to gain or solve some of these challenges- we need to be brutally honest with ourselves as mining houses about the way we do business in Africa – why are we being resisted? We should be aware that the old model of doing business in Africa has changed.
We need to be part of that DNA of the country and integrate with the community- it is not about the Corporate Social Initiatives or a public relations exercise (building clinics, schools and donate desk) but being integral part of the communities in which such companies operate. The mining companies, out of essence, need to become change agents and transformative in their operational doctrines. For instance most of these companies have engineers, financial, environmental, business experts etc. who can be deployed to resolve many of the challenges affecting the surrounding communities as they strive to improve their quality of life!
NM. How is the investor confidence currently, and what needs to be done to attract more investors?
AM. Capital goes to where it is welcome and over the last 15 years the country has moved from being the ideal investor destination of choice, largely due to too many policy, legal, fiscal and regulatory inconsistencies, instabilities, unpredictabilities and corrupt tendencies that are pushing investors away. The net effect has been to erode the investor confidence and scare potential suitors.
We need to go back to the basics- creating a conducive environment for investors, we have done it in the past and we can still do – a political will is needed to drive the appropriate policies.
NM. What competitive advantages does Tanzania have over African countries as the ideal destination for mining capital?
AM. Tanzania’s mining sector is still at its infancy. Recently the country made huge discoveries of other minerals such helium, graphite, rare earth, natural gas etc., all underpinned by high level peace and political stability and profound level of national integration.
Geography is also on Tanzania favour. In addition to being a member of East African Community (EAC) common market, Tanzania is also a member of the Southern African Development Community (SADC). This later factor offers huge opportunity for integrated markets and, therefore, requisite scales for global competitiveness.
Tanzania’s newly elected president’s committed drive against corruption, misuse of government resources and inefficiency is set to bring much needed confidence from the potential investors and creating a positive image about the country.
NM. Skills shortage is a key impediment to the growth of the mining sector in Africa. How is the situation in Tanzania?
AM. TCME took a strategic decision to partner with the Vocational and Education Training Authority (VETA) to establish a technical and trade training centre. A US$4 million training centre was established to alleviate skills shortages in the mining sector.
NM. Is local beneficiation viable at this point in time?
AM. Beneficiation is an ideal situation in any country and we encourage our members to locally beneficiate, however Tanzania does not have the capacity to do that at the present moment, especially when it comes to the beneficiation of resources like copper concentrates. The country currently produces approximately 60 000 tonnes of copper concentrate and to warrant a viable refinery we need approximately 150 000 tonnes of copper concentrate, and thus making it difficult to locally beneficiate.
Our limited power supply and other infrastructural and business challenges also constitute significant hindrance to local beneficiation. Tanzania also has to improve its investment and business environment in order to inspire both local and foreign investors to invest in various beneficiation projects that are beyond the focus or specialization of the mining companies!
NM. What is key role being played by TCME and what does an organisation benefit from being part of the association?
AM. The key fundamental issue is to create an umbrella body of the sector that subscribes to ethical ways of doing business, and companies that comply with the mining regulations and policies of the country.
- To coordinate the interest of the various subsectors, and are brought together to further their interest in the sector.
- Maintaining a close liaison with the government and the stakeholders.
- Policy advocacy which includes mining policies, fiscal policies, etc.
- Interfacing with other industries such as the Tanzania Private Sector Foundation, Tanzania CEO Round Table, Confederation of Tanzania Industry, Agriculture Council of Tanzania, Tanzania Chamber of Commerce, Industry and Agriculture, Tourist Council of Tanzania and National Business Council
- Encouraging investment in the sector
NM: What is the future of the mining sector in Tanzania?
AM: The country is at a position where some of its peers were 150 years ago, and we need to take a strategic decision in order to develop the sector beyond vision 2025, and thus creating beneficial linkages with other sectors.
Mining is one of the key drivers of socio economic growth- as the mining sector, government and other key stakeholders we need to plan the future, together we can shape the future now by our actions.