by Roger Nellist
Controversial Presidential actions on mining
In the last few months President Magufuli has issued decrees on a range of mineral matters, which are unsettling some mining investors and causing a big local stir.
Last year he ordered the revocation of a large-scale mining licence in Shinyanga in favour of the award of mineral rights to small-scale miners. In January this year, Magufuli directed the Minister of Energy and Minerals, Professor Sospeter Muhongo, to cancel a nickel mining licence at Dutwa in Simiyu region in favour of a water supply project in the area. The company that holds the Dutwa nickel mining rights (in which the World Bank through its International Finance Corporation is a 10% shareholder) has been prospecting in the area for almost a decade and is at the point of establishing a large open pit nickel mining operation. Referring to water problems in the area, the President said: “There is no way over one million people should be suffering just because one investor is extracting minerals – that does not make sense”. However, the President’s action has been strongly criticised by opposition MP Zitto Kabwe, who highlighted the considerable economic potential of the mine and said “the government is sending all negative messages to investors. These statements will cost the nation dearly in future”. The Tanzanian Chamber of Minerals and Energy called the Presidential decrees “alarming”; another body has called them an extension of violation of the law.
In a separate move, and as had been foreshadowed by President Magufuli in 2016, the Ministry of Energy and Minerals announced on 3 March an immediate ban on the export of mineral concentrates and ores for metallic minerals such as gold, copper, nickel and silver. The ban is intended to ensure that mineral value-addition activities (i.e. the processing, smelting or refining of the mineral ores/concentrates) are carried out in Tanzania, as specified in the 2009 Mineral Policy and the 2010 Mining Act. Local mineral beneficiation activities are expected to create extra jobs, generate additional revenues and transfer technology and skills to Tanzania.
However, the immediate imposition of the export ban has been criticised by several stakeholders (including small-scale miners fearing bankruptcy), who argue that existing producers have been given no time to build the necessary beneficiation facilities and that arbitrary administrative measures create an unpredictable policy environment that will deter new investors. Senior representatives of some foreign mining companies operating in Tanzania have commented that “any government making unilateral decisions is worrying and of concern” and “if the Tanzanians wish to encourage foreign investment, they’re not helping by making these sorts of announcements”. The Australian government said it was “closely monitoring” the new business policies and regulations in Tanzania for any impact those changes may have on Australian investment interests in the country.
Reports indicate that Acacia Mining Plc is the first big mining company to be affected. Although the gold bars it refines can be exported, the company has had to suspend the export of mineral sands and copper concentrate recovered during its gold mining operations. Acacia let it be known that it was losing more than $1 million each day in revenue from two of its three Tanzanian gold mines (Bulyanhulu and Buzwagi) because of the export ban. It said the ban has put unsustainable pressure on its cash flow and required it to implement stringent spending cuts and to freeze new employment.
On 23 March, President Magufuli unexpectedly visited Dar es Salaam port and inspected a number of mineral sand containers that had already been cleared for export. He ordered the stock of almost 300 containers at the port to be impounded until analysis of their contents had been completed. “Based on the information that I have, if I say what is really inside these containers, it could make any patriotic Tanzanian cry…. From now onwards, no mineralised sand will be exported from Tanzania… There is no country being robbed of its mineral wealth like Tanzania”. According to the Tanzanian Ports Authority, more than 50,000 containers holding mineral sands are being exported out of the country every year.
A few days after the President’s visit, the Speaker of the National Assembly and a number of other MPs also went to the Port to inspect the seized containers. The Speaker announced he was establishing a Parliamentary committee to investigate all aspects of the mineral sands exports saga.
The Permanent Secretary of the Ministry of Energy and Minerals, Professor Justin Ntalikwa, had joined the Speaker’s visit to the port. But within hours of their visit, in an abrupt move signalling the growing sensitivity of the mineral sands export ban, President Magufuli sacked Prof Ntalikwa. No reasons were given but speculation in the press attributed Ntalikwa’s removal to his remarks about the high cost and time needed to establish local beneficiation facilities.
Then at the end of March, in an attempt to allay investors’ fears over the export ban, Prime Minister Kassim Majaliwa made a surprise visit to the Buzwagi Gold Mine in Shinyanga and spoke to workers there who were concerned about potential job losses resulting from the export ban. “I want to assure Tanzanians questioning this exercise that we are not doing this to scare away investors,” he said. “We want to satisfy ourselves on what is going on with our mines.” He added that the government had to clear doubts that the country was not being short-changed with regard to the export of copper concentrates. The PM’s team also took samples of mineral sands from sealed containers destined for export from the mine, in order to have them analysed independently for the amounts of copper concentrates.
The ongoing controversy has now led to official calls for some of the mining agreements to be renegotiated. Just before Easter the Controller & Auditor General sent a report to President Magufuli saying that the government must review mining contracts and rethink its tax code (to remove unreasonable provisions including generous tax exemptions and other contractual loopholes) if Tanzania is to benefit from the extractives industry.
Five-year delay for the LNG plant
At the end of 2016, Statoil’s Tanzania country manager, Oystein Michelsen, warned that a final investment decision on the $30 billion onshore liquefied natural gas export terminal will not be made for at least five years, and that it would take another five years after that to actually build the plant. The commercial partners in this mega project (which the Bank of Tanzania estimates would add 2 percentage points to annual economic growth) are Royal Dutch Shell, Statoil, Exxon Mobil, Ophir Energy and the Tanzania Petroleum Development Corporation. The big hurdles facing the project include the paramount need for a stable contractual framework with the Government, resolution of land issues, identification of funding and clarity over local ownership requirements in some contracts. President Magufuli has ordered officials to accelerate the resolution of these issues so that the project can start.
Tanesco – Power price hikes cancelled
At the end of December 2016, the Energy and Water Utilities Regulatory Authority announced an increase in electricity tariffs of 8.5%, to the consternation of many including the Energy and Minerals Minister Sospeter Muhongo, who immediately revoked the order. The increase had been sought by the state utility, Tanesco, which had actually wanted an even bigger hike. After Minister Muhongo also disclosed that Tanesco managers had been paying themselves large bonuses despite the utility’s dire financial position, President Magufuli intervened and on 1 January sacked Tanesco’s Managing Director, Felchesmi Mramba. University of Dar es Salaam senior lecturer Dr Tito Mwinuka was appointed as Mramba’s successor in an acting capacity. Mwinuka said his priorities would be to expand the country’s power production capacity, to pursue those owing the utility money, and to improve the utility’s efficiency by changing its ‘business as usual’ culture and reducing the substantial wastage of both electricity and finances within the company. He would also pursue those who make illegal electrical connections.