Gold Digger
Member
- May 21, 2009
- 86
- 8
How big is mining's macroeconomic contribution?
In many countries, there are ongoing debates about how to enhance the development contributions of mining. In Tanzania, 'a relative' newcomer to the mining sector and a jurisdiction where fiscal incentives have been used to attract mining sector development, these debates have become particularly intense, and a government review of mining sector legislation is now underway. Debates include the role of fiscal incentives and stability agreements in limiting the contribution to national welfare from the sector.
In many countries, there are ongoing debates about how to enhance the development contributions of mining. In Tanzania, 'a relative' newcomer to the mining sector and a jurisdiction where fiscal incentives have been used to attract mining sector development, these debates have become particularly intense, and a government review of mining sector legislation is now underway. Debates include the role of fiscal incentives and stability agreements in limiting the contribution to national welfare from the sector.
Critics of the industry claim that the foreign mining firms which have entered the country in recent years are generating inadequate revenues for the public purse due to tax breaks and unjustifiable fiscal incentives. The mining companies, by contrast, argue that given the huge levels of upfront investment and high costs of operation for major mines it often takes several years for such projects to become profitable. Competitive and stable fiscal terms are needed, they say, to justify this investment as well as the ongoing investment the mines may require over 20 years or more. Significant revision of these terms, they say, could make such investments nonviable and actually strangle the sector before it has fully developed.
Mining has attracted more than US$2bn of the US$3bn total foreign direct investment flows to Tanzania since 2000, making Tanzania – according to UNCTAD – the largest recipient of non oil FDI in Africa after South Africa. Importantly, Tanzania saw minimal commercial mining investment in the decades prior to 1998, largely due to policies and an economic climate widely viewed as unfriendly to private investors.
- UNCTAD World Investment Report 2008 data tells us that:
- Tanzania is now the leading non-oil destination for FDI in Africa after South Africa
- FDI flows of only $10 million per annum in the 1990s have grown FIFTY-FOLD to over $500 million per annum now!
- In the 3 years to 2007 alone the total FDI was $1.7 billion
- More than $2 billion of the $3 billion total FDI flows since 2000 are in the Mining Sector
- Many of the positive macro contributions of mining will arise naturally provided that the regulatory and taxation conditions are reasonably attractive
- But mining's FULL POTENTIAL contribution to the macro-economy requires complementary government policies that can help to build on the relative modest direct impact of mining (e.g. on employment levels)
- Examples might include designating mining regions as "poles of growth" to attract new manufacturing and service activities that complement the stimulus provided by mines themselves and active programs of encouragement to sustainable artisanal mining
- Mining companies being criticised as the villains for the things that they DO NOT and cannot be expected to deliver
- Inadequate recognition of the positive macro benefits that the mining companies can and DO deliver
- Overly narrow policies that try to resolve all problems via mining sector policies alone without due regard for the broader supportive policies and the need for KEY PARTNERSHIPS (Bomani recognises this problem very explicitly)
Forward thinkers you are invited to take part in this debate.
