Investors & Media
In the media
Mining companies’ massive investment in Tanzania makes government nervous on hiking royalties
Source: Mineweb
Publication: Mineweb.net
5 June 2007
Discussions on putting up mining royalties in Tanzania may come to nothing as reports suggest the government is nervous about raising these and perhaps discouraging new mining investment.
BLANTYRE – The last decade saw Tanzania registering an investment of over US$2 billion in its mining sector. This massive investment, in African terms is largely based on Tanzania's appetizing incentives to woo investors in its mining industry and to maintain the buoyant trend. Investors should perhaps not worry of a mining royalty hike, at least in the near future.
Tanzania Chamber of Minerals and Energy (TCME) told one of the dailies, the Guardian newspaper that mining companies apart from investing US$2 billion over the past decade have also paid a total of US$255,526,893 from 1997 to 2005 to government in the form of statutory taxes and other contributions.
TCME Executive Secretary Emmanuel Jengo told the paper that mineral exports in 2005 amounted to US$692.8 million compared to a mere US$16.1 million it raked in 1997. Gold which has been enjoying buoyant prices on the international market generated US$639.2 million in exports in 2005 compared to US$13.1 million registered in 1999.
From the comparative year – 1997 – the mining sector’s contribution to the GDP has risen from zero to 3.5 percent in 2005/2006, according to figures from TCME.
“These results are a reflection of competitive and rational policies as enshrined in the 1997 national policy on mining and the Mining Act of 1998,” said Jengo.
Tanzania, currently third largest producer of gold in Africa after South Africa and Ghana, is hailed as having a Mining Act which is attractive to investors. However some stakeholders feel Tanzania's soft approach on investors is at the expense of the poor people who are the owners of the mineral resource.
The major bone of contention is a low mining royalty. Investors in the mining sector currently pay three per cent royalty to the government, a rate some local stakeholders view as too low for comfort.
The government has engaged the miners to try reach a consensus and according to Energy and Minerals Minister Nazir Karamagi experts and officials from the government and mining companies are due to wrap up negotiations.
“They (experts) are busy right now finalizing discussions with investors. We are left with only two mining companies, and should be through with those as well very soon,” said Karamagi.
However, little is expected from the talks in terms of raising royalties. According to the minister, the review process has registered inspiring progress and government has tried to avoid frustrating prospective mining firms wishing to invest their money in the country.
“We have to employ the very best approach in the course of negotiating with existing mining investors so that we do not discourage other prospective and potential investors,” he noted.
The government says it sees little possibility of the rate going up, based on the technicalities attendant to the mining sector.
Dr Peter Kafumu, commissioner of minerals in the Energy and Minerals ministry says based on global standards and the nature of Tanzania's environment, the royalty investors in the country are paying is highly competitive and charging anything beyond that would be a disincentive.