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AMN - Tanzania not alone with misplaced reforms – comment by Yolanda Torrisi

Yol headshot May 2011

There has been plenty written and said in recent times about Tanzania’s push to gain more revenue from its mining industry – a push that has been very costly for mining investment in the resource-rich country. While there is no doubt the resource nationalism quest has set the industry back, it must be remembered that Tanzania is not alone in this regard.

It is a growing global trend that has most recently manifested itself in South Africa, the Philippines and Indonesia. In the past governments in Mongolia and even Australia have made similar moves which have hit the industry hard and the mining industries in those countries are still recovering.

Even more recently in Western Australia there was a plan to dramatically increase gold revenue for the state but thankfully the government has realised that this is self-defeating and the plan has been shelved … talk about biting the hand that feeds you. Why was this even being considered at a time when the industry needs all the help it can get? It is particularly perplexing when you consider that Western Australia is built on the back of the mining industry.

In Tanzania the new mining regulations and a crackdown on mining firms has slowed investment in one of Africa’s brightest mining countries. Exploration plans have been cancelled, takeover bids shelved and workers laid off while the share prices of many of the companies from the UK, Canada, Australia and South Africa that operate in Tanzania have tumbled as the value of their investments drop.

This follows the passage of three laws in July that increase taxes on mineral exports, mandate a higher government stake in some operations and force the construction of local smelters to bring Tanzania higher up the mining value chain.

It is a familiar story for the mining industry but one that governments seem intent on pursuing despite failures past and present.

The changes in Tanzania aim to eliminate what President John Magufuli says has been years of corrupt practices and tax evasion that have taken revenue away from the state. Perhaps the actions of a couple of unscrupulous miners in the past may have tainted the entire industry, which would be a real shame.

However, it appears the whole industry is being punished and it is difficult to see how the case of Tanzania will be any different to South Africa or the Philippines.

The Tanzanian situation is not helped by uncertainty, which seems to go hand in hand with the resource nationalism push, as evidenced in the other countries mentioned. It is still unclear how the rules will be applied while a mining commission that is supposed to oversee the regulations is yet to be formed.

The very least the government can do is clear up the uncertainty but the future for many miners in the country, particularly smaller players who are hardest hit by lack of investment funds, appears very dark as early indications are that Tanzania may have overplayed its hand.

Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the continent. Contact:yolanda@yolandatorrisi.com