Over decades good governance of the extractive sector has remained
Over decades good governance of the extractive sector has remained elusive yet with improvements, the sector can unlock tremendous economic potential, sparing Tanzania and the entire East Africa region faster to a middle income economy status.
Tanzania is endowed with vast deposits of extractive resources particularly minerals and natural gas. The minerals sector has recorded substantive growth contributing to 7.3% of GDP in 2022 up from 4.3% in 2018. The Mining sector is however yet to achieve the government’s desired target of 10 % of GDP by 2025. The sectors growth is driven by large scale investments and exports from three major minerals ; Gold, Diamonds and Tanzanite. Between 1995 and 2015 the sector was characterized with significant governance challenges such as generous exemptions, aggressive tax planning, avoidance and evasion by large scale mining companies, economic injustices in some mining areas such as Geita and Nyamongo. There was public concerns that the sector was not benefiting the Country. The Mining Acts of 2010 and other legislative, policy and fiscal reforms were intended to improve but were not fully successful.
In 2017 the government took measures to address some of these concerns by enacting laws such as the Natural Wealth and Permanent Sovereignty Act , Renegotiation of Contracts and changing its fiscal regime with a view of providing more government control and direct participation in the mining sector, maximisation of revenues and value addition. However some of these reforms were viewed as regressive, have faced silent corporate resistance and cases against the government have been filed before International courts for arbitration. Tanzania is a member of the EITI and transparency has improved since 2015 when the Tanzania Extractive Industries Transparency Act (TEITA) was passed. However, the government could go an extra mile on contract disclosure. Governance challenges therefore still exist and the government is yet to carefully navigate around them.
Moreover, Tanzania has vast deposits of coal and natural gas. The government has coal and natural gas as strategic resources positioned to drive the Country’s energy and industrial agenda. With confirmed deposits of 1.9 billion tones of coal reserves of which 25 percent are proven and at least 57 Tcf of Natural Gas, Tanzania is an extractive giant and could be new large gas exporter in the nearest future. According to the Bank of Tanzania reports, Tanzania coal exports drastically increased to $223.8 million in 2022 compared to 319 million in the previous year. This was accelerated by the surge in demand for alternative energy, amid supply challenges caused by the Russia-Ukraine war. However the imminent energy transition from fossil based sources to cleaner energy sources could thwart these benefits in the future. According to the International Energy Agency (IEA) the demand for some minerals such as Copper, Nickel, Tantalum, Lithium, critical for supporting clean energy technology will continue to rise. But the demand for fossil based energy sources such as coal, oil and gas could be mixed and reduced to meet the Paris Agreement targets of achieving zero carbon emissions by 2050. The transition therefore offers some opportunities and major risks to the sector in the longterm. Strategic governance choices and significant alignment has to be made , if the country is to benefit from this transition.
Tanzania’s extractive governance challenges can replicated all over the African continent. Generally, Africa has been the source of materials for global progress with its extractive resources exploited as raw materials for export to elsewhere. This time around governments must think about how to position not to be left riddled with the resource curse which has bedeviled the continent for so long. The surging demand for renewable energy and critical minerals must not push the continent further into poverty and inequality, exacerbated environmental degradation and health risks, corruption, aggressive tax abuse and a new wave of mineral driven conflicts, violence, and death.
Rather governments should equip to benefit from the green or critical mineral revenues boom, finance and technology which is necessary for the needs of our citizens. Also think about how to move up value chains to benefit socially, economically through minerals value addition to avoid exporting raw materials, negotiation of better contracts and better management of revenues collected. Increased transparency, citizen participation and oversight is fundamental. All these are important in achieving longterm social, economic and transformation from the extractive sector as stipulated the government’s national development plans and Africa’s Mining Vision.
The political context has been shifting with more new reforms expected. President Samia Suluhu Hassan has committed to attracting new investments into the Mining sector. After stalling for more than 5 years, in early 2023 the government signed contracts with International Gas companies, paving way for the construction of the Liquefied Natural Gas (LNG) project in Mtwara. The Host Government Agreement (HGA) is expected to be signed by end of 2023 and the Project Front Engineering Design (FEED) expected by 2028. The government has commenced a process to institute new mining reforms, with a view of capturing more benefits from its strategic green or critical minerals. These provide a new momentum for Tanzania’s future extractive sector. This program therefore works to address
- Extractive Policy and legislative reforms
- Transparency and Accountability
- Green or Critical Minerals governance