WHO LENT HIS NAME TO STIEGLER’S GORGE?

by Rolf D. Baldus

Stiegler in camp (Source: Günter Kraus / Rolf D. Baldus)

A Gorge in Africa’s oldest and largest protected Area
The Tanzanian Government is building a large hydroelectric dam at a place called “Stiegler’s Gorge” in Southern Tanzania, where the mighty Rufiji river thunders through a narrow 100m deep gorge and over several kilometres of rapids. To the north is the newly proclaimed Nyerere National Park, while to the south lies the famous Selous Game Reserve, declared a UNESCO World Heritage Site in 1982 – a status that may be imperilled by the hydropower project. The man after whom the gorge was named – “Stiegler” – remained a mystery until recently.

Franz Stiegler goes to Africa
It was generally assumed that Stiegler had been a Swiss engineer who, at the beginning of the last century, examined the possibilities of constructing a bridge or a dam across the gorge and that he was killed by an elephant while hunting close to the gorge. Information from relatives of the man and some further research, however, has now shed light on this mysterious person and the events leading to his death.

Franz Stiegler was born in a village called Dießen on the Ammersee in Southern Germany around 1878. He became a civil engineer and emigrated to German East Africa in 1905 or in early 1906.

In 1905 the German colonial Government had started to construct the “Tanganyika Railway” (Central Line), which was to connect Dar es Salaam with Lake Tanganyika. Young Stiegler was employed as a surveyor starting in February 1907.

Map showing Franz Stiegler’s route in 1907/08 – Rolf D. Baldus

Later in that year he became the leader of the Rufiji Expedition. In July 1907 he camped at the Pangani Rapids on the Rufiji River – the place which now bears his name. On July 13th, 1907 he wrote in a card to his sister that a lion had attacked the camp and severely injured one of his African staff. Notwithstanding, he concludes: “It is a very nice trip.”

The expedition was to explore the river and the surrounding lands, conduct trigonometric and hydrological surveys, in particular take measurements of water flow and water levels. The colonial administration wanted to appraise the navigability of the Rufiji and the Kilombero (Ulanga) rivers. The viability of connecting Boma Ulanga (southern Kilombero Valley) by railway with the Central Line and with the lower Rufiji was another question.

On December 12th 1907 Stiegler camped at the Shuguli Falls, a very scenic spot where the Kilombero flows over a kilometre or so through a myriad of falls, ponds and ravines. He writes from there to his sister that he will continue from the falls up the Kilombero River to Boma Ulanga. Then he would unfortunately have to return to work on the railway again.

Stiegler was assisted by several local employees and at times by the German survey technician R. Pelz, who will later write in an obituary that Stiegler was “an example of a distinguished and fair-minded superior.”

Franz Stiegler came from a family of hunters, and he used the opportunities that the game-rich land offered, to hunt, not least to feed his party. He bought hunting licences, as his name can be found in the lists of licence-holders which were published every year in Official Gazette for German East Africa.

A deadly encounter with an elephant
On February 17, 1908, Stiegler camped 8 km away from Mberera Mountain. He was most probably on the way back to Morogoro. His local companions narrated later that he went hunting and wounded an elephant. The Deutsch Ostafrikanische Zeitung of April 11, 1908, gives this account: “The elephant … immediately attacked and flung a black man aside. Stiegler also jumped aside, but probably not fast enough, for he was seized by the elephant and hurled into the air. Death was instantaneous.” The body was taken to “Lugongeka’s village” the next morning and buried there. This village can be found on a German map of the time. From Shuguli it is 20 km up the Kilombero river on the south bank.

The place where Franz Stiegler met his fate is about 100 km direct distance south-west and upriver of the gorge which was later named after him.

The German and later the British colonial Governments continued to call the place Pangani Rapids. We find the term Stiegler’s Gorge first mentioned in the 1950´s. A tourist map of around 1970 uses the term too in connection with a lodge that seems to have existed on the high ground over the rapids. It remains a mystery who named the Gorge after Franz Stiegler and when.

The author wishes to acknowledge the contribution of Günter Kraus, a relative of Franz Stiegler, who provided indispensable information and to Mike Shand (University of Glasgow) for his assistance with the mapping.

Bibliography:
Baldus, Rolf D. (Ed.): Wild Heart of Africa. The Selous Game Reserve in Tanzania. Johannesburg 2009.
Baldus, Rolf D. (2021) The End of the Game, in: Sports Afield, No.1 and http://www.wildlife-baldus.com/selous_game.html

ENERGY & MINERALS

by Ben Taylor

Note: we are seeking a new contributor to take over this section of Tanzanian Affairs. If you are interested, please contact the editor.

Tanzania-Uganda oil pipeline agreements signed
Uganda, Tanzania and the oil companies Total SE and China National Offshore Oil Company (CNOOC) signed three key agreements on April 11, 2021 in Uganda that pave the way for construction to start on the planned east African crude oil pipeline (EACOP). Both President Yoweri Museveni of Uganda and President Samia Suluhu Hassan of Tanzania were present to witness the signing of the agreements.

The 1,443km pipeline will transport crude oil from oil fields near Lake Albert in western Uganda to Chongoleani terminal in Tanga on the Tanzanian coast. From Lake Albert, the pipeline will head southwards, crossing into Tanzania near Bukoba and passing to the west of Lake Victoria before heading west to Tanga via Kahama, Singida and Kondoa. On completion, it is expected to be the world’s longest electrically heated pipeline. Uganda’s crude oil is highly viscous, so it must be heated to be kept liquid enough to flow.

Patrick Pouyanne, chief executive of the French oil giant Total, described this as a “momentous occasion in history … Expect the first oil tanker to dock at Tanga port in early 2025.”

The project is expected to cost at least USD $3.8bn, 80% of which will be spent in Tanzania. The full amount will be pooled through the EACOP holding company co-owned by the oil companies – Total E&P and China National Offshore Oil Company (CNOOC), and the governments of Uganda and Tanzania through their respective national oil companies, UNOC and TPDC. The transit tariff per barrel of crude oil going through the pipeline is to be capped at $12.77, after tax concessions were offered by the Tanzanian government.

President Museveni explained that he chose the date for signing the agreements as April 11th for sentimental reasons: to coincide with the toppling of former President Idi Amin by Ugandan rebel groups with the help of Tanzanian troops 42 years earlier on the same date. “So today is a triple victory for Uganda and Tanzania; militarily, politically, add economically,” he said. The event had been planned for March 22nd, but had been delayed out of respect for the late President Magufuli.
Environmental groups have expressed concern with the plans. A letter signed by 38 civil society organisations across both east African countries said the parties had failed to address environmental concerns over the pipeline and had steamrollered over court and parliamentary processes.

Diana Nabiruma, of the Africa Institute for Energy Governance (AFIEGO), told the (UK) Guardian newspaper: “It is concerning that major agreements are being signed and the companies are being given the go-ahead to award contracts and start developing the Lake Albert oil project. The projects pose major environmental risks. Resources, some shared with countries such as the DRC, Tanzania and Kenya, including Lake Albert as well as Lake Victoria and rivers, are at risk of oil pollution,” she said.

The #StopEACOP alliance campaign condemned the decision to build the pipeline, which it says will displace 12,000 families and would be a huge environmental risk at a time of climate emergency, when the world needs to move away from fossil fuels.

Vanessa Nakate, founder of the Rise Up climate movement in Uganda, said: “There is no reason for Total to engage in oil exploration and the construction of the east Africa crude oil pipeline because this means fuelling the destruction of the planet and worsening the already existing climate disasters in the most affected areas. There is no future in the fossil fuel industry and we cannot drink oil. We demand Total to rise up for the people and the planet,” she said.

David Pred, of Inclusive Development International, which supports communities to defend their rights against harmful corporate projects, said: “The oil companies are trying to dress up the investment decision signing ceremony, but fortunately this climate-destroying project is far from a done deal. Total and CNOOC still need to secure insurance and raise $2.5bn in debt financing for the EACOP to move forward and they are going to struggle mightily to find enough banks and insurance providers willing to associate themselves with such a project,” he claimed.

President Samia Suluhu Hassan commits to speed up LNG project
Among the many topics covered by the new President, she stressed the need to speed up the long-planned (and much-delayed) Liquid Natural Gas (LNG) processing plant on the southern Tanzania coast. The project cost is estimated at USD $30bn.

In two major speeches – on April 6 at a ceremony to swear-in new Permanent Secretaries and other officials, and April 22 in her maiden speech to parliament as President – she directed the Ministry of Energy to speed up the project by bringing in investors who are ready to start its implementation.

The LNG project has been stalled for some time now following the government’s decision to review Production Sharing Agreements (PSAs). Host Government Agreement (HGA) negotiations have been on and off, after they initially stopped in 2017 due to technicalities and resumed in 2018 only to stall again.

“We have been singing the LNG song for a very long time, I remember when I was sworn in as the Vice President I tried to work on it, but discovered it was beyond me and stopped,” she said. She stressed that it was time to understand who is in and who is out in the implementation of the project so that it can move forward. “We should do what we did when we decided to start construction of the Standard Gauge Railway (SGR) and we all saw how they came back seeking to be put on board,” she said.

There are a number of complicating factors to deal with in kick-starting the project. In addition to maximising the benefits to local communities and national revenue, negotiations will be affected by global gas price projections and the security situation in northern Mozambique.

Barrick Gold CEO praises President Magufuli
The president and chief executive of Barrick Gold Corporation, Mark Bristow, said the company mourned with the people of Tanzania at the loss of President John Magufuli.

Bristow described the late president as “a visionary statesman” who saw the value of a thriving mining sector to his country’s economy. He praised the late President for partnering with Barrick in a joint venture, Twiga Minerals Corporation, to manage the company’s mines in Tanzania and to share the economic benefits they generated equally. Bristow said Twiga would stand as a monument to President Magufuli’s foresight and should serve as a model for future partnerships between governments and mining companies in Africa.

The joint venture came after several years of a strained relationship between the government of Tanzania and Acacia, a company majority owned by Barrick and operating gold mines in Tanzania. President Magufuli accused Acacia of “stealing” by failing to pay proper taxes and exporting more gold than declared, and slapped the company with a USD $190bn tax bill. Protracted negotiations led to a compromise with Barrick offering a goodwill gesture to Tanzania of $300m, and establishment of Twiga Minerals as a joint venture.

Anti-smuggling measures at Mererani Tanzanite Mines declared ineffective
President Samia Suluhu Hassan noted new tactics of smuggling Tanzanite at the Mererani mines in Simanjiro District, Manyara region, and demanded security reinforcement to curb the malpractice. Previously, President Magufuli had overseen the construction of a perimeter wall surrounding the mines in an effort to reduce loses.

In her speech at the State House in Dar es Salaam on April 6, she said smugglers have now resorted to digging underground channels through which they have been sneaking Tanzanite past the 24.5km perimeter wall. As a result, she said, the stones are escaping just as before. “We have TPDF (Tanzania People’s Defence Forces) soldiers protecting the mineral site yet Tanzanite finds its way out of the fortified place,” said the President. She expressed her dismay over the trend, calling on the Ministry of Minerals to further reinforce security despite a successful installation of 24-hour surveillance CCTV cameras on the perimeter wall.

ENERGY & MINERALS

by Roger Nellist

Tanzania’s gold earnings surge
According to the Bank of Tanzania the country earned US$2.72 billion from gold exports during the twelve months ending on 31 July 2020. It was an increase of almost $1 billion over the previous year. The 52% increase meant that gold exports overtook tourism receipts as Tanzania’s number one foreign exchange earner. The principal reason for the surge in gold earnings was the higher price of gold on world commodity markets, as investors switched to gold to counter economic uncertainty arising from the Covid pandemic. In July 2020, the average price of a troy ounce of gold reached $1,846, compared with $1,732 in June and $1,531 in May. The July 2020 gold price was the highest since September 2011.

Other recent gold news
In October 2020, the recently formed Twiga Minerals Corporation declared its first dividend, of $250 million. In accordance with the respective shareholdings, $40 million of it (about TSh 100 billion) was received by Tanzania, reflecting the government’s 16% free stake. Twiga is the joint venture gold mining company established between Barrick Gold and the Tanzanian government in January 2020, following the government’s protracted dispute with Barrick’s subsidiary, Acacia Mining. It operates the three gold mines at Bulyanhulu, North Mara and Buzwagi.

In December 2020, five people in Mbeya region were suspended and arrested for allegedly smuggling 15.4 kilogrammes of gold worth TSh1.8 million. Three of the five were working at the Chunya Mineral Centre and were suspended by the Minerals Minister, Dotto Biteko. The other two were Police officers. The Director of Public Prosecutions announced that his office had acquired enough evidence to prosecute the five on six counts. Three of the five appeared in Court but the other two went missing.

LNG negotiations to resume
Just before Christmas the Tanzania Petroleum Development Corporation (TPDC) announced that it was hopeful that negotiations between Tanzania and foreign oil companies would resume in January 2021 for the Host Government Agreement (HGA) that will govern the establishment of the much-delayed Liquefied Natural Gas (LNG) project at Lindi. The HGA is a crucial project agreement and the negotiation of it has been proceeding on and off for several years. Originally, it was expected to be concluded by September 2019. However, negotiations stalled when the many companies involved – Shell, Ophir, Pavilion, Equinor and ExxonMobil – supposedly could not agree amongst themselves on important aspects of the project. Then Tanzania decided to review and renegotiate some of the terms of the Production Sharing Agreements under which those companies hold exploration and development rights in the country. In December 2020 TPDC confirmed that it was still finalising the amounts of compensation to be paid to landholders in the Lindi region where the LNG plant will be sited. Once the HGA is concluded the investors will then be able to make a Final Investment Decision. The complex LNG project is likely to cost about US$30 billion.

The use and benefits of domestic gas
TPDC also announced that between July 2004 (when Songo Songo gas was first piped to Ubungo in Dar es Salaam) and the end of 2020, the use of domestic gas had saved the country $15.6 billion (TSh 36 trillion) – by displacing expensive imported fuels. $13.2 billion of the savings was attributable to the generation of electricity for the national grid and the remaining $2.4 billion was saved by industries that elected to use domestic gas directly rather than imported fuels. TPDC explained that 48 factories are fully using gas in their operations, as well as four institutions. Moreover, about 1,000 households in Dar and Mtwara are also now powered by gas. Additionally, a modest number of vehicles (about 400) are currently powered by Compressed Natural Gas (CNG), the number being constrained by the costs of converting vehicles from petrol/diesel to CNG and by the lack of CNG refuelling stations. At the present time there is only one CNG station operating in Dar (at Ubungo). However, TPDC clarified in December that it is planning to build five more CNG stations – at Ubungo, Kibaha, the ferry/fish market, Muhimbili hospital and at the University.

In November 2020, TPDC’s Managing Director, James Matarajio, told a conference that TPDC plans to extend the use of gas by households in up-country areas like Morogoro, Dodoma, Mwanza and Tanga. He pointed to both environmental benefits and significant household energy cost savings arising from the use of domestic gas. Matarajio added that Tanzania has discovered sufficient gas resources to be able to export some to neighbouring countries after satisfying Tanzania’s domestic needs, including those of the LNG and perhaps other export-oriented projects too.

East Africa Crude Oil Pipeline (EACOP)
TPDC has confirmed that preparations are now well advanced for the construction of the Uganda–Tanzania East Africa Crude Oil Pipeline (EACOP), that will enable the oil discovered in Uganda in 2006 to be exported through Tanzania. The 898 miles long pipeline will link Uganda’s oil fields with an export terminal at the port of Tanga. About 80% of the pipeline will run through Tanzania. The project is expected to cost $3.5 billion and create more than 18,000 jobs for Tanzanians.
The two governments signed the overarching agreement for EACOP in September 2020, at a ceremony attended by Presidents Museveni and Magufuli. That was followed in October by signature of an agreement between the French oil giant, Total, and Tanzania. Total is the majority stakeholder in the Ugandan oil discoveries and is developing the pipeline project together with the China National Oil Company.

Map showing the proposed route of the East Africa Crude Oil Pipeline (EACOP) from Uganda to Tanga.

Possible fertiliser project
The Petroleum Upstream Regulatory Authority (PURA) which regulates the exploration, development and production of natural gas in Tanzania announced in mid-December 2020 that the planned $1.9 billion fertiliser project on the Mtwara coast is still on – but, significantly, the commercial terms have not yet been agreed with investors. According to PURA’s acting director general, Charles Sangweni, the main stumbling block is disagreement over the price that Tanzania’s natural gas will be sold to the fertiliser plant. Gas is the main raw material feedstock in the manufacture of fertiliser. Sangweni told the media at a workshop that the natural gas price should be at least $3 per MBTU but a German investor wants it reduced to $2.6, which would mean government having to subsidise the gas input. The plant is expected to export 70 percent of the fertiliser produced and the remaining 30 percent will be sold to Tanzanian farmers. It is unclear when the project will be realised. It had been expected to commence in 2016 through a joint venture between TPDC and foreign companies, but the partners were unable to agree on the commercial terms.

The project is reminiscent of the planned Kilwa Ammonia Company (KILAMCO) fertiliser project that this contributor advised on in the Tanzanian Ministry of Water, Energy and Minerals in the early 1980s. As a joint venture between TPDC (26%) and a large USA fertiliser company (74%), KILAMCO was to be a world-scale export-oriented project intended to earn the country much-needed foreign exchange at a time when the economy was in dire trouble. At $645 million (though subsequently downscaled to $425 million) it was to be the largest single investment ever in Tanzania. Intensive domestic and international efforts were made over several years to realise the project and by 1985 in-principle funding commitments were received from the World Bank Group, UK (CDC), Sweden, Italy, USA, Yugoslavia and China. However, by the late 1980s world fertiliser prices had softened considerably, undermining KILAMCO’s commercial viability. Moreover, TPDC was unable to raise the foreign exchange to support its equity stake and, given the magnitude of the sums involved, donors signalled that their financial support for the project would have to be fungible (reducing their commitments to other Tanzanian developmental projects). During the 1990s, the Songas gas-to-electricity project was developed as the preferred alternative use of Songo Songo gas, and began generating electricity at Ubungo in 2004.

Zanzibar’s hopes for oil and gas
Zanzibar President Ali Mohamed Shein told reporters in mid-October 2020 that the results of preliminary 2D seismic and other pre-drilling technical work undertaken to date point to the existence of geological structures with high oil and gas potential in five areas in the Pemba-Zanzibar block. The potential natural gas reserves there have been estimated at 3.8 trillion cubic feet. (For comparison, Tanzania has so far discovered coastal and offshore gas reserves of at least 57 tcf). He cautioned that it is early days yet and that more sophisticated 3D seismic needs to be acquired before any wells are drilled to confirm the possible reserves.

Editor’s Note: This is Roger’s final article as our regular contributor on Energy and Minerals, after eight years. I am confident that our readers would like to join me in thanking him for the brilliant way he has handled this important, sensitive and complex subject. Asante Roger, and best wishes for the future. Ben

ENERGY & MINERALS

by Roger Nellist

Tanzania generates first wind power

In June 2020, in an important first step for Tanzania, a wind farm in Mufindi District generated 0.8 MW of electricity in test production. The wind plant has been developed by the Rift Valley Energy Group (RVEG) and consists of three large wind turbines which, when fully commis­sioned, are expected to generate 2.4 MW that will ensure affordable power to 32 villages which are currently being supplied by the 4MW Mwenga Hydro Plant. The network is the first private large-scale rural power network in Tanzania and any surplus power is sold to TANESCO under a power purchase agreement.

A spokesman for RVEG said: “The facility will ensure the continued availability of affordable power to the rapidly growing number of rural customers within the network, throughout the year, specifically in the dry season when the available water for the Mwenga Hydro Plant is low…… Additionally, it will cater for further expansion of the rural electricity distribution network into those remaining areas of villages that are located near the rural network area, and are still unconnected”. RVEG offered a discount price of TSh 25,000 (about £9) until October for new customers to get connected.

Mineral Concentrate Exports resume
In May 2020, the government at last granted an export permit allowing 277 containers of gold and copper concentrate material to be released from Dar port for sale abroad by Twiga Minerals Corporation (TMC). The containers had been seized in 2017 following an order by President Magufuli prohibiting their export until unpaid taxes by Acacia Mining and other irregularities at Acacia’s three Tanzanian gold mines had been resolved.

Resolution of those issues came in the form of the suite of agreements that government negotiated with Acacia’s parent company, Barrick Gold. Those agreements were signed in January 2020 and put an end to the acrimonious dispute between the parties that had lasted for three years and significantly disrupted production at the mines. [The protracted saga has been reported in previous editions of TA]. The negotiated settlement has resulted in a radical restructuring of Acacia’s former gold mining operations -with the demise of Acacia, with Tanzania and Barrick becoming shareholders in the new joint venture company (TMC) and with the future economic benefits from mine production being shared (in as yet an unspecified manner).

The technical investigative committee that Magufuli established in 2017 to examine the value of the concentrates estimated that the 277 containers included minerals worth TSh 829 billion. That sum was very considerably more than the amounts declared by Acacia and the Tanzania Minerals Audit Agency.

In a statement Barrick also said that the shipping of some 1,600 containers of concentrate stockpiled from the Bulyanhulu and Buzwagi gold mines resumed in April.

Tanzania receives US$100 million from Barrick
At the end of May, in accordance with the terms of the negotiated settlement between government and Barrick Gold, Barrick paid $100 million (approx. TSh 230 billion) to Tanzania. It was the first tranche of the $300 million that the giant mining company agreed to pay to settle the long-running tax dispute between the parties. When presented with a representative cheque at a ceremony in Dodoma, the Minister for Finance and Planning, Dr Philip Mpango, said: “I congratulate Barrick for implementing our agreement and call upon other mining firms to emulate the move in ensuring a win-win situation”.

Tanzanite gemstone discoveries make latest billionaire
In June 2020, a small-scale miner Mr Saniniu Laizer from Simanjiru in Manyara Region sold two huge Tanzanite gemstones to the government and became Tanzania’s latest Shilling billionaire. With a combined weight of just over 14 kgs, they were valued at TSh 7.7 billion (about $3.4 million). Authorities confirmed that they were the biggest Tanzanites ever to be discovered. Mr Laizer was commended by both President Magufuli and Mines Minister Biteko, who signalled the importance of the small-scale mining sector in the country despite some detractors and that the discoveries proved that Tanzania did not have to be wholly dependent on foreign mining companies. Magufuli, speaking in a broadcast telephone call, said: “Laizer’s incident sends a signal that Tanzania is rich”.
Then Laizer’s luck struck for a third time. In early August, he announced he had discovered a third big Tanzanite stone weighing 6 kgs that was valued at about $2 million.

Tanzanites, which have a dark blue-violet colour, are one of the rarest gemstones on our planet. Remarkably, they are only to be found in Tanzania, where the law specifies that they must be sold to the government.

Williamson Diamond Mine sale?
The Williamson Diamond Mine at Mwadui is owned 25% by the Tanzanian government and 75% by UK-based Petra Diamonds (which also operates three diamond mines in South Africa). However, at the end of June Petra announced that it was facing mounting losses and debts because of depressed global markets, exacerbated by the Covid-19 pandemic (that had apparently caused the price of diamonds to drop from about $246 per carat before the coronavirus outbreak to $135 by March 2020). Petra therefore wished to divest its Tanzanian and South African assets and was also offering itself up for sale – as part of a strategic review of its commercial options.

However, Petra’s announcement seems to have taken the Tanzanian authorities by surprise. Government said it was not given prior notice of the announcement and would block the sale of the Williamson mine since it has a first right of refusal. In response, Petra said it had apologised for its oversight in not first communicating its sale announcement to the government, adding that it was considering all its options to determine what will be in the best interests of the company and its shareholders. Minerals Minister Biteko said government was dissatisfied with the manner in which Petra was going about resolving its problems.

ENERGY & MINERALS

by Roger Nellist

Historic mining agreement signed in January 2020
On Friday 24 January the Tanzanian Government signed an historic mining agreement with Barrick Gold, finally putting an end to the three or more years of acrimonious relations with Barrick’s former subsidiary (Acacia Mining, now wound up) and establishing the arrangements under which the new joint venture, Twiga Minerals Corporation (TMC), will operate in the country. In a televised ceremony in State House, witnessed by President Magufuli and Barrick’s President and CEO Mark Bristow, nine detailed agreements were signed which establish the terms under which the parties can go forward together with confidence. Amongst other things, they provide for a 16% free-carried interest shareholding for government in TMC (with representation on the joint management committee) and for the economic benefits to be split 50/50 after recovery of costs.

TMC will now operate the three gold mines at Bulyanhulu, North Mara and Buzwagi which together generate Tanzania’s biggest export earnings. After the signature Bristow said: “Reflecting our confidence in the potential of this highly prospective gold region, we have budgeted $50 million for exploration here in 2020 alone and are looking at various opportunities to sustain and expand our operations”. Barrick will also invest $40 million to upgrade the road between Bulyanhulu and Mwanza as well as building a housing estate and related infrastructure. In partnership with the University of Dar es Salaam they will also be supporting a $10 million programme to upgrade mining skills in Tanzania.

In welcoming the new deal, President Magufuli clarified that the many metal concentrate containers stored for the last two years at Dar es Salaam’s port will be sold by TMC to willing buyers and the profits shared. He said they are worth millions of dollars.

The nine agreements which cement this deal comprise: Framework Agreement, Twiga Shareholders Agreement, Bulyanhulu Shareholders Agreement, North Mara Shareholders Agreement, Buzwagi Shareholders Agreement, Bulyanhulu Development Agreement, North Mara Development Agreement, Pangea Development Agreement, and the Management & Administrative Service Agreement.

The new deal hopefully puts an end to a protracted period of enormous disruption in Tanzania’s mineral sector. The new terms are expected to improve Tanzania’s revenues from the gold mining operations. However, the detailed terms of those agreements were not made public and, in a session of the National Assembly in Dodoma a few days after their signature, Opposition MPs called for them to be made so. Chadema’s Shadow Minister of Minerals demanded that the government explain what the 16% and 50/50 split provisions actually mean for Tanzania. He also pressed Government to explain what has happened to the earlier claim for Barrick to pay unpaid tax of $190 billion. It is reported that the Government made major concessions to Barrick during the “arduous and frustrating” negotiations – allowing international arbitration, permitting the export of mineral concentrates again and waiving the requirement for the mining company to establish ore beneficiation facilities in the country. The offering of significant concessions by both parties during a major negotiation is, of course, the essence of the process by which an agreement can be concluded that, overall, is satisfactory to both sides.

Cooking with LPG rather than wood and charcoal
With Tanzania having lost eight million hectares of forest between 1990 and 2010 to firewood and charcoal for burning, the Government has embarked on a plan to raise to 50% the number of Tanzanian households using instead Liquefied Petroleum Gas (LPG) for cooking. The plan was unveiled in mid-February by the Tanzanian Environment Minister, Hon Mussa Zungu. Government wants to build further on the increasing use of LPG witnessed in recent years, and also to introduce more competition into LPG supply so as to reduce its price to households.

Data shows that marketing companies imported 8,000 tonnes of LPG in 2008. The volume had grown to 120,000 tonnes by 2017/18 and Government expects this to rise to 145,000 tonnes annually. Currently, 50% of the LPG imports are consumed in Dar es Salaam and the Coastal Zone; the Northern Zone consumes 23%, the Lakes Zone 12% and the Southern Highland Zone 8%.

Contract reviews and delays
Investor representatives, analysts, commentators and Government officials continue to look forward to the resumption of negotiations concerning the Host Government Agreement that will kickstart the mega Liquefied Natural Gas (LNG) project in Lindi. Those crucial negotiations are being held up whilst Government continues to review and renegotiate the country’s existing Petroleum Production Sharing Agreements, to bring their terms into line with the new natural wealth and resource legislation enacted in 2017.

The Ministry of Trade, Industry and Investment has stated that it is undertaking a similar review of the contracts governing the associated Mchuchuma coal mining and power generation project and the Liganga iron ore project. Those complex projects, said to be worth $3 billion, have so far taken nine years and are still not ready. The current contract reviews are introducing yet another delay. The implementing partner and investor – Tanzania China International Mineral Resource Ltd – has already invested considerable funds in the projects (which were originally expected to be implemented by 2016) and has completed necessary geological, technical and environmental impact work. However, it is understood there have been wrangles over certain tax exemptions on imported project equipment and supplies as well as the provision of other incentives. The investor says the projects are beset by burdensome red tape. However, construction is under way and reports indicate that the project could create 35,000 direct and indirect jobs. It has an expected lifespan of between 50 and 100 years.

ENERGY & MINERALS

by Roger Nellist

A resolution at last – Barrick acquires Acacia Mining
The long drawn out saga of Acacia Mining in Tanzania is at last drawing to a satisfactory close. Acacia was listed in the UK but 64% of its shares were owned by the Canadian mining giant Barrick Gold Corporation. Acacia operated three gold mines in Tanzania – at Bulhanyulu, North Mara and Buzwagi – but under the government of President Magufuli the firm was accused of wide-ranging irregularities, as we reported in earlier editions of Tanzanian Affairs. Last year Acacia was told in no uncertain terms to pack its bags and leave the country.

After high-level negotiations during 2018 and 2019 between the government and Barrick (in which Acacia was excluded) a Framework Agreement was concluded to resolve the politically and commercially explosive impasse. Under the terms of that agreement Barrick would acquire all of Acacia Mining and its assets and then establish a new joint-venture company in Tanzania to run those three gold mines in which government would assume a free 16% shareholding interest and play a direct role in running the operations. Among the other key terms, the economic benefits from the venture would be shared 50/50 between Tanzania and Barrick.

Barrick then sought to buy out Acacia’s minority (36%) shareholders and so become the 100% owner and controller of the former Acacia. Those negotiations took some months but on 17 September 2019, after certain legal processes were completed in Tanzania and in the UK, Barrick officially acquired the remaining Acacia shares in a deal that reportedly valued Acacia at $1.1 billion or more (a substantial improvement on Barrick’s initial offer of $787 million). Acacia Mining shares were immediately delisted and ceased to be tradeable on the London Stock Exchange and trading of them was suspended on the secondary Dar Stock Exchange too.

Tanzania and Barrick then moved quickly to establish their new joint-venture company. It is named Twiga Minerals Corporation (TMC) and was registered in Tanzania by mid-October. Its headquarters will be in Mwanza.

Apparently, though, there might have been some last-minute hiccups since by the end of the year no other details had been made public. Declining to explain why, the Ministry of Minerals did say that the ban on the export of mineral condensates still stood but confirmed that discussions were still ongoing. Commentators have speculated that two of the important matters yet to be fully resolved and holding up the overall new arrangement are the government’s insistence that gold smelting facilities should be established in Tanzania (so that the country can derive greater value-add from TMC’s gold mining operations) as well as the treatment of the former Acacia executives who were jailed last year for alleged money laundering, tax evasion and other crimes (see TA122 and TA124).

Temporary delay in LNG Project
In November 2019 the Tanzania Petroleum Development Corporation (TPDC) announced that the government’s negotiation of a Host Government Agreement (HGA) with the foreign oil companies that will develop the large Liquefied Natural Gas (LNG) project in Lindi had been temporarily suspended. The delay was to allow government to complete its ongoing review of existing Production Sharing Agreements (PSA), which was found to be necessary because some PSA issues apparently contradict or overlap with other contracts. It was not known when the review would be completed and the HGA negotiations could resume but the review was said to be at an advanced stage. However, official sources confirmed that the Ministry of Finance and Planning had already approved TSh 5.07 billion for compensating nearly 700 people who will have to move from the 2,077 hectares in Lindi Region where the LNG complex will be constructed. One of the partners in the project, Shell Tanzania, which also operates two of the offshore licences where large gas reserves have been discovered, said: “The HGA negotiations commenced in April [2019] and are currently on pause…. We are continuing to engage with the government and are supportive of the HGA process as it is an important step in agreeing the key commercial, technical and legal principles for the next phase of this important project”. It is reported that the other project partners, Equinor and Exxon-Mobil, have already invested in excess of US$2 billion in the other gas discovery licence. Equinor Tanzania recently clarified that the LNG project will take up to five years to construct once the HGA negotiations are concluded and should operate for at least 30 years.

More optimistic news on gas
Several government Ministers and officials spoke at the Oil and Gas Congress 2019 that was convened in early October in Dar es Salaam. At it the Minister of Energy, Medard Kalemani, announced that four new licence areas with expected high gas potential were available to the industry for exploration and drilling work. Adjacent to already proven gas reserve areas, they include Ruvu, Western Songo Songo and North Mnazi Bay. According to the Minister they have a gas potential of more than 5 trillion cubic feet (tcf). If proven, the new discoveries would raise Tanzania’s total gas reserves to almost 63 tcf. At the same Congress the Minister of State in the Prime Minister’s Office, Angellah Kairuki, announced that she would shortly be tabling in Parliament a new Investment Bill that would help create a more conducive business environment. Investors should also benefit from the provisions of an Action Facilitation Bill that will create a single law unit across government to implement regulatory reforms (rather than the current Ministry by Ministry differential approach to such matters).

Delegates at the Congress also heard from Charles Sangweni, the acting Director General of Tanzania’s Petroleum Upstream Regulatory Authority (PURA). He explained that the ongoing review of the 11 existing PSAs was to bring them into line with the provisions of the two new major natural resource Acts enacted in 2017. He told the oil industry delegates to expect that government would announce a fifth competitive bidding round for petroleum licenses in about two years’ time when, hopefully, global oil and gas prices would be stronger than now. He envisaged that more than 20 offshore and onshore blocks would then be open to tender from the local and international petroleum industry. The last such bidding round was in 2013. Separately, Sangweni told reporters that Tanzania’s deep offshore areas have higher potential for gas discoveries than onshore ones but that there is a big disparity in the cost of drilling a single well; offshore in deep water a well may cost $100 million whereas an onshore well would typically cost about $30 million. (For comparison, in the early 1980s when various oil consortia were drilling wells onshore Tanzania and at Songo Songo Island a single well cost in the order of $10 million). According to PURA, a total of 96 wells have been drilled in the search for oil and gas in Tanzania to date and 44 of them have made gas discoveries. The vast majority of the other 52 wells, which were dry, were located onshore.

Songas – its plans and contribution
Songas is the Tanzanian company that generates electricity from gas, primarily sourced from the Songo Songo reserves. In round percentage terms it is owned 29% by TPDC, 10% by TANESCO, 7% by TDFL and 54% by UK-based Globeleq. Songas currently generates 180 Megawatts of electricity (which is roughly one fifth of the total power supplied to Tanzania’s National Grid) but in September 2019 announced its intention, subject to regulatory approval by TANESCO, to increase its generation to 250 MW in support of the government’s industrialisation programmes.

That same month Songas paid as dividends TSh 6.6 billion to TPDC and 2.2 billion to TANESCO. The company’s Managing Director, Nigel Whittaker, announced that since 2012 Songas has paid almost TSh 122 billion as dividends to the government and its agencies as well as 139 billion in corporate tax. He added that since the start of its operations in 2004 Songas has saved Tanzania about TSh 11 trillion in displaced fossil fuel imports that would otherwise have been necessary for power generation in the country.

Other extractives news in brief
Over the last two decades Geita Gold Mines (GGM) has been mining gold using open cast surface techniques. However, to improve production and profitability it now needs to switch to tunnelling and other underground mining methods for which its workforce of about 350 people are ill-equipped. Government is insisting that GGM explain what will happen to its current workers, notwithstanding the fact that the switch to underground mining at Geita is predicted to yield some $230 million a year. GGM executives have responded telling government that, although the majority of its workers are likely to be laid off, the company has begun training about 150 in underground mining techniques.

In 2019 the Zanzibar government signed a PSA with RAK Gas, a petroleum company based in the UAE. The agreement provides for oil and gas exploration work to be undertaken in the Zanzibar-Pemba block and aerial and other pre-drilling surveys have so far been conducted. In September the Zanzibar President, Ali Mohamed Shein, visited the UAE and met with the management of the RAK Gas company to be briefed on the initial survey work. On his return to Zanzibar he was at pains to stress that his government was fully committed to the project saying that, contrary to rumours, it does not flout the Constitution.

ENERGY & MINERALS

by Roger Nellist

A milestone for the Stiegler’s Gorge Hydropower project
In April the huge and environmentally controversial Stiegler’s Gorge Hydropower Project on the Rufiji River in the Selous Game Reserve witnessed a major milestone when the Tanzanian government issued Performance Guarantees and made an advance payment of almost US$310 million to the foreign contractor that will be undertaking the project. The contractor is a joint-venture of two Egyptian companies: Arab Contractors and Elsewedy Electric S.A.E.

The Stiegler’s Gorge contract between the Tanzanian government and the Egyptian consortium was signed in December 2018. Two months later, in February 2019, the government handed over the site.

Upon completion the project is projected to generate up to 2,115 MW of electricity for the national grid, adding very substantially to Tanzania’s current generation of about 1,600 MW from all existing power projects. This will provide more than enough electricity to support the growth of the Tanzanian economy in the foreseeable future as the country targets attainment of Middle-Income status during the next decade. Excess power could be exported to neighbouring countries.

The provision of a reliably adequate supply of electricity to support the country’s expanding industrial base is obviously the most important feature of Stiegler’s Gorge, but the government also expects the project to generate some 6,000 new direct jobs. Construction work is scheduled to take 3 years.

The total cost of the Stiegler’s Gorge project is put at around US$3 bil­lion. At the payment ceremony in April in the Ministry of Finance it was explained that the $310 million was the (70%) foreign exchange component of the agreed total Advance Payment due under the project contract; the remaining 30% local currency portion will be paid once the contractor has finalised certain contractual processes. The Advance Payment constitutes 15% of the total project cost and allows the contrac­tor to mobilise and commence construction work.
It is understood that the project is to be fully funded by the Tanzanian government. In his June 2019 Budget in Dodoma the Finance Minister, Phillip Mpango, allocated 4% (TSh 1.44 trillion; approx. US$600m) of the national budget towards construction of the Stiegler’s Gorge project in the coming year.
Responsibility for the Stiegler’s Gorge power project rests with the Ministry of Energy. At the end of May in his own Parliamentary budget session, the Minister for Energy, Dr Medard Kalemani, also tabled project funding requirements for his Ministry in the coming financial year of TSh 363 billion for the third phase of the Rural Electrification Agency (REA) and TSh 60 billion for the extension of the Kinyerezi 1 gas-to-power project.

Government piles on the pressure on Acacia Mining and Barrick Gold
With apparently little recent news of interest concerning Tanzania’s petroleum exploration and development activities, the country’s extrac­tives news is dominated by the continuing saga over Acacia Mining and the efforts by its Canadian parent company – Barrick Gold – to sort out the complicated situation involving Acacia and the Tanzanian government. It is a long-drawn-out saga, with big reputational and financial implications for the two international corporates as well as the government. Acacia Mining (listed on the London Stock Exchange) is Tanzania’s largest gold producer and Barrick is one of the world’s major gold mining companies.

Acacia has been accused of massively under-reporting gold exports, of smuggling out gold concentrates, of underpaying taxes, of operating and concealing foreign accounts, of not respecting other important pro­visions in its Mining Development Agreements and generally of poor management at its three operational gold mines in the country (includ­ing of adopting a high-handed manner in its community relations and failing to comply with environmental laws). As a consequence, in 2017 and 2018 the government banned further gold concentrate exports by the company and demanded back payment of taxes amounting to a staggering US$190 billion. Last year, a few senior Acacia employees were also arrested and jailed.

In an attempt to resolve matters, Barrick then engaged directly in high-level negotiations with the government, excluding Acacia from all the discussions. A cooperation framework agreement was reached at the end of 2018 in which it was anticipated that the future economic benefits derived from Acacia’s gold mining operations would be shared with the government on a 50/50 basis and that an early payment of $300 million would be made by Acacia to government “to resolve outstanding tax claims”. However, unhappy at being excluded, Acacia then challenged those proposed arrangements, asserting that its own Board must first approve them. Apparently, it has also launched an arbitration case against the government through an international tribunal.

However, in the middle of May 2019, with no payment yet made and final terms not quite settled, the government further ratcheted up the pressure on Acacia and Barrick by announcing in a letter to the com­pany’s three gold mines (at Bulhanyulu, North Mara and Buzwagi) that it would no longer recognise any agreements with their holding company, Acacia. In a news statement the government spokesman, Dr Hassan Abbas, announced that Acacia was “operating as a rogue company that was disdainful of the Tanzanian authorities and the laws of the land”, adding that “Acacia management is loathed” and “The government does not want the presence of Acacia in any form in the country”. Perhaps ominously, Abbas said that Acacia stood in the way of the government reaching an amicable deal with Barrick and chal­lenged Barrick to sort out the problem or risk not concluding a deal. Declaring Acacia “unwanted in Tanzania” the government told Barrick: “Solve Acacia or no deal”. The government made clear it expects a new mining operating company to be established in which it has a share and there is no presence or involvement whatsoever by Acacia.

With media headlines like “Why Tanzania wants Acacia to pack and go”, Barrick – which holds 64% of Acacia’s shares – then moved quickly to affect a full take-over of Acacia, seeking to buy the remaining 36% shareholding. It proposed to do so by offering Barrick shares to Acacia’s minority shareholders in a shares-swap, but at a discount on the current share trading price. The proposal valued Acacia at about $787 million. However, at the end of June Acacia rejected that bid, accusing Barrick of trying to take advantage of its troubles. More optimistically, though, it did signal that acquisition of its minority shares by Barrick at a fair price “would be an attractive solution” to its Tanzanian impasse.

ENERGY & MINERALS

by Ben Taylor

Still waiting on Acacia settlement
The long-running dispute between the government of Tanzania and Acacia Mining continues to drag on, though some parties have expressed optimism that an agreement may be close. The dispute relates to a US$ 190 bn tax bill demanded of Acacia by the government in 2017, citing claims of massively underreported mining output.

Speaking in February, the Minister of Constitutional and Legal Affairs, Prof Palamagamba Kabudi (who has more recently become Minister of Foreign Affairs), suggested a payment from Acacia and/or its majority shareholder, Barrick Gold, could come as early as March.

Around the same time, Barrick released a statement confirming that it and the government had “arrived at a proposal” that sets out the commercial terms to resolve the dispute. The Barrick statement added that this agreement is consistent with the agreement announced in October 2017, including economic benefits from Acacia’s operations to be shared with the government of Tanzania on a 50/50 basis, and a US $300m payment to the government “to resolve outstanding tax claims, to be paid over time on terms to be settled by the parties.”

Acacia itself has not been part of the negotiation process and issued a statement in response, reiterating that it had not yet seen the suggested deal with Tanzania.

Prof Kabudi’s anticipated March payment did not materialise, and in mid-March, the Tanzanian Attorney General, Adelardus Kilangi, said he anticipated the deal would be agreed with 1-2 months. He added that the appointment of a new CEO of Barrick Gold, Mark Bristow, in January 2019 had aided the negotiation process.

Analysts for RBC Capital Markets think Acacia minority shareholders do not have much choice in this case. If they reject the deal agreed, Acacia would land up facing expensive and lengthy arbitration hearings. Accepting the agreement could open the possibility of securing a better operating environment, one that would almost certainly be more profitable that the current situation, as the companies mining operations have been drastically scaled back. Accepting the agreement could also secure the release of Acacia’s employees from a Tanzanian jail.

At the time of writing (April 20), the situation remains unresolved – with Acacia’s shareholders yet to reach a decision on whether to back to the deal agreed between Barrick and the government.

Uganda-Tanzania oil pipeline construction expected to start in June
Energy Minister, Medard Kalemani, announced at the end of January that construction of an oil pipeline connecting Hoima in Uganda with Tanga on the Tanzanian coast was scheduled to begin in June this year. He was speaking following a meeting between Tanzanian and Ugandan officials in Kampala.

The execution of the 1,445 km long underground crude oil pipeline from Hoima in Uganda to Tanga in Tanzania will cost an estimated US $3.5 billion. It is expected to have the capacity to transport 216,000 barrels of crude oil every day. It will be 24 inches in diameter, and Uganda will pay Tanzania a reported $12.20 for every barrel of oil that flows through the pipeline. It will also be constructed in a way that enables it to heat the crude oil. On completion, it is expected to become the world’s longest heated oil pipeline.

Since the project’s inauguration in August 2017, there have been a series of technical meetings between the governments of the two countries but there were a number of issues that had not yet been addressed. Before the meeting in Kampala, Uganda’s Minister for Energy and Mineral Development, Irene Muloni, explained that the financial arrangements were one of the major reasons for the delay, setting back the goal of transporting oil by 2020.

The three principal companies involved in the project are Total Oil of France, China National Offshore Oil Corporation and Tullow Oil of the UK.

Liganga-Mchuchuma coal and iron project in dispute
In February, the government reignited a controversy surrounding the US $3 bn iron and coal Liganga-Mchuchuma project in Southern Tanzania, by signalling its intent to cancel the licence held by a Chinese company.
Minerals Minister Doto Biteko said the Mchuchuma-Liganga licence was troubling them and should be resolved forthwith. He instructed the National Development Corporation (NDC) to “rectify mistakes” in the mining agreement within 30 days.

The project is jointly implemented by NDC and Sichuan Hongda Group through a local venture called Tanzania China International Mineral Resources Limited (TCIMRL).

Mr Biteko said there were numerous investors ready to invest in the stalled Mchuchuma-Liganga project. The minister declared that he would be ready to shoulder the burden on the licence which has accumulated an unpaid royalty of $375,000 (over TSh 840 million).

TCIMRL responded by appearing to fault the government for not providing the promised tax incentives to ensure the implementation of the project, which it described as “risky”.

The company’s deputy chief executive officer, Eric Mwingira, told The Citizen that the project, whose contract was signed in 2011, would be up and running by now had the government not delayed.

According to Mr Mwingira, the company was asking for a 10-year tax relief for a project whose lifespan stretches between 50 and 100 years. He said the company was seeking tax incentives on import duty on cargo to be imported for the construction work, as well as incentives on spare parts and machinery and tax relief on fuel.

He said the Ministry of Finance and Planning was yet to gazette the investment incentives approved by the National Investment Steering Committee (NISC) and enshrined in the two signed performance contracts to make them legally operational. “We have been following up with the government, in meetings and letters but so far nothing has happened and we can’t drop the incentives because the projects are very risky and we can only hope that matters will open up soon as we have spent about $70 million and continue to lose,” he said.

He added that if the incentives had been endorsed as planned, Mchuchuma coal mine and power plant construction would have been completed more than three years ago, producing electricity, while the Liganga iron ore mine’s four-year construction period would have been almost complete.

Mchuchuma is said to have 428 million tonnes of coal while Liganga has 128 million tonnes of iron. The Chinese company’s plans include both mining and generation of 600MW of electricity. All the minerals will be processed locally to separate titanium and vanadium from iron ore.

The Liganga-Mchuchuma project has for many years been listed as a strategic national development investment but was in 2018 dropped from the list by finance minister Philip Mpango. TCIMRL was expected to invest $1.8 billion to establish an iron ore mine and iron and steel complex. Its power plant would be run by coal, with 250MW used for the industry and 350MW connected to the national grid.

Waste water spill at Mara North
In a development that cannot help in resolving the ongoing dispute between the government and Acacia Mining, a waste water leak occurred in March at the company’s North Mara gold mine. The toxic waste water was leaking from a waste rock storage facility and threatened to pollute local communities and their water supply.

Minerals Minister, Doto Biteko, gave the company three weeks to resolve the situation or face the mine being closed down. “The life of even one Tanzanian is worth more than their gold mining activities,” he told Reuters news agency.

Acacia issued a statement: “The spillage resulted from a security incident in which sections of the pipe used to transport water from the polishing pond to the Tailing Storage Facility (TSF) were either vandalised or stolen. The incident led to the switching off of the pump used to transport water to the TSF, and the water level in the polishing pond subsequently overflowed. Following the Mine’s remedial actions, the temporary overspill from the pond has been stopped.”

“The Mine has welcomed the support of the Government on resolving this issue, and is working closely with the authorities to implement improvements to security measures around the polishing pond in order to help prevent any reoccurrence.”

ENERGY & MINERALS

by Roger Nellist

Tanzania’s mining sector turmoil continues
The ban on the export of mineral concentrates that the government imposed in early 2017 is still in force and has hit the country’s major gold producer, Acacia Mining, hard. The company has been forced to stockpile its output, especially from its Bulyanhulu gold mine, and as a result this year has suffered a big drop in its revenues and cash reserves. In an effort to contain costs Acacia initiated in the summer a process of voluntary redundancies but in September, in a leaked internal memo from the company’s Managing Director, Mr Assa Mwaipopo, employees were told that it had become necessary to adopt a compulsory retrenchment scheme, beginning that month with a staff consultation process. Employees would be consulted on the staff retrenchment selection criteria, the timing of lay-offs and the terms of the severance package. It is understood that this is the second time that Acacia Mining has retrenched its Tanzanian workforce since the government’s mineral export ban came into effect.

Acacia’s parent company – the Canadian (Toronto based) Barrick Gold Corporation – owns 64% of Acacia Mining and this year has itself embarked on a massive staff reduction programme. Barrick’s Executive Chairman, John Thornton, said in September that he was seeking to achieve a leaner organisation and that, having slashed middle management by half to about 700, “we want to get it down to 300”.

In October, industry reports suggested that Barrick wished to take back full ownership and control of Acacia Mining, though it was uncertain whether that meant all three of Acacia’s Tanzanian gold mines or just Bulyanhulu. (The other two mines that Acacia operates are North Mara and Buzwagi). Estimates then put the value of the remaining 36% stake in Acacia at about $300 million. However, the potential buy-back was thought to be complicated by two big issues. First, Barrick was in merger talks with Randgold Resources, its big African gold producing rival, and needed to finalise that mega deal (rumoured to be worth more than $18 billion) before the merged group could find solutions to the Acacia Mining problem. Also, Barrick had just concluded a 50-50 deal with the Shandong Gold Corporation, a large Chinese mining company, under which each company will purchase 50% of the other’s shares. The Chinese deal is important for Tanzania because it can bring additional capital, technical expertise and importantly political connections. Thornton commented: “It’s one thing to be a Canadian company. It’s another to have China as your partner”. The second complicating issue is that Acacia is still in dispute with the Tanzanian government over its earlier concentrate exports and the bill it has been handed of $190 billion in unpaid taxes; Barrick has been trying to resolve the dispute and is unlikely to want to take back full ownership of Acacia until those major matters are settled.

But that is not the only problem Acacia Mining faces. In late October Mr Mwaipopo (the company’s Managing Director) appeared in court in Dar es Salaam charged with several serious criminal offences including money-laundering, tax evasion and forgery. The executive denied all charges but was remanded. He is one of three senior Acacia officials facing charges at the Kisutu Resident’s Magistrate Court, all of whom deny the charges. The other two are Acacia’s former Vice President for Corporate Affairs, Deo Mwanyika, and the Bulyanhulu gold mine’s Corporate Relations Manager, Alex Lugendo. The charges claim that in one transaction, $719 million was transferred into the account of a government official.

Acacia Mining issued a statement in response to these and other matters. “In light of recent developments in Tanzania,” the statement read, “the Company is now considering its position including in particular with respect to the Government actions and the charges now being brought.”

More work for the TEITI
At the end of October in Dodoma the Minister for Minerals, Ms Angella Kairuki, launched the Board of the Tanzania Extractive Industries Transparency Initiative (TEITI) and commissioned it to compile a special register detailing the ownership, shareholders, revenue and income of Tanzania’s extractive companies and operations. Acknowledging that this would not be an easy task she emphasised that such a register was essential to enable Tanzanians to know who owns what and for the government to satisfy itself that the country is obtaining its rightful share of the revenues generated from mineral, gas, and perhaps eventually oil, production. The Minister announced that some regulations would be changed to ensure that the TEITI can audit the extractive operations thoroughly. The TEITI Board is chaired by the former Controller and Auditor General, Mr Ludovick Utouh.

ENERGY & MINERALS

by Roger Nellist

Ministry split, new Ministers appointed
In October 2017 following the mineral sands export saga, enactment of the controversial new mining and petroleum legislation and the dismissal of the former Minister for Energy and Minerals, President Magufuli divided the Ministry of Energy and Minerals into two portfo­lios and appointed new top teams.

Tanzania’s new Minister for Energy is Dr Medard Kalemani, supported by Ms Subira Mgalu as Deputy Minister and by Mr Khamis Mwinyi Mvua as Permanent Secretary. Tanzania’s new Minister for Mining is Ms Angellah Kairuki, supported by Deputy Minister Stanislaus Nyongo and by Mr Simon Samuel Msanjika as Permanent Secretary.

Statoil renamed as Equinor
Meanwhile in May the large Norwegian State oil and gas company Statoil – which has discovered large gas reserves offshore Tanzania and is a key partner in the potential liquefied natural gas (LNG) project – announced it had formally changed its name to Equinor. The new name reflects the company’s values (of equality and equity) as well as its continuing Norwegian presence. The move comes at a time when it is increasing its efforts to develop new and renewable forms of energy.

LNG project in the doldrums
In recent years, large gas discoveries (estimated at about 57 tcf) have been made offshore southern Tanzania and during the last two or three years the government and the Tanzania Petroleum Development Corporation (TPDC) have been in discussions with the principal discov­erers – Shell, Exxon Mobil, Ophir Energy and Equinor (Statoil) – with a view to building a large LNG export terminal onshore at Lindi. It will be a huge investment, costing an estimated US$30 billion. However, progress on realising the project has slowed recently and various factors are being cited for this.

The investors are blaming government for the bureaucratic procedures they face in acquiring land to build the plant on as well as the uncer­tainty introduced into the overall energy regulatory environment by the tough new legislative provisions. (See articles in earlier TA bulle­tins). Crucially, the Host Government Agreement terms have yet to be agreed, without which the LNG project cannot proceed. Further uncer­tainty arose this summer when Exxon Mobil indicated it was seeking a buyer for its 35% interest in the big gas reserves in Tanzania’s offshore deep water Block 2 (where Equinor, the operator, holds 65%). There have also been worries about the substantial fall (by about one third) in world gas prices since 2015.

Observers suggest that relations between the gas developers and the government are strained and that a final investment decision on the Tanzanian LNG project seems unlikely before the early 2020s. To help move matters along, in April TPDC announced it was recruiting inter­national advisers to assist it to formulate an appropriate commercial framework for the project.

Three critical parliamentary committee reports
In Dodoma in May the Parliamentary Energy and Minerals Committee criticised the Ministry of Energy for its slow progress in implementing the LNG project, and called on the government to fast-track its negotia­tions with the investors – so as not to lose crucial overseas gas markets to competition from other major gas producers. They pointed to neigh­bouring Mozambique, which has gas reserves three times larger than those so far discovered in Tanzania and is also more advanced with its gas commercialisation plans.

In response, Minister Kalemani told Parliament that government was still in discussions with the multinational investors and that conceptual design work and initial project evaluation had been completed. He said government had already budgeted TSh 6 billion to fund pre-front end engineering design of the LNG plant as well as to compensate people affected by the project.

Then on 25 June Dr Kalemani told Parliament that “everything is pro­gressing well” and that actual construction of the LNG plant would start in 2022. He said the multinational investors were currently com­peting among themselves to determine which of them will lead the project execution.

On a related gas matter the same Committee also criticised his Ministry for the slow speed at which it was connecting homes in Dar to the gas supply. Minister Kalemani responded saying that 70 homes were already connected, another 1,000 would be served in the near future and that TPDC would be spending about TSh 21 billion next year putting in place the necessary infrastructure to supply a further 2,000 homes.

Also in June the Parliamentary Budget Committee asked government for an analysis of the reasons for the fall in exploration activity in Tanzania in the last year. No new wells have been drilled and con­cerns were heightened by the unsettling reports in June that Exxon Mobil was seeking to leave Tanzania in favour of a bigger LNG project in Mozambique. Minister Kalemani told Parliament: “It is true that Mozambique is doing well but Tanzanians should also understand that we are not very far from that stage”. TPDC sought to reassure stake­holders and the public about the Exxon Mobil sell-out too, commenting that such a move was normal business practise for the big multination­als, adding: “when it comes to energy investment never be in a hurry. This might just be a change of strategy or change of management”. An Equinor (Statoil) spokesman confirmed that they were proceeding with business as usual, having already invested a very large sum of money in Tanzania drilling 15 wells (and making nine discoveries).

In June too a special Parliamentary Committee that was established at the end of last year to investigate the 11 Production Sharing Agreements so far signed with government reported that gas is being produced under only three of them. Naming the five former Energy Ministers who signed all the agreements with TPDC and various international oil companies, the Committee asserted that what it viewed as shortcomings and loopholes in the terms were resulting in financial losses to govern­ment amounting to hundreds of billions of shillings. In particular, the Committee pointed to the supposed lopsided nature of the provisions in the various agreements with Songas and advised government not to renew the power production and gas drilling contracts with Songas when they expire in 2024. It highlighted the various assets of TANESCO and TPDC that were effectively given free to Songas in return for which the Committee believes those two parastatals were not awarded adequate shareholdings in the project.

The Attorney General responded, telling Parliament that government was now reviewing all the contracts with Songas. But Pan Africa Energy Tanzania – the developer and operator of the producing Songo Songo gas field and Songas – expressed concern at the “inaccurate findings and allegations” made by the special Committee, stating it had com­plied with the terms of its agreements with government and pointed to its impeccable operational record and the significant economic benefit its operations had already brought to Tanzania.

Other petroleum and mining sector problems
In April, Swala Oil and Gas declared ‘force majeure’ under the terms of its Kilosa-Kilombero Production Sharing Agreement with government and TPDC, saying it was “disappointed and frustrated” by the demand for it to undertake a special environmental impact assessment (EIA) of the likely implications for the proposed Stiegler’s Gorge hydropower dam of the company’s use of water during the drilling of its first explo­ration well (Kito-1) next year. The government has already approved an EIA that Swala undertook in 2017 and the amount of water to be con­sumed in the drilling of the well will be a tiny fraction of that pertaining to the dam. Swala has so far spent more than $20 million exploring for oil and gas in Tanzania.

Given the continuing ban on the export of gold and copper concentrates, Acacia Mining Tanzania announced in April that during 2018 it will be producing 40% less gold than it did in 2016 and, with no end then in sight to the ongoing discussions between its parent – Barrick Gold – and the government, the company was being forced to cut costs and unfor­tunately would have to lay off an unspecified number of workers at its Tanzanian mines. Acacia employs about 2,800 workers in the country, 96% of whom are Tanzanian.

In June the Minister for Constitution and Legal Affairs, Prof Palamagamba Kabudi, told Parliament during the debate on the Ministry of Minerals’ budget that the ongoing discussions between government and Barrick “are in the final stages and things are in good order”; however, the US$300 million good faith payment to Tanzania promised earlier by Barrick/Acacia will only be paid once the discussions are concluded.

In a Canadian (Fraser Institute) global mining survey of 2,700 mining companies operating around the world, Tanzania’s perceived ‘mining investment attractiveness’ dropped 19 places on the world listing, fall­ing from 59th position in 2016 to 78th position last year. The substantial deterioration is blamed on the adverse legislative changes in 2017 (especially their retrospective application) and on what some inves­tors in Tanzania see as excessive and random taxation of their mineral operations. Of the 91 countries surveyed 15 were African and Tanzania ranked only 12th out of the 15 – behind Ghana, Mali, Botswana, South Africa, DRC, Namibia, Zambia, Morocco, Zimbabwe, Burkina Faso and Ivory Coast, and only a little ahead of Ethiopia, Mozambique and Kenya (the worst).

Some good news: Miombo Hewani Wind Farm
In June, Windlab Limited announced that its Tanzanian subsidiary will be constructing a large wind turbine farm with associated electri­cal infrastructure at a location in Southern Central Tanzania close to Makambako (where it will connect with the national grid). The Miombo Hewani wind project will be built in phases and now has approval for a total generating capacity of 300 MW. The first phase (costing US$300 million) will involve the construction of 34 wind turbines that will deliver about 100 MW of electricity, also creating jobs and extra income in Njombe Region. This wind project will therefore add significantly to Tanzania’s current power generation capacity of just over 1,300 MW (comprising 560 MW of hydropower and 750 MW of thermal gas and diesel), importantly also diversifying the generating source.

In making the announcement the CEO of Windlab Limited, said: “We are very pleased to receive the first Environmental and Social Impact Assessment certificate for a wind farm in Tanzania. In developing Miombo Hewani, Windlab has applied the industry best practices and experience it has gained from developing more than 50 wind energy projects across North America, Australia and Southern Africa”. He added that Miombo Hewani enjoys an excellent wind resource, one of the best in the world. Moreover, the wind pattern there is biased towards night time generation and generation during Tanzania’s dry season, making it an ideal addition to Tanzania’s current and planned electricity generation mix. Windlab Tanzania said that the wind farm is expected to operate for at least 25 years and should generate enough power to supply nearly 1 million average Tanzanian homes.