The Tanzanite Wall: Production, government revenue and Community Livelihood

The Tanzanite Wall: Production, government revenue and Community Livelihood

By virtue of Article 27 of the constitution of the United Republic of Tanzania and The Natural Wealth and Resources (Permanent Sovereignty) Act of 2017, the protection of natural wealth and resources in Tanzania belongs to the people and the Government, of which the control is entrusted to the President. With this capacity, in order to protect the country’s natural resource His Excellency the President of the United Republic of Tanzania, Dr. John P. Magufuli in September 2018 ordered the army to construct a wall around Tanzanite mining areas (UKUTA) from Block A to D.

An overview

Tanzania has a conducive and prospective geological environment with abundant mineral potential including the world’s unique Tanzanite gemstone. Despite the vast mineral reserves in Tanzania, the contribution of this sector to the national economy and community development does not seem to be meeting citizens’ expectations compared to other sectors of the economy.

Poor revenue collections, tax evasion and massive smuggling of the gemstones through neighboring countries are the major reasons why Tanzania is not obtaining optimal benefits from this mineral wealth.

The mining sector has been perpetually experiencing reforms aimed at ensuring that country’s natural resources benefit a significant number of Tanzanians through government revenue collection, citizens’ participation in the mining activities and improved community livelihood.  By virtue of Article 27 of the constitution of the United Republic of Tanzania and The Natural Wealth and Resources (Permanent Sovereignty) Act of 2017, the protection of natural wealth and resources in Tanzania belongs to the people and the Government, of which the control is entrusted to the President. With this capacity, in order to protect the country’s natural resource His Excellency the President of the United Republic of Tanzania, Dr. John P. Magufuli in September 2018 ordered the army to construct a wall around Tanzanite mining areas (UKUTA) from Block A to D.

Thus, on April 2018, he launched 24 km wall surrounding Mirerani Tanzanite mining area. Further to this, the government formulated “The Mining (Mirerani Controlled area) Regulation 2019” with the purpose of ensuring high security, effective management of the mining activities and environmental issues in/and around the wall.

On 30th May 2019 the government spokesperson Dr. Hassan Abbas published summary of Tanzanite production and its revenue collected before and after construction of the wall. Those records provided cover three consecutive years – 2016 to 2018 and the first five months of 2019.

These records show increasing trend and contribution of Mining sector, particularly Tanzanite under Artisanal and Small-Scale Mining (ASM). The government action of making these data available for public consumption shows transparency and the sense of public ownership in the respective sector. However, the analysis of this data provided brings to attention number of aspects that are not clear or might need further clarifications, including but not limited to Tanzanite production, revenue collected by the government and Community Livelihood before and after UKUTA.  

The data provided reveals that the Tanzanite production records from the year 2017 to 2018 has tremendously increased from 147.7 to 781.2kg. This increase is equivalent to more than 400 per cent. This was also reflected in the government revenue collected in the same period; that is 166 Million to 1.43 Billion respectively and the increase is equivalent to more than 750 per cent. However, in comparison production and revenue records for the period of 2018/July – 2019/ May as it stands bring ambiguity as it shows an overlap of the data on the production and government revenue collected.

There are no specific revenue records for the first five months of the year 2019. With this presentation, the validity and objectivity of these reports may be questionable including the upward trajectory of the production and revenues. Therefore, the curiosity transpires from both Tanzanite production records and records on government revenue collected between the year 2018 and July 2018 to May 2019 which shows the conflicting trend i.e. the production data demonstrate an increasing trend contrary to revenue collected. Patterns and complete data are important to establish their meaning. For example, in the same data provided there is large increase in revenue per kg produced for in 2017 before UKUTA with lowest produced total compare to 2018 which has small comparison in revenue collected to its production levels.

Is UKUTA the factor for increase in production and government revenue?

The data provided portray that UKUTA seems to be the main or only factor for positive trend in tanzanite production and revenue collected. However, in the mining sector, production increase might be highly instigated by factors such as technology adopted in production, new exploration and mineral discovery, while increase in government revenue can instigated by factors such as the market price, weight, value of the Tanzanite carat and changes on country’s Tax Regime, of which the reported data are silent on neither of these.

From these records UKUTA as a factor, has no direct link to the actual tanzanite production by the ASM as reported rather, it has significantly contributed to improvement of the production record keeping by the government. UKUTA has greatly facilitated record keeping and control on Tanzanite produced by the ASM from production to revenue collection points unlike previous years.  After UKUTA government officials through Tanzania Mineral Commission provides close control  and regular produced mineral audits, therefore the government has been able to collect data on the tanzanite produced and tax appropriately.

Close scrutinization of records provided, reveals a divergent trend for Tanzanite production and government revenue collected records for year 2016 and 2018.  Tanzanite produced in 2016 declined from 164.6 Kg to 147.7 kg in 2017 contrary to the government revenue collected in the same period. Therefore, in this case UKUTA is not the factor for neither decreasing trend on Tanzanite production or increasing on government revenue collected. It is the same case for the conflicting/divergent trend between the year 2018 and from July 2018 to May 2019. 

What about surrounding Community livelihood improvement?

The data presented by the government show how UKUTA have greatly help accounting for both tanzanite produced and government revenue collected. ASM sector contribute highly in the social economic activities in the surrounding communities. It is important for the data to show the impact of these production increases to the community livelihood.

Mirerani wall -UKUTA has isolated the mining area from surrounding communities thus, difficult to fathom communities benefiting as a result of the wall. It is important for government to share records that shows direct impact of the celebrated increase production and revenue. Instead questions remain on how did the surrounding communities’ benefit from the wall installation and reported increase in production and revenue?  What is the state of Service delivery at Mirerani after UKUTA?

Immediate beneficiaries

There are some positives impacts on UKUTA such as recognition of workers in mineral rights areas. Mostly workers in the ASM sub sector undertake activities without having a contract or any formal agreement with the license holders or investors. After UKUTA through The Mining (Mirerani controlled area) Regulations of 2019, 6(4) for control purpose requires every person to pass through the main gate of the wall at the time of entry and exit and to work in the mineral right area requires an identity card issued by the residents mining officer to holder of mineral right, his employee, agent or contractor. Moreover, for the employee, agent or contractor to get an identification card to enter into controlled area they must have an employment contract or any formal agreement with the holder of the mineral right/investor. This provides a necessary security and verification means for workers to claim for their rights against license holders as it increases transparency through third (government) part information.

Secondary impact of UKUTA

Mirerani and Naisinyai Small Miners Primary Cooperative Society (MINASCO Ltd) is another group seems to be positively impacted by the UKUTA. MINASCO is a primary cooperative association for small scale miners in Mirerani and Naisinyai. One of the community member said “for 10 years, MINASCO has been receiving dividend of not more than 2 million from its members, at one point it was a risk to the association growth and development. With recent records, the association is confidently waiting for almost 54mil as dividend from its members. Further, he testifies that on previous time it was not possible because there is no mechanism for them to get the production records from its members, but, through UKUTA now they can access and get production records from the government hence they can know exactly how much they will get as dividend from their members”.

Is there room for improvement?

It is important that for any business venture to succeed, it needs to be positively received and accepted by community impacted by its presence. UKUTA construction isolated mining from surrounding communities which restricted economic activities. Regulation requires one to not approach less than 200m distance from the wall. Lack of interactions with mining have impact on community spending power which are accompanied by small business also women vendors have limited direct interactions with miners as before. Business are now enclosed within mining area from village area which weakens business at the villages and lead to limited availability of goods and service for communities surrounding the UKUTA. Regulation change to facilitate these interactions is important and key to facilitate economic activities. Exclusion but managed area that foster trade needs to be devised.

Managing pastoral areas

Mirerani controlled area needs to be managed in the holistic way. Grazing areas have been impacted by isolation and restrictions on the grazing areas. Incremental increase and shifting of mining area should have been devised. Pastoralists are impacted by moving to distant area for grazing. It will important for consideration in future.

Will artisans and small miners engage in corporate social responsibility?

It is very difficult for the government to manage corporate social responsibility (CSR) for ASM given the informal and chaotic nature of the sector. In Mirerani controlled area, it is more advantageous for the government to use the same control mechanism in terms of production and revenue collection to ensure Primary Mining License (PML) holders engaged in CSR activities. It will be interesting to see in the near future that PML holders are more accountable and meaningful CSR projects take place around Mirerani villages under the close management and monitoring of the government through Local Government Authority (LGAs) in collaboration with resident Mining officer (RMO).

Generally, the data shared by government is not enough; it could not be feasible to imagine that only UKUTA can increase production and government revenue collection. More information is needed, e.g. what is the share of service levy for the local governments? The celebration of the records provided by the government should be extend to the impact that the reported trend brings the community social economic development.

About the Author

Lucy Shao – Concerned Citizen.

Twitter @LucyLinus3