Tanzanians now get fair share of mineral resources

Tanzanians now get fair share of mineral resources

THE year 2017 under the administration of President John Magufuli has been described as a turning point for the country's mining sector which has seen Tanzanians today earn their fair share of mineral resources.

The fifth phase government’s determination to transform the mining sector has led to various steps that have been taken, including banning gold and copper concentrates exports, the formation of special presidential committees and negotiation teams to ensure the country benefits from its natural resources.

During this time the Parliament also passed three laws which significantly increased government control of minerals, oil and gas resources.

Among others, the laws have increased the royalty rate on gold from 4-6 per cent and have allowed the government to own a 16-per cent share of mining companies’ stock without compensation.

Dissolving the 11th sitting of Parliament, President John Magufuli said the mining sector had undergone major reforms in the past five years of his administration, including the formation of the Ministry of Minerals, control mineral smuggling and export of raw minerals.

"The most significant change is the endorsement of the Natural Wealth and Resources (Permanent Sovereignty) Act, 2017, including minerals," President Magufuli said.

The law requires Parliamentary approval for future investor-state agreements, which must “fully secure” the interests of Tanzanians and restrict investors from exporting raw minerals, repatriating funds and accessing an international dispute resolution mechanism.

He said the law had enabled Tanzanians for the first time to own their resources through legal powers.

“It has also facilitated the establishment of Twiga Minerals Company whereby the government owns 16 per cent shares while Barrick owns 84 per cent.”

President Magufuli further said changes in the mining laws had also facilitated the payment of $100m in May this year as the first tranche of the $300m settlement the Canadian mining firm agreed with Tanzania to resolve a dispute it had inherited from Acacia Mining.

Tabling the budget estimates for 2020/21 for the Ministry of Minerals, Minister Doto Biteko said the passing of the mining laws had strengthened the mining sector and increased its contribution to the country's revenue.

"Amendments to the mining laws have enabled Tanzanians to benefit from their national resources," he said.

The changes began early March in 2017 after President Magufuli banned the export of gold and copper concentrates, following his suspicion of the declared value of mineral sand.

The ban on the transportation of mineral sand overseas resulted in the formation of the first probe team to investigate the amount of minerals present in exported sand and its value. The eight-member team led by Prof Abdulkarim Mruma comprised experts in geology, chemicals and scientific analysts.

A few days later, President Magufuli formed the second probe committee led by Prof Nehemiah Osoro to investigate the legal and economic impact on mining in respect to the impoundment of 277 mineral concentrate containers which were due for export by Acacia.

The first committee revealed how Tanzania was losing trillions of shillings in revenue by exporting mineral concentrates.

According to a report, the amount of gold per tonne found in the mineral sand was between 671 - 2,775g, translating to between 7.8 tonnes to 13.16 tonnes for all 277 containers which were detained at the Dar es Salaam Port.

“If we take 23.1 tonnes as the weight of the container as opposed to the standard 20 tonnes, you find that there are 15.5 tonnes of gold in all 277 containers, which translates into two lorries and one pickup truck loads of gold,” said President Magufuli while receiving the report.

The committee recommended the government to reinforce the ban on mineral sand exports until the right royalties were paid to the country and ensure smelters were constructed in Tanzania to maximise the full value of minerals produced.

It also proposed that disciplinary action should be taken against officials in the Ministry of Energy & Minerals (MEM) and in the TMAA.

The second  report  presented to the Head of State on the economic impact of mineral sand revealed between 44,000 and 61,000 containers of gold and copper concentrates had been exported between 1998 and March 2017, most emanating from two mines run by Acacia (formerly Barrick Gold).

 It estimated losses in government revenue running into trillions of shillings over the two decades–through the under-declaration of both export volume and value of gold and copper concentrates.  It revealed how Acacia Mining evaded tax, occasioning a loss amounting to trillions of shillings to the government.

The report said the amount of unpaid taxes between 1998 and March 2017 through illegal exports of gold and copper concentrates was between 68.59tri/-and 108.5tri/-.

The two reports   necessitated the amendment of the country's mining laws which increased government control of the mining sector.

President Magufuli, however, directed Acacia Mining to pay billions of shillings in royalty and tax arrears arising from its activities since 1998 if it expected to continue operating in the country, but later on Barrick Gold Corporation-Acacia's largest shareholder declared that it was ready to negotiate and pay the dues.

Barrick Gold Corporation Executive Chairman, Prof John Thornton, who flew by his private jet to Dar es Salaam in mid-June 2017, assured President Magufuli his company was willing and ready to hold talks with Tanzania based on a win-win situation to ensure the evaded tax was settled.

The development led to the formation of a negotiation team led by then Minister for Constitutional and Legal Affairs, Prof Palamagamba Kabudi, who started talks with Barrick Gold Corporation officials early August 2017.

The negotiations between the two parties were finally concluded in October last year 2019  after  Tanzania and Barrick  agreed to  form a new company—Twiga Minerals Corporation—to manage Bulyanhulu, North Mara and Buzwagi mines as one of the strategies to settle all disputes.

 The parties also agreed Barrick to own 84 per cent and Tanzanians, through the government, to control 16 per cent of Twiga Minerals.

Other terms of agreement included the payment of $300m (about 700bn/-) to settle all outstanding tax and other disputes and the lifting of the concentrate export ban, sharing of future economic benefits from the mines on a 50/50 basis.

Finally, early this year, Tanzania and Barrick Gold Corporation signed agreements that opened a new chapter in the country’s mining sector by granting the government ownership of 16 per cent of undiluted shares in the newly incorporated Twiga Minerals Corporation.

The agreements between the government and the Canadian company marked the end of the tax dispute negotiations between the two parties and set a precedent for the issuance of future mining licences.

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