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Why Tanzanians are angry about their gold

Discussion in 'Jukwaa la Siasa' started by BAK, Oct 5, 2007.

  1. BAK

    BAK JF-Expert Member

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    Oct 5, 2007
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    Why Tanzanians are angry about their gold

    -Latest survey findings show that a growing number of wananchi are becoming increasingly disillusioned with the actual distribution of wealth from the lucrative sector.

    FUMBUKA NG'WANAKILALA
    Dar es Salaam

    WHEN multinational companies began commercial gold mining operations in Tanzania more than a decade ago, there was fresh optimism about the future with many Tanzanians hoping that the newly-tapped gold wealth would finally end decades of grinding national poverty.

    However, the latest survey findings by THISDAY show that a growing number of wananchi are becoming increasingly disillusioned with the actual distribution of wealth from the lucrative sector.

    Much of the current debate centres around the fact that while minerals account for about half of Tanzania's total exports revenue, the sector contributes just 3.5 per cent to the gross domestic product (GDP).

    Official figures from Barrick Gold Corporation's Bulyanhulu mine property in Shinyanga Region, one of the largest underground gold producers in the world, offer an illustration of why there is an intense brewing political storm over the mining industry.

    By the end of this year (2007), it is estimated that the mine will have exported gold worth a total of $1bn (approx. 1.3tr/-), plus copper valued at over $100m (approx. 130bn/-) and about $10.5m (approx. 13.7bn/-) worth of silver, according to the figures made available to THISDAY last week.

    During the same period, the giant mine is expected to generate various taxes amounting to just $120m (approx. 156bn/-), in the form of royalty, payroll salaries, pay as you earn (PAYE), levies, withholding tax and duties, NSSF/PPF and several more.

    Barrick Gold officials are quick to point out that apart from taxes there are other indirect benefits to the economy derived from the gold mine.

    These include $79.6m (approx. 100bn/-) spent by the mine management in procurement of local goods and services; some $18.6m (approx. 24bn/-) in corporate social responsibility projects; and another $13.8m (approx. 18bn/-) in staff training.

    But still, the latest statistics seem to indicate that a huge disparity continues to exist between what Barrick Gold and other mining industry investors actually earn and what Tanzania benefits as a country.

    On the political front, long before members of parliament from the opposition camp took up the issue, ruling Chama Cha Mapinduzi lawmakers from the country's gold-producing regions have been publicly lamenting the lack of any real economic impact from the existing gold mines.

    The politicians have been demanding more taxes from the mining sector, which could in turn be used to distribute wealth across the country by building more roads, hospitals and schools.

    To try and avert the growing threat of an eventual angry revolt from the majority poor, gold mine managements across the country have begun to vigorously reach out to surrounding village communities by investing more and more generously in community projects.

    But industry analysts say the mining companies will only start to make a real impact on the national economy and be fully accepted by the people by contributing more in the form of taxes.

    When addressing the nation at this year's May Day celebrations in Mwanza, President Jakaya Kikwete reiterated that his government would continue to review the existing major mining contracts to attain a 'win-win' situation for both the mining companies and the country as a whole.

    The president acknowledged the need to set up a better legal and regulatory structure to make mining activities in the country mutually beneficial to both the foreign investors and the economy as an entity.

    Subsequently, the Ministry of Energy and Minerals has been instructed to work with the Ministry of Justice and Constitutional Affairs, the Ministry of Planning and Economic Empowerment, the Ministry of Finance, and the mining companies themselves in the ongoing sectoral review process.

    Some fruits of the exercise have already been tasted, with AngloGold, Barrick Gold and Resolute all agreeing to waive a 15 per cent tax allowance on unredeemed capital and pay annual levies of $200,000 directly to local government authorities in their respective areas of operation.

    More importantly, however, mining companies are yet to agree to start paying the 30 per cent national corporate tax, which will guarantee considerable revenue earnings for the government.

    In its early attempts to woo multinational mining companies to the country, the government devised a system under which gold mine projects would be subject to minimal disbursements in national and local taxes.

    The government appeared to gamble with the assumption that generous tax incentives would make Tanzania's mining industry a more attractive investment destination than its closest rivals in Ghana and even South Africa, for example.

    And as a result of sustained investment in the sector, Tanzania currently produces more than 50 tonnes of gold per annum, making it one of Africa's recognised mining powerhouses.

    Initially, it was hoped and expected that the multi-billion dollar mining investments would translate into more jobs for Tanzanians and have a healthy, trickle-down effect on the ordinary man and woman on the street.

    To this effect, the country's current mining policy and laws were enacted, and the contracts were signed with generous incentives to lure major gold companies into Tanzania's nascent mining sector over the past decade.
    But little was it suspected, that the same taxation system which successfully attracted foreign direct investments of $2.5bn (approx. 3.25tr/-) into mining since 1998 would eventually become the main cause of a nationwide cry of 'Foul!' among Tanzanians.
     
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