Testing times for Tanzania’s mining industry

Need for trust and reliable data higher than ever in the midst of controversial mining sector reforms.

Just days after Tanzania’s 2014/15 EITI Report was published in end of June, the Tanzanian government passed laws with significant implications for extractive sector governance in the country (including the Natural Wealth and Resources Contracts Bill, the Natural Wealth and Resources Bill and the Written Laws Act). One of the most significant implications of the bills is that they empower the national assembly to allow the government to re-negotiate any agreement considered inequitable and containing “unconscionable terms”. Other provisions entitle the government to stakes of at least 16 % in mining companies operating in the country, with the option to acquire up to 50%.

The recent reforms follow public upheaval related to the results of a mineral audit which accused the mining company Acacia of under-declaring the value of gold and copper being exported and thus evading tax on the profits from the sales. These allegations have been refuted by the company, which is currently in negotiations with the government.

Concerns were raised by mining industry players following the adoption of the bills, and shares of both Acacia and its majority owner parent company Barrick Gold dropped on the respective stock exchanges.

What will these legislative changes mean for the future of the industry?

Stakeholders from government, industry and civil society in Tanzania now have the opportunity to use the EITI process to increase the public understanding of the potential benefits and challenges of the reforms and to rebuild trust in the sector.

The 2014/15 EITI Report provides more information than before on the role of the state in the sector, the licencing system, and production and export data. Information gaps in these areas were recently highlighted in Tanzania’s score on the Resource Governance Index. These are issues that are relevant for the public debates about the sector, as well as for wider dialogue on resource nationalisation.

Details on the state participation in the extractive sector are also of particular interest for investors as oil and gas companies are required to partner and enter into Production-Sharing Agreements with the Tanzania Petroleum Development Corporation (TPDC).

Need for more timely extractives data

According to the EITI Report, 8% of total government revenue came from the oil, gas and mining sectors in the 2014/15 financial year. The contribution has been less than in previous years, where the share of total government revenue was 12% (2012/13 and 2013/14). The main decrease drop was due decrease in corporate tax. The share of gold of total Tanzania’s exports also dropped from about 40% in 2013 and 2014 to 32% in 2015.

While the report provides valuable information about the sector, the current situation demonstrates the need for extractives data to be timely to be able to contribute to ongoing debates. This is one of the reasons the EITI is increasingly working to ‘mainstream’ extractives transparency to ensure more regular disclosures directly from the government agencies collecting or maintaining the data.

Tanzania is currently undergoing Validation under the 2016 EITI Standard, which will demonstrate Tanzania’s progress in implementing extractives transparency. Further opportunities for contributing to improved natural resource governance will also be highlighted as part of this process.

Read the full Tanzania 2014/15 EITI Report

 

To find out more about the EITI in Tanzania, visit the country page on eiti.org or Tanzania’s EITI website.

Image: Wikimedia Commons​.​