Magufuli’s Systemic Reform of the Mining Sector and How The Government has Exceeded Tundu Lissu’s 2008 Mining Sector Recommendations.
I recently stumbled upon a 2008 report authored by Tundu Lissu and Mark Curtis titled A Golden Opportunity?: How Tanzania is Failing To Benefit from Gold Mining. It is an interesting report which highlights the different challenges the mining sector was facing and how we as a national were failing to capitalize on our natural resources. It is then when I decided to look at the report’s recommendations and compare it to President Magufuli’s reforms in the sector seeing as it has been one of his major issues in his first term.
The report has five recommendations, 1) Develop government strategy, 2) Strengthen parliamentary scrutiny, 3) Introduce independent audit, 4) Enforce public disclosure and 5) Create local accountability. I will dwelve into each of these recommendations individually but I highly recommend one take a look at the report before reading farther. And with that said, let us take a look at the recommendations and measure them up to President Magufuli’s perfomance.
1. Develop a government strategy
From early on in his presidency, the mining sector has been a key target of reform for President Magufuli. In 2017 Magufuli formed two separate Commissions to research and report on the mining sector. The subsequent reports from the Commissions led to sweeping reform in the sector.
For starters, President Magufuli separated what was then the Ministry of Energy and Natural Resourses and created the Ministry of Natural Resources to deal exclusivity and extensively with the mining sector and the management of our narural resources. This would ensure that extra attention and focus would be paid to the sector.
The government then ammended different laws including the Mineral Act of 2010 and introduced new laws such as the National Wealth and Resources Act of 2017. The law among other things required that all disputes between the government and investors to be settled in Tanzania instead of by foreign arbitration.
The new laws also prohibit the export of raw minerals and instead minerals are to be processed right here in Tanzania before being exported. This means more income generated from tax because processed mineral is significantly higher in value than raw materials.
The new laws allows government ownership of 16 to 50 percent of mid to large scale mines. This means that the government is not simply collecting taxes and royalties but also recieving a share of the profits made.
What has been the results of the government strategy on the mining sector? The country saw an increase from 4 percent to 6 percent of royalty payments for raw minerals and a 1 percent inspection fee. This has lead to an increase of the contribution to GDP of the mining sector from 4 percent in 2015 to 4.8 percent in 2017 and 5% in 2019. In the first quarter of 2020, the mining industry accounted for 15.3 percent of GDP.
2. Strengthen Parliamentary Scrutiny
In my opinion, the Parliament has always been well equipped to scrutinize the mining sector through its Land, Natural Resources and Environment Committee. The Committe membership is comprised of both ruling party MPs and opposition MPs.
The Committee is tasked with being the Parliament's oversight of the mining sector. Members of the Committee make frequent visits to different offices and facilities involved in the sector and are entiled to recieve reports from the relevant ministry. The Committee is then tasked to create different reports which are presented infront of the entire Parliament. The portfolio minister and deputy minister are answerable to all members of Parliament when the body is in session.
Hence, in this regard the mechanisms for scrutiny from Parliament and its members are in place. Members of Parliament have access to all the information they need and through the Committee they can call anyone to a meeting to get any clarification that may be needed.
3. Introduce independent auditing
In 2009 the government established the Tanzania Mineral Audit Agency (TMAA), a semi autonomous institution that audited quality and quantity of minerals produced and exported, conducted financial and environmental audits, and monitored the smuggling of minerals.
The Written Laws Act of 2017 dissolved the TMAA and replaced it with the Minerals Commission which among other duties perfoms the same tasks inheritted from TMAA..
4. Enforce Public Disclosure
The aforementioned Natural Wealth and Resources Act of 17 requires that all natural resource contracts be made public and that Parliament must endorse them.
5. Create local accountability
One of the major reforms President Magufuli’s administration introduced in 2017 was requiring by law all major mines to be listed on the Dar Es Salaam Stock Exchange and to ensure that 30 percent of shares are placed in the hands of Tanzanians. As you might already know, all companies operating under the Dar Es Salaam Stock Exchange are public and thus different information about the companies are also a matter of public record.
The government established Mineral and Gem houses to facilitate the buying and selling of minerals. All businesses must be conducted by government approved Mineral and Gem Houses.
In February of 2019, Acasia Mining faced potential shutdown of its North Mara mines following serious accusations of water polution.
In March 2019, the government created the gold exchange in Geita to allow small scale minors to sell their gold to the international market.
In conclusion, I am of the opinion that President Magufuli has succeeded in reforming and revolutionizing the mining sector. The country has benefitted from more income from the sector and conditions have been eased to allow small indigenous miners to thrive. One famous beneficiary of these reforms is Seniniu Laizer who recently discovered the worlds largest and second largest Tanzanite stones.
I am not saying that everything is perfect and there is certainly room for improvement and I am sure the government will work on building upon the gains already achieved. However it can’t be denied that the mining sector has seen a turn for the better. It would be interesting to hear from Mr. Tundu Lissu regarding his recommendations from 2008 and if he feels that the president has exceeded expectations in the sector or not. Otherwise I leave it up to you the reader to judge.
Thomas Joel Kibwana.
