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THE MINING INDUSTRY IN TANZANIA

THE MINING INDUSTRY IN TANZANIA

 

Tanzania like most other African countries is endowed with naturally occurring minerals.

The Tanzanian mining sector is one of the biggest industries in the country and it makes a contribution of about 3% to the annual country’s GDP. However, the Tanzanian government plans to increase this contribution to at least 10% by 2025. 

As at 2011, the value of mineral exports from Tanzania was $2.1billion, of which about 95% of this was from gold, and this value has increased almost annually.

Some of the minerals that occur abundantly in Tanzania include:

Gold, Diamonds, Gemstones(rubies, emerald, sapphire, garnets, opal, tanzanite), Iron and base metals(Nickel, Cobalt), Platinum metals(Platinum, Palladium, Rhodium), Industrial minerals( soda ash, salt, limestone, phosphate, silica), Dimension stones(granite, marble, quartzite) and coal.

Gold Mining

Tanzania has the second largest gold reserve in Africa, after South Africa, estimated at 45 million ounces, but it is the fourth largest producer in Africa after South Africa, Ghana and Mali. 

Gold production in Tanzania stood at 39 tonnes in 2018 and has shown a great increase of over 700% in the last 25years. 

The Geita open pit gold mine is the biggest gold mine of the 11 in Tanzania and its production was up to 327,000 ounces as at 2007. It is also the biggest open pit mine in Africa out of the eight in existence. 

Some large gold deposits have been found in the Lake Victoria Gold Fields in northern Tanzania, in the Mpanda Mineral Field in western Tanzania and in Lupa Gold Field in southwestern Tanzania, in Matandani and Kukuluma.

Diamond Mining

Although Tanzania is one of the eight African countries of the world significantly involved in diamond mining, it is not a big diamond producer as it has only one diamond mine- the Williamson diamond mine.

The Williamson diamond mine has reserves of andl estimated 31.2 million carats, 75% of which is owned by the Williamson Diamonds Limited while the Tanzanian government owns 25%.

The diamond ores are extracted from the mine using different methods ranging from using hydraulic shovels to drills and explosives. The extracted diamond ores are then processed to retain the diamond and some of its concentrates. A separation of the diamonds from the concentrates is done next with the use of radiation from X-ray equipment before finally sending the separated diamond pieces out to be cut and polished.

Statistical figures show that about 1.1million tonnes of diamond ores were treated and 57,050 carats of diamonds produced in 2011 and this production increased by up to 93%by 2012.

Tanzania contributed up to 400,000 carats of diamonds to the world population and was in the top 10 countries of the world with the most contribution.

Coal Mining

It is estimated that Tanzania has the largest coal reserves in the whole of East Africa with its reserves being up to 1.9 billion tonnes and geologists believe from recent exploration that there could be almost 5billion tonnes of coal within the country.

In 2015, 94% of the 250,000 tonnes of coal produced in the country were consumed locally, but production was up to 712,136 tonnes by the year 2019.

The mined coal is used in industrial and thermal applications within industries like cement factories and agro-processing companies and it is also the main source for cooking in the country.

The Tanzanian coal mines are the Ngaka coal mine, the Rukwa coalfields, and the Kiwira coal mine. As of now, the Ngaka coal mine is the largest coal mine not just in the whole of Tanzania but also in the whole of East Africa.

Nickel Mining

Nickel Mining and exploration in Tanzania takes place in Kabanga Nickel Sulphide Deposit and it is the largest and richest deposit known in the world at present. 

The Kabanga Nickel Project was started with the aim to consistently deliver the best grade of Nickel, Cobalt and Copper products to reach the increasing demand around the world. 

The mine which contains about  is owned by Tembo Mining Limited which owns 84% of the mine and the Tanzanian government which owns 16% of the mine according to an agreement signed in January 2021.

Tanzanite Mining

Tanzanite, found only in northern Tanzania, is one of the rarest gems in the world.

Tanzanite possesses attributes that allow it to exude variety in colours ranging from green to purple, red and blue. 

The value of this gem increases in proportion to its rarity.

The production of Tanzanite increased by 17% between 2008–2013 from 768 tonnes to 900 tonnes while documented reserves are close to 500m carats.

However, the Tanzanian government has not been able to turn a profit on this rare gem, one of the reasons being that Tanzanite can only be used in adornment unlike diamonds that have multiple uses.

Tanzanian Mining Laws

In July 2017, the Tanzanian Parliament passed a new set of legislations and regulations affecting the mining industry. These legislations were passed as a way to secure and protect the naturally occurring resources within the country and the opportunities available for the Tanzanian citizens. 

The newly introduced laws by the Tanzanian Parliament includes the Written Laws (Miscellaneous Amendments) Act, 2017 which was introduced to amend the Mining Act of 2010 (Amendment Act).

The new legislations passed are jointly called the 2017 Mining laws and these laws have changed the ways in which the mining business is carried out.

These legislations have had some impact on the mining industry and some of these include:

  • Introduction of a steep free carried interest(FCI)

A 16% free carried interest to be paid to the government was introduced and this was initially not compulsory and negotiable for mining companies. 

The introduction of a free carried interest ensures that the Tanzanian government owns shares in the mining industry as a whole, has more control over larger mining companies, would be entitled to receive dividends on the profits made from mining projects and would also be able to increase their shares in any mining business when/if they want. 

  • Increased restrictions and reviews to agreements

These new legislations put restrictions on the export of raw resources for the benefit of people/nations outside Tanzania. 

These legislations also gave the Tanzanian National Assembly power to review all agreements made by the government with respect to the mining of resources by individuals and companies as they deem fit.

  • Prohibition of dispute over natural resources in a foreign court

Before the new legislations were put in place mining partners could enter agreements and settle disputes through any law of their choice. But after the introduction of the Sovereignty Act from the 2017 Mining laws all agreements and disagreements had to be made and settled through the Tanzanian laws.

This however caused raised eyebrows and unrest among foreign investors as this meant that terms of an agreement could be rendered null and void by the government if they deem it fit, and an amendment to the legislation had to be made.

  • Requirement to patronize and train indigenous companies and citizens

The 2017 Mining Laws ensure that mining companies that require goods or services of any sort patronize local and indigenous companies first and there have been incentives given by the government to mining companies to ensure they give preference to the indigenous labour force and train unskilled citizens. 

This new law means that on many occasions foreign investors are not permitted to hold more than 49% stakes in a company within the country or are not permitted to own shares in particular industries. 

The new law also ensures that in many cases while foreigners could hold managerial positions, 100% of the non-managerial positions must be held by indigenous citizens of the country.

This however poses a problem for companies and investors when the indigenous labour force is largely unskilled and training costs prove to be too high, and when the necessary goods and services required cannot be obtained as easily in Tanzania.

While it is evident and commendable that the 2017 Mining Laws for the country were introduced for the benefits of the Tanzanian citizens it is still important that necessary amendments are made to ensure that investors are also able to mutually benefit from the industry.

However, until these amendments are made it is quite necessary and judicious for investors to seek professional help from the appropriate quarters.

Shikana Law Group is a prestigious and renowned legal and investment firm located in Dar es Salaam. Shikana Law group has proven over the years that coupled with their vast experience and impressive professionalism they also have the best interests of their clients at heart. 

They have broad knowledge and experience in dealing with legal and investment matters that might arise from the Mining industry.

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