Mining Tanzania: Keeping the Balance

by Ina King (Potgieter) September 26, 2019

Tanzania is blessed with vast quantities and types of natural resources whose extraction has been central to the country’s economic growth. Mining is one of the leading sectors in Tanzania, with the value of mineral exports increasing each year. A couple of years’ after amendments to the 2010 Mining Act, a new series of reforms have been launched as part of President John Magufuli’s drive to optimise mineral trading.

Tanzania’s mineral wealth

Tanzania has a population of 54 million and is endowed with vast natural resources. Mining is one of the leading sectors in Tanzania, with the value of mineral exports increasing each year. Tanzania is the 4th largest gold producer in Africa after Ghana, South Africa and Mali.

In addition to gold, other key minerals include iron ore, nickel, copper, cobalt, silver, diamond, ruby, garnet, limestone, soda ash, gypsum, salt, phosphate, coal, uranium and graphite. Tanzanite is a mineral exclusive to the country. One of the biggest uranium development projects is at Mkuju River in the country’s south, where geological surveys indicate 36 000 tons exist.

In 2017, the mining industry experienced 8.5% growth. Mining and quarrying contributes approximately 5% to Tanzania’s GDP. Based on Tanzania’s Development Vision 2025 Plan, the mining sector is expected to account for 10% of the GDP by that year.

Harmful policy changes

In 2017, a series of policy decisions by President John Magufuli that changed the 2010 Mining Act, rocked the Tanzanian economy. The leader enacted new laws asserting the state’s ‘permanent sovereignty’ over its natural resources and increased taxation of the mining sector. The Natural Resource Governance Institute (NRGI), an independent non-profit organisation, has put Tanzania’s tax as one of the highest in the world (at 74%) and the International Monetary Fund (IMF) reported Tanzania’s economy is under threat and is being harmed by the government’s “unpredictable and interventionist policies”.

While it is becoming more common for African countries to require mandatory local ownership, Tanzania’s reforms have undermined its international competitiveness. The country is now ranked 144 among 190 economies in the World Bank’s 2019 Doing Business ratings, down from 132nd in 2017.

A balancing act

It certainly seems the Tanzanian government has heard these reports and is taking them seriously. President Magufuli is well aware of the difficulties in getting the balance of tax and investment right. At a multi-stakeholder meeting concerning the mining sector, the President shared his intention to review the 2017 fiscal regime that is hindering rather than helping efforts to collect more revenue from the mining sector.

Now seen as too ambitious, the Mining Sector Regulations 2018 required Tanzanian companies to have at least 51% stake in mining firms. These regulations have been recently relaxed. Local Tanzanian companies, under the amended regulations, now have to own a minimum 20% equity. In response, miners have welcomed the amendment, saying it will make the mining industry vibrant.

In addition, newly appointed Mining Minister Dotto Biteko has discussed plans to boost production and exports, open new mineral trading centres, curb smuggling and ensure closer supervision of the industry.

Mining Tanzania tomorrow

Today the biggest projects in Tanzania include various minerals. The diverse resources for future mining in Tanzania appear to be abundant, and new mining plants are being commissioned. Mining is certainly lucrative and projects are valued between ZAR 2 million for feasibility studies to the Liganga Mining Project valued at ZAR 6,8 billion.

The Liganga Project is located in the Iringa region covering an area of 24,66km² and lies 8km along strike from the titanferous magnetite ore deposit of Liganga. The average mineral composition has shown 53% magnetite, 10% spinal, 13% chlorite, and 22% ilmenite. In another of the 182 projects that AMIQ tracks, the The Mahenge Project consists of three graphite mineralised structures for the Epanko North, Ulanzi and Cascades Prospects. The combined Mahenge Graphite Project has a Mineral Resource Estimate of 211,9m tonnes. Mahenge’s Ore Reserve is 48,3 million tonnes. The Life of Mine (LOM) is 32 years.

Tanzania has retained an allure to foreign investors. With its thriving economy, abundance of natural resources, and booming tourism (the main source of hard currency in Tanzania) along with the latest relaxation of strict mining sector regulations, Tanzania continues to offer foreign mining companies significant opportunities.