How WB and IMF pushed Dar into large-scale mining | JamiiForums | The Home of Great Thinkers

Dismiss Notice
You are browsing this site as a guest. It takes 2 minutes to CREATE AN ACCOUNT and less than 1 minute to LOGIN

How WB and IMF pushed Dar into large-scale mining

Discussion in 'International Forum' started by BabuK, Apr 8, 2012.

  1. BabuK

    BabuK JF-Expert Member

    Apr 8, 2012
    Joined: Jul 30, 2008
    Messages: 1,847
    Likes Received: 69
    Trophy Points: 145
    As the world approached the 1990s, three major events occurred which shaped the global economy, enforcing globalisation and multiparty democracy, especially in African countries.
    These events were the end of the Cold War, the collapse of the Berlin Wall and the crumble of the Union of Soviet Socialist Republics (USSR). Gone were the days when superpowers planned espionage to counter their rivals, and present was the new world where all of us were to be forced to follow one order: globalisation.
    For about three decades most African countries had managed to decolonise the continent, but were still trapped in brutal civil wars masterminded by the West through their pimps and massive poverty. African countries were successful in removing colonialism, but what they were not aware of was that the West, through their corporate world, was still planning a major comeback.
    The comeback wasn’t aimed at attaining political power but exploiting the rich natural resources left unfinished after colonialism was interrupted by the wave of nationalist struggles in the early 1960s under leaders such as Julius Nyerere, Kwame Nkrumah and Jomo Kenyatta.
    In Tanzania, when the Germans were defeated during World War II and were forced to abandon Tanganyika Territory, they left behind a mineral-rich country. When the Britons were also kicked out after playing the role of a caretaker for four decades, they too left some unfinished business behind.
    So when an opportunity emerged in the 1990s during the rally for globalisation, whose main slogan was economic liberalisation to allow the flow of foreign direct investments to African countries, it was time to wind up the unfinished business in Tanzania.
    In 1992 two institutions, the World Bank and the International Monetary Fund, carefully drafted what was known as ‘The Africa Strategy for Mining Technical Paper,’ which, among other things, laid down the foundation for the comeback of Western corporations to finish their business in Africa.
    The World Bank and International Monetary Fund-authored Africa Strategy for Mining Technical Paper of 1992 played a significant role in financing and developing a blueprint for the mining sector in Tanzania through the Mineral Sector Development Programme.
    The main interest of this programme was to oversee the privatization and liberalisation of state-controlled mining corporations and the mining sector in order to facilitate the entry of foreign mining corporations.
    The strategy paper urged the need to emulate success stories of countries such as Botswana, Gabon, Ghana, Guinea and Niger, where new mining developments had been successful, mainly as a result of the formation of joint ventures between the private sector and the government.
    The programme, carried out under the WB/IMF directives and support, resulted in the engagement of consultants to carry out legal policy reforms. The Mining department was restructured to accommodate these changes and the Mineral Policy of 1997, and later the Mining Act of 1998, reflect the direction charted by the reform process.
    These reforms highlighted mining in Tanzania as a priority economic sector, targeted to grow to 10 per cent of the GDP from 1.5 percent. A strong, vibrant, well-organized private sector was envisioned to enable this process.
    This code includes enacting ‘appropriate rules’ giving access to land, exploration licences and mining rights, ‘appropriate’ marketing and export and ‘appropriate labour regulations’. The bank’s African mining strategy (World Bank 1992) advocates outright privatization of state-owned mining companies and complete withdrawal of the state from mineral marketing functions.
    Since our leaders have never questioned the white masters from the World Bank and the International Monetary Fund, they blindly accepted the deal in the same way Chief Mangungo of Msovero sold his territory to a German spy, Karl Peters, during the colonization of Africa.
    The first president to swallow the WB and IMF ‘fishy’ deal was Ali Hassan Mwinyi, better known as ‘Mr Rukhsa’ for his liberalisation policy. However, the man who came to nail the coffin was Benjamin William Mkapa, or Mr Clean, who rose from newsroom corridors to diplomacy, before dramatically clinching the presidency of Tanzania.
    While the WB and IMF paper named Botswana as a success story, the very same institutions were not ready to see any joint venture between the government of Tanzania and foreign investors in the mining sector. Instead the institutions advocated a private sector which enjoyed unfettered tax holidays, full repatriation of capital and many other incentives which mainly favoured the foreign corporate bodies at the expense of the locals.
    The often-cited Botswana success story was a result of joint ventures between the government and foreign investors, but in Tanzania the story was deliberately distorted. The WB and IMF paper called for legal reforms to facilitate the plunder of the country’s resources and the two institutions even offered so-called technical assistance to the government of Tanzania.
    Without carefully studying the hidden agenda, President Mkapa suddenly became the ‘pimp’ of the WB and IMF, campaigning tirelessly to grant the country’s minerals to the multinationals. In return Tanzania, which, according to the WB and IMF, was in the group of Highly Indebted Poor Countries (HIPC), was granted the so-called debt relief.
    President Mkapa became the darling of the West, especially of the two financial institutions, because he was their man, dancing to their tune but at the expense of his people. While he preached the gospel of a tax-compliant society, he offered numerous tax exemptions and incentives to foreign firms.
    Towards the end of 1997, the government introduced a mineral policy that finally paved the way for the introduction of the controversial Mining Act, which was incidentally drafted by the current Attorney General, Fredrick Werema, and supervised by the then Attorney General, Andrew Chenge.
    While the Mining Act of 1979 required mineral-rights holders to present a plan for the local procurement of goods and services, the stipulation was entirely omitted from the Mining Act, 1998. The Act also offered many subsidies to foreign investors in the form of incentives, including five-year tax holidays, full transferability of profits, 100 percent foreign ownership, exemptions from a wide range of taxes and environmental impact assessments.
    The law also provided for ministerial powers to enter into Mining Development Agreements (MDAs) with private foreign companies to develop mineral potential by which the minister in charge of minerals could enter into specific private agreements with investors without being restricted by other legal requirements.
    The minister was allowed to give special preference to foreign companies, including tax exemptions and the requirements of environmental impact assessment exemptions. While this provided flexibility to the minister during negotiations, it contributed to making reached contracts more difficult to monitor or question. Public accountability was thus undermined in the process. This era is remembered not only for its encouragement of foreign players through a host of incentives but also for its scant attention to local small-scale miners.
    In a study titled, ‘The Extractive Resource Industry in Tanzania: Status and Challenges of the Mining Sector,’ undertaken by the Heinrich Böll Foundation, the scramble for the country’s vast minerals resources is well documented.
    According to the study, following the liberalisation of the Tanzanian economy, a number of multilateral and bilateral players were encouraged to flock into the country to participate in the mining sector in various ways and with varied interests, influence and impacts.
    The study noted that the influx of foreign investors appeared to be a result of competition between new and emerging economic powers as well as competition between old and new architects of liberalization.
    “Behind what appears to be a typical case of resource capture is a struggle for political hegemony reminiscent of Europe’s Great Powers’ 19th century scramble for Africa’s extractive resources. Today, however, the operative word is globalisation,” the study said.
    Pimps for this plunder argue that it brought huge foreign direct investments to Tanzania. While the claim might be true, one might rightly ask: A what cost? For, whenever a Western corporation injects a dollar into your economy, it will reap a hundred dollars - hence the so-called huge FDIs are a mere drop in the ocean.
    For instance, while foreign mining firms invested a total of $5 billion between 1997 and 2010, minerals exports between 2009 and 2011 reached $4.55 billion, while the government earned only $196 million in taxes and royalties. To put things in the right perspective, total mineral exports between 2000 and 2011 are twice the total investments in the mining sector.
    Therefore, the argument that the country benefited from huge FDI flows was cheap politics as it lacked a clear understanding of the big picture. First and foremost, you are forced to come up with a law that bars you as a nation from mining, exporting and marketing minerals.
    Secondly, you are forced to fully guarantee the repatriation of capital and profits. Not only that you, but you are also forced to grant huge tax exemptions and incentives which last for over a decade. The playing field is laid out in such a way that the landlord is at the mercy of the tenant.
    How often have we begged mining companies to build schools, roads, hospitals and provide water to the neighbouring communities through the so-called corporate social responsibility? Why should we beg while we have all the resources? If a joint venture was allowed between the government and foreign investors, we would have followed the Botswana’s path; but in our case we are beggars!
    But there is also another drama in which the foreign investor tells the government and Tanzanians the amount of gold deposits available in their land. How can this happen and to what extent will they tell you the truth?
    If the government of Tanzania was really committed to a win-win situation it would have hired reputable international firms to conduct exploration on its behalf. In collaboration with our few geologists, the international firms would have then done the job even for ten years, before handing over their exploration findings to the government.
    It’s only once you have the report which tells you how rich you are or how much wealth you have got that you can then negotiate with foreign investors. But, in a situation where you don’t even know how much you have got, it’s useless and dangerous to negotiate with the Western corporate world because, in the end, you will be robbed in the name of investments.
    If Julius Nyerere managed to run the country without proceeds from large-scale mining, waiting for the right time when Tanzania would have had enough qualified and skilled geologists and technical know-how, why the sudden rush to sell our minerals?
    Minerals are not perishable goods and therefore there was no need to hurry, especially at a time when the country had not a single professional mining accountant. We got the first one in 2009, who graduated from the UK, and it’s not clear whether he even came back to the country.
    To justify the plunder, the Mkapa regime was made to believe that since mining was a very complicated industry that needed huge amounts of capital and technical know-how, the government and the locals couldn’t afford to invest in such a business.
    This could not be farther from the truth. Which immense capital do you need while you have got land and minerals? I think what was needed was for the Western capitalists to bring in capital and technical know-how to join forces with either the government or local entrepreneurs to form joint ventures. But this was not to be.
    There’s another lie being circulated by the pimps of the IMF and WB in the mining sector, and this pertains to the claim that a big chunk of the billions in the procurement of facilities was spent locally. The truth of the matter is that eighty per cent of mining supplies were dominated by foreign-based suppliers who have subsidiaries in the country.
    Anglogold Ashanti, for instance, used an Australian company to provide catering services to its gold mine for about a decade while importing beef, though it had about 80 per cent local employees. Of course, there are some businesses which are granted to local suppliers, but a big chunk of the money went to Australia, South Africa, Canada and the United Kingdom.
    In its strategic paper, the WB claimed that through large-scale mining, the contribution of the sector to the GDP would have increased from 1.5 percent to 10 percent within a decade.
    Today, nearly 15 years down the road, the contribution of the mining sector to the economy has grown, averaging at 7 percent but poverty has remained very high among the people living in the minerals-rich areas, despite the surge in mineral exports amounting to $10 billion during the same period.
    Ironically, some mining companies are closing down their businesses after reaching the end of the mines’ lifespan. Resolute is in the process of winding up its operations, and so is Tulawaka gold mine.


  2. K

    KALABASH JF-Expert Member

    Apr 8, 2012
    Joined: Jan 26, 2011
    Messages: 465
    Likes Received: 17
    Trophy Points: 35
    Mkuu BabuK: Very interesting and an eye opener for me. I was always curious to know what drove Mkapa into such a hurry to open up our mineral resources to foreigners. Somehow I suspected WB and IMF were behind this and this article has just confirmed my worst fears! Could you please give me the date of this publication so I can do a cutting and keep the copy for posterity?