Mining Sector to Boost Sector Contribution to GDP by 51.60%

Mining Sector to Boost Sector Contribution to GDP by 51.60%

Tanzania anticipates to collect over $ 204.4 million (51.60 per cent increment) from the mining sector in fiscal year 2019/2020.

For many developing countries, industrial mining is a key source of foreign direct investment, export earnings, technology transfer and infrastructure development. Yet, in numerous cases, mining has not only failed to spur sustainable economic development but brought harm to people and the environment. This has led to growing opposition to mining and prompted authorities to rethink their laws and policies.

In Tanzania, the government has rather aggressively sought to improve mining’s contribution in recent years by asserting control over the sector. This has involved hiking taxes, exacting higher government stakes in projects, imposing huge fines for non-compliance, banning the export of mineral concentrates and removing the right of international arbitration. Some have characterized its actions as a “crackdown” on mining companies or even as “economic warfare”.

Narrowing to the extractive industry in Tanzania, the industry is prone to substantial operational and management changes.

Since President John Magufuli took leadership, several mining sector advancements have been made in the course of 3 years, proving billions in return at a rather intriguing socio-political cost.

The latter can be reflected, in a recent development ushered by Ministry of Mining (on September 19th 2019) directing all gold produced from Biharamulo gold mine, operated by STAMIGOLD company a subsidiary of the State Mining Cooperation (STAMICO), to be sold within Tanzania, primarily in the newly established Biharamulo gold market, by December 2019.

During the first quarter in 2019, the mining sector saw a 10 per cent growth, which was attributed by increased gold production.

However, the mining industry contributed over 5.07 per cent to Gross Domestic Product (GDP) by 2018, this being a significant increment attributed by the ongoing reformation in the sector, compelling wider transparency actions from vital players and effective management of the industry, including environmental protection and local content adherence.

Via vital stakeholders such as: Tanzania Extractives Industry Transparency Initiative (TEITI) and Natural Resource Governance Initiative (NRGI), mining industry now, experiences a rather different level of interaction, due to wider approaches taken by, the third sector with collaboration from government in promoting sustainable harnessing of natural resources in Tanzania.

It essential to say that: modest state gold-miner now begins to charter in complex, but yet profitable extractives paths, which gold-mining giants— Acacia Mining (Barrick Gold Corp) are investing billions and enormous packages of high-tech to fetch profit.

State gold mining company

STAMIGOLD is a Tanzanian gold mining company, incorporated on 28th October 2013 assigned for prospecting, exploration, development, production, processing of gold and market gold within the country and foreign markets.

According to STAMICO, the mine was operated as an open-pit in 2015, but underwent a different conversion and became an underground mine.

Over time, gold reserve decreased, while attracting unfavorable high operating cost, forcing a shutdown of operations in 2013.

Further, STAMIGOLD considers itself as a growing gold company, which is estimated to host gold resources of more than 200,000 troy ounces.

As reported by the ministry, STAMIGOLD general manager, Gray Shamika mentioned to Minister of Minerals, Dotto Biteko, about current developments of the mine. He elaborated that: at the moment, STAMIGOLD can completely run on its own, including paying its human capital and suppliers.

According to mine-chief, geological surveys show, the mine still has operational longevity, despite of several challenges standing on its path, including debts.

Moreover, the mine-chief said, STAMIGOLD is underway to establish its new tailings processing project, giving the mine an extra kick-of-life for seven to ten years.

Gold-miner also managed to reduce production costs, from $ 1800 to $ 940 per, but minister Biteko encouraged the mine to trim the costs to $ 800 per ounce.

Gold Production in Tanzania

Bank of Tanzania, quarterly economic bulletin (June 2019), placed the value of gold produced by large-scale miners in the first quarter ending June in 2019, at a slight increase of $ 378.5 million (11,604.7 kilograms) from $ 376.3 million (10,383.4 kilograms) in corresponding quarter in 2018.

On the same mark, the latter was attributed by production volume increase and world commodity prices—gold prices shooting up due to higher demand

According to Ministry of Minerals, until March 2019: about 27,550.9 kilograms of gold were produced in Tanzania and exported. Accounted from large and medium scaled gold miners, including STAMIGOLD.

However, from the latter grand-total, about 2,214.99 kilograms were produced by small-scale miners. In addition, the Mining Commission of Tanzania, indicates tax-collected from gold production, since July 2018 to March 2019 accounts for 83 per cent.

Until March 31st 2019, STAMIGOLD managed to produce up to 9.879.8 ounce of gold worth of over $ 12 million (including a slight-package of silver), which led to a significant royalty contribution to government of $ 735,175.

State gold-miner stake in the market

The ministry cited a rather crucial milestone earned by STAMICO, which featured its capacity to take-on standard industry’s operations, which as a result provided a room for the corporation to deliver its, $ 435,015 contribution to the government in the fiscal year 2018/2019, plus making a quite promising profit.

Despite of stiff challenges facing the sector, particularly to local players: high operational costs, huge investment demands, inadequate availability of high-end human capital within extractives, absence of reliable and constructive local content conducive environment, STAMIGOLD success depends entirely upon government strategies to amend local-gold market interaction.

In light of the current initiatives made by the government, including policy reformation and establishing gold-markets in Geita (Geita Gold Miner host) and Biharamulo (STAMIGOLD), gold markets stand to curve an important mark in adding value to the sector, especially on improving local suppliers’ capacity on value addition, transport and logistics, security and also attract other form of sustainable investment within the latter.

The government has already made rather firm commitment to upraise its forex attracting industry, by seeking to establish smelters and refinery across Tanzania in the quest of adding value, still locals need to well-equipped and prepared to take over gold-markets operations demands, for sustainable local-economy growth and gold-miners development at large.

Hindrances in the sector that hamper the industry’s growth

The lack of engagement between companies and communities’ risks exacerbating long-standing feelings of marginalization. For locals, the arrival of industrial miners has not only threatened their ability to mine minerals themselves, but has hindered their access to land previously used for farming, pasture, fetching water or collecting firewood.

Relations have also sometimes led to conflict. Communities reported a range of harms they associate with nearby mining companies, including allegations of serious human rights violations. Most concerning was reports, in over half of all surveyed villages, of excessive force used by private security companies and police officers against locals trespassing on mining concessions. Some locals convey testimonies of beatings, shootings and sexual violence that leads to life-changing injuries, disability and death. Other reported violations include water, soil, air and noise pollution as well as unease and property damage caused by vibrations from drilling, blasting and truck traffic.

While there are differences between companies, there is a shared sentiment across all surveyed communities that corporate accountability and redress is low. Numerous locals said they struggle to report grievances to companies or seek remediation through legal avenues. This is problematic as unresolved harms typically raise tensions and create a downward spiral of distrust and conflict and that may affect the industry’s growth.

http://linkedoc.com Bryan Elliott, the host of Behind the Brand, 
interviews best-selling author Seth Godin about his new book, "Poke the Box." Seth Godin talks about taking the risk and trying new things.

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