A BRIEF ON THE MINERAL SECTOR OF TANZANIA

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1 A BRIEF ON THE MINERAL SECTOR OF TANZANIA 1.0 Preamble Tanzania s mining industry has experienced a boom in both mineral exploration and mining, activities during the past ten years. Notable developments during the boom period include the commissioning of six large-scale gold mines at Nzega, Geita, Bulyanhulu, North Mara, Buhemba, and Tulawaka. During this period more than fifteen mineral prospects of gold, nickel and uranium, have also been developed to various stages of exploration. This development has resulted in increase of the country s annual gold production from less than one tonne per annum in 1998 to about 50 tonnes in 2008, making the mining industry the second fastest growing sector after tourism and increasing its contribution to the GDP from 2.0% in 1998 to 3.5% in 2005 (based on 1991 prices). Furthermore, the cumulative total direct foreign investment (FDI) in the mining industry in the past ten years exceeded US$ 2.5 billion and employed around 1% of wage earners. Factors that led to the rapid growth of the mineral sector in Tanzania include: conducive geological environment, major economic reforms which have been undertaken since mid 1980 s; (mineral policy of 1997, enactment of internationally competitive fiscal and legal regimes for the mineral sector); and political stability of the country. These developments pose challenges and create opportunities to Tanzania as more goods and services are needed to support this fast growing sector. Capacity building is thus essential to meet the demands in the country for delivering essential services and goods such as reliable power supply, mining equipment and other consumables for the mining industry. 2.0 Tanzania Mineral Endowment Mineral exploration and geological work undertaken so far reveal that Tanzania has a diverse mineral resource base. Most mineralization falls into a number of geological environments. These include the following: Gold occurrences hosted by the Archean greenstone belts and banded iron formations around the southern and eastern parts of Lake Victoria. Gold and base-metal occurrences in the Proterozoic Ubendian Supergroup in southwest of Tanzania. Kimberlite pipes in the central and southern parts of the Archean craton. Nickel, cobalt, copper, tin and tungsten bearing rock formations in the Karagwe Ankolean Supergroup in northwest Tanzania.

2 Major gemstone occurrences in the Proterozoic Usagaran (eastern Tanzania) and Ubendian Supergroups. Main gemstone types include: tanzanite, ruby, green garnet, green tourmaline, rhodolite, sapphire, emerald, acquamarine and chrysoprase. Carbonatites associated with the East African Rift Valley system. Iron ore hosted in anorthositic intrusives in the Proterozoic Ubendian Supergroup. Evaporites in the Rift Valley and younger formations along the coastal belt. Coal resources in the Karoo Supergroup in south-western Tanzania. Uranium occurrences in the Karoo Supergroup in southwestern and southern Tanzania and in superficial deposits within the Archaean craton in central Tanzania. A variety of industrial minerals such as kaolin, diatomite, gypsum, pozollana, limestone, meerschaum, bentonite, ball clay and dimension and artstones (granites, marble, anyolite) occurring in different rock formations. 3.0 Legal framework and fiscal regime The current legal framework and fiscal regime for the mineral sector are the outcome of policy reforms that were initiated in The country moved from a command economy to the free, private-led economy and consequently the mineral policy of 1997 and mining act of 1998 changed the role of the government from being owner and operator of mines to that of administrator, regulator, facilitator and service provider to the industry. 3.1 Legal framework Tanzania has a globally competitive and investor-friendly Mining Act, which was enacted in The Act guarantees investors security of tenure, repatriation of capital and profits, and transparency in the issuance and administration of mineral rights on the basis of first come first served. It also addresses adequately environmental concerns. The Mining Act No. 5 of 1998 sets out the legal framework governing mineral exploration, exploitation and marketing. Various mining regulations have been established under the Mining Act, 1998 to regulate mining activities. These mining regulations and rules are: The Mining (Mineral Rights) Regulations 1999; The Mining (Mineral Trading) Regulations 1999; The Mining (Safe-working and Occupational Health) Regulations 1999; The Mining (Environmental Management and Protection) Regulations 1999; The Mining (Salt and Iodation) Regulations 1999; The Mining (Provisional Licenses) Regulations 1999; The Mining (Mirerani Controlled Area) Regulations 2001; The Mining (Diamond Trading) Regulations 2002; 2

3 The Mining (Gemstone Board) Regulations 2004; and The Mining (Dispute Settlement Resolution) Rules Licensing Procedure The Mining Act, 1998 establishes state ownership of minerals and provides rights and conditions whereby the rights to explore, develop and produce such minerals are granted. Licensing procedures are streamlined to ensure transparency to and fairness by conferring ownership of mineral rights on first come, first served principle. There are seven types of licences issued under the Act as follows: Prospecting Licence The Act groups minerals into categories for purpose of facilitating targeting of incentives, penalties, specialized skills development and mineral administration, as follows: i) all minerals other than building materials or gemstones; ii) building materials; or iii) gemstones. A Prospecting Licence is granted for an initial prospecting period of three years, except in the case of an application for a Prospecting Licence for gemstones where the period may not exceed two years and is not subject to renewal. A Prospecting Licence covering a preliminary reconnaissance period for all minerals other than building materials and gemstones may be granted for a period not exceeding two years. The holder shall relinquish 50% of the prospecting area on each renewal. The size of each Prospecting Licence shall be as follows: i) for a Prospecting Licence with a preliminary reconnaissance period, the maximum area shall be 5,000 sq. km.. ii) for a Prospecting Licence for all minerals other than building materials or gemstones the maximum area during the initial prospecting period shall be 200 sq. km. iii) for a Prospecting Licence for gemstones or building materials the maximum area shall be 10 sq. km. Retention Licence The holder of a Prospecting Licence, other than a Prospecting Licence for building materials or gemstones, may be granted a Retention Licence for a period not exceeding five years when an 3

4 exploration programme and feasibility studies have identified the existence of a significant ore body, which cannot be immediately developed as a mine due to adverse market conditions. The licence may be renewed for a single period of five years. Special Mining Licence A Special Mining Licence is granted in respect of the development and production stages of a large mining operation. The licence may be granted for a period not exceeding 25 years which it is proposed to mine. On application duly made, it may be renewed for a period not exceeding twenty-five years. Application for a Special Mining Licence must be accompanied by a proposal of mining operations, Environmental Management Plan (EMP), employment of citizens of Tanzania and an Environmental Impact Assessment (EIA). The application under this licence must also be submitted to the Mining Advisory Committee for advice before issuance of licence. Mining Licence A Mining Licence may be granted for a period not exceeding ten years, or the estimated life of the ore body which it is proposed to mine. It may be renewed for a period not exceeding ten years. Each application under the Mining Licence must include a feasibility study, which shall set out the proposed programme of mining operations and must be accompanied by an EMP and an EIA. The size of each Mining Licence shall be as follows: for a Mining Licence for all minerals other than building materials or gemstones the maximum area shall be 10 sq. km; and for a Mining Licence for building materials the maximum area shall be 0.5 sq. km. Gemstone Mining Licence A Gemstone Mining Licence confers on the holder the exclusive right to carry on mining operations for gemstones in the mining area. The licence may be granted for a period not exceeding ten years, and may be renewed for the period not exceeding ten years. No Gemstone Mining Licence shall be granted to a non-citizen of Tanzania, unless the Gemstone Mining Licence is held by that person in undivided participating shares with a citizen of Tanzania whose share or shares amount to not less than twenty five per cent. For a Gemstone Mining Licence, the maximum area shall be 1.0 sq. km. 4

5 Primary Prospecting Licence A Primary Prospecting Licence authorises the holder to prospect for minerals for any area located in the Zone for which the Zonal Mines Officer has responsibility. The licence shall be granted for a period of one year, and may be renewed for a like period or periods. Primary Mining Licence A Primary Mining Licence confers on the holder the exclusive right to carry on mining operations in the mining area. The licence is granted for a period of five years and may be renewed for the like period. The holder of one or more Primary Mining Licences may apply to convert the licence or licences to a Mining Licence or a Gemstone Mining Licence. The size of each Primary Mining Licence shall be as follows: for a Primary Mining Licence for all minerals other than building materials the maximum size shall be 10 hectares; and for a Primary Mining Licence for building materials the maximum size shall be 2 hectares. The above maximum sizes shall not apply to Primary Mining Licences amalgamated for the purpose of conversion to Mining Licence or Gemstone Mining Licence. A Primary Prospecting Licence and a Primary Mining Licence cannot be granted to an individual who is not a citizen of Tanzania or to a company unless: its members are all citizens of Tanzania. its directors are all citizens of Tanzania. control over the company, both direct and indirect, is exercised from within Tanzania by persons all of whom are citizens of Tanzania. 3.2 Fiscal regime Tanzania has a globally competitive and investor-friendly Fiscal regime, which was formulated in Applicable legislation under the fiscal regime are the Financial Laws (Miscellaneous Amendments) Act, 1997 and The Value Added Act, Royalty on minerals is administered under the Mining Act, Tanzania offers internationally competitive tax incentives which guarantees investors security of tenure; repatriation of capital and profits; and transparency in the issuance and administration of mineral rights. The tax structure and incentives include: 5

6 Depreciation allowances for depreciable assets (a deduction equal to the amount of capital expenditure (=100% depreciation allowance) in the year of expenditure, which also can be carried forward; Import and excise duty for mining equipment at 0% during exploration and mine development up to the first anniversary of commercial operation; and thereafter a cap limit of 5% applies; Losses carried forward for unlimited period; Other major taxes applicable include a 30% corporate tax, after capital allowances and adjustment for loses carried forward; Royalty payment: 5% on diamonds and rough gemstone; 0% on cut gemstone; and 3% on other minerals; Withholding tax: 10% on dividend; 3% on technical services or 20% if management fees exceed 2% of operating costs (amended, 2004, whereas foreign 15% and local 5%); and On interest 0% VAT Special Relief (goods and services purchased or imported are subject to VAT, however, the VAT Act provides relief to mining companies on certain goods and services); Fuel Taxes (Fuel Levy and Excise duty on fuel): US$200,000 per annum; Local Levy: US$200,000 are paid to Local Government per annum; Banking and Foreign Exchange: investors are allowed to open foreign account to service loans; Ring fencing: None; and Tax stability: Full mine project life or 25 years, whichever comes first State participation in any mineral venture is not mandatory. Stability Agreements The current Agreements made under Section 10 of the Mining Act, 1998 are restricted to assurances of stability of the fiscal regime applying to a particular investor at the time the Agreement is made. The agreement covers the life of the mine project. However, the agreement must be registered by the Minister for Finance in the Register of Tax Agreements. 4.0 Mineral exploration trend in Tanzania Since 1994, there has been a mineral exploration boom, whereby more than 50 multinational companies and over 250 local companies have acquired mineral rights. The companies used geological maps for basic data and information during initial exploration activities. By the end of 6

7 2005 there were a total of 4,073 prospecting licences issued to different companies. The majority of these licences targeted on gold deposits in the Archaean greenstone belts around Lake Victoria. Other licences were for base metals, iron ore, nickel, industrial minerals, platinum group metals (PGM) and gemstones. The basic data and information on the mineral potential of the country is collected through geological mapping and publication of geological maps. The country is sub-divided into 322 Quarter Degree Sheets (QDS), each measuring 54 km x 54 km or 2916 sq. km). Up to 2008, eighty six percent (86%) of the 322 Quarter Degree Sheets (QDS) has been geologically mapped. Out of these 77% have been mapped at a scale of 1:125,000 (50% published and 27% not yet published.). The remaining 9% of the mapped QDS are at the scale of 1:100,000 whereby 2% have been published and 7% are not yet published. The published geological maps show type of rocks, structures, potential mineral resources (mineral showings and occurrences), and soil types. The maps are accompanied by reports of the respective QDS. The 1:100,000 map scale show more detailed information than the 1:125,000 map scale. In view of this geological maps are currently being published at the scale of 1:100,000. Furthermore stakeholders prefer the 1:100,000 scale for easy integration of other geoscientific data. The geological maps at 1: 125,000 scale therefore, need to be updated to 1:100,000 scale. Under the NDF Project from 2003 through 2007, the following work was completed: 1.5 % geological mapping was completed and maps published at 1:100,000 scale (ie. 5 QDS out of the remaining 320 QDS) 3% of the 322 QDS covered by high resolution airborne geophysical surveys (i.e. 11 QDS out of 322 QDS) and published at scale of 1:100, % or 5 QDS geochemical maps published at 1:100,000 scale (out of 322 QDS) Under SMMRP project, the aim is to accomplish the following: Geological mapping and publishing of QDS maps 6% or 18 QDS to be mapped and published at 1:100,000 scale (ie. increase of 6 % of the QDS). GST will continue to publish 6% of the unpublished maps which will make 14% of the QDS published at 1:100,000 scale. Geochemical survey 5 % proposed to be surveyed (ie. 9 QDS out of the remaining 308 QDS) or decrease by 5 % of the maps) After the project only 13% coverage of geochemical survey out of the 322 QDS 7

8 Geophysical Survey 34 QDS will be covered making 11% coverage out of the remaining 311 QDS, and maps will be published at scale of 1:100, % coverage will be realised after the project (i.e. Increase of 11% from the current 3%) Multinational companies which are active in the mineral exploration are Barrick Gold Corporation, AngloGold Ashanti, Minieres du Nord (NMD), IAMGOLD, and Randgold. Investment in exploration activities has led to the upgrade of more than 12 economic gold prospects which are at various exploration stages. These include: Project Resource Grade Status (Mt) (g/tons) Golden Ridge Exploration Mgusu Exploration Nyakafuru Exploration Buckreef Exploration Busolwa Exploration Msasa Exploration Rwamagaza reefs Exploration Bingwa and Tembo Exploration Kitongo Exploration Luhala Exploration Miyabi Exploration Kisuge Hill Exploration Apart from gold, other prospects which are at advanced stages of exploration are nickel at Kabanga (Ngara) with resource of 21.3 Mt 2.18%Ni, 0.27%Cu and 0.16% and Dutwa (Bariadi) with initial resource of 31 Mt at 1.1% nickel and 0.034% cobalt and uranium (Namtumbo). 8

9 Mining trend in Tanzania The earliest organized mineral prospecting and mining in Tanzania took place during the German colonial period, beginning with gold discoveries in the Lake Victoria region around 1894 (Nilsen, 1980). After 1930, gold production was substantial and increased steadily until 1966 when Geita Gold Mine (GGM) closed. By 1967, the gold industry had declined to insignificant level due to the closure of the mine and production was mostly from artisanal mining. The Government took the first step in 1967, to develop the mineral sector, whereby Statedirected economic development strategy was adopted. The strategy directed among other things that medium to large scale private owned investments in the mining industry not allowed without State participation of not less than 50%. This led to the establishment of State Mining Corporation (STAMICO) in However, artisanal- and small-scale mining has been key rural mining activity in Tanzania for many years and was the major producer of minerals in Tanzania for the period between 1987 and The activity employs over 500,000 people. With the changes in macro-economic policy of the country to adopt free market economic policies from 1985, many private foreign and local investors showed interest and subsequently invested in the mineral sector. In 1992 there were 10 Prospecting Licences and 9 Mining Licences granted to private investors, the number has increased to over 5,900 Prospecting Licences and 220 Mining Licences in 2008, including six special mining licences for gold. Annual gold production from these mines is about 50 tonnes, putting Tanzania among the third leading gold producing countries in Africa. Major players in the mining industry are shown in Annex 1. Since 1998 production increased after the construction of the first mine (Golden Pride) out of the six mechanized large scale mines, whereby two of which (Geita and Bulyanhulu) are of worldclass deposits. The six mines are: Golden Pride in Nzega with 2.8 M oz. resource became operational in Geita Gold Mine (GGM) with 20.0 M. oz resource became operational in Kahama Gold Mine (KGM) at Bulyanhulu with 14.6 M oz. resource became operational in North Mara Mine with 4.1 M. oz resource became operational in Tulawaka Mine in with 1.7 M. oz resource commenced production in March Besides gold, diamond mining, which had been relatively minor, received a major boost with the discovery of the Mwadui kimberlite pipe in Commercial production started in 1951 and continued progressively until mid 1960s.. Between 1967 and 1997, diamond production at 9

10 Mwadui mine had been affected by both global diamond production and internal policies. However, since 1998, production has increased due to the new investment that was put into the Mwadui Diamond Mine. There has been significant increase in tanzanite mining activities in the country. The only large scale gemstone mine is that of tanzanite at Mirerani. Traditionally, tanzanite has been mined by small-scale miners since it was discovered in Exploration work conducted in 2002 calculated and indicated resource of 4.6 Mt of ore with a grade of 22 carats/tonne (4.4 g/t), containing 50 million carats of A and B grades tanzanite. In 2003, a large scale mechanized tanzanite mine was opened at Mirerani. Re-evaluation of the deposit in 2004, revealed indicated resource between 0.95 and 1.26 Mt of ore with between 63 and 83 million carats of tanzanite. Other than gold, diamonds and tanzanite, which are produced by large scale mining, production of other mineral commodities, have been relatively modest. In the past few years, significant production of coal, phosphate, kaolin, gypsum, salt and varieties of gemstones (tanzanite, garnets, sapphire) have been produced mainly from small and medium to scale mines (Annex 2 & 3). 6.0 Artisanal and small scale mining in Tanzania: Small-scale and artisanal mining has been a key rural mining activity in Tanzania for many years. It was the major producer of minerals in Tanzania for the period between 1987 and The definitions of artisanal and small-scale mining are not clear in Tanzania. Most people involved in the mineral sector imply that small-scale miners are those working in Primary Mining licence areas and artisanal miners are those individuals mining haphazardly without proper authority. The Mineral Policy recognizes the positive contribution of the artisanal and small-scale mining sub-sector to the economy. For simplicity, artisanal miners are mobile operators who often employ traditional tools and techniques in exploration and mining. Small-Scale Miners on the other hand, own mining licences and are relatively organised compared to artisanal miners. The Government is committed to supporting the small-scale mining by facilitating the transformation of the present artisanal mining activities into more organized and modernized small-scale mining units. In the late 1980s, the Government organized a series of miners associations to transform and upgrade artisanal mining into organised and modernised mining, principally in gold and gemstones. This move coincided with a major increase in artisanal mining activity, which is estimated to employ between 600,000 and 1,000,000 people. 10

11 The growth of artisanal and Small-Scale sub-sector has been hampered by many technical problems despite the favourable geology in the country. They usually generate the following problems: Unprotected and unreclaimed trenches and pits after mining has ceased, causing safety problems to the miners themselves as well as to local people in general and animals; Uncontrolled use of reagents used to recover gold causing environmental and health problems; Poor techniques for crushing and milling the extracted material, as well as lack of protection, causing poor recovery of minerals and health problems particularly those related to exposure and absorption of dust; Use of contaminated water, lack of sanitary and hygiene facilities, increasing the potential of transmission of certain diseases; and Development of mining activities without proper environmental management plan which leads to continual contamination and pollution of soil and surface and underground water in artisanal and small-scale mining areas. In realising the potential for growth and the need for improving the sub-sector, the Ministry of Energy and Minerals formulate strategies in 2006 aimed at developing small-scale mining in Tanzania. The strategies address the following specific areas: 1. Improve information and statistics on artisanal and small-scale mining; 2. identification and allocation of exclusive areas for small-scale mining; 3. training and extension services; 4. facilitating geological investigations in small-scale mining areas; 5. improving credit and financing; 6. promoting value a addition; 7. improving marketing; 8. streamlining the fiscal framework; and 9. enhancing regularisation and addressing cross-cutting issues such as environment, health and safety, gender, HIV/AIDS, and social responsibility. The strategies are summarized in the table below. Some of these activities will be included in the SMMRP. 11

12 Strategies to Develop ASM S/N Objective Strategies Key Players Key Performance 1 To have up to (i) date information and updatable statistics on artisanal and small-scale mining To map ASM activities to update number of people involved; groupings; technology; marketing arrangements; cooperatives and associations. Establish databases on ASM Small-Scale mining Section at MEM HQ; Zonal and Resident Mines Offices; and consultants. Indicator To have an updatable database at MEM HQ that links with ZMO and RMOs. 2 To identify and (i) To liaise with LSM to assist with the identification of MEM, STAMICO, Increase in the demarcate exclusive suitable areas for small-scale mining. GST number of mining areas for small-scale (ii) To facilitate timely allocation of demarcated areas for licences for SSM; mining and address conflicts and disputes small-scale mining by technically assisting allocation committees chaired by District Commissioners Decrease in number of between ASM, LSM. (iii) To demarcate some of relinquished areas after PL disputes between and other land users (iv) (v) renewals for small-scale mining, To support GST to conduct geological investigations in ASM areas To publicise areas that fall vacant to help other applicants, in particular small-scale miners apply for those vacant areas. SSM and LSM and other land users; and Increase in formal employment in SSM. (vi) Promote cooperatives and joint venture in SSM to improve their performance. (vii) To discourage hoarding of licences areas by LSM. 3 To improve training (i) To improve codes of practices and MEM; VETA; Increase in

13 Strategies to Develop ASM S/N Objective Strategies Key Players Key Performance and extension services for small-scale mining (ii) (iii) (iv) (v) outreach; To impart training according to identified needs; To strengthen training and extension service provision in RMOs, ZMOs and other training Institutions; To put in place monitoring and evaluation systems in Extension services To promote appropriate and affordable technologies. Mineral Resource Institute (MRI); SIDO; UDSM; Dar es Salaam Institute of Technology (DIT); and donors. Indicator regularized artisanal miners; Increased safety and decrease in disputes; Increase in welfare and productivity; Increased social Stability in SSM areas; Improved institutional capacity for extension services. Improved local fabrication of mining tools and equipment. 4 To impart entrepreneurship skills to Small-scale Miners to improve planning, management, financial (i) (ii) (iii) To conduct needs assessment for training on entrepreneurship. To prepare and conduct training programs according to needs assessment. To promote and coordinate training by various MEM; Colleges of Business Education (CBEs); VETA; and SIDO. Increase in stable and formal employment. Increase in bank savings among 13

14 Strategies to Develop ASM S/N Objective Strategies Key Players Key Performance accounting and marketing; and improve productivity, safety environmental compliance (iv) (v) stakeholder close to SSM areas. To work closely with SSM who demonstrate improving performance to enhance their business orientation. To promote stable markets services close to SSM centres on a selective basis (according to improvement rating) Indicator SSM. Improved access to better equipment and increased skilled labour in SSM. 5 To enhance access to (i) To assist SSM to access geoscientific data and MEM, STAMICO, -Reduced SSM geological data and information on relinquished areas that have that GST, UDSM, mobility and information for information. Consultants. increased high SSM improvement of productivity, (ii) To conduct geological investigation in mineral rush areas prior to demarcation and allocation to SSM. performance mines. - Increase in stable employment and (iii) To promote geological extension services in SSM and formal financing in SSM; (iv) (v) areas, and encourage miners to spend on geological investigations. To support geological extension services by STAMICO and GST. To build institutional capacity for geological investigations and information, specifically in major SSM centres employment - Increased social Stability and investments in SSM areas. - Increased access to credit facilities for SSM. - Improved social services in SSM centres 14

15 Strategies to Develop ASM S/N Objective Strategies Key Players Key Performance 6 To prepare and implement a special program to enhance access to credit facilities that suit SSM needs i. To establish the Mineral Development Fund under MEM for mine development; payment for ii. iii. geotechnical investigation and advice; and for purchase and hire of mining equipment. To establish the Mineral Revolving Fund under MEM for mining services in SSM centres such as customer milling services, value addition and mineral trading. To liaise with financial institutions and NGOs to promote financial services in SSM. MEM; MoFEA; Financial Institutions; Ministry of Cooperatives and marketing; NGOs; SIDO; LGRAs; mineral beneficiators Indicator Improved mining finance and equipment in SSM Increased investments in SSM Improved financial services to SSM Increased valuein gemstones. iv. To establish asset leasing to SSM under SIDO; v. To empower SSM, service providers and mineral vi. vii. dealers to access existing trust funds,; To promote establishment of cooperatives in SSM centres. To promote hire-cum-purchase arrangements between SSM and mineral dealers and service providers. 7 To strengthen value i. To phase out export of raw gemstones; addition in minerals for ii. To create enabling environment for mineral beneficiation improved socioeconomic benefits iii. To promote training in value addition in Tanzania; activities; MEM; Gemstone Board, MoFEA, TRA; AG Chambers, Ministry Increased export value of gemstones; Increased number of local gem cutters; 15

16 Strategies to Develop ASM S/N Objective Strategies Key Players Key Performance 8 To improve and strengthen internal markets and marketing to improve socioeconomic benefits to people and the nation iv. To support jewelry activities to enhance value addition; v. To promote investment among Tanzanians in value vi. (i) (ii) (iii) (iv) (v) (vi) addition. To institute standards and accreditation of value added products. To promote formal mineral trading in SSM centered by coordinating SSM and mineral dealers. To promote cooperation among miners, in particular in industrial mining to enhance productivity and marketing. To create environment for increased investments in mineral trading by foreigners. To strengthen the promotion of Tanzania as the Gemstone Centre of Africa. To promote sale of SSM to local gold refineries through fiscal incentives. To promote development of minerals in the country. of Industry, Trade and marketing; Arusha and Manyara LGRAs; BoT and Ministry of Home Affairs MEM; MoF; District Authorities; District Cooperatives Officers; TAMIDA; AG Chambers; and Board of External Trade. Indicator Increased quality of value added products Strengthening of mineral shows; Increased mining cooperatives, particularly in industrial mining; Increased number of visiting mineral traders from overseas; Increase in export values of minerals; Increase in volume of officially traded minerals, particularly gold; Re-introduction of gem shows; and Increased 16

17 Strategies to Develop ASM S/N Objective Strategies Key Players Key Performance 9 To streamline the fiscal regime and enhance revenue collection in Small-Scale Mining. (i) (ii) (iii) (iv) To raise awareness to Small-scale miners on taxation requirements and on existing fiscal incentives. To streamline the fiscal regime on basis of different groupings in SSM. To remove fiscal barriers to mineral trading and value addition. To raise awareness to TRA and LGRA on the specific needs of SSM. MEM, MoFEA; TRA; and TIC Indicator development of minerals other than gold, diamond and gemstones Increase in licensed mining activities; Reduced underinvoicing practices and illegal export of minerals Increase in volume of officially traded minerals. 10 To strengthen regulation and coordination of smallscale mining to ensure compliance with legal requirements (i) (ii) (iii) (iv) (v) To strengthen the budgetary and logistical support of Zonal Mines Offices and Resident Mines Offices through the Retention Scheme; To facilitate deployment of Environmental Engineers in RMOs and ZMOs; To have a comprehensive staff training program as part of capacity building; To strengthen law enforcement by MEM; To establish the small-scale mining section at MEM; MEM; PSMU; MRI, VETA; AG Chambers; Ministry of Home Affairs Increased in legal miners; Reduced environmental destruction; Reduced mining disputes; Improved institutional 17

18 Strategies to Develop ASM S/N Objective Strategies Key Players Key Performance (vi) (vii) (viii) (ix) (x) (xi) (xii) To streamline licensing procedures for SSM; To create awareness to SSM on legal requirements by Holders of Mining licences; To categorize legally artisanal miners and small-scale miners like in Ethiopia; To introduce excellence awards for SSM; To strengthen REMAS; To strengthen co-ordination of SSM issues among stakeholders; and To establish mechanisms to enable LGRAs to participate in the administration of ASM. Indicator capacity, particularly ZMOs and RMOs; and Strengthened REMAs. To adequately To strengthen environmental protection in ASM areas MEM; MoH; Improved socio welfare address crosscutting issues in mining To raise awareness to ASM on HIV AIDS and its impacts and behavioral changes required To create awareness on health and safety in mining and improve access to health services in ASM. To combat employment of persons under age (under 15) in mining. To address gender equality in the promotion of mining investments LGRAs; NEMC; Religious institutions; NGOs; SSM and local communities in mining areas and reduced negative impacts in mining areas To promote productivity in mining and environmental protection 18

19 Strategies to Develop ASM S/N Objective Strategies Key Players Key Performance Indicator To improve social service in SSM centres 19

20 Other initiatives to promote development of ASM in Tanzania were: Training conducted in collaboration with stakeholders like; UNIDO, USAID, UNDP, VETA, DfID and the World Bank, particularly in the lake Zone area. Demonstration training conducted by using successful small scale mines. Among those are, Mr. Christopher Kadeo of Rwamgasa village Geita district, and Mr. Yusuph Money of Mirerani Simanjiro district. A Mining Technological Demonstration Centre has been established in Matundasi Chunya district. The government has opened mine offices close to mining sites, for example Tunduru, Handeni, and Mirerani and improving the existing offices by providing them with working tools in order to facilitate supervision of mining activities and the availability of extensional services. The government in association with stakeholders made some efforts to create markets in mining sites. Examples of this were the MEREMETA (Geita) and now FBME bank that has buying centres in Geita and Musoma areas. The minerals business authorised by providing brokers licence although at the moment there are very few licence holders Initiatives by LSM to Develop ASM i) Mwadui Community Diamond Partnership (MCDP) MCDP is a community development initiative led by De Beers Group, which committed US$2 million for the project. Further funding is being solicited from other sources including local funds from the Government of Tanzania. MCDP main objectives are: to alleviate poverty through multi-stakeholder partnership and address political and socio-economic challenges that are being faced by the artisanal and smallscale diamond mining sub-sector. The expected deliverables are as follow: Poverty alleviation through creation of small and medium businesses, job creation, provision of health, education, water and electricity infrastructures; availability of credit facilities to assist artisanal and small scale diamond miners; having an improved regulated artisanal and small scale diamond mining sub-sector; availability of reliable markets and right prices for Tanzanian diamonds; enhancing safety, health and environment standards; increasing Government tax revenue through close regulation of the artisanal and small scale diamond miners; and

21 improved geological database. DeBeers sold it s interest to the Williamson diamond mine to Petra Diamonds in late 2008, who have expressed interest in continuing the MCDP. ii) The Transformation of Artisanal Gold Mining ActivitiesScale Mining Operations Initiative Barrick Gold Corporation have developed a program to improve the productivity, safety and environmental management of small-scale miners around North Mara and Bulyankulu gold mines. In order to implement the program effectively, the company has identified six work streams: Land Acquisition- for both mining, services and waste management Formation and Registration of a Cooperative Societies as well as formulation and registration of Bye-laws (the Cooperative Societies Act, 2003) Managing the transfer of Mineral Rights ownership Developing training programs (Mining Act- Safety Regulations, 1999 as well as Capacity Building in form of Business Skills) Identifying and sourcing for appropriate technology that is safe, easy to operate and maintain, as well as being environmental acceptable Identifying and soliciting for adequate funding so that operations can sustain themselves as businesses At North Mara, four Cooperative Societies have been formed and registered namely: Mara Miners Cooperative Society Ltd Mlima Mgosi Cooperative Society Ltd Msege Miners Cooperative Society Ltd Nyamagunchara Miners Cooperative Society Ltd The four Societies formed are based on closeness, infrastructure and obviously common challenges. They employ 1513 people (973 men and 540 women) 21

22 The desired transformation could be achieved through taking cognizance of the following education as a key, people participation, cooperative societies as the right vehicle; and land, appropriate technology with adequate funding. To realize the desired outcome and benefits, the company intends to: Address safety and health issues on the rock face Improve on their mining methods and schedules Have a centralized decent processing plant that conforms to our base line Put some decent logistics to support production. The approximate cost for one model mine with a production and ventilation shafts, central processing plant with a capacity of 5tph, processing plant to produce sellable gold, gold trading through responsible mining is US$ 2.7 million. The breakdown is as follows: Processing plant USD 1.5 million Mining and logistics USD 0.5 million Infrastructure USD 0.3 million Working costs USD 0.4 million To achieve the responsible metal trading objective, Barrick Gold is discussing with the Rand Refinery of South Africa who are planning to build and operate the refinery in Mwanza, and are willing to buy gold from artisanal and small-scale miners. 7.0 Social and Economic Benefits from the Mining Industry The contribution of the mining industry to the GDP has been increasing over the years from 2.0% in 1998 to 3.7% in This contribution has been attributed to both large scale mining operations as well as medium- and small scale mining activities. However, medium- and small scale mining has been an important contributor to local economies, providing a means whereby large numbers of people can complement income derived from other primary activities, such as subsistence or seasonal agriculture. Subsequently, the industry plays a significant role in changing the social and cultural interaction and economic wellbeing of the majority of Tanzanians by providing them with employment, thereby reducing poverty. Tanzania benefits socially and economically from the mining projects as highlighted in Annex 4. Despite the positive aspects of the mining industry, there are negative aspects of environmental damage; particularly artisanal and small scale mining. Factors that lead to serious environmental 22

23 concern include lack of appropriate mechanized mining methods, lack of properly established social structure within mining areas and lack of awareness on environmental issues. The contribution of large-scale mining operations does not reach directly the local Governments and communities surrounding the mines, apart from non-obligatory contribution towards health, education, communication and water supply for some of the mines. This situation has resulted into the notion from the local community that there are no benefits from the mining industry. In order to arrest this situation, in recent years the government of Tanzania has started reforming/restructuring Local Governments with the aim of enabling them to be more autonomous and work towards structural improvement of the welfare of the population, alleviation of poverty, disease, ignorance, social injustice and inequalities. Proper coordination and transparency in the mining industry, can contribute towards poverty reduction and community development, both in the vicinity of mining operations and in a broader regional and national context. In order to achieve this Government has decided to join and implement Extractive Industries Transparency Initiative (EITI) principles. 8.0 Value Addition on Minerals Tanzania has a better chance of developing value addition to minerals such as gemstones cutting industry and goldsmiths, industrial minerals and ornamental- and dimension stones due to abundant resources available in the country. This will enhance the contribution of the mineral industry towards the national economy and increase employments for Tanzanians. Some of the strategies to be considered to foster value addition activities to minerals include: tax attractions in gemstones; introducing attractive taxing system in the design of gemstones and precious metals; securing EPZ areas for designing of gemstones and goldsmiths; encouraging local entrepreneurs to enter the designing of gemstones; amending the investment and Finance acts in order to provide tax exemption for gemstones cutting and designing machines, goldsmiths machines and their spare parts; introducing gem and jewellery shows in the country in collaboration with the gemstones and gold business stakeholders; encouraging mineral traders and goldsmiths to participate in International Gem & Jewellery shows in advertising and improving businesses; establishing Lapidary and Jewellery Sections at the Arusha Carving Centre. The MEM established the Arusha Gem Centre in The emphasis up to the present has been on training in carving of ornamental stones. The MEM aims to turn the centre into a fully fledged gemological centre with Carving, lapidary and jewelry sections that trains, conducts business and promotion of mineral products. 23

24 9.0 Administration of the Mineral Sector 9.1 Vision and mission of the Ministry of Energy and Minerals (MEM) Vision of MEM The vision of MEM is to be the highest contributor to GDP through sustainable exploitation and utilisation of energy and mineral resources in Tanzania by Mission of MEM The mission of MEM is to spearhead sustainable development of energy and mineral resources by providing best services and conducive environment for investment to our customers through competent and skilled staff. 9.2 Organisation structure A comprehensive restructuring of the Ministry of Energy and Minerals (MEM) commenced in 2001, under the public sector restructuring programme. The Mineral Resources Division was restructured into Minerals Division and Geological Survey of Tanzania and Madini Institute as government executive agencies in order to increase efficiency. Improvement of the structure was made in April 2006, whereby changes were effected to include the post of Deputy Commissioner for minerals and units of Procurement Management; Information, Education and Communication; Environment Management and Legal Services. Further improvements were made in the MEM structure on 13 th January 2009, to include Management Information Systems unit and Minerals Auditing section in the Minerals Division. The Ministry s current organogram is as presented in Annex Functions of Sections under the Minerals Division 1. Mineral Economics and Trading Section Despite the remarkable investment growth in the mining sector, value addition in produced and exported minerals is insignificant (currently standing at 0.3 per cent), thus not contributing fully to job creation as well as to the economic growth. The main challenges, therefore; is to continue attracting investment in mining and ensuring that value addition activities are done within the country. 24

25 In addition, MKUKUTA and CCM Election Manifesto of 2005 have emphasized on the two issues. One addresses value addition activities as an important element in increasing national wealth, reducing poverty and creating jobs. The other is the need to develop and promote enabling environment so as to increase investments in the sector. The institutional capacity of the Government to monitor large scale foreign investment has been surpassed by the rapid growth of the mining sector. Therefore, there is a need to build Government s capacity to enable it to regulate and control the sector efficiently and be able to receive its rightful share of revenue. MEM has undertaken several initiatives aimed at promoting value addition in minerals such as preparing draft legislation to govern value addition; and establishing training and demonstration centre (Arusha Gemstone Carving Centre). In order to effectively and efficiently address the above challenges, MEM has established the Mineral Economics and Trading Section. 2. Small-Scale Mining Development Section The small scale mining sub sector has been growing tremendously despite the fact that its contribution to the country s economy is yet to be realized. The sub sector is currently not well organized, monitored and controlled. To address this, MKUKUTA has come up with strategies aimed at transforming the small-scale miners into sustainable sub-sector. Furthermore, the Mineral Policy of 1997 and the CCM Election Manifesto of 2005 have deliberately put emphasis on modernization of the sub sector to ensure that it becomes sustainable and contributes significantly to the economy. Based on the above challenges, the MEM has established the Small Scale Mining Development Section so as to adequately deal with the small scale mining sub sector and to enhance its contribution to the economy. 3. Mines Inspectorate Section The number of Large Scale Mining Licenses has increased from 2 in 1990 to 212 in Likewise, the number of valid Small Scale Mining Licenses has increased from 2,609 in 2000 to over 8,600 in This increase in large and small-scale mining activities has necessitated closer monitoring of the mining operations to ensure compliance with mining laws and regulations for sustainable development of the sector. Furthermore, the Mining Policy of

26 and MKUKUTA put emphasis on the development of a system that ensures safe and sustainable mining operations. In order to ensure compliance with mining laws and regulations in the mines, the MEM has established the Mines Inspectorate Section. 4. Licensing and Mineral Rights Management Section The fast expanding mineral sector has scaled up the mineral rights licensing function. This is depicted by the increase of the number of large scale prospecting licenses from 454 in 1995 to 3,433 in To ensure security of tenure, transparency and efficiency in mineral rights licensing activities, MEM initiated the Mining Cadastre Information Management System (MCIMS) in Furthermore, MKUKUTA stresses the establishment and implementation of the MCIMS to enhance efficiency in processing mineral rights. MEM has established the Licensing and Mineral Rights Management Section to enhance efficiency in processing and granting of mineral rights. 5. Explosives Management Section Increased mineral exploration and mining activities in the country has led to increased demand for the acquisition and use of explosives. For example, quantity of explosives used in the country for mining purposes in 1990 amounted to 834 tonnes. At the end of October 2006 the amount of explosives used for mining purposes was 18,000 tonnes, which is a substantial increase. Explosives usage need to be carefully regulated, otherwise it can be used in clandestine activities like terrorism and illegal fishing. The Explosives Act, 1963 and its Regulations of 1964 empower the Commissioner for Minerals to regulate manufacturing, importation, exportation, transportation, storage and usage of explosives in the country. MEM has established the Explosives Management Section to cater for the administration and management of explosives used in mining activities in the country. 6. Minerals Auditing Section Despite the remarkable investment growth in the mining sector, the contribution of the sector to the economy has not been fully realized. There has been an outcry from the public that, the mining companies operating in the country have been cheating through over invoicing of capital and operating expenses, under declaring values of exported minerals and avoiding environmental safeguards in order to maximize profit at the expense of the rightful share of the Government revenue. 26

27 The institutional capacity of the Government to monitor large scale foreign investment has been surpassed by the rapid growth of the mining sector. Therefore, there is a need to build Government s capacity to enable it to regulate and control the sector efficiently and be able to receive its rightful share of revenue. MEM has undertaken several initiatives including hiring of a foreign firm, M/S Alex Stewart Assayers and Government Business Corporation to undertake gold auditing of the large scale gold mines. These initiatives have enabled the Government to understand the scope of the challenge and establish the Mineral Auditing Section in order to effectively and efficiently monitor and audit mineral production and exports, investments and operating costs and environmental safeguards. 7. Environmental Management Unit The energy and mineral sectors exploration and exploitation activities have much negative impacts to the environment. MEM has recognized this and has come up with strategies stipulated in the mineral and energy policies aimed at mitigating environmental degradation impacts and enhancing positive impacts. In addition, Articles 30, 31 and 32 of the Environmental Management Act, 2004 require each sector to form a Unit that would coordinate environmental management activities in the respective sector. The CCM Election Manifesto of 2005 among other things puts emphasis on protection and management of the environment during energy and mineral resources exploration and exploitation. MEM has established the Environmental Management Unit aimed at developing and promulgating sectoral environmental strategies to mitigate environmental impacts resulting from the minerals and energy exploration and exploitation activities. 8. Legal Services Unit The legal services activities at MEM were decentralized, with each Division having its own Legal Officers. This arrangement hindered efficiency of the legal services in the Ministry and has resulted into the public outcry of not benefiting in a number of contracts in mining and energy sectors. At the same time, energy and mineral sectors activities has attracted a number of local and foreign investors and these require a well coordinated, holistic and firm legal advises so as to ensure the country benefits from the agreements and contracts entered. MEM has established the Legal Services Unit that will offer legal advises relevant to the development of the energy and mineral sectors. 27