16th September 2020
By Staff Writer
MINING sector reforms in Tanzania, just like elsewhere in the world, relate to the whole of natural resources governance.
According to the OECD (2011) task force natural resources report, both renewable and non-renewable, as well as ecosystem services are part of the real wealth of nations such that they uniquely form the natural capital out of which other forms of capital are made.
In view of this assertion, natural resources contribute towards fiscal revenue, income, and poverty reduction across nations. Even more importantly, we have equally noted that sectors related to natural resources use provide jobs and are often the basis of livelihoods in poorer communities.
Owing to this fundamental importance of natural resources, they must be managed sustainably. Governments play a significant role putting in place policies that ensure that resources contribute to the long-term nations’ economic development, and not only to short-term revenue generation.
These observations resonate very well with the national ideology on natural resources governance as one of the key roles of the government. One of the key roles as outlined in the TANU creed reads: That all citizens together possess all the natural resources of the country in trust for their descendants.
That in order to ensure economic justice the State must have effective control over the principal means of production; and That it is the responsibility of the State to intervene actively in the economic life of the Nation so as to ensure the well-being of all citizens and so as to prevent the exploitation of one person by another or one group by another, and so as to prevent the accumulation of wealth to an extent which is inconsistent with a classless society (TANU, 1967).
The fifth-phase President of Tanzania Dr John Pombe Magufuli, one of the staunch believers of Mwalimu Nyerere’s ideologies, believed that it is against these principles of socialism and self-reliance that Tanzania’s natural resources should be managed.
As pointed out earlier, benefits associated with mining sector reforms are many but with varied potentials. The focus of this article lies on domestic resource mobilisation and financing of development projects.
Mining Sector Fiscal Reforms
Reforms in the mining sector culminated into the formulation of “The Natural Wealth and Resources (Permanent Sovereignty) Act, 2017” (“Permanent Sovereignty Act”).
The Act requires Parliamentary approval for future investor-state agreements, which must “fully secure” the interests of Tanzanian citizens, and restricts investors from exporting raw minerals, repatriating funds and accessing international dispute resolution mechanism.
The act lies into the establishment of the Mining Commission to regulate the industry. The Amendments Act in the mining sector increases the royalty on diamonds and gemstones from 5 to 6 per cent, and raises the royalty on metallic minerals from 4 to 6 per cent of gross value.
The Acts provide several provisions relating to state equity in natural resource operations. Section 8 of the Sovereignty Act requires that any natural resource contract provide for both state participation and the opportunity for participation by Tanzanian citizens.
With regard to state equity, the government shall have no less than a 16 per cent free carried interest in the capital of mining companies.
During the fifth phase government under President Magufuli, we have witnessed a raft of measures in the sector such as establishment of mineral markets and buying centres in various parts of the country in order to make it easier for small-scale miners to access markets.
One area that has benefited mostly from mining sector reforms is domestic resource mobilisation. Resource mobilisation at domestic level involves both Central Government, and Local government Authorities (LGAs).
While at central government level revenues accrues from the corporate income tax, at LGA level they mainly come in form of fees, charges and corporate social responsibility (CSR). Ever since the reforms were enacted, revenue collections in the mining have grown significantly.
For instance, mining revenues increased from 194bn in fiscal year 2016/17 to 346bn in fiscal year 2018/19. While the government expected to collect 470 bn but up to May 2020, it collected 479bn way above the target amount.
Likewise, with the establishment of mineral markets for small scale miners, between March 2019 and February 2020, the miners managed to conduct mineral sales valued at 1.088tri/- with government collecting royalties amounting to 78bn according to the June 2020 budget speech by the Minister for Minerals.
When the President Dr John Pombe Magufuli was dissolving the parliament in June, 2020, he noted that tax revenues increased from 688.7bn during fiscal year 2014/15 to more than 2.4 tri/- in fiscal year 2018/19. He also noted that LGA revenue collections increased from 402.66bn during financial year 2015/16 to more than 661bn in the financial year 2018/19.
While at central government monthly revenue collections have increased from an average of 850bn in 2015 to 1.3 tri/- in December 2019. This is yet another milestone reached deserving credit to the fifth phase government under President Magufuli for his firm, patriotic, and realistic mineral sector reforms, benefitting the Tanzanians.
Raising domestic revenues is one thing but how well this resource is being spent is yet another aspect altogether. The government has implemented stringent fiscal measures that have greatly reduced wasteful public expenditure such as unnecessary trips abroad, conferences, and workshops.
As a result, we have witnessed substantial growth in the amount of resources allocated for development activities including infrastructure projects.
Between 2016/17 and 2020/21 fiscal period, the government budget analysis shows that development expenditure increased by 9.1 per cent from 11,820.5 billion to 12,899.4 billion while general budget support (donor support) declined by 71.3 per cent from 483.0 billion to 138.3 billion.
We clearly see President Magufuli’s desire to lower down dependency and build a country which capitalises on her own natural resources to generate income which in turn is invested in her own development.
Infrastructure development manifests itself in a number of ways including construction of roads, railways, ports airports, ship building, schools, hospitals and so many other construction related sectors. One such project benefiting from increased domestic resource mobilisation is the railway infrastructure.
The fifth phase government is constructing 1,457kms long Standard Gauge Railway from Dar es Salaam to the shores of Lake Victoria.
It is expected to cost $7.5 billion over the next five years. While we are building the SGR, we are also honoring the past by revamping, rehabilitating and modernising the old Meter Gauge Railway (MGR) both in the central corridor and the northern corridor.
These developments resonate with the famous British-Iraqi architect Zaha Mohammad Hadid’s note when designing the Daxing International Airport acknowledging the need for “designing the future while honoring the past with ancient Chinese Architecture”.
This emphasizes that with modernity we should not forget where we came from and thus, the need to honour and protect our old railway infrastructure with the view to protect our road infrastructure while enhancing the volume of transit cargo into great lakes region.
In the view of issues discussed in this article it is, with no doubt, the case that the fifth phase government under President John Magufuli has brought transformative changes in the natural resources, from which Tanzanians have benefited.