Broad perspectives on mineral concentrates issue

Among the major issues of discussion in Tanzania for the last two weeks of May 2017 is the mineral concentrates report from the presidential commission, which, among other things, was tasked to investigate the contents of minerals in over 200 containers with mineral concentrates seized at Dar es Salaam Port. According to the report, the containers contained more minerals than those declared by the mining giant Acacia.

Research by religious .leaders

The mineral concentrates issue reflects by and large a part of broader issues raised by religious leaders among other stakeholders for years. Under their interfaith standing committee on economic justice and integrity of creation, they have commissioned several studies on natural resources and revenue loss in Tanzania. Among their commissioned works include a piece on revenue lost in gold mining popularly termed the golden opportunity. This came out in 2008. Other pieces are researches on the potential tax revenue loss.

Religious leaders’ findings

Key issues in the report by the presidential commission reflect on a very large extent the findings of the studies commissioned by religious leaders and recommendations of the same. Their studies discovered substantial potential revenue loss in various sectors, including mining. The loss is through tax evasion and avoidance as well as through tax exemptions that could have been avoided. The loss is also through corruption as well as through illicit financial outflows. Reports by religious leaders recommended, among other things, that these revenue and resources loss avenue be blocked accordingly. This was the case in 2008, in 2012 and in May 2017 studies. The latter study discovered, among other things, that some of the recommendations given to halt revenue and resources loss had not been implemented by 2017, some nine and five years later for 2008 and 2012 studies respectively.

Contracts

The export of mineral concentrates issue has raised issues related to contracts in general and Mineral Development Agreements (MDAs) in particular. Key issues revolve around the axis of transparency and good deals for the country. It is generally argued that mining contracts in the context of MDAs are not transparent. They are confidential and not in the public space for critical scrutiny. Issues on commercially sensitive information are understood and, therefore, may not be prudent to be placed in the public space for the sake of competition. Issues that are not of material commercial sensitivity in the MDAs in the context of national interest should be placed in plain fields.

Arguments around contracts in the mining sector include views that they do not present good deals for the country, but for investors. This raises further questions on our capacity, ability and willingness to enter into good deals for the country. These will be deals with meaningful win-win between the parties involved.

Strong institutions

There are several institutions in various policy, legal and regulatory decision making processes in the mining value chain and its various nodes. Among the direct ones in the context of gold include the parent ministry, Tanzania Mineral Audit Agency (TMAA) and Tanzania Revenue Authority. The Parliament is a key institution in making laws in this and other sectors. For the country to benefit from the transactions in this and related sectors there is a need to have very strong institutions along the value chain and its many nodes.

Since strong institutions do not just emerge, they have to be built, developed and be strengthened over time. To have very badly needed strong institutions for the country to benefit from its resources endowment is a function of inter alia investment in these institutions. The needed investment for each institution should  be based on needs assessment. Generally, however, investments should aim at having optimal mix of skills both technical and soft bas well as adequate physical and financial resources both in quantity and quality.

Domestic value addition

The export of mineral concentrates reminds us of the need for domestic value addition (mineral beneficiation). The concentrates are exported for further processing abroad. The assumption is that there is no what it takes to add the value domestically. When a country exports raw materials for value addition abroad it is generally bad economics.

This is the case not only for minerals, but also for all other products exported without value addition including a very long litany of agricultural products. Exporting raw materials, whatever the reason, implies exporting direct and indirect jobs and associated direct and indirect incomes. The said incomes are at individual, household, local and central government levels.