THE year 2017 under
the administration of President John Magufuli has been described as a
turning point for the country's mining sector which has seen Tanzanians
today
earn their fair share of mineral resources.
The fifth phase
government's determination to transform the mining sector has led to
various steps that have been taken, including banning gold and copper
concentrates exports, the formation of special presidential committees
and negotiation teams to ensure the country benefits from its natural
resources.
During this time
the Parliament also passed three laws which significantly increased
government control of minerals, oil and gas resources.
Among others, the
laws have increased the royalty rate on gold from 4-6 per cent and have
allowed the government to own a 16-per cent share of mining companies'
stock without compensation.
Dissolving the 11th
sitting of Parliament, President John Magufuli said the mining sector
had undergone major reforms in the past five years of his
administration, including the formation of the Ministry of Minerals,
control mineral smuggling and export of raw minerals.
"The most
significant change is the endorsement of the Natural Wealth and
Resources (Permanent Sovereignty) Act, 2017, including minerals,"
President Magufuli said.
The law requires
Parliamentary approval for future investor-state agreements, which must
"fully secure" the interests of Tanzanians and restrict investors from
exporting raw minerals, repatriating funds and accessing an
international dispute resolution mechanism.
He said the law had enabled Tanzanians for the first time to own their resources through legal powers.
"It has also
facilitated the establishment of Twiga Minerals Company whereby the
government owns 16 per cent shares while Barrick owns 84 per cent."
President Magufuli
further said changes in the mining laws had also facilitated the payment
of $100m in May this year as the first tranche of the $300m settlement
the Canadian mining firm agreed with Tanzania to resolve a dispute it
had inherited from Acacia Mining.
Tabling the budget
estimates for 2020/21 for the Ministry of Minerals, Minister Doto Biteko
said the passing of the mining laws had strengthened the mining sector
and increased its contribution to the country's revenue.
"Amendments to the mining laws have enabled Tanzanians to benefit from their national resources," he said.
The changes began
early March in 2017 after President Magufuli banned the export of gold
and copper concentrates, following his suspicion of the declared value
of mineral sand.
The ban on the
transportation of mineral sand overseas resulted in the formation of the
first probe team to investigate the amount of minerals present in
exported sand and its value. The eight-member team led by Prof
Abdulkarim Mruma comprised experts in geology, chemicals and scientific
analysts.
A few days later,
President Magufuli formed the second probe committee led by Prof
Nehemiah Osoro to investigate the legal and economic impact on mining in
respect to the impoundment of 277 mineral concentrate containers which
were due for export by Acacia.
The first committee revealed how Tanzania was losing trillions of shillings in revenue by exporting mineral concentrates.
According to a
report, the amount of gold per tonne found in the mineral sand was
between 671 - 2,775g, translating to between 7.8 tonnes to 13.16 tonnes
for all 277 containers which were detained at the Dar es Salaam Port.
"If we take 23.1
tonnes as the weight of the container as opposed to the standard 20
tonnes, you find that there are 15.5 tonnes of gold in all 277
containers, which translates into two lorries and one pickup truck loads
of gold," said President Magufuli while receiving the report.
The committee
recommended the government to reinforce the ban on mineral sand exports
until the right royalties were paid to the country and ensure smelters
were constructed in Tanzania to maximise the full value of minerals
produced.
It also proposed
that disciplinary action should be taken against officials in the
Ministry of Energy & Minerals (MEM) and in the TMAA.
The second report
presented to the Head of State on the economic impact of mineral sand
revealed between 44,000 and 61,000 containers of gold and copper
concentrates had been exported between 1998 and March 2017, most
emanating from two mines run by Acacia (formerly Barrick Gold).
It estimated losses
in government revenue running into trillions of shillings over the two
decades-through the under-declaration of both export volume and value of
gold and copper concentrates. It revealed how Acacia Mining evaded tax,
occasioning a loss amounting to trillions of shillings to the
government.
The report said the
amount of unpaid taxes between 1998 and March 2017 through illegal
exports of gold and copper concentrates was between 68.59tri/-and
108.5tri/-.
The two reports necessitated the amendment of the country's mining laws which increased government control of the mining sector.
President Magufuli,
however, directed Acacia Mining to pay billions of shillings in royalty
and tax arrears arising from its activities since 1998 if it expected
to continue operating in the country, but later on Barrick Gold
Corporation-Acacia's largest shareholder declared that it was ready to
negotiate and pay the dues.
Barrick Gold
Corporation Executive Chairman, Prof John Thornton, who flew by his
private jet to Dar es Salaam in mid-June 2017, assured President
Magufuli his company was willing and ready to hold talks with Tanzania
based on a win-win situation to ensure the evaded tax was settled.
The development led
to the formation of a negotiation team led by then Minister for
Constitutional and Legal Affairs, Prof Palamagamba Kabudi, who started
talks with Barrick Gold Corporation officials early August 2017.
The negotiations
between the two parties were finally concluded in October last year 2019
after Tanzania and Barrick agreed to form a new company-Twiga Minerals
Corporation-to manage Bulyanhulu, North Mara and Buzwagi mines as one of
the strategies to settle all disputes.
The parties also
agreed Barrick to own 84 per cent and Tanzanians, through the
government, to control 16 per cent of Twiga Minerals.
Other terms of
agreement included the payment of $300m (about 700bn/-) to settle all
outstanding tax and other disputes and the lifting of the concentrate
export ban, sharing of future economic benefits from the mines on a
50/50 basis.
Finally, early this
year, Tanzania and Barrick Gold Corporation signed agreements that
opened a new chapter in the country's mining sector by granting the
government ownership of 16 per cent of undiluted shares in the newly
incorporated Twiga Minerals Corporation.
The agreements
between the government and the Canadian company marked the end of the
tax dispute negotiations between the two parties and set a precedent for
the issuance of future mining licences.
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