Gold is the most important driver of investment that Tanzania has ever seen. Foreign direct investment in gold exploration and mining totalled USD 2.5 billion from 1997 to 2007. Between them, African Barrick Gold (ABG), AngloGoldAshanti (AGA), and Resolute Mining Ltd currently produce over a million ounces of gold a year, worth USD 1.8 billion at the current (September 2011) price of USD 1,800 an ounce. Last year, gold accounted for nearly half of all exports. The three companies’ mines (Barrick has four, the other two companies one each) employ about 15,000 Tanzanians, with another 50,000 jobs created through local procurement of goods and services. The mining companies build roads, power supplies and water systems that serve local towns and villages. ABG has invested USD 100 million in electricity alone. The mines build schools and health facilities and pay local authorities to help run them. They are already among the biggest tax payers to the Tanzanian Revenue Authority (TRA) and they should pay more taxes as they finish paying back the loans that financed their mining operations.
With all this apparent good news, why do most Tanzanians consider the presence of foreign mining companies ‘a curse, not a blessing’, to cite a typical recent newspaper editorial? My recent research with the Africa Power and Politics Programme (APPP) suggests the following explanation .
First, enforcing mining rights proved to be a protracted and divisive process, irrevocably souring relations between the foreign mining companies (FMC) and local artisanal and small-scale miners. In August 1994 Sutton Resources, a small Canadian company, signed a Minerals Development Agreement (MDA) with the Tanzanian government for Bulyanhulu, located in Kahama District, Mwanza Region. Sutton spent the next two years trying to enforce its mining rights against resistance from local small-scale miners (dubbed ‘illegals’), who refused to move from the site. On 5 August 1996 54 miners were allegedly buried alive following the bulldozing of small mines during the enforcement of an eviction order.
Subsequent investigations found no evidence to support the claim of over 50 dead through ‘extra-judicial killings’ (Amnesty International’s description), but the damage was done. Sutton’s uncompromising approach in clearing the Bulyanhulu ‘illegals’ without compensation prepared the way for increasingly hostile relations between the FMCs and their Tanzanian hosts. In 1999 Barrick Gold, the largest gold mining company in the world, bought Sutton, and further acquisitions made it by far the largest player in Tanzania, producing about three-quarters of Tanzanian gold .
Second, the public outrage triggered by Sutton’s unsubtle approach to acquiring mining rights galvanised both local and international civil society opposition to the FMCs’ presence. Local NGO and media coverage of instances of alleged water pollution, mine invasions and shootings and the destruction of property reinforced latent public antipathy to the FMCs, who were also accused of benefiting from overgenerous tax breaks, fuelling suspicions that the secretly signed MDAs involved corruption among senior government officials.
On coming to power in December 2005, President Jakaya Kikwete promised that mining contracts and laws regulating mining activities would be reviewed. Opposition parties were quick to make political capital out of the FMCs’ poor public image and suspicion of corruptly negotiated deals. When in August 2007 Chadema opposition party MP Zitto Kabwe challenged the government’s non-transparent approach to its dealings with the mining companies, he was banned from parliament and instantly became a popular hero. Realising its mistake, the government quickly launched a Mining Sector Review Committee, headed by former Attorney General Mark Bomani. The Committee’s recommendations to raise both tax and royalties were incorporated in a new Mining Act, passed by Parliament in April 2010.
To the FMCs, the new mining law simply worsened an already deteriorating investment and business environment. They claimed that the TRA did not respect the tax conditions contained in the MDAs and that TRA officials practiced extortion, leading to costly litigation and arbitration. Another major issue for the FMCs was the empowerment of the Minister of Energy and Minerals to enter into negotiations to obtain an equity stake in any new mining venture at any time. ABG considered that the 2010 Mining Act, by granting ‘ministerial discretionary powers to make or interfere with commercial decisions’, was the source of ‘insecurity and unpredictability‘, had a negative impact on ‘governance and transparency’ and gave ‘room for abuse of power.’
While gold exploration slumped after the 2008 financial crisis, fears of further financial turmoil pushed up the value of mining shares. Big Gold in Tanzania has benefited tremendously from soaring gold prices. For example, ABG posted net profits of USD 223 million in 2010, an increase of 237% over 2009.  Resolute’s Golden Pride mine was scheduled to close, but is still producing after posting record profits in 2009. 
Between the big three and the thousands of small-scale mines employing hundreds of thousands of miners there is a ‘missing middle’ of small-to- medium mines. The explanation for this anomaly emerging from my research is that only large foreign companies can afford the high costs of Tanzanian gold mining. Lack of infrastructure means that FMCs have to invest in roads, water and power. Skilled labour is in short supply. The costs of maintaining mine security are high. Theft and destruction of property are quite common. Tax assessments are unpredictable and extortion practiced.  ‘Negotiations’ are time-consuming and costly. Expatriate staff frequently have immigration problems. Last, the process of allocating exploration and mining rights is slow, corrupt and inefficient. It can take up to two years to obtain a prospecting licence.
The FMCs are waiting to see how the 2010 Mining Act will be enforced. The ruling party CCM and Chadema, the main opposition party, agree that the government should take a greater cut from FMC profits, and sky-high gold prices are likely to renew pressures to introduce a windfall tax on gold sales. In 2010, ABG made pre-tax profits of USD 309 million – more than double the previous year–on gold production of 701,000 oz. Yet the USD 86.5 million paid to the Treasury in taxes represented only a 28% effective tax rate, compared with 56% in 2009. 
The confrontational relations that have developed between the Tanzanian government and FMCs are not conducive to the long-term sustainability of ‘modern’ mining in Tanzania. One mining executive cited by the Fraser Institute (2010) put it thus:
“… Tanzania has changed from a country encouraging foreign mining investment to one which actively discourages new investment, constantly harasses resident foreign miners and keeps changing the laws and regulations or abusing the operation of current laws and regulations to the detriment of the foreign miner and the benefit of the corrupt government.” 
As long as gold prices stay robust, ABG will continue to earn fabulous rents from mining Tanzanian gold and exporting its profits. Whether or not this is sustainable or ‘developmental’ is open to debate.
 Financed by the British and Irish governments, APPP (www.institutions-africa. org) is managed by the Overseas Development Institute (ODI). ‘The investment and business environment for gold exploration and mining in Tanzania’, can be found at: http://www.institutions-africa.org/fileinfo/20110606-appp-background-paper-03-theinvestment- and-business-environment-for-gold-exploration-and-mining-in-tanzaniabrian- cooksey-june-2011  Excluding small-scale gold production, which may be the equivalent of another large mine.
 ABG Annual report 2010, www.africanbarrickgold.
 www.resolute-ltd.com.au/. Resolute posted a gross margin of USD 71m on gold sales of 148,000 oz.
 ABG have outstanding tax claims with TRA of USD 120 million.
 ABG Annual report 2010, www.africanbarrickgold. In 2010, ABG paid only USD 0.5million in corporate tax.
 Fraser Institute 2010. ‘Survey of Mining Companies 2009/10, 2010 Mid-Year Update’ www.fraserinstitute.org
Dr Brian Cooksey, after teaching sociology at the University of Dar es Salaam, set up his own consultancy and research organisation. He has been actively involved in civil society and journalism and is a member of Transparency International.