Africa Focus

Sassda Market Intelligence Specialist Lesley Squires provides an update on Tanzania, a country famed for its tanzanite deposits and is home to many rare earth and critical minerals that are currently in the exploration stage…

Tanzania is awash with potential thanks to its wealth of natural resources and burgeoning middle class that is driving consumption and growth within its economy. Against this backdrop, the top three sectors that have the greatest potential in Tanzania are ICT, Infrastructure, and Agribusiness.

The government has also invested heavily in infrastructure projects such as railways, roads, and airports. Agriculture continues to be the major economic activity among most Tanzanians and employs more than 70% of the population. With the growing middle class in the country, there is also increasing demand for consumer products.

Mining is another leading industrial sector in Tanzania with the value of mineral exports increasing for the past several years. The sector consists of small- and large-scale operations. Mining in Tanzania includes metals (gold, iron ore, nickel, copper, cobalt, silver), industrial minerals (diamonds, tanzanite, ruby, garnet, limestone, soda ash, gypsum, salt, phosphate, gravel, sand, dimension stones and graphite), and fuel minerals (coal, uranium).

Tanzania earned around $2.3-Billion in minerals exports in 2019, a significant increase over the 2018 level of $1.6-Billion. Gold had the highest contribution to the value of mineral exports. Tanzania is the fourth largest gold producer in Africa after South Africa, Ghana and Mali and is the world’s sole producer of the precious stone tanzanite. Gold production currently stands at roughly 40 t a year, copper at 2 980 t, silver at 10 t and diamond at 112 670 carats.

Mining and quarrying activities made a large contribution to Tanzania’s Gross Domestic Product (GDP) growth in the first quarter of 2021. The sector recorded 10.2% of the GDP.

The Tanzania mining industry remains attractive to investors, given the next few years of significant diversification in the mining of nickel, uranium, and coal. There is also an availability of investment incentives and supply chain opportunities in the mining sector.

MINING LAWS ABOUND

There have been a number of legislative changes to the mining industry in the country. According to the Petroleum Act of 2015 and the Mining Act of 2010, license holders and contractors in the extractive sector are liable to pay taxes, including corporate tax (30%), capital gain tax (30%), withholding tax (10%), and other taxes.

Profits resulting from the transfer or disposal of rights are also subject to taxes, which are collected by the Tanzania Revenue Authority. In June 2017, the Tanzanian government passed laws with significant implications for extractive sector governance in the country (including the Natural Wealth and Resources Contracts Bill, the Natural Wealth and Resources Bill, and the Written Laws Act).

One of the most significant implications of the bills is that they empower the national assembly to allow the government to renegotiate any agreement considered inequitable and containing “unconscionable terms”. Other provisions entitle the government to stakes of at least 16% in  mining companies operating in the country, with the option to acquire up to 50%.

The Tanzania Extractive Industries Transparency and Accountability Act 2015 has provisions for all new concessions, contracts and licenses to be made available to the public. (FYI All the major pieces of legislation governing the industry today can be found on the website for Tanzania  Chambers of Mines: https://www.miasa.org.za/members/tanzania-chamber-of-mines

A MERGING OF THE MINDS

As a result of these amendments a joint venture company known as Twiga Minerals Corporation Limited has been established between the Government (16%) and Barrick Gold Corporation Company (84%); and the payment of compensation of $100 -Million from Barrick Gold Corporation Company as initial settlement of the agreed $300-Million.

The government of Tanzania would also like to see more value-added activities in the country, including smelting and processing of minerals. As of 2020, two model gold smelters were built in Lwamgasa and Katente, a one-stop mineral processing and export centre.

This has resulted in a strengthening of mineral controls and a reduction of smuggling due to the construction of a 24.5km wall around the Mirerani tanzanite mine. An additional 28 markets and 25 mineral centres have been established.

In recent years, mineral exploration has increased in several parts of the country. The sector has attracted substantial new foreign investment in mineral development exploration, with local investment surpassing $1-Billion. Recent nickel, helium, graphite, uranium, and coal finds have spurred increased interest on the part of investors.

THE BIGGER PICTURE

Tanzania’s GDP grew to 4.9% in 2021 up from 4.8% in 2020, supported by the global economic recovery. Growth was driven by agriculture and services on the supply side and final consumption and investment on the demand side. Monetary policy remained tight, which stabilised inflation at 3.3% in 2020 and 3.7% in 2021.

The Tanzanian shilling remained stable in 2020-21, depreciating by only 0.2% against the US dollar. The ratio of NPLs to gross loans fell to 9.4% in March 2021 from 11% in March 2020 but was still above the statutory requirement of 5%.

The fiscal deficit increased to 3.4% of GDP in 2021 from 0.8% in 2020 due to weak revenue performance and growing financial needs. These were fed by the impacts of COVID-19 and subsequent external and domestic borrowing.

SUB-SECTOR PROSPECTS

The mining sector depends on imported machinery and supplies, and investors can import capital goods at zero duty. There are significant opportunities for the export of technology, machinery, and services. Mining companies have significant demand for better power alternatives as they currently rely on diesel generators.

The Tanzanian Government encourages mining companies to procure local goods and services whenever possible, and many of the foreign mining executives would like to increase local consumption to support the Tanzanian economy. There is a significant opportunity to supply foodstuffs, clean water, training, consultancy, and other services. With an unreliable power grid and rail system, alternative energy and transport solutions are also in high demand.

OPPORTUNITIES ABOUND

• Establishment of gold refinery activities
• Supply equipment and explosives, grinding media, mill liners, etc., under a joint venture with Tanzanian entrepreneurs
• Establishment of value-added activities
• Gemstone cutting and polishing (lapidary). In 2010, the Government passed new legislation banning the export of unprocessed gemstones in a bid to spur local beneficiation
• Rock and mineral carvings
• Jewellery manufacturing, utilising gold, and gemstones
• Mineral processing industry e. g., smelters
• New areas in mineral exploration