‘Makinikia’ and economic liberation: The untold story – 8

 

By Dr Dalaly Peter Kafumu

Summary

·         Civil society organisations questioned the government’s intention to review the policy and law.

This week we continue dissecting the Makinikia story by examining the

continuing mining industry review process that came with a lot of stakeholders’ reactive pessimism; on one hand mining companies (investors) were worried that it would erode incentives for foreign investments and discourage investment.

On the other hand, civil society organisations questioned the government’s intention to review the policy and law as they thought the process would not do much in getting rid of the alleged “too much” incentives to foreign investments in favour of local investments.

The enactment of the Mining Act was therefore shrouded in tension and tug of war between investors on one hand and civil society organisations on the other hand each camp suspecting the other side of foul play.

The government played its regulating role between the two groups and In the midst of this tension the Mining Act was finally enacted by the Parliament in 2010 to interpret the mineral policy.

Nevertheless, the review process was a success as the Fourth Phase Government concluded the protracted review process by designing a new Mineral Policy of Tanzania 2009 and the enactment of Mining Act, 2010. 

These new policy and law pushed for more benefits to the citizens and the country but did not deviate from the previous policies that wanted to invite technology and capital investment from abroad but with a local private sector essential participation.

The Act was signed by the President and published on the 1st November 2010 to regulate exploration, mining, mineral processing and beneficiation, and mineral trading in Tanzania.

The Mining Act, 2010 was therefore a key document that was to ensure the Mineral Policy of Tanzania, 2009 was rightly implemented.

In the Tanzania Mineral Policy of 2009, the government’s objective continued to be attracting and enabling the private sector to take a lead in exploration, mining, mineral beneficiation and marketing; with an endeavour to increase the mineral sector’s contribution to the GDP and alleviate poverty.

The Mineral Policy decreed to promote local content strategy by promoting State and Tanzanians participation in mining activities. 

Inventors (mining companies) were obligated to ensure rightful compensation, relocation and resettlement of people displaced by mining projects.

The policy also required mining companies to procure goods and services locally; and promoting Tanzanians to supply quality goods and services to the mining industry.

On part of the government, the policy directed the government to develop and implement coordinated programs to increase integration of the industry with other sectors of the economy.

It directed the government to collaborate with the private sector to develop essential infrastructure in areas where there is a potential for establishing a new mine as well as invest in strategic mining projects.

It was also the obligation of the government to promote mineral value addition in order to expand mineral value chain and develop artisanal and small scale miners by availing to them capital and markets.

The Mining Act, 2010 that was enacted to implement the policy required mining companies to submit to the government local procurement pans and staff training and localisation plans to ensure mines management is in the end placed under local expertise.

The law also requires mining companies to ensure all mining projects grants a free carried interest that would be negotiated depending on project specifics on profitability.

Royalty on minerals was raised from 3 percent on net back value to 4 percent and 5 percent (diamonds) on gross value.

The Mining Act, 2010 also assured the protection of large capital investment through Mining Development Agreements (MDA) by providing a fiscal stabilisation clause that stabilised royalties, taxes, duties and other imposts for the life of the mine, short of which an unstable regime may have not guarantee return of investments on long-term large scale investments.

Furthermore, MDAs also set and imposed additional project specific conditions on environmental management requirements not covered in environmental regulations to ensure proper environmental protection.