What Sh1.5 trillion pacts with mining firms herald for Tanzania's economy

President Samia Suluhu Hassan witnesses as Treasury registrar Nehemiah Mchechu signs an agreement with EcoGraf Mining Company Limited CEO Andrew Spinks at Chamwino State House in Dodoma yesterday. PHOTO | STATE HOUSE

What you need to know:

  • The target of mining contributing 10 percent of GDP is expected to be surpassed soon

Dar es Salaam. The government om Monday, April 17, signed Framework Agreements worth $667 million (about Sh1.54 trillion) with three mining firms in a landmark development that would see Tanzania surpassing its target of mining contributing at least ten percent of the economy.

The government’s target is to ensure that the sector’s contribution to gross domestic product (GDP) reaches ten percent by 2025.

However, speaking during the signing of the agreements with three Australian firms, President Samia Suluhu Hassan said the country was on the right track to meet and surpass the target.

“I’m glad that even before 2025, the sector’s contribution is nearing the ten percent target. Taking into consideration the ongoing investments and government efforts, I’m sure we will surpass that target,” she said.

The President’s remarks came after Minerals minister Doto Biteko revealed that sector is currently only 0.3 percent short of reaching the ten percent mark.

“The sector’s performance has improved significantly as in the short period from July to September 2022 alone, the mining sector’s contribution was at 9.7 percent of total GDP,” he said.

The government’s prospects remain positive as yesterday’s joint venture agreements with three Aussie firms, Evolution Energy Minerals, Eco Graf Ltd and Peak Rare Earths Ltd are expected to put Tanzania on the map as a supplier of critical and strategic minerals.

Since the projects involve the extraction, processing and transportation of strategic minerals, the projects would therefore put Tanzania’s profile on the global map and that they will stimulate economic activities in the entire value chain for the benefit of the people in Lindi, Songwe and Morogoro regions and the entire country, President Hassan said.

She said the growth of the mineral sector was in line with the government’s economic inclusion agenda whereby the role of artisanal miners has gone up from 20 percent to 40 percent during the past two years.

“The government will continue to raise its investment in the sector, including improving the speed of electrification of areas operated by artisanal miners so they can use modern mining equipment and improve their efficiency and productivity,” she said, urging the artisanal miners to avoid engaging themselves in mineral smuggling.

With the graphite development company Evolution Energy Minerals, the Tanzanian government signed an agreement for the development, and management of the Chilalo Graphite Project in Nachingwea, Lindi Region.

Under a new joint venture company called Kudu Graphite, Evolution will retain an indirect 84 percent interest through its wholly-owned subsidiary Evolution Energy Minerals UK, while the Tanzanian government will hold the remaining 16 percent.

Evolution managing director Phil Hoskins said this project will be Tanzania’s first large-scale graphite mine, anticipated to produce an average of 55, 000 tonnes of graphite annually for 17 years.

“We believe the agreement signed today reflects our partnership as we build to operate Chilalo together, the joint venture must be focused on the success of this partnership to build a long life mine and sustainable opportunities for all,” he said.

The government also signed the framework agreement with battery manufacturing company EcoGraf Limited for the Epanko Graphite project located in the Ulanga district in Morogoro.

According to EcoGraf managing director Andrew Spinks, while the project is expected to operate for over 40 years, direct economic benefits to Tanzania are projected at over $3 billion via employment, procurement, royalties, taxes, and dividends.

“Our team has demonstrated that the quality of Epanko graphite outperforms the existing market materials for Lithium-ion batteries and is also suitable for other industrial uses,” he said.

Mr Spinks said demand for graphite is currently on the rise since its one of the single most required raw materials for the transition to clean energy, and thus through the project 60,000 tonnes are expected for production.

With the Peak Rare Earths, the government signed an agreement for the development of the Ngualla rare earth Project.

The project is a world-class rare earth development located near Ngwala Village in Songwe Region, approximately 150 kilometres from Mbeya.

The company’s executive chairman, Dr Russell Scrimshaw, said the construction of the project is expected to provide nearly Sh750 billions of direct foreign investment to Tanzania.

“The project will create around 800 and 3,000 indirect jobs during construction and around 220 direct and 1,000 indirect jobs during operations, which we hoped will be by 2025,” he said.

Dr Scrimshaw said during the life of the project at an average of 20 years, it is expected that the project will generate nearly Sh11.7 trillion of revenue for the Tanzanian government.

 During her remarks, President Hassan said these three agreements coupled with the advantageous geographical position are crucial in making the country a center for mineral investment and business.

“We have been engaging with investors to formulate joint ventures, and this system is beneficial because apart from the 16 percent statutory shareholding we get new tax revenues, employment opportunities, infrastructure, technology transfer, expertise, and community support,” said the President.