Talking to miners is digging the hole deeper

Filed under Tzuk.net-- Last November, Tanzanian President Jakaya Kikwete established a Mining Review Committee chaired by former Attorney-General (retired) Justice Mark Bomani. 

The 12-member committee was given six months to review the mining regulations and relative taxation, as well as the management/control systems currently in force in the country. It was also mandated to look into extant contracts between multinational miners and the government.

The objective was to foster equitability in mining, creating a win-win situation for Tanzanians (the natural owners) and investors (the risk-takers). 

Tanzania is known for its production of raw gold, diamonds and other gemstones -- notably tanzanite, a stone only found in the country, which commands a $400 million global market. The country is the third-largest exporter of gold in Africa, at 40 metric tones a year, behind Ghana (980 metric tones) and South Africa (400 metric tones). 

Any way you look at it, Tanzania is endowed with mineral wealth. This -- together with other natural wealth ranging from woodlands, fishery, water, arable land and livestock -- makes it theoretically one of the richest countries in the world. Yet its people are among the worlds poorest.

Sixty six per cent of its 39 million populations still live on less than $1 a day -- which is less than the $2 a day allocated to a cow in the European Union!

In its 10th anniversary report, the Tanzania Chamber of Minerals & Energy notes that mining hogged 74 per cent of the foreign direct investment share following its proclamation as a priority investment area. 

In the event, eight large miners invested $1,306.3 million, yielding 1.73 million ounces of gold, 221,000 carats of diamonds and 230,000 grams of Tanzanite annually. Although the price of gold has sharply appreciated from $255 a troy ounce in 1999-2000 to $927.5/t-o in May 23, this year, mining contribution to the economy peaked at only 3.8 per cent in 2006, when Tanzania exported $856.8 million worth of gold. 

Mining continues to benefit foreign investors more than Tanzanians. Hence President Kikwete's decision to establish the Bomani Committee, which filed its report on May 24.Among its major recommendations were an increase in royalty rates paid to the government by the investors and the abolition, reduction or suspension of some taxes/tax rates. 

Perhaps the most curious bit is the committee's recommendation that its proposals will not perforce apply to existing mining operations -- only new ones. The committee -- unbelievably -- calls upon the government to negotiate with mining companies operating in the country in an effort to get them to comply with the recommendations.

If this is truly the case, then the win-win equitability that was being sought through the Bomani Committee becomes an exercise in futility. A chain is as strong as is its weakest link, and if the miners cannot be compelled by law, custom or ethical decency to comply, then this recommendation is the weakest link.

No sane businessman will invest under the proposed regime when he cannot compete fairly with existing investors.  

And if the miners play the enraged bull, stubbornly pursuing their operations, it's only a matter of time before the mineral deposits are exhausted -- with the Bomani report becoming another well meaning relic at State House.