Count Down:Three Years of Magufulification, Miracles on Minerals Wealth a “Real Deal”

    A total royalty taxes collected in three years were now collected in just three months at the same previous rate;

Reports By Masondore Masondore, Toronto and Staff Writer, Dar Es Salaam

6 JUNE 2018 Toronto and Dar Es Salaam: 

A NON-AID MODEL that would propel resource-rich African nations able to finance own development plans has been proven successful in Tanzania through effective management and administration of gem royalty and taxes.

This comes as no news about Tanzania. The East African mineral-resource rich nation has since independence, been on a forefront fighting injustices brought about by colonialism and exploitation in Africa and away. This time, however, the guns were turned to fight traditional economic injustices and grand exploitations. 

President Magufuli seats with the discoverer of Tanzanite germstone after launching the Mirerani wall

All African nations have had their eyes focused on Tanzania as their customary ally while strengthening solidarity in their midst. In this economic war, most African nations continued to emulate Tanzania in harnessing its natural resources to the maximum for national development.

Entrance at the newly built Mirerani wall at the Tanzanite extraction site

In the gamut of this development trajectory, Tanzania overhauled the existed mining laws and adopted a myriad of measures to ensure the mineral sector generated the expected profitability enough to finance strategic development in Tanzania.

Mirerani wall.

Magical solution to smuggling of blue gem, Tanzanite

Tanzania is the sole home of Tanzanite, a gem-quality variety of the mineral zoisite. Tanzania’s gem deposits, the world’s only commercial tanzanite mines were a result of massive tectonic activity that created one of the most highly mineralized zones in the world.

The mining area extends a 200–300 km-wide north-south, swathing through the central and eastern part of the country. President John Magufuli understood that the mining firms were cheating Tanzania out of its fair share of mineral wealth through tax evasion and smuggling. The mines denied the allegations. The truth was evident after the wall was built.

“All tanzanite gemstones will be controlled and will pass through one gate,” said President Magufuli. A parliamentary inquiry had uncovered massive smuggling of the blue-violet tanzanite gemstone, found only in Tanzania.

It was estimated that until June 2017, $90 billion had been lost in tax evasion since 1998. Paradoxically, Tanzania was the sole home for Tanzanite yet the country was the world’s third largest exporter of the mineral after Kenya ($100 million) while the largest exporter was India at $300 million.

This raised many questions which developed curiosity to uncover the truth into the trade. However, the global turnover of tanzanite trade is more than $500 million. President Magufuli, therefore, ordered the military to build walls around the mine with security cameras and checkpoints around all tanzanite mining concessions in Merelani, in the northern tourist region of Arusha, Tanzania. The move was meant to control illegal mining and trading activities.

Construction of the wall took three (3) months to finish. It started on 1 November 2017 and was completed on 15 February 2018. Dr Magufuli inaugurated it on 6 April 2018. The President, previously a mathematics teacher, had his plan worked out. In barely three months, the collections magically improved tremendously. 

 

A sloppy 36-month collections was obtained in only three (3) months 

It was another wonder to most African countries. In the span of only three months, from January to March this year (2018), the government collected Sh714.6M ($306,300.9); the amount was nearly double the total collections the country had collected in the past 36 months (three years) combined.

Tabling her budget for 2018/19 in the National Assemble recently, Minerals Minister Angela Kairuki said Tanzania had collected Sh166.8M ($71,495.9) in 2015, Sh71.8M ($30,775.8) in 2016 and in 2017 it collected Sh147.1M ($63,051.8).

She said in total, the amount collected in three years were barely Sh385.8M ($165,366.4). The collections improved tremendously after the wall was constructed. When the world talks about “Magufulification effect,” this is another proof which makes most mineral-rich African nations started to emulate the Tanzanian leader. Most countries started calling for contract compliance as Tanzania did last year.

 

The historic achievement came as a result of the radical reforms Dr Magufuli continues to implement in the mineral sector whose decisions have helped ushering a new era of upholding accountability across Africa.

Negotiations with Acasia Mining on its Tax Bill

Meanwhile, the constitutional and Legal Affairs Minister, Prof Paramagamba Kabudi, told the National Assembly that the government is finalizing its bargaining with the world’s largest gold producer, Barrick Gold.

Prof Kabudi, who leads the government’s bargaining team with Barrick Gold, said the miner will then facilitate payment of $300 million (Sh700bn) as a sign of good will over the tax dispute booked in July last year. The company was accused of massive tax evasion.

“We shall no longer enter into Mining Development Agreements (MDAs) with investors,” he said adding that now investors will be provided with a special license and a license to operate.

It is a new dawn for doing business on a win-win scale, hinted a business consultant in Dar Es Salaam.

Learning from Shell’s Experience: There is more to it than just royalties

                                                          

As the minerals were a depleted resource and huge holes which would mostly turn the land desolate after depletion, it was prudent to ensure the proceeds were equitably shared and spent for mainly development infrastructures.

It is true that one day, when companies like Resolute in Nzega pack up to leave when the minerals were depleted, hiils or gravels and deep holes would have adverse economic effects on the surrounding communities. The lands would remain deserted and some of the rivers polluted not mentioning generational effects by animals and surrounding communities.

Cognizant of these atrocities, while In 2010, Royal Dutch Shell apologized to all inhabitants of Nigeria’s Niger Delta for the many years of human rights violations, for which Shell accepted responsibility and launched a campaign branded, “We are sorry.”

When it was confronted with monumental evidence of human rights violations, attributed to its operations in the Niger Delta, Bradford Houppe, Vice-President of Shell’s Ethical Affairs Committee said they were extremely proud to be the first international petrochemical company to publicly say: We are sorry.

Shell first discovered oil in the Niger Delta in 1956. Ever since that time, the giant Dutch oil company ravished the land and polluted the environment. “We thought these people didn’t know what was good for them,” he explains

He said they never knew that they were bringing them impoverishment, conflict, abuse and deprivation. “Now we know.”Shell acknowledges that it is responsible for large-scale oil spills, waste dumping and gas flaring,” he said.

Houppe said more than 60 per cent of the people in the Niger Delta depended on the natural environment for their livelihood. But due to the oil pollution, many of them uses polluted water to drink and to cook and wash with, and eat fish contaminated with oil and other toxins. Oil spills and waste dumping have also seriously damaged agricultural land.

                                               DRC

The value of termism in African politics now appears profitable with President Magufuli’s continental shakeup. Other African countries also treaded in Magufuli’s footsteps.

They also filed their demands to review the contracts for reasonable revenues from the proceeds obtained in selling their minerals. The Africa Business Review Magazine reports that Glencore, Ivanhoe and China Molybdenum met DRC President Joseph Kabila two days before signing the new code in a bid to have him review the decision to their favour.

                                          Zimbabwe

In Zimbabwe, President Emmason Mnangagwa, with elections in July this year, is pushing for the mining companies to list the majority of their shares on the local stock exchange, in an effort to bring capital into the local market. “No mining right or title shall be granted or issued to a public company unless the majority of its shares are listed on a securities exchange in Zimbabwe,” the President said.

                                          Zambia

In Zambia, the government gave First Quantum Minerals Ltd. a $7.9 billion tax bill. The government said it is planning an audit of other mining companies going back six years. The Canadian miner, First Quantum Minerals Ltd, had received a letter from the Zambia Revenue Authority (ZRA) which said it was an assessment for import duties, penalties and interest on consumables and spare parts.”

                                            Ghana

The mineral-rich second largest producer of gold in Africa, is the latest nation seeking to extract more revenue from its mining after its deputy finance minister declared the government intention to  “ensure compliance” by scrutinizing existing mining contracts.

This West African nation followed Tanzania’s move which last year froze exports by gold producer Acacia Mining, for unpaid taxes, interest and penalties.

The government appointed consultants to review contracts. This comes after Vice President Mahamudu Bawumia had said the nation was benefiting little from its mineral wealth and needs a review of its mining code and tax policies. The country has earned almost nothing in dividends from its 10 percent stake in most mines since 2012, rendering the operations “virtually useless,” Bawumia said.

                                              Mauritania

Bawumia’s comments coincided with Mauritania rejecting a key permit for the Toronto-based Kinross for the expansion of a project in the country. The Canadian miner were recently hit by the company’s decision to temporarily halt operations at its Tasiast mine, following the West African country order to expatriates whose work permits were invalid to stop working.

Many mining companies were increasingly opening up for dialogue to keep their businesses going. The shake-up in the mineral sector whose epicenter is traced in Tanzania is irreversible. Africa is poised to improve the way it conducts its business with the external world after many years of imbalance trade.

Dialogue for fair business practices between Africa and the external world, particularly the West, was the only future for survival of mining companies with major operations in Africa. 

ends