Tanzania: Ben Mkapa Was Architect of Tanzania's Modern Mining

PRESIDENT Benjamin Mkapa was a formidable statesman who presided over the positive changes of the mining industry in Tanzania during his Presidency from 1995 to 2005.

On the late hours of July 23, 2020, Tanzania received the very unfortunate news of his passing; announced by President John Pombe Joseph Magufuli, our fifth (and current) president who in October 2020 won his second term with majority vote.

This was an election which again served as a positive indication of the democratic progress Tanzania has made. Mkapa's death sent not only Tanzania but neighbouring East African countries and other countries abroad into angst mourning.

Our northern neighbour, Kenya, for instance, flew their national flag at half-mast for three days in solidarity for Mkapa's passing. In Tanzania, we mourned, and we're still mourning his death, even months after he has been laid to rest in his family plot in Masasi District, Mtwara Region, on July 29, 2020.

It would be a great disservice to not only his legacy but also our country, if we were not to mention the late President Benjamin Mkapa's significant contributions to present-day, particularly in developing the mining industry.

This is in a way a rejoinder to the article in the Citizen Newspaper (July 28, 2020) "Working for Tanzania Government under Mkapa's Leadership". The author, Mr Patrick Rutabanzibwa, was the Permanent Secretary for approximately nine years of the then Ministry of Energy and Minerals during the Mkapa presidency.

In the article he affirmed the essential qualities of Mkapa's leadership required for a nation. His narrative focussed primarily on energy-related and administration matters and he called upon those of his contemporaries to attest Mkapa's leadership qualities linked to other sectors.

Although I was not Rutabanzibwa's peer, instead a relatively junior staff member of the same ministry, working as his Personal Assistant for five years, I have felt it necessary to focus and highlight Mkapa's achievements in the mining sector.

The mining sector was one of the vital elements underpinning Mkapa's macroeconomic reforms. When he became President in late 1995, he inherited an economy that was experiencing adverse terms of trade. Since Tanzania's independence in 1961 our export earnings were primarily from agricultural produce whose prices tended to decline over time.

In a report on "the Achievement of the Third Phase Government, November 1995 to October 2005, issued by then Prime Minister's Office, is recorded that in 1995, imports and exports were 35.5 per 13.7 per cent of Gross Domestic Product (GDP), respectively; such variance was creating a highly negative balance of payments and was eroding our real exchange rate.

In addition to this challenge, Government debt (local and international) was piling up and the fiscal situation overall was weak with a rising budget deficit and an alarming increase in inflation. Mkapa, being a visionary leader and an excellent communicator, faced economic dilemma and promptly found a solution.

Under his leadership, Tanzania went from initially depending more on traditional exports, to engaging further in the production of nontraditional commodities such as mineral resources and negotiating with international lenders to forego or restructure Tanzania's debt.

In the mining sector he had to develop necessary gears, appropriate policies and legal frameworks to attract more local and foreign investment in the sector that proved noticeably beneficial for improving Tanzania's economic position at the time.

In October 1997, he promulgated the first Mineral Policy of Tanzania since independence. The policy stipulated the role of his Government as being the promoter and protector of private investment and regulator of the sector; and designate private investors as the "doers".

In order to enforce the policy, Mkapa through the National Assembly enacted the Mining Act of 1998. These documents and other initiatives such as being signatory to the MIGA Convention were the anchors that attracted the "doers" into the mining sector.

Both the Mineral Policy of 1997 and the Mining Act of 1998 were replaced and repealed by the Mineral Policy of 2009 and the Mining Act of 2010, respectively.

Even before the Mining Act 1998 came into force Mkapa also being a good consensus builder; ready to hear concerns and issues of stakeholders, before making the final decision himself around July 1998 he held a meeting in Arusha with chief executive officers of international mining companies.

The CEOs of largest mining companies in the world such as BHP (now BHPBilliton), AngloGold (now AngloGold Ashanti), Barrick Gold, Placer Dome International, just to mention a few, attended, long with mid-tier mining companies' CEOs such as Resolute Limited of Australia, Sutton Resources of Canada, De Beers of South Africa, and exchanged viewpoints.

It was after these gamechanging initiatives made by the President that the mining sector became a powerhouse of economic growth in Tanzania.

Another term that emerged was the concept of "the win-win" situation, meaning allowing the owner of resources (Wananchi) and shareholders of mining companies and their employees to gain a fair share of the value generated from the mining operations in Tanzania.

Mkapa's macroeconomic reforms and adopting appropriate policy and legal framework in the mining sector led to considerable private investment in the mining sector in particular exploration for gold, and within less than ten years five large scale gold mines were commissioned and inaugurated by the President or one of his lieutenants on his behalf.

These included: (i) Golden Pride in Nzega (commenced operations in 1999 and closed in 2013), (ii) Geita Gold Mine in Geita (2000), (iii) Bulyanhulu Gold Mine (2001), (iv) North Mara Gold Mine (2002), and (v) Tulawaka Gold Mine (2005 closed in 2013 but now operates under a subsidiary of STAMICO called STAMIGOLD).

In that period of less than 10 years, in the mining sector alone there was over US$2.2 billion investment. The combined production of gold from all these mines equated to approximately 50 tonnes of gold per annum compared to less than one tone that was officially recorded as being produced by artisanal and small-scale gold miners' pre-1995.

State Mining Corporation (STAMICO) mines had by then already ceased most of their production. Tanzania observed a big jump in gold production in a short span, allowing Tanzania to be considered among some of the largest gold mining countries in Africa and ranking 3rd in Africa after South Africa and Ghana.

This success was unprecedented in the mining industry. Scholars of geosciences after many years of research believe that exploration usually takes 3 to 10 years and that less than 0.1 % of the explored sites lead to a productive mine.

On the other hand, development of a medium to large-scale gold mine (from construction, ordering plant to operations) takes 2 to 5 years. Fortunately, however, because of efforts by both the Government and the investors' the results of gold mining in Tanzania were better than the predictions of scholars of geoscientists.

The significant increase in production in the mining industry led to the sector becoming the highest growing sector (from negligible in 1995 to over 17 % in 2004) and the leading sector in export earnings (from 0.07 % in 1995 to over 48% in 2003).

These statistics are as recorded in the publication "Achievements of the Third Phase Government" refereed previously. In his book, 'My Life My Purpose', the retired President, narrates (page 145) the unfair criticism he faced of giving away vast amounts of Tanzania's gold and Tanzanite by opening up the mining sector to foreign direct investment.

He also argues that he was criticised for imposing a royalty rate of 3% for minerals and 5% for diamonds, which were considered too low. He argues, however, that the upfront capital requirement for commercial mining at the time exceed Tanzania's financial capabilities and mining was one of the riskiest investment sectors, he had this knowledge in mind before his decision to allow foreign investors.

Comparison of royalty rates globally that have been done by researchers in mineral economics such as James Otto of Colorado School of Mines, USA, in 1999, the rate Mkapa's Government imposed was indeed average.

Generally, in most jurisdictions royalty ranges from about 0.5 % to not more than 10 % depending on the type of minerals and there are some jurisdictions which do not even impose royalty at all (the last two sentences are author's addition).

The significant development of the mining industry would not have been made possible without Mkapa orchestrating a successful development model based mainly on the strong collaboration between the Government and the business community, ensured by tactful problem solving.

It is therefore very appropriate to call him the architect of the modern mining industry in Tanzania. His successful mineral development model was adopted by his successors, the Fourth Phase President, Dr Jakaya M. Kikwete, and now even more so by, the Fifth Phase President Dr John Pombe Joseph Magufuli, who through his additional input has almost tripped revenue collection from the mining industry.

As JPM said recently that it was about Shilling 160 billion when he came to power and last financial year it was about Shilling 550 billion.

The significant achievement of President JPM could be attributed to the Mining Act 2010 as Amended in 2017 as well as two more legal instruments: The Natural Wealth and Resources (Permanent Sovereignty) Act 2017 and the Natural Wealth and Resources (Revenue and Re-Negotiation of Unconscionable Terms) Act 2017.

* Julius S. Sarota is tutor at Mineral Resources Institute - Nzega Campus. The opinions expressed here are of the author and do not reflect the position of his employer.

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