INTERVIEW: Mining investment outlook ‘bright’

The Minister for Minerals, Mr Doto Biteko, held an interview with Mwananchi Communications Limited journalists on Thursday,

April 25, 2019. Excerpts:

Question: In 2017, the government enacted new laws on natural resources. It also amended six laws – including the Mining Act, Cap. 123 through the Written Laws Miscellaneous Amendments) Act, 2017 – to address several challenges that had been identified as preventing Tanzania from yielding maximum returns from its natural resources. However, mining companies said the laws would scare investors away. How has the going been so far?

Answer: So far so good. Some people continue to think that the changes would scare investors from the mining sector, but the good news is that the number of investors seeking to inject their cash into the sector is on the increase.

How can you justify your statement that the number of investors seeking to inject their money into the sector is increasing?

Three foreign investors will soon invest over $300 million (about Sh700 billion) in the mining sector. Each has applied for a special mining licence requiring an investor to invest a minimum investment capital of $100 million into a project.

It should be noted that we have not issued a special mining licence in 19 years, and this is because such investments require huge sums of money.

Currently, mining concerns with active special mining licences are North Mara, Buzwagi and Bulyanhulu gold mines.

Due to its sensitivity, this kind of licence is approved by the Cabinet ministers only, not the Minerals Commission.

What else do you have to show investors’ increasing interest in the mining sector, if any?

We have received a number of enquiries through our embassies in various countries where investors are showing keen interest in Tanzania’s mining sector.

We have held preliminary talks with potential investors from Canada, Russia, India and China.

We have also had discussions with investors seeking to invest in big projects including Kabanga nickel, whereby at least nine have applied for prospecting licences.

We have held discussions with those seeking to invest in niobium mining in Panda Hill, Mbeya, and helium extraction in Lake Tanganyika, among others.

So far the good, but what are the reasons behind investors’ growing appetite for mineral resource exploitation in Tanzania?

We are trying our best to improve the business environment by cutting red tape and cracking down on corruption.

Investors now understand that the government’s goal to change the laws was not to milk them dry, but to create an environment for a win-win situation. That is why they keep coming.

How many mining licences have been issued since the enactment of the new laws on natural resources in July 2017?

Before the establishment of the Minerals ministry (President Magufuli split the then Ministry of Energy and Minerals and formed two independent ministries in 2017) there were over 12,000 pending licence applications. They were pending due to changes in the law, which also resulted in the establishment of the Minerals Commission which is vested with powers to approve all licence applications except special mining licences, which must be approved by the Cabinet.

The commission went through all applications and until March, 2019, it had approved 7,320.

The main reason for changing the laws was that the country was being short-changed by investors. What is the situation so far?

Things have improved. Revenue collection through royalties, inspection fees and annual rent from the sector have increased significantly.

In the past, we were collecting Sh196 billion in revenue annually, but during the last financial year we garnered Sh310 billion. We plan to collect Sh470 billion in the current fiscal year.

Let me assure you that we have what it takes to collect over Sh470 billion, and my team and I are well prepared to ensure that we walk the talk on this.

How will you do that?

If we close loopholes for theft and smuggling and create an enabling environment for mineral trade in formally recognised markets, revenue will definitely go up.

What is the government’s strategy to ensure that traders have easy access to reliable markets?

The Prime Minister (Kassim Majaliwa) has directed that all formal mineral trading centres be operational by June 30, this year.

So far, it is only the trading centre in Geita which is operational.

Yesterday (Wednesday, April 24), I was in Geita where the Geita Town Council director informed me that he collects up to Sh15 million per day in service levy. Some 0.3 per cent of the turnover goes to local councils.

In the past, it could take up to a year to collect the same amount.

Upon their completion, the trading centres will ease and control the buying of minerals and ensure mineral traders pay the required dues to the government.

What’s about corporate social responsibility?

With changes to the Mining Act, Tanzanians are now more protected when it comes to corporate social responsibility.

Previously, it was an investor who decided what to do. It was not an obligation.

This is attributable to the fact that contracts, which we entered into with investors, gave them the freedom to decide whatever they wanted.

They could say, for instance, that they built a classroom for Sh100 million whereas, in fact, the actual amount spent was only Sh17 million. With changes to the laws, CSR must now be approved by the council where mining activities take place.

Recently, President John Magufuli directed the Bank of Tanzania to start buying the country’s gold to curb smuggling and build reserves to stabilise the local currency. What is the progress on this?

BoT does not buy gold which has not been refined. It should have a purity of at least 95 per cent, but in most cases the purity of small-scale miners’ gold hovers around 60 and 80 per cent.

What are you doing instead?

The Head of State directed us to welcome investors who would invest in refineries for the purification of gold.

We acted quickly and so far some 27 investors have shown interest in setting up smelters and refineries.

Fifteen firms came for presentation and five – two owned by Tanzanians and three owned by foreigners – qualified for the task. They have already applied for the relevant licences.

Contribution of the mining sector to gross domestic product (GDP). The government wants this to increase to at least ten per cent by 2025. What strategies are in place to ensure the realisation of this goal?

Firstly, we are helping small-scale miners by providing them with the right to own mining sites. This is contrary to the past where large investors hoarded almost all sites without developing them.

Secondly, we are helping the realisation of the goal through the creation of mineral trading centres.

Thirdly, we are assisting them on research, which accounts for the lion’s share of mining operational costs. Fourthly, we have created centres of excellence in seven regions where small-scale miners are trained on how to conduct advanced mining.

All these efforts aim at improving the economy of small-scale miners and that of the country at large.

Does the government face any challenge insofar as attracting investors to the mining sector is concerned?

The majority of investors come to invest through the guidance of third parties, who, in most cases, are Tanzanians. The unfortunate thing is that these fellow countrymen don’t explain to prospective investors the proper procedures for investing in the country.

Some investors don’t come to us physically and instead choose to enter into contracts through third parties and end up paying more during execution of projects as a result.

At the end of the day, they start complaining and piling the blame on the government. This tarnishes the image of our country, and must be stopped.