The United Republic of Tanzania Ministry of Energy and Minerals Tanzania Minerals Audit Agency Tanzania Mining, Energy / Power and Infrastructure Indaba CONTRIBUTION OF TANZANIA S MINING SECTOR TO THE ECONOMY Eng. Paul M. Masanja CEO Tanzania Minerals Audit Agency 2 nd October, 2013
OUTLINE About TMAA Mineral Occurrence Fiscal Regime Highlights - Contribution of Mining to the Economy Critical Challenges Way Forward 2 of 27
ABOUT TMAA MINERALS PRODUCTION & EXPORT AUDIT Quality Quantity Increased Govt. Revenues Availability of Reliable Minerals Data FINANCIAL AUDIT Mining Entities Financial Analysis Tax Review TMAA GOVT ENVIRONMENTAL AUDIT Environmental Stewardship Compliance 3 of 27
MINERAL OCCURRENCE IN TANZANIA North Mara Kabanga Geita Bulyanhulu Tulawaka Buzwagi Williamson Golden Pride TanzaniteOne Shanta Chunya Liganga Mchuchuma Ngaka Mkuju 4 of 27
MEASURED & INDICATED RESOURCES Gold 2,222 Tons Coal 5 billion Tons Uranium 35.9 million pounds Iron Ore 103 million Tons Tanzanite 12.6 million Tons Nickel 209 million Tons Diamonds 51 Million Carats 5 of 27
FISCAL REGIME Royalty Rates: Gold and all metallic minerals - 4%; Diamond and uncut Gemstones - 5%; Gem (cut and polished gemstone) - 1%; Uranium - 5%; Industrial and others minerals - 3% Corporate Tax: 30% Depreciation Allowances: 100% (in year of expenditure) VAT- Special Relief for exploration activities only Withholding Tax on Dividends: 5% for locals; 15% for foreigners Withholding Tax on Technical Services and Mgt. Fees: 5% for locals; 15% for foreigners Import Duty on Capital Goods: 0%, and cap limit of 5% on equipment and supplies after one year of production Ring Fencing: Mine to mine Thin Capitalization Rule: 70/30 debt: equity ratio 6 of 27
BENEFITS AND COSTS ACCRUED TO THE GOVERNMENT FROM A MINING PROJECT 7 of 27
HIGHLIGHTS_CONTRIBUTION OF MINING TO THE ECONOMY (1) Mining directly contributed about 3.5% of Tanzania s GDP in 2012 as compared to 3.3% in 2011 as per 2012 prices. Major mines returned about TZS 635.88 bil. (USD 410.24 mil.) to the Government in form of taxes and royalties, representing 18.51% of their mineral sales in 2012. 3 Large Scale Gold Mines paid TZS 299.85 bil. (USD 193.45 mil.) in corporate tax, representing 47.16% of total payments made by all major mines to the Government in 2012. Major mines directly employed 8,803 people in 2012 of which 7.6% were expatriates. ASM Sub-Sector employs directly about 700,000 people. 8 of 27
HIGHLIGHTS_CONTRIBUTION OF MINING TO THE ECONOMY (2) Total amount spent by major mines on local procurement was USD 520.67 mil. in 2012, representing 23.5% of their mineral revenues in the same year. In 2011, seven major mines (GPM, GGM, BZGM, TGM, BGM, WDL & TTM) voluntarily committed USD 7.44 mil. to CSR projects in their host communities and other areas in the country, representing 0.4% of their mineral revenues in the same year. Gold exports accounted for 25% of total exports and 51.1% of non-traditional export earnings in 2012. Spill-over effects of mining: notable sectors that have benefited from mining are Banking/Financial Services; Transport & Logistics; Manufacturing & Fabrication; Hospitality & Catering; Consulting (Environmental & Engineering Services). 9 of 27
HIGHLIGHTS_CONTRIBUTION OF MINING TO THE ECONOMY (3) VALUE CONTRIBUTION TO TOTAL NON-TRADITIONAL EXPORTS (2012) Source: BoT Monthly Economic Review, January 2013 10 of 27
FOREIGN DIRECT INVESTMENTS Avg. 482/Yr 11 of 27
MINING SECTOR GROWTH 12 of 27
HISTORICAL GOLD EXPORTS BY 7 LARGE SCALEMINES 1999 2012 (mil. toz) 13 of 27
14 of 27 GOVERNMENT REVENUE (1) TAX & ROYALTY PAYMENTS BY MAJOR GOLD MINES 1999 2012 (TZS BIL.) Year Corp. Tax PAYE WHT SDL VAT & Other * Sub Total Royalty Grand Total 1999 0.00 0.84 0.26 0.29 0.15 1.54 0.55 2.09 2000 0.00 3.88 4.71 0.86 0.40 9.85 2.79 12.64 2001 0.00 7.23 4.86 1.13 0.35 13.57 6.56 20.13 2002 0.00 10.68 5.40 1.69 1.64 19.41 10.22 29.63 2003 0.00 12.79 5.45 1.66 2.19 22.09 14.97 37.06 2004 0.00 8.33 5.32 2.44 4.86 20.95 18.87 39.82 2005 2.31 13.05 7.50 8.87 5.43 37.16 21.34 58.50 2006 1.75 11.78 3.35 2.49 2.84 22.21 29.30 51.51 2007 1.44 22.28 3.26 3.76 3.44 34.18 30.00 64.18 2008 0.88 44.01 5.61 7.55 9.23 67.27 32.69 99.96 2009 3.21 52.64 7.87 9.78 8.67 82.16 43.34 125.50 2010 21.38 49.92 13.13 11.32 4.87 100.63 70.37 171.00 2011 137.16 90.30 12.26 19.50 26.26 285.49 97.03 382.52 2012 299.85 87.45 67.64 19.32 46.81 521.07 114.81 635.88 Total 467.98 415.18 146.62 90.66 117.14 1,237.58 492.84 1,730.42 * Other taxes include: Stamp Duty, Import Duty, Excise Duty, Income Tax & Local Govt. Levy (2012) and exclude Road Toll
GOVERNMENT REVENUE (2) TAX & ROYALTY PAYMENTS BY MAJOR MINES 2012 VAT&Other 7% SDL 3% WHT 11% Royalty 18% Corp.Tax 47% PAYE 14% 15 of 27
GOVERNMENT REVENUE (3) TOTAL ROYALTY PAID BY MAJOR GOLD MINES 16 of 27
Year PROCUREMENT OF GOODS AND SERVICES LARGE SCALE MINES (2001 2012) Foreign (USD Mil.) Local (USD Mil.) Total (USD Mil.) 2001 75.47 109.51 184.98 2002 111.9 125.45 237.35 2003 215.73 186.15 401.88 2004 102.73 130.48 233.21 2005 336.08 237.97 574.05 2006 217.24 349.6 566.84 2007 467.88 547.82 1,015.70 2008 649.78 554.93 1,204.71 2009 619.9 551.77 1,171.67 2010 546.17 337.92 884.09 2011 991.29 379.57 1,370.86 2012 829.35 520.67 1,350.02 TOTAL 5,163.52 4,031.84 9,195.36 17 of 27
DIRECT EMPLOYMENT MAJOR GOLD MINES 9,000 8,000 7,000 6,000 5,976 6,999 7,139 6,917 7,361 7,753 8,134 5,000 4,000 3,000 2,689 2,000 1,000 0 145 395 460 567 583 650 718 669 2005 2006 2007 2008 2009 2010 2011 2012 Tanzanians Expatriates 18 of 27
PROFILES OF 9 LARGE SCALE MINES Mine Project Start Project End Remaining Life of Mine as of 2012 Main Product Output from Inception to 2012 Total Payments to the Government from Inception to 2012 (TZS Bil.) BGM 2001 2035 22 Gold 3.29 mil toz. 337.58 BZGM 2009 2020 7 Gold 0.7 mil toz. 74.43 GGM 2000 2026 13 Gold 5.81 mil toz. 668.87 GPM 1999 2013 0 Gold 2.12 mil toz. 212.35 NLGM 2012 2023 11 Gold 0.04 mil toz. 0.41 NMGM 2002 2022 9 Gold 2.29 mil toz. 176.71 TGM 2005 2013 0 Gold 0.87 mil toz. 199.66 TTM 2004 2042 29 Tanzanite 16.54 mil crt 21.00 WDM 2000 2028 15 Diamond 20.71 mil crt 39.41 TOTAL 1,730.42 19 of 27
EXPORT EARNINGS Total Export Earnings (Sales Revenue) by 6 Major Gold Mines (USD Bil.) 2.5 2.17 2.17 2.0 1.5 1.58 1.0 0.5 0.0 0.04 0.12 0.26 0.36 0.49 0.60 0.64 0.78 0.83 0.92 1.11 20 of 27
GDP CONTRIBUTION MINING & QUARRYING CONTRIBUTION TO GDP (%, at 2012 prices) 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 3.5 3.4 3.5 3.2 3.3 3.3 3.3 2.9 2.6 2.4 2.1 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: BoT Annual Report 2011/2012, MEM 21 of 27
REVENUE FORECASTING (1) HISTORICAL AND PROJECTED ANNUAL TOTAL GOVERNMENT TAKE, 2000-2035 (USD MIL.) 22 of 27
REVENUE FORECASTING (2) HISTORICAL AND PROJECTED ANNUAL GOVERNMENT TAKE (UNDISCOUNTED) BY MINE, 2000-2035 (USD MIL.) 23 of 27
CORPORATE SOCIAL RESPONSIBILITIES CSR EXPENDITURE BY 7 MAJOR MINES 24 of 27
CRITICAL CHALLENGES Linkage of the mineral sector with other sectors of the economy so as to optimize its contribution to the national economy. Infrastructures (Railway, roads, ports); Reliable and affordable power. Security Public expectations on extractive sectors. 25 of 27
WAY FORWARD Promote economic integration between the mineral sector and other sectors of the economy, so as to maximize its contribution to the economy. Improvement of infrastructure through PPPs. Use of gas and coal to provide affordable and reliable power supply; Promotion of relationship between mining companies and societies surrounding the mines; Public awareness on revenue collected from the mineral sector and its expenditure. 26 of 27
Thank you for listening 27 of 27