Tanzania
Country Case Study
The challenge of mineral wealth:
using resource endowments to foster
sustainable development
July 2007
Tanzania Country Case Study
CONTENTS
1
INTRODUCTION
1.1
1.2
1.3
1.4
1.5
2
BACKGROUND
OBJECTIVES
METHODOLOGY
CONSULTEES
REPORT STRUCTURE
4.1
4.2
4.3
4.4
17
BRIEF HISTORY OF TANZANIA
THE ECONOMY
BRIEF HISTORY OF MINING IN TANZANIA
17
17
19
21
21
21
22
23
23
DESCRIPTION OF NORTH MARA MINE
Overview
Environment and sustainability
History
2005 Outlook
Location
Access 23
Climate
Exploration and Development
DESCRIPTION OF COMMUNITIES SURROUNDING THE NMM
23
24
24
IMPACT ANALYSIS: HAS MINING HAD A POSITIVE INFLUENCE ON TANZANIA’S
27
SOCIO-ECONOMIC PERFORMANCE?
3.1
3.2
3.3
3.4
3.5
3.5.1
3.6
3.7
4
14
14
15
16
16
BACKGROUND
2.1
2.2
2.3
2.4
2.4.1
2.4.2
2.4.3
2.4.4
2.4.5
2.4.6
2.4.7
2.4.8
2.5
3
14
27
27
28
35
THE CONTRIBUTION TO SOCIAL AND POVERTY OUTCOMES
37
Contributions to Millennium Development Goals by the mining sector as a whole 39
CONTRIBUTIONS TO MILLENNIUM DEVELOPMENT GOALS BY THE NORTH MARA MINE 51
STAKEHOLDER PERCEPTIONS OF THE IMPACT OF NMM
67
THE MACROECONOMIC IMPACT OF MINING
MINING AND ECONOMIC PERFORMANCE SINCE THE 1950’S
ECONOMIC PERFORMANCE SINCE THE EARLY 1990S
RECENT PERFORMANCE –THE TWO SUB-SECTORS OF MINING
REASONS BEHIND SUCCESS FACTORS, CHALLENGES AND CONSTRAINTS
THE STANDARD EXPLANATIONS – ECONOMIC POLICIES AND GOVERNANCE
MACROECONOMIC POLICIES AT THE NATIONAL LEVEL
GOVERNANCE, LEGAL AND INSTITUTIONAL DEVELOPMENT
OVERVIEW
1
71
71
71
76
80
5
5.1
5.2
5.3
5.4
5.5
5.6
5.7
6
6.1
6.2
6.3
6.4
UNDERSTANDING THE ROUTES TO ENHANCED IMPACTS
INTRODUCTION
PUBLIC BUDGET MANAGEMENT AT NATIONAL LEVEL
LOCAL GOVERNMENT FINANCING AND DECENTRALIZATION
THE ABSENCE OF EXPLICIT FISCAL TRANSFERS FOR MINING REGIONS
THE CONFLICTS OVER LAND USE WITH THE ASM SECTOR
SOCIAL COHESION MORE GENERALLY
SYNERGIES BETWEEN MINING AND THE REST OF THE PRIVATE SECTOR
MAIN CONCLUSION AND LESSONS FOR POLICY REFORMS AND MINING
COMPANIES
INTRODUCTION
OUTCOMES
CAUSES AND EXPLANATIONS
UNDERSTANDING THE STEPS TO ENHANCE IMPACTS
81
81
82
85
89
89
92
92
94
94
94
95
99
7
ACKNOWLEDGEMENTS
102
8
BIBLIOGRAPHY
104
2
Authors: Catherine MacDonald, Alan Roe
The findings, interpretations, conclusions and recommendations expressed in
this report are entirely those of the authors and do not necessarily reflect the
views of the Government of the United Republic of Tanzania, the United
Nations Conference on Trade and Development, the World Bank, its Executive
Directors, or the countries they represent.
3
PREFACE
In the past five years, the economic, social and environmental dimensions of
mining and minerals have been the subject of wide-ranging consultation,
critical comment, research and analysis. The Mining Minerals and Sustainable
Development Project (MMSD) and Extractive Industries Review (EIR) respond
to the unprecedented focus of public attention on the sustainable development
challenges for extractives in general and mining in particular.
In May 2004, ICMM 1 initiated its Resource Endowment 2 initiative 3 to better
understand how large scale mining activity in low and middle income
countries can enhance the socio-economic development of host countries. The
initiative aims to isolate the drivers of development effectiveness in the
mining and metals sector and to document the policy frameworks, operational
practices, and partnership arrangements that deliver sustainable outcomes on
the ground. This action-research project is being done together with UNCTAD
and the World Bank Group. ICMM also consulted stakeholders such as
mining companies, governments, donor agencies, labor and nongovernmental organizations (NGOs). The Government of the United Republic
of Tanzania (GOT) has had the opportunity to review this report and has
agreed to its publication. The GOT reviewers registered no objections to the
report’s contents and conclusions. It is important to remember, however, that
the report represents the work of ICMM and its partners in this initiative and
should not be construed to represent the views of the Tanzanian government.
Much of the “resource curse” literature has focused on problems rather than
solutions. Consequently it is not of much practical help in designing improved
policy or filling gaps in knowledge. For example, how have apparently
“successful” countries avoided problems now so widely perceived? Can such
outcomes be repeated in other developing economies endowed with an
abundance of mineral resources? How should the main stakeholders work
together to enhance positive socio-economic outcomes from mining
investments?
To help bridge these gaps, some of the specific questions the Resource
Endowment initiative attempts to address are:
ƒ
ƒ
ƒ
How the mining sector overall contributes to national development?
What strategies have been effective in managing revenues generated by
natural resources for sustainable development and poverty reduction?
How an individual mining project contributes to development at national,
regional and local levels?
1 The International Council on Mining and Metals.
2 The Challenge of Mineral Wealth: using resource endowments to foster sustainable development.
3 The initiative is managed by Kathryn McPhail, Principal, ICMM.
4
ƒ
ƒ
What are the practical and policy implications for mining companies, host
country governments, development institutions, and NGOs?
What might the distinct responsibilities of these development partners be
to support implementation of findings and recommendations?
The three distinct phases of the initiative and related products are outlined
below.
Phase 1: Analytical Framework and Tools
The initial phase of the project concentrated on the development of an
analytical framework focusing on governance processes, including the
underlying factors and rules of the game that affect social and economic
interactions and outcomes. These aspects were incorporated into a practical
Toolkit to assess local, regional and national socio-economic impacts of
mining. The Toolkit also deals with how mining operations impact on
governance structures, institutions and policy changes at different levels of
government. Phase 1 involved an extensive literature review, and a ‘coarsesift’ comparative analysis of the relative economic and social well-being of 33
countries with a high dependence on minerals. Initial findings were critiqued
in a multi-stakeholder workshop which helped to shape a revised approach.
Phase 1 Published reports:
ƒ Analytical Framework: Executive Summary
ƒ Resource Endowment Toolkit
Phase 1 Additional Online Resources:
ƒ Analytical Framework: Main Report
ƒ Literature Review
ƒ November 2004 Workshop proceedings
Phase 2: Testing, Synthesis and Emerging Lessons
This involved applying the Toolkit to two main and two comparator
countries, Peru (with Chile as a comparator) and Ghana (with Tanzania as a
comparator). In all four countries, mining had shown some evidence of having
successfully contributed to economic and social improvements. The purpose
was to test the Toolkit, to assess whether it could be applied to a broader set of
mining countries, and to propose refinements. The findings were reviewed by
a second multi-stakeholder workshop which provided valuable feedback.
Phase 2 Published reports:
ƒ Four country case study executive summaries
ƒ Synthesis report of findings of the four case studies
Phase 2 Additional Online Resources:
ƒ Ghana, Tanzania, Peru and Chile country case studies
ƒ October 2005 Workshop proceedings
In addition, a number of other publications summarize the process or findings
of both Phases 1 and 2 and signal ICMM’s approach to Phase 3.
5
ƒ
ƒ
A Spotlight series that summarizes key aspects of Phases 1 and 2 (The
Prize; The Challenge; Ways Forward; and Process and Feedback)
Resource Endowment Guide to Phases 1, 2 and 3
Phase 3: Action Learning through Partnerships
The activities of Phase 3 will include a number of ‘pilot projects’ in
partnership with others to encourage uptake of the Phase 2 recommendations
and, as a consequence, enhance the contribution of mining to social and
economic development. Phase 3 will also focus on dissemination and
outreach.
For the latest information on Phase 3, including details of pilot activities and
partners visit www.icmm.com
6
EXECUTIVE SUMMARY
Introduction
Mining in Tanzania has changed dramatically in the past decade. After many
years of stagnation, the country has seen substantial new investment, mainly
in five major new mines. Supported by Tanzania’s long-delayed
macroeconomic and structural reforms in the mid-1990s, and radical new
mining legislation in 1998, gold production by end-1998 had exceeded its
previous peak as achieved in 1938 with an output level of 388,000 ounces
(versus 48,000 ounces in the preceding year and zero in 1998). Since 2001,
annual gold production has continued to grow rapidly and now routinely
exceeds one million ounces per annum. This impressive upsurge in mining
activity means that the sector now accounts for over 40% of the country’s
exports, around 75% of its foreign direct investment (some $300 million
annually in recent years as against total FDI of only around $10 million per
annum a decade earlier) and a rising share of government tax revenues
(currently 3.6%) and GDP (currently around 3.2%).
But how does this success impinge on the living standards and general wellbeing of the country and the people of Tanzania and does it presage some
Tanzanian version of the ‘resource curse’ at some point in the future?
This case study sought to answer these and related questions by examining
the performance of mining in terms of both its macroeconomic and its more
local economic and social contributions. To this end, the case study focused on
the Placer Dome Mine in North Mara, one of the five new mines in Tanzania.
It combined these aspects of the analysis with parallel work on the
macroeconomic and national effects of the mining upsurge. The results were
used to identify remaining gaps in the Tanzanian system of public
management and governance that could arguably help to deliver larger
benefits and less risk for the future if they were to be adequately addressed.
The Macroeconomic Effects and Benefits
Tanzania has had a long history of serious macroeconomic mismanagement
combined with obvious deficiencies of governance. Unlike the other case
study countries, however, these problems have occurred at a much lower
income level with a total population that is relatively large. Mining has made
a contribution quite quickly. However, because modern commercial mining is
such a capital intensive industry, it has contributed less to Tanzania’s
employment and value-added (and so GDP) than the large scale investments
of the past few years might lead one to expect. Specifically, of the average
annual GDP growth of 4.8% achieved in the period 1996-2003, mining
contributed about 0.3% (or some 6% of the total) (Treichel, 2005).
This performance, however, must be seen in the context of Tanzania’s long
term growth record which has been extremely poor. This contextualization is
shown in Figure (i) below which covers a period of more than 50 years. It can
7
be seen that the period since the new mining surge has been one of generally
higher and more stable growth than anything seen in the previous decades.
Mining’s contribution of plus 0.3% growth contrasts with the often
significantly negative growth of earlier years.
The study does not conclude that mining per se has caused the improved
growth performance seen since 1996. But it does argue that mining has been
one of the crucial elements in a broader package of favorable policy and other
developments that together explain the good outcomes.
Tanzania per capita Growth: 1950 - 2003
Tanzania Per capita Growth: 1950- 2003 (PPP 1990$)
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
19
51
Figure (i)
-2.0%
-4.0%
-6.0%
-8.0%
Source: The University of Groningen, Growth Centre at www.ggdc.net
A key proposition is that a fragile country that was run for many years on
strict socialist lines does not easily make the transition to a market-based
economy and a predominantly private ownership structure. Commercial
mining, since 1996, has shown itself to be unusual in that it has demonstrably
been capable of operating successfully in an environment that is still only
partly reformed and where basic infrastructure and the other supports needed
for most private business activity are still weak. This case study concludes that
the authorities and donors would be well advised to try to build on this partial
success rather than bemoan the absence of significant other forms of new
private investment activity.
Social and Poverty Effects
This case study also examines in some detail the contribution of the mining
sector to Tanzania’s achievement of seven of the eight Millennium
8
Development Goals (MDGs) and does so both at the national level and at the
level of the North Mara Mine (NMM). 4
Other researchers using data from the 2001 household surveys have reported
generally negative findings about Tanzania’s use of recently improved growth
to address its very high rates of poverty. This case study does not challenge
this finding. It does, however, find some basis for cautious optimism about the
contribution of the mining sector. The extra growth that has been associated
with the mining boom – albeit small on the national canvas - is certainly large
and significant in those communities that are in the direct areas of influence of
the mines. The new mining companies in Tanzania have clearly created a
significant number of good quality jobs in these communities – either directly
or indirectly – via their procurement activities. The indirect impacts could, of
course, be larger. There is an expectation that this will indeed occur as the
embryonic mining industry becomes more mature and embedded in the
country’s economic system. Specific corporate policies of the type already
practiced at North Mara are an important part of this prospect. At the same
time there have been negative effects of the newer commercial mining on the
small-scale (but large in employment terms) artisanal mining sector and these
too are reviewed in detail 5.
The fostering of strong community relationships and partnerships is critical if
the local social and economic impacts of the mines are to be deepened further.
The companies generally recognize that this is not yet happening sufficiently
in spite of large amounts of spending on community development and
environmental safeguards. As a consequence, community development is
high on the agenda for all of the mines, albeit with different approaches to that
goal. The substantive problem is that of embedding the corporate
contributions sustainably into the mainstream public provision of social and
economic services. It is difficult for a mining company working in isolation to
achieve success in this area (after all, community development is not a core
mining business). Most of the companies have realized that they need to
combine forces with government and social service providers and are seeking
guidance and support about how such arrangements might be brokered and
structured.
Explanations of Successful Outcomes
A fundamental reform of mineral legislation has been the first key ingredient of
the successful resurgence of mining in Tanzania as it was also in the other
three case study countries. The new legislation has also been a recent sequel to
the launch of systematic policies of macroeconomic stabilization and structural
4
See http://www.undp.org/mdg/ for explanations of the eight Millennium Development Goals. As the eighth goal, ‘Develop a
global partnership for development’ was focussed internationally, we did not consider it relevant for this case study on local
performance.
5
In brief, the arrival of the large mines has coincided with the cessation of access to artisanal and small scale mining
(ASM) that generated income for many people in some regions. Some of this has been due to the displacement of the ASM
miners as part of the company agreements with national government. Also ASM miners seem to be reaching the limits of
their technical abilities to mine those areas without large machinery and more modern methods.
9
adjustment. The more investor-friendly mineral legislation from 1998
represented the first part of the success package, and the macroeconomic
stabilizing reforms of the same period represented the second part. The third
component seems to have been a selective improvement in some aspects of
Tanzania’s governance that also began after 1996.
In regards to the new 1998 mineral legislation, critics argue that this has
increasingly been slanted in favor of international mining companies and
against the interests of the host countries. These criticisms are certainly heard
loud and clear in Tanzania. However, the study finds several points that argue
against this popular opinion. First, in a very short space of time the
government revenues from mining in Tanzania have grown from almost
nothing (artisanal mining contributed little) to almost 4% of total tax revenues
and over 3% of total domestic budget revenues: a not insubstantial
contribution in a country with a generally poor record on tax collection.
Second, the mining revenues have been very stable to date (much more so
than the dominant donor aid flows) and could soon overtake HIPC debt relief
as a source of resources for the government. Third, the objective assessment
from investors is that the tax regime in Tanzanian (as is also the case of
Ghana) still represents a significant deterrent to investment relative to the
similar regimes of countries that compete for the same investments. 6
In relation to macroeconomic policies, Tanzania has achieved a lower and
more stable inflation climate and a fiscal balance that is much more easily
financed without inflation than in the past. 7 The maintenance of this lower
inflation equilibrium in the past decade has been an important ingredient of
the stability that has encouraged higher levels of new mineral and other
investments. But even more important than this is the fact that Tanzania has,
for a decade, sustained a reasonably reliable commercial regime that gives
investors confidence that payments and receipts in foreign currency – a key
factor in commercial mining - will not be associated with unreasonably high
risks. This has been supported by a much more realistic exchange rate than in
the years before 1996 and, above all, by the avoidance of the serious real
exchange rate misalignments that plagued those earlier years.
In regards to governance, Tanzania has seen clear improvements but it does
remain weak in many areas as routinely measured by the World Bank’s
standard indicators. Therefore, the case study contradicts some strong
international opinions that argue for a systematic improvement in governance
as a pre-condition for successful mining activity 8. The critical components in the
case of Tanzania have been the establishment of the stronger, and more
effective, central executive power that was necessary in order to achieve the
gains in economic policy performance referred to above. However, some
6
See Figure 4 in the Synthesis Report of this project (drawn from data provide by the Fraser Institute).
7 The dilemma now for Tanzania is that the new budget equilibrium relies far more than is desirable on donor aid flows
which are both unreliable for the longer term and unpredictable in magnitude in the short term.
8
For example, the Extractive Industries Review commissioned by the World Bank.
10
aspects of this improvement may have diluted further the effective power at
the local and community levels of government which is necessary to achieve a
set of true partnership arrangements with the large and powerful
international mining companies. Many of the difficulties still experienced at
the local and community levels derive from this fact.
The Contribution of the Mining Companies
This case study analyzes in some detail the substantial direct and indirect
contribution of the companies to the overall performance of the host country
since 1998. In relation to the main MDG, the eradication of extreme poverty, it
is noted that although NMM and other mining companies do not focus
specifically on eradicating poverty and hunger, they have nonetheless
contributed to this first MDG, by increasing economic activity significantly in
the remote areas where they operate. By providing direct employment and
initiating the multiplier effects to create significant indirect employment, the
presence of large-scale mines has almost certainly helped to reduce poverty in
the areas in which they operate in Tanzania 9. This conclusion is qualified only
by the uncertainty about the number of artisanal and small-scale mining
(ASM) jobs that could plausibly have survived longer term given the inherent
limitations of this sub-sector of activity. Certainly in North Mara, the amount
of such activity that was truly sustainable is argued to be very limited indeed.
In addition to their direct contributions to output, employment, government
revenues and exports, the large mines in Tanzania have also adopted a range
of corporate policies relating to social investment and have supported a diverse
range of related investments in social and economic infrastructure. As newer
arrivals on the scene, the companies, and certainly Placer Dome, have
committed to social responsibility agendas that are quite advanced relative to
industry averages.
At the level of individual mines including North Mara, the companies
certainly face difficulties and criticisms in relation to some of the component
MDGs. However, the general but brief experience in Tanzania is that the new
international mining investors are adopting sound and helpful approaches to
difficult issues such as gender empowerment and the mitigation of
environmental side effects. They have also become an important part of the
delivery in social areas such as health and education.
9
Overall, the NMM has contributed positively to the important areas of employment and local business development.
Placer Dome has adopted more active measures than its predecessor to enhance the levels of local employment,
procurement and business development, so this positive contribution is likely to increase. Although the creation of jobs and
economic activities may not directly reduce poverty levels, economic expansion has provided increased income to a wider
number of people than would have had these opportunities without the presence of the large mine. In addition, for those
people in receipts of royalties or who have received relocation houses, living standards have almost certainly improved. It
is recognition of the fact that the mine’s presence has raised living standards for many people which leads the Tanzanian
government to refuse to return a proportion of income earned from mining taxes and royalties directly to the mining
regions.
11
However, a particular area of difficulty relates to the point made earlier about
the still limited trickle-down effects of mining through the creation of
productive activities linked to the main mining operation. The arrangements
necessary to support local economic development and economic diversification –
including the long-term sustainability of mining communities when mines
close – remain incomplete. Both the mining companies and the authorities still
have some way to go in developing effective ways to address this very
difficult set of problems. This case study identifies investment in interesting
individual local projects but little evidence of consistent planning by mining
firms and other stakeholders (including local and national governments) to
consider the broader economic potential that mining can catalyze or indeed
the economic future for local economies after mining. This is an issue that
needs to be addressed also by government. There needs to be an extension of
the governance improvements already achieved at the national level to local
government (see discussion below).
Enhancing the Economic and Social Benefits
It is a central proposition of this case study that some of the remaining
difficulties and controversies surrounding mining are associated with the
ongoing weaknesses in some of the dimensions of governance where reform is
incomplete. The institutional and other reforms in Tanzania of the past few
years now ensure a reasonable degree of delivery of publicly stated objectives
– including poverty-reduction programs - through the budgetary process. The
government is also now reasonably well equipped to make good use of those
revenues that it raises from mining activities. Its future participation in the
Extractive Industries Transparency Initiative (EITI) would be a confirmation
of the reasonable standards of transparency and accountability that have
already been achieved. Nonetheless the public management systems and their
implementation remain problematic in some respects and significant leakages
are still occurring. The control of corruption, although much improved,
remains one aspect of this.
A specific recommendation is that that improved local impacts from mining
will require the greater empowerment of local authorities through both
greater independence of their finances and greater local management and
other capabilities. The present system of local authority financing is improving
but it does not yet provide a satisfactory basis for the effective bottom-up
planning and financing of local economic and social development. Nor does it
provide sufficiently well-equipped interlocutors for the mining companies in
local and regional administrations to ensure the maximum economic and
social benefits from the spending done by those companies. Changes in
present arrangements may also call for a reconsideration of the present
Tanzanian government policy not to have any special redistribution
arrangements that favor the mining areas.
How these further reforms are best achieved, and with what sequencing, is a
large question in its own right and is beyond the scope of this case study. The
12
study, however, certainly argues for a degree of greater decentralization of
decision making authority.
A second set of recommendations relate to the management of the interface
between commercial and artisanal mining. This subject is hugely controversial
in Tanzania and possibly the single most important factor that negatively
colors attitudes to the international mines.
The case study concludes that the mining companies can only do so much on
their own to address the inherent social tensions and economic rifts that a
major new investment may create. A rounded solution to these incipient
problems needs, above all, a coherent local and regional capacity that can
effectively represent all segments of local society and address their changes in
situation (positive or negative) so as to avoid major fractures. This in turn
reflects the earlier point about the present limitations of local government
capacity and empowerment in Tanzania. All parties would be well advised to
regard this as a major constraint on the benefits that mining can potentially
bring to local society.
13
1
INTRODUCTION
1.1
BACKGROUND
This case study has been prepared to provide an assessment of the positive and
negative socio-economic impacts of mining projects in Tanzania. Tanzania was
selected to provide a second example of African experiences, Ghana having been
studied as the principal African case study nation. The report has been prepared
under the guidance of Oxford Policy Management (OPM), on behalf of the
International Council on Mining & Metals (ICMM). The report forms part of ICMM’s
broader Resource Endowment initiative.
The aim of the Resource Endowment initiative is to establish how mining activities
can contribute to the socio-economic development of host communities and countries.
In order to inform this debate, four country case studies have been undertaken in
countries that are both heavily dependent on mining and which have performed
relatively well in recent years. The other three countries for which case studies have
been prepared are:
•
•
•
Ghana;
Peru; and
Chile (which has been selected to provide a second example of South American
experiences).
It should be noted that the selection of countries and mines studied is not intended to
be representative of the whole of the mining sector. Rather, they are intended to
provide interesting cases from which lessons can be learned.
1.2
OBJECTIVES
The objectives of this report are to present an assessment of the positive and negative
socio-economic impacts of mining in Tanzania at:
•
•
the local/regional level; and
the national level.
There is extensive mining activity in Tanzania, with active exploration and mine
development programs ongoing as well as a number of operational mines. The
modern mining sector is relatively recent. To examine impacts at the local level the
case study uses the North Mara Gold Mine (NMM) as an example. NMM has been in
production since 2002, so it ranks in the middle of the modern mines in Tanzania as
far as years of operation are concerned.
NMM is an interesting case study for various reasons. First, there has not yet been a
huge influx of people migrating to the area in the hope of obtaining jobs. 10 Hence, the
This statement is based on 92.2%of people surveyed in 2004 for the North Mara Mine Social
Impact Assessment (NMM) SIA (responses to Questions 9-10) reporting that they had been
born locally, and more than 96% had been living there since 2001 or earlier, so there was not a
high proportion of migrants to the area since the NMM began.
10
14
impacts are more genuinely local than might be the case for other mines where many
outsiders have been attracted in. The local population has grown, but mostly from
migration within the region and by natural increase. The reasons for the relatively low
inward migration to North Mara are not clear. It is often attributed to the reputation
the majority of local people, the Wakuria, have for being unwelcoming to outsiders.
But an alternative explanation may be that the development of the large mines in the
Geita and Kahama areas had already soaked up much of the population interested in
working in mining areas.
Second, NMM is an interesting case study in that the mine was established by Afrika
Mashariki Gold Mining (AMGM) company, a privately-owned Australian company,
which meant that it was possibly less concerned about public opinion and share
market concerns than a public company might have been. AMGM also had no public
position on sustainable development. By contrast, the Mine is now fully-owned by
Placer Dome Inc.’s Tanzanian subsidiary, Placer Dome Tanzania (PDT). Placer Dome
does have a public position on sustainability and, in fact, subscribes to the ICMM
Sustainability Principles, having modeled its Sustainability Charter closely on the
ICMM Principles. 11 NMM therefore represents a study in the challenges involved in
implementing sustainable development principles in an environment where they
were initially not stringently required, and where the practices of the previous owners
of the mine were not particularly focused on sustainability.
The specific questions the case study is aimed at answering are:
1.
2.
3.
1.3
How does mining in Tanzania contribute to economic growth and poverty
reduction, using the Millennium Development Goals (MDGs) as measures?
How does North Mara Mine (NMM) create economic value added and
contribute to poverty reduction at local, regional and national levels?
What national, regional and local governance conditions and sector policies
have been effective in explaining the outcomes generated by both the mining
sector as a whole and by the specific NMM investment?
METHODOLOGY
All of the country case studies have been undertaken in accordance with an agreed
methodology. The methodology was developed from summer 2004 to January 2005
and has been extensively peer reviewed by social development specialists and
economists in academia, non-governmental organizations and government. The
methodology has also benefited from the inputs from a wide range of stakeholders at
a workshop held in London in November 2004. Importantly, many of the
stakeholders have been critical of aspects of mining company performance in the past,
and their views have actively been sought to ensure that the concerns of a wide range
of interested stakeholders are addressed by the Resource Endowment initiative.
A key objective of the case studies is to test the methodology to ensure that it provides
a comprehensive and workable means of assessing socio-economic impacts.
Following the completion of the case studies, the method will be revised to take
account of case study experiences. The methodology is designed to allow a more rapid
See the PDI Sustainability Charter at
http://www.placerdome.com/sustainability/Policies/Sustainability_Charter.htm, accessed on
18 September 2005. As PDI is now owned by Barrick Gold Corporation, their web sites are no
longer available, but Barrick can be found at http://www.barrick.com/
11
15
assessment of impacts than would be required for ex-ante assessments (for example
Social Impact Assessments). This report has therefore been produced with
approximately six person weeks of time from international consultants. The case
study of the NMM project was based on extensive consultations undertaken for the
social impact assessment of the Mine in the latter half of 2004 (this will be referred to
as the NMM SIA). Additional consultations with district government and local
business stakeholders took place over two weeks in July and August 2005, using
primary data obtained from the NMM administration as well as secondary data
sources.
1.4
CONSULTEES
A very wide range of stakeholders was consulted during the preparation of the case
study. Much of the information on stakeholder attitudes used in this case study was
gathered as part of routine stakeholder consultations undertaken by the ICMM
consultants, both for the NMM SIA and for other potential mining projects in the
Tanzanian goldfields. Although not strictly part of the methodology developed for the
Resource Endowment initiative, this SIA is extremely pertinent and provides
additional richness to the data which might not otherwise have been available.
The authors would like to stress that agreeing to be consulted should not be taken as
endorsement of the objectives of the study, or of the findings of this report.
The persons consulted include (most of the surveys were conducted on a confidential
basis, so names of those surveyed will not be supplied):
• 753 households in the NMM project area (for SIA study)
• 304 individuals participated in 20 focus groups (for SIA study)
• 13 businesses in Nyangoto village were surveyed
• Five Tarime district government departmental heads were surveyed,
including the district commissioner
• Two trade union representatives at NMM were interviewed
• Sustainability, training and mining department personnel at NMM provided
detailed input
• Geita district executive director was interviewed
• Focus groups were held in five other communities in Geita district, in the
potential impact area of other gold mines
1.5
REPORT STRUCTURE
This case study report presents the following:
•
•
•
•
•
•
Background information on Tanzania and its mining sector;
A description of the NMM;
An analysis of whether the mining sector as a whole and the NMM in particular
contribute to the MDGs;
A description of the perceptions of mining in the NMM area;
An analysis of practical dilemmas faced by mining companies in Tanzania; and
Conclusions.
16
2
BACKGROUND
2.1
BRIEF HISTORY OF TANZANIA
The mainland (Tanganyika) part of Tanzania gained independence from British
administered trusteeship in December 1961 and the merger with Zanzibar followed in
1964. Tanzania at independence was one of the poorest countries in Africa and
remains so today: per capita income was only $300 in 2003 (or $586 in purchasing
power parity (PPP) terms). However, Tanzania has enjoyed a high level of political
stability largely due to the strong leadership of its first Prime Minister and later
President, Julius Nyerere. Nyerere was widely respected, retaining office until his
voluntary retirement in 1985. By common consent, he then maintained ongoing
influence through his presidency of the ruling party until 1990 and indeed until his
death in 1999. Nyerere’s handover of power ensured a peaceful succession to the
subsequent Presidents, Ali Hassan Mwinyi (1985-1995) and Benjamin Mkapa (19952005). Communal disputes among the more than 130 ethnic groups who together
constitute Tanzania’s population have been limited.
For the first quarter century of Tanzania’s independence Nyerere’s Tanganyika
African National Union (TANU) party - later re-named as Chama cha Mapinduzi
(CCM or Revolutionary Party) after its merger with the Zanzibar Afro-Shirazi Party
(ASP) - retained power in a one party system. Multi-party democracy was introduced
only in 1995 and then only by courtesy of a decision by the CCM. That same party
went on to win the first multi-party elections with some ease and now holds 244 of the
275 seats in the national parliament. CCM also won the 2005 elections with similar
ease.
The country is relatively large by African standards with a very extensive land area
and a population that now totals some 37 million persons of whom 45% are 14 years
old or less.
2.2
THE ECONOMY
The First President of Tanzania, Mwalimu (teacher in Kiswahili, abbreviated as Mwl.)
Julius K. Nyerere was non-corrupt and diligently committed to the accelerated
development of the newly born (1961) nation of Tanganyika. These sentiments were
widely manifested during the preparation of "Tanzania's Development Vision 2025"
in the closing years of the twentieth century, indicating their continuing relevance in
Tanzania. 12 Mwl. Nyerere’s noble vision was, however, constrained by human
resources capacity, and perhaps an inappropriate development model - partly
influenced by the Keynesian bias in economic management at that time. This apart, he
is highly credited by Tanzanians for his foresight in creating a cohesive, peaceful
nation from an assortment of more than 130 ethnic/tribal groups.
The Tanzanian economy, both before and after independence, has been hugely
unstable and very poor. This instability was seen in the pre-independence growth
record before 1961 and it continued in the early years of independence. In 1967,
Available at http://www.tanzania.go.tz/vision.htm#1.0%20DEVELOPMENT%20VISION,
accessed 26 June, 2007.
12
17
President Nyerere abandoned a traditional mixed market model in favor of a far more
centralized and dirigiste approach to economic development. At the core of this was
Nyerere’s particular view about the social and cooperative nature of African
agriculture (Nyerere (1994)). This was translated initially into a limited experiment
with new village settlements and from 1968 with a far more broad-based resettlement
of rural populations into Ujamaa 13 villages modeled loosely on the Chinese commune
system. This was combined with the broad-based nationalization of all major
industries including all the main mines and the banks.
In spite of considerable initial donor support for parts of Nyerere’s agenda, the
implementation of his radical reforms proved to be deeply flawed. The increased
state-ownership in particular became the breeding ground for widespread and high
level corruption, and the rural resettlement lowered rather than raised agricultural
productivity. So the inherent fragility of Tanzania’s economy including excessive
reliance on a few primary commodities such as sisal, tea and coffee, was exacerbated
both by the failures in agricultural production but also by the unsuccessful
diversification of production driven by tight state control. Certainly the economy’s
overall growth performance worsened further in the 1970s and 1980s as the flaws in
President Nyerere’s socialist policies became increasingly evident.
Figure 2.1 below puts these developments into a longer term perspective by
comparing the per capita GDP growth rates achieved in the more than half a century
from 1950 until 2004. The data makes use of the University of Groningen’s extensive
historical data series on GDP and growth. The arrow indicates the date when the
Tanzanian mining legislation underwent a major reform. The poor and unstable
performance of both the immediate pre and post-Independence years are clearly
visible as are the results of the failures of the Ujamaa experiments.
Per Capita GDP Growth, 1950 to 2004
Tanzania Per capita Growth: 1950- 2003 (PPP 1990$)
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
19
51
Figure 2.1
-2.0%
-4.0%
-6.0%
-8.0%
Source: Groningen Growth Centre www.ggdc.net
13
Ujamaa is Swahili for familyhood, and is also often referred to as African socialism.
18
Tanzania’s economic recovery efforts started in 1981 with the National Economic
Survival Program (NESP) and the Structural Adjustment Program in 1982. This was
followed by the first Economic Recovery Program (ERP) which won the first IMF
Stand-by Arrangement in mid-1986, and then the second ERP in 1989, also known as
the Economic and Social Action Program. The macreconomic policy reforms which
were sequenced earliest in combination with Structural Reforms intensification in the
1990s gave momentum to the high growth rates Tanzania has been enjoying since the
late 1990s. Policy consistency and political commitment to the reforms were critical
factors. The irreversibility of these efforts became underpinned by the Tanzania
Development Vision 2025 (its formulation commenced in 1995), which in effect
consolidated the paradigm shift from a state-managed economy to a market-based
economy under private enterprise.
By the early years of the 1990s, many years of declining per capita incomes had
persuaded the Tanzanian authorities that a different approach was called for. As a
result they began a cautious liberalization and started to allow greater private sector
engagement in economic activity. This commitment was intensified from 1996 with a
major IMF and World Bank program to which other donors rapidly added their
support. The results of this are also evident in Figure 2.1 which shows sustained real
GDP growth from 1996 through 2004: the first time that Tanzania has achieved ten
years of uninterrupted growth in the post-war years. Independent estimates indicate
that about one third of the GDP growth since 1996 has come from agricultural
activities – still the main source of livelihoods for the majority of the Tanzanian
population. Trade and services (notably tourism) contributed another one third of the
total with the balance of growth coming from industry, mining and construction.
Mining has been one of the fastest growing sectors in the later part of this period as
shown in Table 2.1. But the small initial base of mining in 1996 and the concentration
of the fast growth of the sector on the years since 2000, means that the mining sector
added only 0.3% to the overall GDP growth of 4.8% seen in the ten years taken as a
whole (Volker Treichel, 2005).
The four case study countries for this initiative were selected on the basis of their
economic and social performance in the data period 1980 to 2002. In spite of
Tanzania’s very poor record until about 1996, the country still achieves superior
performance to Sub-Saharan Africa generally in that overall period 14.
2.3
BRIEF HISTORY OF MINING IN TANZANIA
The history of Tanzania is intertwined with the history of gold mining in East Africa.
Over a thousand years ago Arabs settled on the Swahili coast in order to purchase
gold and other goods produced by African workers. These goods were transported by
human caravan from Great Zimbabwe and fueled a very active Indian Ocean trade
that continued for many years. It was primarily the lure of gold which drew the
Portuguese to the region and they became the first Europeans to settle on the coast of
east Africa in around 1500.
Alluvial gold has been mined for centuries by Tanzanian farmers, who have used it as
an alternative source of income in the off season. However, it was in the nineteenth
See the Phase 1 Report for more details on the indicators and the methods used to compare
countries.
14
19
century that larger-scale mining first began to be organized in Tanzania, commencing
with gold discoveries in the Lake Victoria area by German prospectors in 1894. The
first mine to start producing gold was the Sekenke in Iramba district in 1909. Other
mines began operation in the Geita and Musoma districts in 1913, during the German
colonial administration. Then in the 1920s, after the British had assumed colonial
control, further substantial gold deposits were discovered in the Mwanza and
Musoma districts of Northwestern Tanzania and several mines began to produce
gold. The mining of diamonds, especially by Williamsons at Mwadui was also
important at this time.
Just before World War II, gold output peaked at more than 100,000 ounces in 1938 and
in 1939, gold was exceeded only by sisal as Tanganyika’s main export, earning almost
£1 million. But most of these gold mines became exhausted in the late 1960s and 1970s
and gold production almost ceased in Tanzania in the early post-independence years,
with only 84 ounces sold in 1975. Diamonds remained as the most significant
component of the mining sector.
This situation has changed dramatically in the past decade. Since 1992, the Tanzanian
Government has actively sought to rejuvenate the mining industry. Resolute Mining’s
Golden Pride Mine in the Nzega district was the first of the major new mines to pour
gold. This was in December 1998. By the year 2000, Tanzania’s gold production
exceeded its peak 1938 output level with production of 388,324 ounces. This
represented a huge increase on the 48,078 ounces in the preceding year and zero in
1998. Since 2001, annual gold production has continued to grow rapidly and now
routinely exceeds one million ounces per annum. This is about half the values
achieved in Ghana in the same years.
Figure 2.2
Map of Tanzania
20
The US dollar values of that production are shown in Table 2.1, demonstrating the
rapid increases in mining activity in Tanzania since 1997 – for gold, but also for
several other minerals, especially silver and copper.
Table 2.1
Mineral production by value (in $ US million), 1997-2004
Mineral/value in USD
Gold
Silver
Copper
Diamonds
Tanzanite
Total value
1997
1998
1999
2000
2001
0
0
13.1
114.4
282.8
2002
362.8
2003
509.8
2004
602.3
Total
0
0
0.2
0.2
1.2
1.5
1.8
2.9
7.6
0
0
0
0
5.0
6.5
6.0
12.2
29.7
16.1
10.2
17.6
28.7
17.7
13.0
22.0
29.0
154.3
0
0
0
0.2
1.5
3.2
3.2
6.0
14.1
16.1
10.2
30.7
143.5
308.2
387.2
542.9
652.3
2,091.1
1,885.3
Source: Tanzania Chamber of Minerals and Energy, 2005
The major mines operating in Tanzania in 2005 are Golden Pride (Tabora region),
Geita (Mwanza region), Bulyanhulu (Shinyanga region), Buhemba and North Mara
(Mara region).
2.4
DESCRIPTION OF NORTH MARA MINE
2.4.1
Overview
The North Mara Gold Mine is located in the northwestern part of Tanzania in Tarime
district of Mara region, some 100 kilometers east of Lake Victoria and 20 kilometers
south of the Kenyan border (see Figure 2.2 above). The North Mara Mine consists of
three open pit deposits – Nyabirama, Nyabigena and Gokona. Mining is underway at
Nyabirama and the Nyabigena pit is in the development phase. The Gokona pit is
currently being prepared for development. North Mara currently produces
approximately 280,000 – 300,000 ounces of gold per year, following a plant expansion
in 2004. The processing plant has been expanded from 2.0 million tons annual
throughput capacity, to 2.8 million tons.
According to the mine plan, the Nyabirama open cut will be exploited to a depth of
325 meters, Nyabigena to 160 meters and Gokona to 280 meters. The feasibility of
deepening the original Nyabirama open pit design to 325 meters below surface has
also now been confirmed. Because mineralization remains open at still greater depth
at Nyabirama, and also below the limit of current reserves at both Nyabigena and
Gokona, the evaluation of mining extensions below the current levels will also be
conducted.
2.4.2
Environment and sustainability
The North Mara Mine operates at zero discharge meaning that it does not discharge
any water from processing into the environment. The North Mara Mine is committed
to achieving the highest levels of safety, environmental protection and social
responsibility. This includes engaging the community and other key stakeholders in
the decision-making processes to ensure their needs are identified and understood.
21
2.4.3
History
Table 2.2 shows a brief outline of the history of the development of the NMM.
22
Table 2.2
Brief history of NMM
Year
1993
1993
1996
2001
2002
2002
2003
2.4.4
Activity
Incorporation of AMGM and start of exploration in Mara Region.
Drilling commenced.
Special mining licenses over Nyabirama and Nyabigena granted.
Construction of process plant commences.
Plant commissioned and first gold pour.
Official opening of the Mine.
Placer Dome acquires AMGM.
2005 Outlook
North Mara's updated 2005 production forecast was estimated at 245,000 ounces. Cash
and total costs per ounce were estimated at $310 and $400 respectively. Proven and
probable mineral reserves as of December 31, 2004 were estimated at 3.9 million
ounces.
Approved capital expenditure for 2005 was $40 million, required to complete the
transition to owner mining (following the purchase of the assets of the contractor PW
Mining in October 2004) and associated additional loading , truck and ancillary
machinery capacity during 2005, and to fund the costs required to start the pit at
Gokona.
2.4.5
Location
The North Mara Mine comprises two open pit mining operations: Nyabirama and
Nyabigena. 15 The Nyabirama open pit is located adjacent to the gold process plant in
Nyangoto village and within the area of the company’s special Mining License 18/96.
Nyabigena open pit lies within the area of the company’s Special Mining License
17/96 in Kewanja village seven kilometers to the north east of Nyabirama. Gokona
deposit is located within SML 17/96, one kilometer west of Nyabigena. Both SML
17/96 (8.3 kilometers squared) and SML 18/96 (6.65 kilometers squared) were granted
on August 30th, 1996 for 15 years. The geology of the two pits is summarized in Box
2.1 below.
2.4.6
Access
Access to North Mara is via an all-weather unpaved road known as the Old German
Road that joins the sealed Tarime-Musoma-Mwanza road 60 kilometers to the west.
The company also maintains an airstrip adjacent to the access road six kilometers from
the plant site, near the Nyabigena-Gokona deposits.
2.4.7
Climate
The climate of the North Mara area is a tropical one, with two distinct rainy seasons –
long rains from March to the end of May and short rains from October to November.
The temperatures are moderate throughout the year and they range from 15 degrees
Celsius to 35 degrees Celsius. Wind direction is predominantly east-west.
15
See Figure 2.3.
23
Box 2.1
Geology and Mineralogy
The North Mara mine is situated within the Mara Greenstone Belt which is part of the larger
Lake Victoria Greenstone belt. This is a granite-greenstone cratonic setting geologically
similar to major gold producing Archaean provinces elsewhere in the world – for example,
in the Abitibi region of the province of Quebec in Canada and the Yilgarn Province of
Western Australia. The underlying geology comprises felsic and mafic volcanics intercalated
with sediments which are intruded by various granitoid and gabbroic plutonic rocks.
Tertiary volcanic lava flows partially cover the underlying Archaean geology.
The specific Nyabirama and Nyabigena-Gokona ore bodies are structurally controlled,
shear-hosted lode gold deposits. Situated seven kilometers. apart, the deposits occur in
similar structural settings, but in different host rocks. At Nyabirama, mineralization is
predominantly disseminated in an intensively deformed, pervasively altered granitoid
intrusive rock associated with intensive silicious alteration and approximately1% sulphide
minerals. At Nyabigena it occurs as both disseminated sulphide-gold (2-3% sulphide)
mineralization within pervasively altered andesitic volcanic rocks and quartz veinlets.
The Nyabirama deposit comprises several mineralized zones including the Footwall zone,
Eastern Zone and the Hanging Wall zone. Contouring of grade distribution within each zone
identifies both steeply plunging and shallowly plunging ore shoots. At Nyabigena-Gokona
deposits the zones of mineralization of sulphide minerals are up to 25 meters in width. They
have an approximate east-west strike and dip 40-70 degrees to the south. In structure,
intersection zones conducive to high rates of fluid flow and vein precipitation, quartz
veinlets, form “bonanza” zones. These comprise an important component of mineral
reserves.
The gold found at the North Mara deposits is generally fine. While there is coarse gold
associated with quartz veins, the majority is finely disseminated. There is more coarse gold
at Nyabirama than at Nyabigena. The majority sulphide is pyrite with minor arsenopyrite.
A minor amount of silver occurs with the gold.
2.4.8
Exploration and Development
Placer Dome Tanzania has a very active exploration program aimed at finding new
deposits in several highly prospective areas within the North Mara project tenements.
In particular, emphasis will be focused on various targets along the Mara Shear (host
to the Nyabirama deposit), the Nyabigena/Gokona trend, and at the Dett prospect at
Ochuna.
Development activity will be concentrated on the start-up of mining activities at
Gokona. A scoping study will be undertaken to determine the viability and economics
of connecting North Mara to the Tanzanian national power grid. 16
2.5
DESCRIPTION OF COMMUNITIES SURROUNDING THE NMM
The following descriptions of the social environment of the NMM are extracted from
the SIA survey conducted for the project in the latter half of 2004. 17
16 Data contained above in the Overview to Exploration & Development sections were obtained
from http://www.placerdome.com/operations/tanzania/northmara.htm, accessed on 10
September 2005.
24
Figure 2.3
Placer Dome, Tanzania
Source: PDT
The pyramid of local government, at the level which concerns this case study, starts at
the district (wilaya in Kiswahili) - in this case Tarime – which is some 35 kilometers
away. The district is divided into divisions (tarafa), in this case Ingwe division, except
for one ward Kibasuka, which is placed within Inchage division. This is not important
administratively, but is significant politically. The division is divided into wards
(kata). The local social impact area which NMM has defined as being its
neighborhood, comprises five wards, containing thirteen villages (vijiji).
The Nyamwaga ward is on the top of the scarp. Three villages of the 13 villages in the
SIA area are in this ward, Nyamwaga, Keisangora and Kimusi. The Nyarakoba ward
is located mainly in the rocky hills in the east of the area, opening into a large plain
separated from the Mara river by another small ridge. Genkuru village is adjacent to
the thicketed hills, Gibaso village is at the edge of the plain.
The Kemambo ward lies mainly alongside the Mara River in the east. It comprises
Mrito village, Kerende village and finally Kewanja village, which is now part of the
urbanized area adjacent to NMM. All these villages are perched on a shelf above the
floodplains of the Mara River.
Matongo ward lies in the centre of the area, adjacent to the Mara River. Nyangoto
village is adjacent to the Nyabirama pit, together with the process plant and the mining
camp. It is fully urbanized. Matongo village lies just above the confluence of the
Thigithe River and the Mara River and is agricultural and damp.
UDSM Consultancy Bureau and URS Sustainable Development, Social Baseline Study and
Impact Assessment of the North Mara Mine, prepared for PDT, issued July 2005.
17
25
Finally, the Kibasuka ward occupies the western part of the area, and lies on the
slopes leading from the Utimbaru scarp to the river. This ward, unlike the others, is
part of the Inchage division. The soils here are shallow in the main, and the woodland
and thicket remaining is less diverse and less dense than that in the east. At this point
the Mara River has broadened out into a large swamp with adjacent floodplains.
Nyakunguru is the easternmost village, lying on the “German road” which provides
the main access to the Mine. Nyarwana is similar in landscape and layout and lies
further west. Weigita is down on the lowest slopes, near to the floodplain.
The area is peopled by the Wakurya tribe. Their language is widely used, although the
national language, Kiswahili, is also spoken perfectly by almost all. The Kurya tribe
comprises some 13-plus clans, which have a history of feuding among themselves at
times. The clans in this area are the waNyamongo, living in the centre, and above the
scarp are the waNyabasi. Above the scarp to the northwest dwell the waKira, while to
the east are the waIregi. There is a long tradition among the Kurya of obtaining work
in the uniformed forces, army, police and prison services. For this reason wealth has
been filtering back home from the towns and cities over a long period of time. People
from this area have also risen to high positions in government, but less so in
commerce. Almost every family has strong representation in the capital city. Artisanal
mining has also been going on for a long time. As a result of these various nonmineral factors wealth exists in the area, but is unevenly distributed.
Most of these villages host weekly markets, and at these times the villages become
very vibrant. The two villages closest to the NMM plant and administration, and
therefore those most directly impacted by the Mine’s operation, are Nyangoto and
Kewanja. As they are most directly affected, they deserve a fuller description than the
other villages in the impact area, and this description follows.
Nyangoto contains the Nyabirama pit and the North Mara plant. It is entirely
dominated by mining activities and contains a large population of people from other
parts of the country. It supports two cellular phone towers, a dispensary which is
about to become a hospital, many shops and even a taxi or two. There is a daily bus to
Mwanza but services to Tarime are neither as frequent nor as reliable as could be
desired. Bars and drinking places, with the various attendant services, are numerous.
The village is really a town, and contains a large number of very high quality houses,
built as a result of profitable mining-related activities. There are a few churches and a
few schools. The road layout is partly planned, but there are no utilities such as
sewerage and electricity, and only a primitive water distribution network provided by
the NMM. The village is well planted with trees, and the dirt roads are in generally
good condition.
Kewanja lies away from the river, and is adjacent to Nyangoto where the North Mara
Mine operations are located. It is joined to Nyangoto in an urbanized agglomeration,
but to the north it becomes more agricultural. It is densely built up in its southern
portion, but to the north contains many rocky hills. The Thigithe River flows in the
north and provides a basis for market gardening, which is increasingly profitable.
Numbers of local homesteads remain but, as would be expected, there are numerous
houses which are quite large and well built. Really, Kewanja is now a suburb of
Nyangoto.
26
3
IMPACT ANALYSIS: HAS MINING HAD A POSITIVE INFLUENCE ON
TANZANIA’S SOCIO-ECONOMIC PERFORMANCE?
3.1
THE MACROECONOMIC IMPACT OF MINING
Table 3.1 below shows the remarkably fast growth of mining activity as measured by
output volumes in the past eight years from 1997. It is noted that this period of rapid
growth has coincided in timing with the successful growth record of GDP and GDP
per capita as shown in Figure 2.1 above. This does not prove cause and effect but it
does show conclusively that the resurgence of commercial mining has occurred in a
period during which the overall recovery of the macro economy has also been
impressive.
This recent success has emerged from an extended period of failing economic
performance that until 1997 was making an already extremely poor country even
poorer (see Figure 2.1). The next few paragraphs describe the main evolution that led
to the eventually successful reform agenda of the Mkapa government from 1995.
Table 3.1
Value of mineral production and industry contributions to Tanzania, 19972004
Total value
of mineral
production,
US$ million
Total taxes
and
contributions
to
government
Tax as % of
value
Total
community
projects
Tax +
community
as % of
value
1997
16.1
1998
10.2
1999
30.7
2000
143.5
2001
308.2
2002
387.2
2003
542.9
2004
652.3
Totals
2,091.1
2.2
2.2
4.9
18.9
24.4
34.4
44.3
46.5
177.8
13.36
21.39
15.89
13.21
7.92
8.90
8.16
7.12
8.50
1.1
1.5
4.2
8.1
3.6
1.5
1.1
4.6
20.46
35.89
29.43
18.84
9.11
9.29
8.36
7.83
25.7
9.73
Source: Tanzania Chamber of Minerals and Energy, 2005
3.2
MINING AND ECONOMIC PERFORMANCE SINCE THE 1950’S
As was noted earlier, between 1967 following the Arusha Declaration until the mid
1980s, Tanzania adopted a socialist model to try to promote economic development
(Naschold & Fozzard, 2002). This meant, among other things, that the activities of the
private sector were severely constrained by the use of regulations and licenses. The
public sector had access to preferential credit and foreign trade was tightly controlled
and mainly for the benefit of a small number of parastatals. The result through the
1970s and much of the 1980s was a succession of economic crises leading to a near
collapse, in spite of various efforts to modernise the economy in the 1980s, described
below. There was little private investment and almost zero foreign direct investment.
27
The 1980s saw a variety of partial reforms – for example the so-called National
Economic Survival Programs (NESP) - which included periodic appeals to the IMF for
assistance. However, these all failed to address the underlying problems and inflation
grew, budget deficits rose and exports stagnated (ibid.). Indeed the failures of the
NESP saw a further economic collapse that hit the bottom eventually in 1985
following the government’s own attempts at a Structural Adjustment Program. These
incorporated a limited but inadequate devaluation. However, this was far from
sufficient to unify the official and parallel market exchange rates and the gap between
them remained large. After 1985, more serious reforms began with a series of
Economic Recovery Programs (ERPs). The first ERP attracted inevitable political
opposition as the pain of reform began to bite. However, the attempts by the
government did from this point on receive the support of the World Bank and the IMF
and the economy began to grow modestly although inflation still remained high. The
second ERP launched in 1989 continued the process. Although the emphasis of this
second program was nominally placed on the social consequences of reform, it still
failed to address the negative impact that the reforms were having on the poor.
3.3
ECONOMIC PERFORMANCE SINCE THE EARLY 1990S
Reforms
In spite of the initial reforms of the 1980s, the Tanzanian economy at the start of the
1990s was still highly dependent upon both aid and agriculture. It remains so today.
Currently 44% of public expenditure is paid for by aid. Agriculture accounts for about
50% of GDP and it still employs 80% of the labor force despite the fact that only about
4% of the land is under cultivation (CIA, 2005). 18 This represents about 15% of the
farmable land, furthermore, the economy is dominated by an informal “extralegal”
sector that severely undermines the tax base of the system. Indeed, one recent study
suggests that the assets of this “extralegal” sector amounts to some $29 billion which
is ten times the current government budget of Tsh 3 trillion (De Soto, 2000).
The turning point for macroeconomic performance was the 1995 election of the
Government of Benjamin Mkapa that opened the way for a more serious program of
reforms that eventually led to a remarkable improvement. The result has been that
both the World Bank and the IMF now see Tanzania’s progress especially in the public
finance areas as being among the best in Africa. Table 3.2 provides a summary of the
main reforms following the ERP II
Table 3.2
Reform Timeline
1991
1992
1993
Economic reform
Poverty Reduction Issues
Financial sector reform – approach
increasingly seen as a blue-print
for other countries
First private bank licensed
Household budget survey
Riots to protest
universities
cost
sharing
in
Most trade restrictions abolished.
Interest rates liberalized
Source: US, CIA, The World Factbook, 2005.www.gov/cia/publications/factobbok/geos/tz
Among other things, this dependence upon agriculture has been a problem in the past because
the sector is extremely vulnerable to drought, the last serious drought being in 2003.
18
28
1994
Marketing and processing of
traditional export crops open to the
private sector
1995
1997
1998
1999
2000
2001
200203
National Bank of Commerce split.
New investment code adopted.
Tariffs reduced
VAT introduced.
Duties on
traditional exports abolished
Reform of Tanzania Investment
Centre. Maximum tariff now set at
25%
HIPC decision point (March)
HIPC
completion
point
(November)
HIPC Debt Relief granted – one of
the first cases in Africa
Participatory
Poverty
Assessment.
Health sector reform
Social sectors fully protected under cash
budgeting
National Poverty Eradication Strategy
adopted. Start of Basic Educational
Master Plan
Poverty and Welfare Monitoring
Indicators published
Full PRSP finalized. Household Budget
Survey conducted. IMF PRGF of $US
174 million approved.
Poverty Monitoring Master Plan
prepared. Initial results from HBS
Major new funding for poverty
programs available
Source: Naschold & Fozzard, 2002 and various web resources.
The reforms of the new Mkapa Government from 1995/96 involved a wide ranging
program based upon tighter fiscal controls and structural reform of institutions.
These included investment deregulation, a privatization program, the freeing up of
goods and factor markets, and a complete reform of the financial sector (Naschold &
Fozzard, 2002). The key to this program has been the government’s willingness to
entrust productive activity to the private sector. As the Financial Times put it in
August 2005….”Recovering from the collapse of Tanzania’s distinctive model of
cooperative economics, the government has tried instead to be a pioneer of private
sector orthodoxy”
Outcomes - Growth
The results have been impressive. As can be seen from Figure 3.1 below and the
earlier Figure 2.1, GDP growth improved rapidly after 1995 and outperformed both
Tanzania's regional and geographic comparators by 2000. The role of the state
contracted significantly and as can be seen from the analysis of policies presented in
Section 5, budget deficits declined and inflation dropped from over 30% in the early
1990s to under 6% by 2000. The private sector, as a result of these reforms, received a
considerable boost and investment recovered (Treicher, 2005).
29
GDP growth: 1989-2004
GDP Growth for Tanzania - Regional and Income Comparators 1989 - 2004
Tanzania
Sub-Saharan Africa
Low income
8%
7%
6%
5%
GDP (Constant 2000 US$)
Figure 3.1
4%
3%
2%
1%
0%
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
-1%
-2%
SOURCE: World Bank
Source: World Bank, World Development Indicators
Outcomes – Investment and FDI
During the period before the serious reforms of 1996, investment in the Tanzanian
mineral sector was virtually non-existent. Despite known reserves of minerals, only
diamonds were commercially exploited and the dominant mine – Williamson Mine was nationalized in 1971. However, in recent years, the success of the economic
reforms has changed this both for large scale and artisanal and small miners (ASM) as
discussed more fully below.
For large scale mining the key was the opening up of the economy which began in the
1990s. In addition to the general improvement in the legal framework supporting the
private sector, the Government‘s specific mineral policy was reformed with a view to
securing much greater private sector involvement. In particular in 1998, a new
Mineral Act was promulgated and this gave a major boost to investment. During that
year, Tanzania managed to attract the most mining exploration investment of any
country in Africa amounting to $58 million. In the early 1990s, De Beers was invited to
take over the management of the Williamson Diamond Mine and by the end of the
decade, diamond output had recovered to the level of 100,000 carats. However, the
main growth came in gold mining and by 2004, gold output amounted to $602 million
which was some 20 times the value of diamond output.
Figure 3.2 puts the large investment in mining (an estimated $1.3 billion since 2000)
into context with the growth of total FDI into the economy. It is readily seen that the
transformation of Tanzania’s fortunes in this regard has been truly remarkable with
the inflows of only $10 million annually in the early 1990s giving way to inflows that
since 2000 have averaged around $300 million per annum and in one year exceeded
$500 million It is equally clear that the $1.3 billion of investment in the mining sector
30
represents easily the largest single contribution to the total FDI inflow since the year
2000.
Figure 3.2
Foreign Direct Investment, 1992-2002 ($ million)
600
500
400
300
200
100
0
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Source: IMF, International Financial Statistics, Washington DC, annual
Government Revenues
Large-scale commercial mining is a relatively new activity in Tanzania and as is the
case with mining in most other countries, the early years of large-scale production are
associated with depreciation and other allowances that can reduce the tax if not the
royalty revenues paid to government. The budget data nonetheless reveal a significant
and rapidly rising contribution of the sector to government revenues since the turn of
the millennium. The mineral revenues and some relevant comparator numbers are
presented below in Table 3.3.
31
Table 3.3
Contribution to Government Revenues (Tsh billion)
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
Actual
Actual
Actual
Actual
Actual
Actual
Budget
Projected
TOTAL RESOURCES
856
974
1,262
1,411
1,626
2,105
2,607
3,348
Domestic revenue
Program loan and grants
Project loans and grants
HIPC Interim Relief
Multilateral
Other
619
82
174
689
106
164
778
128
340
930
154
251
1,043
216
294
1,218
282
568
1,393
405
668
1,572
435
858
(19)
15
11
5
56
20
60
13
73
(36)
103
38
75
241
Mining Revenues in $ US
'000
Exchange Rate
Mining Revenues (Tsh
billion)
% of Domestic Revenues
% of Domestic Tax Revenue
2.15
2.18
4.89
18.95
24.41
34.44
44.33
46.47
612
665
745
800
876
967
1038
1089
0.0
0.0%
0.0%
1.4
0.21%
0.2%
3.6
0.47%
0.5%
15.2
1.63%
1.8%
21.4
2.05%
2.3%
33.3
2.73%
3.0%
46.0
3.30%
3.7%
50.6
3.22%
3.6%
Source: Ministry of Finance.
Note: The revenue figures show slight differences with those from the Chamber of Mines
Mining revenues have risen to account for around 3.6% of total tax revenues and 3.2%
of total domestic revenues. Significantly, these numbers are still dominated in their
magnitudes by the various aid flows that are also shown in Table 3.3. Tanzania
remains extremely highly dependent on international grants and loans for its
budgetary finances. However, the mining revenues are also of growing significance.
In the most recent years, they have grown to be similar in amount to the sums
received by Tanzania from the relief of its international multilateral debts under the
HIPC initiative. In the years ahead, the mineral revenues are likely to overtake the
funds from debt relief for several reasons including, above all, the rising volumes of
production of minerals that are anticipated
Outcomes in General
By 2004/05, mining was contributing some 3.2% of GDP ($US652.4 million of output)
as opposed to only 0.1% in 1995. The sector was providing fully half of the country’s
exports ($US693 million 19 as against only $US28 million just six years earlier). It was
also contributing some $US46 million to the government’s tax revenues – more than
3% of the total and accounting for a very high proportion of foreign direct investment
as shown in Figure 3.1 above.
Of the average annual GDP growth of 4.8% in the period 1996-2003, mining
contributed about 0.3% (or some 6% of the total) (Treichel, 2005).
19 This is the “latest” government figure as reported on August 3rd 2005 in the Financial Times. It
is a higher number than that for output shown in Table 3.1 above. This is probably because it
refers to a slightly later “annual” period than the Jan to Dec 2004 data shown in Table 2.1.
32
Although the large scale, foreign-owned mines contribute only about 7000-8000 direct
and directly contracted jobs, their indirect job creation at least triples this number (see
below). Nonetheless in the hierarchy of effects so far considered, employment
generation is the smallest and also the most highly localized.
By far the biggest employment effect from mining is associated with the artisanal
(ASM) sector that also benefited from the ending of the state monopoly over mining at
the end of the 1980s. This led to a boom in Tanzanians seeking licenses for small scale
mining. Coupled with currency liberalization, this gave a significant boost such that
by 1995, an estimated 550,000 Tanzanians were earning some of their income from
mining. It was partly for this reasons that a USAID study in 2001 suggested that this
ASM boom in the late 1980s had had a “startling” impact in relieving rural poverty.
However, the intensity of this boom proved relatively short lived as many of the ASM
mines rapidly reached the limits of the depths to which they could mine with their
limited technologies (typically seams of 10 meters deep without water pumping as
against 300 meters or more in the NMM pits). It is also the case that the government
revenue benefits from this activity were less than they should have been because of
the high level of informality involved. Export revenues did not show up fully because
of allegedly high levels of cross border smuggling of the gold that was produced. In
brief, while the ASM sector of mining elevated employment up the hierarchy of the
effects of mining, it did very little for the other categories of effect that we find to be
very significant in relation to the large-scale commercial sector of mining.
On a slightly more negative note the new mining sector seems for the moment to
make only a modest contribution to the broader economy through the creation of
backward and forward linkages. To be fair, such effects have taken many decades to
become evident in other countries and Tanzania, starting with such a small
manufacturing base, has not yet had the time to realize such benefits. To date such
linkages that are evident tend to be with the service sectors.
Implications for the ‘Resource Curse’
Since these various contributions of mining to the economy are all relatively recent, it
is extremely difficult to determine whether they will lead to some or all of the
problems associated with the so-called ‘resource curse’. However, so far there are no
signs that this is the case. Figure 3.3 that presents the growth rates of non-mineral
GDP shows no signs of a conventional decline in the traded non-minerals sector. So
although Tanzania remains a relatively undiversified economy, the greater availability
of mining has not worsened growth performance in the non-mining sectors. The fact
that mining is a small share of the economy is also a limiting factor.
The high-aid dependence of the Tanzanian budget on donor assistance (see Table 3.3
above) also, for the moment, rules out a second resource curse effect namely that
which would operate through the spending of high levels of liquidity by the
authorities. Insofar as the authorities are in possession of such liquidity, it is arising
mainly from donor grants and loans rather than from mineral revenues paid by the
companies. Specifically in 2004/05, the former was no less than twenty-five times
higher than the latter. This situation will change as the mining economy expands. But
for the moment, the established literature that points to the possible Dutch Disease
effects stemming from foreign aid (e.g. Collier and Gunning, 1999) is more relevant in
Tanzania than the traditional Dutch Disease arguments applied to mining.
33
A third issue also relates to the budget and in particular to the supposed volatility of
mining-dependent revenues. As Table 3.3 above shows, in the past few years, the
mineral revenue collections have been on a steady upward trend that seems set to
continue. By contrast some of the elements of the donor aid flows have manifested
high degrees of year-to-year volatility. Note for example, the significant declines in
project aid in both 1998 and 2000 and in the HIPC relief in 2004. More significantly,
the aid flows have shown some huge differences as between the budgeted and the
actual receipts in some recent years. For example, program loans and grants showed
shortfalls relative to budgeted amounts of 32%, 22% and 2% in the three financial
years to 2002/03.
Again the unpredictability of the foreign aid flows rather than volatile mining
revenues seems to be the foremost problem for effective fiscal management for the
time being.
Other aspects of the ‘resource curse’ issue are discussed in Section 5 in the context of a
broader discussion of the policies that have fostered the resurgence of mining and the
recovery of the economy in general.
34
Figure 3.3
The Growth of Non-Mineral GDP
Non Mineral GDP Growth for Tanzania - Regional and Income Comparisons
1991 - 2004
Tanzania
Sub-Saharan Africa
Low income
20%
15%
10%
5%
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
0%
-5%
SOURCE: World Bank
-10%
Source: World Bank
Future Prospects
As to the future, the prospects for Tanzania in terms of macroeconomic performance
seem to be positive. The reforms of the 1990s have clearly created an environment to
encourage and better support private sector investment. At the same time the political
situation is seen as relatively stable. When it is remembered that there are 130 ethnic
groups in Tanzania plus several major religions, it is surprising that there appear to be
relatively few ethnic or religious disputes. Their absence further enhances the
investment climate. Thus FDI is currently averaging $300 million per year (3% of
GDP) and in 2004, gross fixed investment amounted to 16.2% of GDP (CIA, 2005). As
part of this improved investment, the recent strong growth in Tanzania has been
driven by growth in both the mining and the manufacturing and service sectors.
Agriculture has lagged but in part this has been due to a series of damaging droughts.
Mining can be expected to become more important in the future as new concessions
come on stream and as the gold price in particular remains high. At some point this
could open up ‘resource curse’ dangers which are not yet in evidence.
3.4
RECENT PERFORMANCE –THE TWO SUB-SECTORS OF MINING
Official statistics such as those used above often group together artisanal and smallscale mining (ASM) and the large-scale modern mines that are the main focus of this
case study. However, this can be misleading since their impacts upon the Tanzanian
economy are quite different as our earlier discussion has suggested. Furthermore,
much of the negative attention being focused on the large mining sector in Tanzania is
based upon the assertion that the large mines have appropriated the industry from the
ASMs, thereby depriving the artisanal miners of their livelihoods. We can see from the
data already presented why this debate would focus partly on the differential
employment effects of the two sub-sectors of the industry. Thus, in the Tanzanian
35
context, it makes sense to discuss these groups as different industries, and that is the
approach being taken in most of this case study. Reference will be to large-scale
mining unless otherwise specified.
USAID funded a study of mining in Tanzania, issued in 2001. 20 The study looked at
both ASM and large-scale mining. It explained why the mining industry in Tanzania
had developed so rapidly since the late 1980s, in the following terms.
Two key policy decisions set off the mining boom. One was the decision in the
late 1980s to end the State Mining Company (STAMICO) monopoly and allow
any Tanzanian to register a claim and sell minerals. The second was the
liberalization of currency controls, beginning with permission to exporters to use
their export proceeds and culminating in the floating of the currency in 1994.
This doubled the benefits of mining, as the foreign exchange proceeds could be
used to finance imported consumer goods, equipment and spare parts, which
had long been scarce. These all set off an immediate artisanal mining boom.
From a few thousand artisanal miners in the 1980s, activity grew rapidly in the
1990s. In 1993, 330,000 were involved, and by 1995 550,000 Tanzanians earned at
least some of their income from mining. Gold, diamonds, tanzanite, and a
multitude of precious and semi-precious colored stones were found throughout
the rural areas. 21
A critical manifestation of this new government attitude to mining was the
promulgation of a radical new Mineral Code in 1998. 22
The USAID study revealed that the mining boom had had a startling impact in
relieving localized rural poverty, putting cash into circulation in rural towns, and
allowing some individuals to accumulate significant investment capital. This
reportedly happened in North Mara, as noted in the Supplementary Environmental
Management Plan (SEMP) for Nyabirama pit in 2002, and described in the following
extract:
…Nyangoto and Kewanja (and to a lesser extent Matongo) have already
experienced the cyclical prosperity of a mining boom. A gold rush in the area
began in 1987 and continued into the early 1990s as both Nyabigena and
Nyabirama deposits were exploited. By 1995, however, the decline in smallscale mining at both deposits was substantial. A majority of the small-scale
miners have left the district, and villagers today are once again predominantly
reliant on subsistence farming and the sale of surplus produce. 23
Lucie C. Phillips, Dr. Haji Semboja et al, Tanzania's Precious Minerals Boom: Issues In Mining
and Marketing, African Economic Policy Discussion Paper Number 68, March 2001.
20
21
Ibid., p. 7.
22
Tanzania’s mineral code was introduced in 1998 supported by a five-year World Bankfinanced sectoral reform project. This code allows 100 per cent foreign ownership; provides
guarantees against nationalization and expropriation; and offers unrestricted repatriation of
profits and capital. It pegs the royalty rate at a maximum of 3%, and provides waivers in respect
of import duties and tax exemptions on imported machinery, equipment and other inputs. It
also waives the requirement (in the 1979 Mining Act) for local procurement of goods and
services.
Earth Systems Environmental Research & Consulting, North Mara Gold Project Supplementary
Environmental Management Plan (Nyabirama), August 2002, p. 71.
23
36
The USAID study commented that large-scale mining exploration began almost
simultaneously with the artisanal rush, stimulated by the trade and investment
liberalization, active promotion of the Tanzanian mineral potential, and a reform of
the legal and fiscal regime applicable to mining. By 1998 Tanzania had attracted the
most mining exploration investment dollars of any country in Africa, US$58 million.
They noted too that it was Tanzanian government policy to encourage the growth of
both small-scale and large-scale mining, for the reasons set out below.
Each brings a unique set of benefits. Large-scale mining exploits deposits up to
several thousand meters in depth that cannot be reached by artisanal or smallscale formal mining. It brings investment, improvements in infrastructure
(roads, electricity, and water supply) that can benefit local populations as well
as the mine itself. It brings advanced technology and transfers skills to
Tanzanians that will prepare a core group to participate in the global economy
at a sophisticated level. It generates royalties many times greater than the
maximum achievable from artisanal and small-scale mining. While it generates
fewer jobs than artisanal mining, they are better quality jobs. The incomes of
their Tanzanian employees and a significant part of the incomes of expatriates
are spent on the local economy. 24
Much of the data in this report will contribute to the analysis begun in the USAID
study, adding several more years’ data to the picture.
3.5
THE CONTRIBUTION TO SOCIAL AND POVERTY OUTCOMES
The next few pages assess the contribution that mining has made to the overall social
and economic improvements that Tanzania is seeking to achieve as articulated and
measured mainly by the Millennium Development Goals (MDGs). The context for this
is survey data, as well as various recent assessments that indicate that overall poverty
in Tanzania (as measured by income levels), did not fall significantly between the
early 1990s (when the Tanzanian reforms began) through to 2000/01 which is the date
of the latest available household survey. This was the central finding of the first
Poverty and Human Development Report 25, using the results of the 2000/01
household survey 26. Slight improvements in the incidence of income poverty, using
either of the two official poverty lines (basic needs and food-based), may have
occurred. However, it was only in Dar es Salaam that the measured change was
statistically significant: the proportion of those in poverty falling from 28% to 18%. In
the country at large the fall in “basic needs poverty” was only from 38.6% to 35.7% in
the ten year period.
In part this limited gain may reflect the fact that the improved macro management of
the economy - although started in 1990 - was only pursued aggressively several years
later. Hence it did not really begin to affect growth in incomes, even on the average,
until the late 1990s. However, critics of mining see the relative failure of the measured
poverty improvement as symptomatic of the limitations of mining development as a
source of broader social improvement. Against this general background it is relevant
24
Phillips, et al, op. cit., p. 14.
25
United Republic of Tanzania, Poverty and Human Development Report, 2003
See National Bureau of Statistics, Household Budget Survey, 2002. United Republic of
Tanzania, Poverty and Human Development Report, 2003
26
37
to see whether the mining-affected communities fared any better than the country
generally– especially where it is possible to assemble more recent data.
Selected key indicators for the mining regions of Tanzania
With the exception of the gemstone mines in the Arusha region, most modern largescale mining in Tanzania is concentrated in an area that can be described as the Lake
Victoria goldfields (Williamson Diamonds is also in this area). The regions where
most of the major mines are located are Mwanza (Geita), Mara (Buhemba and North
Mara), Shinyanga (Bulyanhulu) and Tabora (Golden Pride). Thus, when examining
whether there have been any regional impacts associated with the presence of the
mines, it makes sense to look at data from these regions. Although the 2000/01
Household Budget Survey (HBS) was undertaken too early for any major impacts to
have yet manifested themselves in these regions, it is the most recent comprehensive
survey available, so the data below include key development indicators from the HBS.
Later data for Tarime District in Mara region will be provided in the section on the
direct impacts of the NMM.
Table 3.4
Percentages of households below the food and basic needs poverty lines in
the Tanzanian mining regions, 2000/01.
REGION
% HHs below food
poverty line
Tanzania Mainland
19 (22 in 1991/2)
Highest region
36 (Mara)
Lowest region
7 (Dar Es Salaam)
Mara
36
Mwanza
30
Shinyanga
22
Tabora
9
Source: HBS 2000/01 Appendix C, p. 180.
% HHs below basic needs
poverty line
36 (39 in 1991/2)
55 (Singida)
18 (Dar Es Salaam)
46
48
42
26
Table 3.4, like many of those which follow, with data drawn from the 2000/01 HBS,
does not demonstrate any clear regional pattern. For example, Mara region had the
highest percentage of households below the food poverty line but was in the middle
of the range of regions as far as the percentage below the basic needs poverty line.
Tabora region, which hosts the Golden Pride Mine, the first of the modern gold mines
in operation, scored very well on both measures. Shinyanga, where large amounts of
ASM activity have occurred, did slightly worse than the national average on both
indicators but better than the other mining regions with the exception of Tabora. This
generally average performance of the mining regions for many human development
indicators lends some limited support to the central Tanzanian government policy of
not providing special assistance to mining areas. However, the evidence is at best
inconclusive about the relative prosperity of these areas.
Table 3.5
Household size and access to facilities for Tanzanian mining regions,
2000/01.
REGION
Mean HH size
Electricity %
Toilet %
Tanzania
Mainland
Highest region
4.9
39
93
Protected
water %
55
6.7 (Mwanza)
59 (DSM)
99 (Ruvuma)
94 (DSM)
38
Lowest region
3.8 (Mtwara)
2 (Kagera)
81 (Tanga)
19 (Lindi)
Mara
5.9
10
86
40
Mwanza
6.2
5
92
53
Shinyanga
6.7
3
90
39
Tabora
4.7
4
97
25
Source: URT National Bureau of Statistics (NBS), Household Budget Survey, 2000/2001.HBS
2000/01 Appendix C, p. 180.
This data again shows a range of performances for the mining regions: these
performances are usually neither the highest nor the lowest in the land, with the
exception of Mwanza region having the largest mean household size, at 6.7 persons
per household and Tabora’s mean household size being less than the national average.
None of the mining regions fared well for access to electricity, although Mara’s
average was twice that of the other mining regions, at 10%. Household access to toilet
facilities was lower than the national average for all the mining regions except Tabora
with a high 97%. Access to protected water sources was also quite low for the mining
regions, especially Tabora, although Mwanza’s was only 2% below the national
average.
Overall, the mining regions of Tanzania, at least through the year 2000/01, show
themselves to be generally quite poor albeit with very large intra group variation and
with some mining regions (especially Tabora) faring better than the national average
on some of the poverty indicators. But even in these cases, the data on access to basic
facilities show high levels of ongoing deprivation.
Millennium Development Goals
The discussion that follows begins by focusing on the whole of the mining sector and
then narrows down to consider the contribution of the North Mara Mine. Discussion
is organized by reference to seven of the the eight Millennium Development Goals
(MDGs). As the eighth deals with global development partnerships, it is not really
relevant to the activities of a single mining operation. These goals are listed in greater
detail together with the specific targets for 2015 that have been adopted by the
Tanzanian authorities. Most significantly, the authorities want to halve extreme
poverty based on the national poverty line defined in terms of basic needs. In 1991/92,
38.6% of the population had incomes below this poverty line and that proportion was
reduced to only 35.7% by 2000/01. The reduction, in other words, in the ten year
period was less than 8%. There is a massive distance to go to achieve the target set for
2015.
3.5.1
Contributions to Millennium Development Goals by the mining sector as a whole
1. Eradicate extreme poverty and hunger (MDG 1) 27
The earlier discussion, and especially the evidence from the study by the USAID,
indicates that a broad-based reduction in poverty is being achieved at least for the
communities living in close proximity to major modern mining projects. However, the
beneficial economic impacts of modern, large-scale mines are not enjoyed by all
members of the mining–affected communities since some people were formerly
artisanal or small-scale miners (ASMs). It is known that in the past some of these
27
http://hdr.undp.org/statistics
39
people were able to make large amounts of money, particularly from gold mining, but
also from gemstones, at least over short periods of time.
The arrival of the large mines has effectively coincided with a cessation of access to
this income for many of the ASMs. However, this is not necessarily due to the large,
usually foreign-owned, mines denying access to ASMs. Rather, in many cases, the
ASMs reached the limit of their technical capacity to mine, reaching hard rock or
groundwater and were unable to proceed further without large machinery and
modern methods. The declining amounts of gold being produced by small-scale
miners in Mara region are demonstrated in Table 3.6 below.
The case of Mara region
The Mara region socio-economic profile, released in June 2003, commented that
although small-scale gold mining was conducted in the region, it had ‘tended to
stagnate at a very low level’ in both production and value. The report also commented
that the commissioning of two large-scale mines at Buhemba and North Mara at the
time was expected to contribute ‘much in terms of employment and monetary
contribution to the region’s economy.’ Table 3.6 shows the weight and value of gold
mined by ASMs in Mara region prior to the operation of the large mines. 28 When
compared with the 300,000 ounces (one ounce = 28.345 grams, so approx. 8.7 million
grams) of gold being produced annually by the North Mara Mine, these figures are
extremely small. It should be noted that these figures are the official statistics of ASM
gold production, which may be lower than the total actual production figures, as there
is a long history of unofficial or undeclared production. By their nature, the data is
unavailable and similarly likely to be of limited scale, in order to preserve their
secrecy. Therefore, although the total ASM production levels may be higher than
those contained in the official statistics, they are still much smaller than the amount of
gold produced by North Mara Mine’s modern methods.
Table 3.6
Weight and value of gold from small-scale mining, Mara region, 1998-2001
Year
1998
1999
2000
2001
Weight of
gold (gms)
10,692
7,264
6,125
8,700
Value (Tshs)
53,462
36,321
36,750
52,200
Ave. exchange
rate Tshs/USD
665
744
800
860
USD
80,395
48,819
45,938
60,698
Even though many former ASMs may be disgruntled, communities in general in
mining areas are materially better off than the equivalent rural communities in areas
without mines. In particular, employment levels have risen very significantly (see
Table 3.7 for the evidence). It is for this reason that the Tanzanian Government sees no
need to return a larger proportion of mining income (royalties etc) to mining districts,
arguing that the local populations already enjoy better than average opportunities.
Significantly, the western NGO position - particularly that of environmental NGOs –
tends to be that people with mines in their ‘backyards’ suffer a greater level of
negative impacts associated with reduced visual amenity caused by open pits,
28 United Republic of Tanzania (URT), Mara Region Socio-economic Profile 2nd ed., joint publication
by National Bureau of Statistics (NBS) and Mara Regional Commissioner’s Office, June 2003, pp.
94-5.
40
increased dust caused by increased heavy transport, noise pollution caused by
machinery and blasting, and environmental degradation which may be caused by
chemical spills and groundwater contamination. From this perspective, it is often
argued that local communities suffer more than they benefit from the presence of
mines. Local interviews conducted in 2004 and 2005 in the Tarime and Geita districts
suggest, by contrast, that the populations close to large mines in Tanzania attach
rather greater importance to the economic impacts associated with the mine than to
the environmental disruptions. This is unsurprising, given the limited economic
choices and the already difficult living conditions of many people living in close
proximity to mines in rural Tanzania. Nonetheless, it should be taken into account
when considering whether mining is of benefit to local communities. This will be
discussed in greater detail in Section 3.6.
The Tanzanian government may well be reading the situation correctly by not
allocating additional funds specifically to the mining areas, as identified in interviews
with District officials in Tarime and Geita in 2005. However, their stance does not do
anything to defuse the various concerns that are expressed.
Table 3.7 below reveals one important aspect of the direct benefits to the mining areas,
namely the steadily increasing level of employment in the Tanzanian mining industry.
The vast majority of that employment is also Tanzanian: 90% or more for the direct
employment by mining companies. Data on the numbers of Tanzanians employed by
the on-site contractors is not available but as contractors generally have even fewer
senior staff than do the companies, the percentage for Tanzanian employment would
be at least as high. The industry has certainly contributed significantly to direct
employment opportunities for Tanzanians.
Table 3.7
Employment in the large scale mining industry in Tanzania, 1997-2004
Foreign employees
Tanzanian employees
Total employees
% of Tanzanians
Contractors
Total workers
1997
12
927
939
98.7
0
939
1998
20
687
707
97.2
0
707
1999
47
1142
1189
96.0
335
1524
2000
238
2022
2260
89.5
774
3034
2001
267
2330
2597
89.7
1335
3932
2002
340
3043
3383
89.9
1877
5260
2003
363
3700
4063
91.1
2261
6324
2004
387
3745
4132
90.6
3582
7714
Source: Tanzania Chamber of Minerals and Energy, 2005
Table 3.8 demonstrates that the large-scale mining sector in Tanzania has also spent
substantial amounts on purchasing goods and services in Tanzania. The industry
continues to purchase many of its needs from abroad but this is more by necessity
than choice, as many requirements are not available from the relatively undiversified
production base within Tanzania. Nonetheless, the mining sector has procured, on
average, more than 50% of its needs within the country in the past few years.
Table 3.8
Percentage of goods and services procured in Tanzania by the mining
industry, 1997-2004
Amount spent, $ US million
Local goods and services
Local % of total procurement
1997
1998
1999
2000
2001
2002
2003
2004
Total
2.0
4.3
36.1
104.7
109.5
125.7
187.9
133.5
703.8
51.22
31.77
68.00
58.74
59.20
51.53
44.49
51.31
51.74
Source: Tanzania Chamber of Minerals and Energy, 2005
41
Indirect employment
Taking the purchasing figures from the most recent full year available, 2004, we see
that approximately $US134 million was spent in Tanzania (and $US127 million spent
abroad). This amount can be used to make rough calculations of indirect employment
created by expenditure, as follows:
•
•
•
If sales of $1,000 generate one Tanzanian job, then about 134,000 additional
Tanzanian jobs would be created.
If sales of $2,500 generate one Tanzanian job, then about 53,600 additional
Tanzanian jobs would be created.
If sales of $5,000 generate one Tanzanian job, then about 26,800 additional
Tanzanian jobs would be created.
In the absence of hard data on this point, it is useful to put these rough estimates into
some sort of context by examining explicitly the types of multipliers that are involved.
These are summarized graphically in Figure 3.4.
Figure 3.4
Direct and Indirect Job Creation from Mining
Company
Employees
On-site Contractors
Foreign Supply
Chain Jobs
In-country, Off-site
Supply Chain Jobs
ditto
ditto
etc
etc
Jobs Created inCountry by
Employee Spending
Jobs Created
Abroad by
Employee Spending
ditto
ditto
etc
etc
Boundary of Employment Estimates Presented in the Resource Endowment Study
Key:
Direct Jobs
Indirect Jobs
Induced Jobs
Foreign Jobs – NOT Included in Estimates
The numbers of indirect jobs created for $1 of direct spend will depend on the
proportions of (a) mining company procurement and (b) mining wages and salaries,
that are spent domestically in Tanzania (the inner segments of the diagram) rather
than abroad (the outer segments) at each round of the expenditure chain.
Unfortunately we have no direct estimates of these and so anything we say must b e
regarded as only very approximate. But let us assume that the proportions of both (a)
and (b) are equal to 0.6, then the expenditure multiplier in terms of currency will be
42
2.5.. In other words, $1 of direct spending will multiply round the system to create
$2.5 of total spending. But to convert this monetary amount into a number of jobs, we
need to make further assumptions about the labor productivity of the
producers/suppliers at each round of the expenditure circuit that applies to the $2.5 of
total spending. If for example the productivity levels on average were only one third
of that in the mining company itself – a reasonable assumption given that these other
activities will be far less capital intensive than is mining, then each dollar spend
outside the mining industry would produce three times more jobs than in mining
itself.
Applying this logic and using alternative but plausible proportions for the domestic
spend of both (a) and (b) above of 0.4, 0.5, 0.6, we would achieve the following
indirect and total employment for the actual direct employment (employees and onsite contractors) as shown in Figure 3.4.
Table 3.9
The Calculation of Indirect Job Creation
Domestic Spend
0.4
0.5
Coefficient
Expenditure Multiplier
1.667
2.0
Direct Jobs in 2004
7714
7714
Productivity Differential 0.333
0.333
Indirect Jobs
38960
46750
Total Jobs
46674
54465
Source: Company information and Consultant's estimates
0.6
2.5
7714
0.333
58440
85633
Given the relatively limited depth at the present time of Tanzania’s productive sector,
it would seem reasonably plausible to assume an expenditure multiplier of no more
than 2.0 (the second column of Table 3.9). This would then suggest indirect job
creation by the mining sector in 2004 of around 46,000. Or, if we relate this to the
earlier numbers, it would suggest that it needs $2500 to $3000 of procurement
spending by the mining industry to produce one additional indirect job.
While accepting that these estimates are, of necessity, extremely crude, it would be
reasonable to expect the procurement expenditure of the mining sector in Tanzania to
generate between 30,000 to 60,000 additional jobs in Tanzania at the present time, with
a midpoint estimate being about 45,000 jobs, in addition to the almost 8000 direct jobs
for Tanzanians at the mines. The logic of this proposition is set out fully above and so
can easily be tested and improved as additional hard data become available.
In summary although mining does not focus specifically on eradicating poverty and
hunger, the mining sector has nonetheless contributed to this first MDG, by increasing
economic activity in the remote areas where it operates. By providing direct
employment and initiating the multiplier effects to create significant indirect
employment and business enhancement, the presence of large-scale mines has almost
certainly helped to reduce poverty in the areas in which they operate in Tanzania.
This conclusion is qualified only by the uncertainty about the number of ASM jobs
that could plausibly have survived longer term given the inherent limitations of this
sub-sector of activity. Certainly in North Mara, the amount of such sustainable activity
is thought to be very limited indeed.
2. Achieve universal primary education (MDG 2)
43
By 1999, Tanzania (mainland) had achieved a figure for primary school enrolment of
57.1% (UNDP, 2001). So nationally there is still a long way to go to achieve the 100%
target.
As with the other HBS indicators for the mining regions in Tanzania, the educational
figures show a range of results. Mara region was consistently higher than the national
average for all three measures in the following table – percentage of children
attending upper primary school (Standards 5-8); primary net enrolment; and
percentage of adults literate in any language. Mwanza also exceeded the national
average for upper primary school attendance, but for all other measurements, the
other three mining regions were below the national average. Once again, however,
their scores were middling, neither the highest nor the lowest for Tanzania.
Table 3.10
Educational indicators for Tanzanian mining regions, 2000/01
REGION
Upper primary %
Primary net
enrolment ratio
59
Literate adults %
Tanzania
54
71
Mainland
Highest region
66 (Ruvuma)
81 (Kilimanjaro)
91 (DSM)
Lowest region
36 (Lindi)
44 (Lindi)
55 (Shinyanga)
Mara
59
62
76
Mwanza
56
52
65
Shinyanga
45
46
55
Tabora
51
55
65
Source: URT National Bureau of Statistics (NBS), Household Budget Survey, 2000/2001 HBS
2000/01 Appendix C, p. 169.
Almost all the large-scale, foreign-owned mines in Tanzania have become heavily
involved in improving the conditions of schools in the immediate vicinity of their
projects. The amount of the spending is shown in Table 3.11. The assistance provided
includes:
•
•
•
•
•
•
Repairing school buildings, or constructing new ones
Renovating classroom fittings or providing new ones
Improving teachers’ living quarters (which goes a long way towards
encouraging good quality staff to come and stay at a school)
Providing books and equipment
Subsidizing teachers’ pay and
Usually all of the above
This work, which would normally be the responsibility of the Ministry of Education,
goes somewhat against the principles of sustainable community development, in the
sense that much of the corporate support is in the form of grants. Hence it does not
necessarily foster self-reliance in the recipient communities. In a number of cases,
however, local communities have also contributed substantially to the building
programs and it is official Tanzanian policy to encourage more of them to do this, as it
is more likely to lead to community ‘ownership’ of the buildings and their ongoing
care and maintenance beyond mining. Whether or not these school building
programs are classified as sustainable development, there is no question that the
mining sector in Tanzania has contributed in a visible way to the expansion of
primary education in its areas of direct influence.
44
45
Table 3.11
Expenditure on education projects by the mining sector in Tanzania, 19992004
1999
61,431
Amount spent, USD
2000
196,929
2001
338,886
2002
435,179
2003
177,184
2004
824,276
Total
2,033,885
Source: Tanzania Chamber of Minerals and Energy, 2005
The expenditure on higher level training is shown in Table 3.12 below.
Table 3.12
Expenditure on training of Tanzanian workers by the mining sector, 19972004
USD
Total trained people
Total amount spent
Spent per capita
1997
1998
1999
2000
2001
2002
2003
2004
173
20
1,370
1,815
1,814
2,134
2,485
3,861
8,453
27,095
156.62
1,235
61.75
35,111
25.63
2,359,801
1,300.17
2,376,000
1,309.81
2,416,519
1,132.39
2,647,115
1,065.24
2,996,874
776.19
12,859,750
1,521.32
Source: Tanzania Chamber of Minerals and Energy, 2005
Although the expenditure on training is not related to the MDG of universal primary
education, it does reveal that the mining sector has contributed significantly to
training over 8,000 Tanzanian mining employees, at an average cost of USD 1,500 per
person. This will have helped to transfer skills to local workers and to raise the
general level of skills in the Tanzanian workforce.
3. Promote gender equality and empower women (MDG 3)
Tanzania is far better placed to attain this than some of the other targets since the
equality ratios had already reached 99% and 86% for primary and secondary school
enrolments respectively by 1999. (UNDP, 2001)
In keeping with the generally patriarchal trends of the global mining industry, the
mining sector has not contributed so clearly to help achieve this MDG, although
women certainly do participate in the industry in Tanzania. Significantly this is just as
true of the ASM sector as it is of the large mines. Both provide some employment
opportunities for women, although usually in the less demanding and less lucrative
positions, e.g. reworking mullock heaps for ASMs and cleaning and clerical work in
large mines. There are numerous exceptions in both mining sectors in Tanzania, with
a small number of women owning mining leases in the ASM sector and a growing
number of women engineers, geologists and scientists in the large mines. These are
contributions to women’s empowerment, although limited in scale.
One other way in which the large-scale mining sector is empowering women in some
places, is by insisting upon women’s participation in community development
decision-making processes. Where only senior males may previously have been
consulted about community development priorities, the use of participatory planning
methods ensure that women and other under-represented groups are now able to
have a greater say. 29 These inclusive processes are used by both Golden Pride Mine
and NMM.
Macdonald, C. et al. (2005), Community Development Toolkit, Washington D.C./London, World
Bank/International Council on Mining and Metals
29
46
Total
4. Reduce child mortality and 5. Improve maternal health (MDGs 4 and 5)
Tanzania will have great difficulty in meeting these targets since child mortality in
particular deteriorated further at least in the early years of the 1990s (UNDP. 2001).
However, both these MDGs, in common with the education goal above, have been
contributed to by the mining sector in Tanzania. Specifically, local clinics, dispensaries
and hospitals tend to be among the first recipients of donations from international
mining companies. The amounts of expenditure by the mining sector are shown in
Table 3.13.
Table 3.13
Amount
spent,
USD
Health
projects
Water
projects
Expenditure on health projects by the Mining industry in Tanzania, 19972004
1997
1998
1999
2000
2001
2002
2003
2004
Total
0
0
27,264
242,905
1,032,583
271,000
170,516
662,372
2,406,639
22,820
360,991
2,054,866
3,307,440
1,306,420
120,494
77,000
378,965
7,628,996
Source: Tanzania Chamber of Minerals and Energy, 2005
Although the contributions to health and water projects by mining companies vary a
lot, and also vary from year to year: i.e. there is no evidence of steadily increasing
expenditures over time, they nonetheless represent a significant contribution to local
health services available to Tanzanian communities in mining areas.
6. Combat HIV/AIDS, malaria and other diseases (MDG 6)
This remains a major problem in Tanzania with only modest gains being recorded.
The major mining companies in Tanzania have contributed substantially towards
programs to combat HIV/AIDS and malaria. For example, both Geita and Bulyanhulu
Mines have supported large programs of Voluntary Counseling and Testing (VCT)
and peer educators in the areas of their mines over a number of years. NMM has also
just signed a Memorandum of Understanding (MOU) with the medical NGO, African
Medical and Research Foundation (AMREF), to introduce its programs in Tarime
District. It could be said, and it is certainly frequently claimed, that mining
contributes to the increase of diseases like HIV/AIDS and malaria, by creating
increased social mobility and attendant changes in behavior, principally among
hospitality and transport industry workers.
However, if this is true of large mining, it is equally or even more true of the ASM
sector. One difference seems to be that the large mines have accepted some
responsibility to help counteract any increase.
Studies in Tanzania in the vicinity of Lake Victoria, conducted by the
AMREF/LSHTM/NIMR team in the early 1990s, indicated that small-scale gold mining
was associated with a high HIV prevalence. Large population-based surveys in
Mwanza Region conducted in 1990-91 – before the growth of large-scale mining showed that the proportion of people aged 15-54 who were HIV-infected was 3% in
rural villages, 7% in larger settlements on major roads and 12% in Mwanza town. The
47
same studies showed that the prevalence of active syphilis (TPHA and RPR positive)
in people aged 15-54 was 8% in rural villages, 13% in roadside settlements and 11% in
Mwanza town. In 1993, the team also conducted a similar large population-based
survey of HIV and other STIs in two rural communities with substantial small-scale
gold mining activity- Kakola (Kahama District, Shinyanga Region) and Mugusu (Geita
District, Mwanza Region). This study showed that the prevalence of HIV and STIs
was already much higher in these two rural mining communities than in other rural
communities. In fact, the prevalence was even higher in Kakola and Mugusu than in
Mwanza town, as 15% of males and 23% of females aged 15-54 years were HIVinfected and 12% of men and 17% of women showed evidence of active syphilis
(TPHA and RPR positive) in the rural mining communities.
On a regional basis, those regions with large-scale mining activity do not seem to be
more affected by HIV/AIDS than others. For example, in the Tanzania Mainland HIV
Indicator Survey, 2003-04, the mining regions were not in the top five of Tanzania’s 21
regions for HIV prevalence, with Mwanza and Tabora coming in at equal seventh
place at 7.2%, Shinyanga tenth at 6.5% and Mara 18th at 3.5%. The regions with the
highest HIV prevalence were Mbeya at 13.5%, Iringa at 13.4% and Dar es Salaam at
10.9%. None of these regions are heavily involved in large-scale mining.
Although it is not clear that the presence of large-scale mining has any direct
correlation with increased HIV/AIDS, STIs or malaria, the very mobility of
populations in mining areas and their associated less-traditional ways of life could
contribute to increased morbidity if unmanaged. Fortunately, the major mining
companies take the health and safety of their workforces very seriously, and this
includes their interactions with host communities. For example, the major mines have
nearly all undertaken awareness and management programs for HIV/AIDS and STIs
and have adopted measures such as mosquito spraying and the distribution of treated
mosquito nets for malaria prevention. Some of these awareness programs have also
been shared with the ASMs in pilot programs being undertaken by Geita Gold Mine
and DFID. These measures seem to be assisting the mining sector to reduce the impact
of these serious diseases.
7. Ensure environmental sustainability (MDG 7)
The overall Tanzanian record on this MDG indicates a mixed record. For example, the
proportion of land covered by forests has fallen by around 1% in ten years but the
protected land area has stayed constant over the past few years. Energy supply (use)
has fluctuated since 1990 and there seems to have been no change in levels of the
carbon dioxide emissions.
Environmental sustainability is another main area where the mining industry is often
accused of poor practice. This might seem to make it hard to demonstrate that the
industry is contributing towards the MDG. In Tanzania, there is little doubt that much
of the environmental damage caused by mining comes from the ASM sector, much of
which operates in an unregulated fashion, rarely undertaking any form of
rehabilitation and frequently using unsafe chemicals like mercury openly in the
environment. For example, the Shinyanga regional Human Development Report
stated in 1998 (prior to the large-scale mining boom) that ASM had a negative impact
on the natural resource base, as demonstrated in the extract below.
Small-scale mining affects forests and other types of vegetation and culminates
in abandoned pits. Large areas of forest and other vegetation have been cleared
for mining and the construction of miners’ camps. Trees are felled to build huts
48
and provide firewood, as well as for the timbering of pits. Few miners replace
the vegetation destroyed in the course of mining. 30
These negative effects persist. Small-scale miners and local government officials
interviewed in Geita District in August 2005 admitted that ASM had already caused
significant environmental damage in the area. They did not expect the advent of large
mines to make matters worse. Indeed, they hoped that the improved economic
conditions that might be precipitated by large mines could help people improve the
local environment.
The large mines undoubtedly do damage the natural environment when they
excavate mining pits etc. However, the modern international companies all try to
maintain a high level of environmental management standards. Specifically, they
typically undertake rehabilitation as they move forward; they systematically try to
prevent the release of contaminants into the environment; and they plan actively to
implement emergency damage control measures should any environmental accident
occur. In Tanzania, these corporate arrangements are partly a matter of in-house
policy and partly a matter of the formal agreements signed with government and
supervised in an advisory capacity by the National Environmental Management
Council 31. In addition, there are increasing attempts to extend the good practices
articulated by the larger companies to the ASM sector. Notably there is a current
campaign in Tanzania, sponsored by DfID and AngloGold Ashanti, to raise the level
of awareness and capabilities of the ASMs to improve their own environmental
management practices.
Mining also prospectively can damage forest resources and this is a further source of
anxiety in Tanzania as elsewhere. It is not widely understood, however, that the
footprint left by mining is typically fairly limited in size relative to other factors that
can impact forest areas (this holds true for Australia as well as Tanzania). Specifically,
most large-scale land-clearance in practice is undertaken for agricultural purposes and
this can have a much wider detrimental effect on water resources and erosion. More
generally, the tripling of Tanzania’s population over the four decades since
independence and the associated clearing of forests for firewood, have had a major
negative impact on the Tanzanian environment. The Mara Regional Government
recognized this in its 2003 socio-economic profile, commenting that the overexploitation of forest resources for firewood, charcoal making and brick burning, in
addition to clearing for settlements and tsetse fly eradication, have depleted the
region’s forest cover. They stated that, in 2000, forest resources were over- cut by 30%
of the level needed for sustainability and that the region was thus eating into its forest
capital. 32
The mining companies in Tanzania are active in reforestation programs with most of
the mines investing in this activity in their respective neighborhoods. Regional and
district governments have forestation plans and seedling raising and planting
programs that mining companies should work closely with for mutual benefit. If the
Regional Government of Shinyanga, Shinyanga Human Development Report, Shinyanga Region,
Tanzania, December 1998, funded by UNDP, p. 42.
30
Malyosi, R.B.B., ‘Impact assessment and the mining industry perspectives from Tanzania;
paper presented to the IAIA Conference, Vancouver, April 2004, p.8.
31
32
Mara region socio-economic profile, 2003, pp. 82 and 108.
49
mining sector continues to foster reforestation programs, and provides alternative
sources of incomes to agriculture for rural populations, it will assist in reducing
impacts upon the environment. Access to electricity, which may be increased by the
mining sector both by the extension of the power grid to mining areas and the greater
incomes of people enabling them to afford electricity instead of fuelwood, can
substantially reduce the rate of woodcutting in rural areas. This can indirectly assist
environmental sustainability in mining areas.
8. Summary
Notwithstanding the generally negative findings of other researchers about
Tanzania’s success in addressing its very high rates of poverty, the closer examination
of the mining communities in the country provides some basis for cautious optimism.
The extra growth that has been associated with the mining boom may appear small on
the national canvas but is certainly large and significant in those communities that are
in the direct areas of influence of the mines. The new mining companies in Tanzania
have clearly created a significant number of good quality jobs in these communities –
either directly or indirectly via their procurement activities. The indirect impacts
could of course be larger and the expectation is that this will indeed happen as the
embryonic mining industry become more mature and more embedded in the
country’s economic system. Specific corporate policies of the type practiced at North
Mara (see below) are an important part of this.
Similarly, while mines certainly face difficulties and criticisms in relation to some of
the component MDGs, the general but brief experience in Tanzania is that the new
international mining investors are adopting sound and helpful approaches to the
difficult issues such as gender empowerment and the mitigation of environmental
side effects. They have also become an important part of the delivery in social areas
such as health and education. However, embedding these contributions sustainably
into the mainstream public provision of social and economic services is a difficult
matter and the long-term arrangements for this still need to be further developed.
The fostering of strong community relationships and partnerships is critical if the local
social and economic impacts of the mines are to be fully realized. The companies
generally recognize that this is not yet happening sufficiently. As a consequence,
community development is high on the agenda for all of them, albeit with different
ways of working towards that goal. Most of the companies have realized that they
need to combine forces with government and social service providers. It is difficult to
achieve success in this area as a mining company working alone (after all, community
development is not a core mining business). They have concluded that partnerships
are the optimal means for achieving sustainable development and the report returns
to that topic in Section 5. First, it reviews the specific impacts as they emerge from the
North Mara Mine.
50
3.6
CONTRIBUTIONS TO MILLENNIUM DEVELOPMENT GOALS BY THE NORTH MARA
MINE
1. Eradicate extreme poverty and hunger
Employment
As noted in sub-section 3.5.1, our surveys have revealed that people living in the
vicinity of a large-scale mine tend to be more concerned with economic impacts and
opportunities than they are with environmental impacts. This does not mean that
environmental issues are unimportant, merely that people’s economic circumstances
are such that they are prepared to put up with inconveniences such as dust and noise
if income-earning opportunities offset these. As shown in the Table 3.14, people
surveyed in the NMM area were more concerned about economic than environmental
impacts of the mine’s presence. Indeed, the combined number of complaints about
environmental issues – pollution (64), blasting (12) and dust (9) = 85 out of 398
responses or 21.4% does not reach the total of even the first category of economic
impact identified, at 26.6%.
Table 3.14
Survey Responses in North Mara
Impact area
Number
of %
responses
of
responses
106
26.6
64
16.1
Loss of land
55
13.8
Loss of access to mining areas has taken income
51
12.8
Reduction in business (could refer to mining)
48
12.1
No compensation received for damage to crops,
18
4.5
Blasting causes house cracks, noise
12
3.0
Prices have increased, money scarce
12
3.0
9
2.3
Lack of income/employment
Pollution of air, land, water, noise causes
negative health impacts
loss of land
Increased car accidents, dust from road
Total number of responses
398
Source: NMM SIA Survey Output 2004, Qs. 36-38.
In the NMM SIA survey, people were also asked whether there had been any benefits
from the coming of the large mine. The major benefits identified were that the
company had built schools (26.1%), roads (12.3%) and hospital clinics (9.2%), plus
another 9.2% of respondents commented that all three of these elements were
improved. The other major benefit was employment and income, which 23% of
respondents said had improved.
51
It should be noted that there is a history to the large number of complaints registered
about lack of employment and income from the NMM. In agreements signed with five
local villages during negotiations for the mining leases, the previous owners of the
NMM, AMGM, had agreed to preferential employment and training for people from
those communities. The agreements contained a clause stating ‘as budgets permit’
which apparently provided an escape clause to the company, although not in the eyes
of the community members. Few people from the local villages had obtained the
desired and expected training and jobs and this created considerable resentment. In
addition, people who had previously been engaged in ASM activities complained
about being prevented from doing so after the advent of the large mine, although
most admitted that the increased level of technical difficulty involved with ASM as
pits went deeper had already curtailed activities in this sector. Placer Dome (PDT) has
already done much to improve the access of local people to jobs at the mine, as will be
explained in the following sections on employment and training. 33
Employment for their own people is frequently a matter of great concern for
communities surrounding mines who often feel that, since they bear a greater burden
of the impacts of the presence of the mine, visual and noise disruption, increased
traffic etc, that they should receive preferential treatment when hiring of staff is
concerned. The people in the North Mara Mine impact area are no exception. Minerelated employment or at least income related to the mine was a major focus of a
majority of the people surveyed for the social impact assessment (SIA) undertaken in
2004. The fact that the agreements concluded by AMGM with five local villages in
1995, as part of the process of acquiring the mining leases, expressly included
preferential hiring of members of villages in the mining operations added substance to
this expectation.
However, Tanzanian government policy does not support preferential local hiring:
only a preference for Tanzanian nationals irrespective of where in the country they
come from. This policy is based upon a foundation of non-discrimination. Natural
resources are viewed as the heritage of all Tanzanians, and not just those fortunate to
be born in a well-endowed area. Consequently, it is not legal to give preference to
those born in the North Mara region. Having said that, those who do reside in the
vicinity of the mine (wherever they were born) have better opportunities for picking
up unskilled work whenever extra labor is required, which is frequently.
Additionally, a majority of those filling support positions in roles such as planting
trees for rehabilitation, road maintenance, construction of community infrastructure
projects, cleaning, catering and security are Wakurya people from the area near the
mine. For example, in the NMM community infrastructure programs, there are often
as many as 300 workers building relocation houses, renovating school buildings,
repairing clinics etc. These workers are employed by the three local sub-contracting
firms that undertake most of this work, under company supervision, and they are
overwhelmingly local. In addition, the NMM mining department has instituted an
active program for training unskilled workers from the surrounding communities as
machine operators, i.e. drivers of trucks, excavators, graders etc. This is discussed
further in the education section below.
33
NMM SIA Survey Output 2004, Qs. 36-38
52
Exact numbers of purely local employees cannot be cited, as the mine does not collect
statistics in greater detail than nationality. However, in July 2004, almost 83% of all
employees (direct as well as subcontractors) working at the North Mara Mine were
Tanzanian, and 17% expatriate. Of the direct mine employees, who numbered 498,
there were only 62 expatriates (12.5%) and there were 41 Tanzanians in senior grade
positions. The following table provides more detail.
Table 3.15
Employment numbers at North Mara Mine, July 2004
NMM departments
Mining
Tanzanian
juniors
22
Tanzanian
seniors
4
Total
Tanzanians
26
Expatriates
5
Overall
total
31
Technical services
5
3
8
5
13
Geology
12
3
15
3
18
Process plant
58
3
61
12
73
Sustainability
22
3
25
3
28
Occupational health
& safety
0
3
3
1
4
Human resources
25
3
28
1
29
Finance &
administration
8
4
12
5
17
Security
141
2
143
7
150
Exploration
56
5
61
7
68
Corporate (Dar)
0
4
4
1
5
Upgrade project
2
4
6
12
18
Casuals
44
0
44
0
44
TOTAL PDT
395
41
436
62
498
Summary
percentages PDT
87.5%
12.5%
Contractors
524
136
660
OVERALL TOTAL
960
198
1158
Total summary
percentages
Source: North Mara Mine administration
82.9%
17.1%
Looking at the longer term employment numbers at North Mara, which have been
increasing steadily as mining activity increases, we see an increase in Tanzanian
employment of almost 400 people between 1997 and 2004. In the same period, the
numbers of foreign employees rose by only 60, from four to 64 as shown in Table 3.16.
Table 3.16
Numbers of Tanzanian and foreign employees at North Mara Mine, 19972004
Year /
category
Foreign
employees
Tanzanian
employees
Tanzanian
percentage
1997
1998
1999
2000
2001
2002
2003
2004
2005
TOTAL
4
10
10
13
18
47
39
64
80
205
85
92
175
162
159
298
313
460
707
1744
95.5
90.2
94.6
92.6
89.8
86.4
88.9
87.8
89.8
89.5
53
Source: North Mara Mine administration
Table 3.16 shows that the proportion of Tanzanian employees has averaged almost
90% and has never dropped below 86.4%. In addition, the actual number of Tanzanian
employees has increased markedly over the time the mine has existed. In this respect,
North Mara fits closely with the overall national pattern of mining employment
shown in Table 3.7 above.
Equivalent figures for contractors were unavailable, so the table above refers only to
direct employees of the mine. From September 2004, NMM has become an owneroperated mine, rather than subcontracting the mining work. Hence the high figures
shown for 2005, even though they represent only a partial year, will likely be
maintained by Placer Dome.
Royalties and resettlement expenditure
Placer Dome’s land acquisition processes have involved a procedure of providing
attractive housing packages in addition to the normal government-regulated
compensation package where relocation of households is needed. To May 2005,
$US315,000 had been spent on building 42 relocation houses, at an average of
$US7,500 each. The plan for construction of relocation houses for 2005 totals 103
houses. These houses are built in a style that fits with the best local standard and are
of substantially better quality than traditional houses made of natural materials. They
are considered to be attractive houses by local residents, but do not place resettled
families too far out of step with their community. Thus, the housing conditions of
families who have been moved by PDT for the NMM are improved.
Mineral rights to some of the land required for the Nyabirama and Nyabigena pits
was acquired by means of agreements with holders of mining claims – 11 mineral
rights holders at Nyabirama and five villages and two individual mineral rights
holders at Nyabigena, as well as surface rights holders. These areas were already
being mined prior to the arrival of AMGM. The agreements with holders of mining
claims included royalty arrangements in some cases (in addition to royalties paid to
the Tanzanian government). Royalty agreements with individuals are confidential and
so no detailed data about these are published. However, aggregate figures were
available. These revealed that former claimholders of the Nyabirama pit had received
$US1,727,610 over the three years from 2002 to 2004, and former Nyabigena pit
claimholders had received $US71,288 for the same period, less mining having been
done at Nyabigena. These are substantial amounts of money going to a few local
people and have substantially contributed to the reduction of poverty for those
concerned. However these royalty agreements also led to additional inequalities
within the community, which NMM sought to offset by persuading some royalty
recipients to donate a regular amount to a community development fund, with
contributions being matched by the company (see Section 5.6)
The majority of land required was compulsorily acquired from over 500 surface rights
holders who were relocated, over a number of years, to allow the mine and its
infrastructure to be built. Over one thousand others were also compensated for loss of
crops or surface improvements on land which was needed for roads, the airstrip or
other mine infrastructure. The numbers of people relocated and compensated until
2003 are shown in Table 3.17. Note that the numbers of people with relocated
dwellings are included in the total number of people compensated and not added to
that total.
54
Table 3.17
Land acquisition compensation numbers, 1997-2003
Summary of Land Compensation - 1997 - 2003
Year of
compensation
Total people
entitled for
compensation
1997
1999
2000
2002
2003
Nyabigena Shaft Sinkers
Total number
of people
compensated
Relocated
Land/Dwellings
owners
30
536
12
728
438
30
536
12
728
368
6
151
5
140
182
1,744.00
1,674.00
484.00
Amount of
compensation
paid in T shs
Number of
people
outstanding
compensation
8,500,000
267,339,635
10,028,926
167,106,543
253,428,657
148,298,590
854,702,351
70
70.00
Amount of
compensation
outstanding in
T Shs
104,755,090
13,121,810
117,876,900
Total
compensation
8,500,000
267,339,635
10,028,926
167,106,543
358,183,747
161,420,400
972,579,251
Total
Area/Ha
10.42
261.02
2.66
144.84
222.02
640.96
Source: North Mara Mine Community Affairs Department
Compensation has been processed for all landholders and lease and claim holders,
which is designed to offset the inconvenience of loss of land. Some people,
constituting a minority of those involved in compensation, are engaged in litigation
over compensation issues and their claims are therefore still outstanding.
Nonetheless, the acquisition of land has had a significant impact on a significant
number of people. Whether that impact has been positive, negative or neutral
depends on how people have used the compensation and may vary from individual to
individual. Consequently, the poverty-reduction impacts of the compensation also
varies.
Business Development and Other Indirect Benefits
Significant numbers of businesses have established themselves in the near vicinity of
the Mine. Not all of their business is directly caused by the presence of the Mine but it
is a reasonable presumption that much of it is. A survey conducted for NMM for the
Supplementary Environmental Management Plan at the end of 2002 counted 25 bars,
35 hotels, 3 disco halls, 9 guesthouses, 5 local brew bars and 5 video halls in Nyangoto
village, a total of 82 businesses close to the Mine. 34 Our own field work in August
2005 counted 130 businesses in the same village. 10% of these were questioned about
their views of the Mine. Most of the business owners were locally-born and bred, and
very keen to do business with the Mine. Their greatest complaint was that the Mine
workers had started to have their salaries paid into a bank in Mwanza, which meant
they did not have ready cash available for spending in local businesses. They thought
that this might be ameliorated by a bank opening a local branch, something which the
NMM Sustainability Department was also trying to encourage. However, for their
own reasons of cost etc. Tanzanian banks are naturally reluctant to open new branches
in remote areas where business volumes may be limited. Other options, such as credit
unions, are also being pursued by PDT to help boost local business development.
The presence of large-scale mines attracts infrastructure which might not otherwise
have come to a remote rural area for a long time, and this can help to further alleviate
the poverty that is exacerbated by isolation. For example, very few people had access
to telephone services before NMM began and attracted the mobile telephone service
providers to the area. Mobile telecommunications are now readily available in the
34 Earth Systems, North Mara Gold Project Supplementary Environmental Management Plan (GokonaNyabigena), August 2003, Appendix H, p. 4.
55
NMM area, with three service providers (Celtel, Mobitel and Vodacom) competing for
business. As most people use these services on a pre-paid rather than subscription
basis, it is not possible to know how many people are using mobile telephone services
in the NMM area, although we counted seven shops selling phone cards in Nyangoto
village, so there is an obviously active trade. Only three households in the North Mara
SIA survey had landline telephones and 35 had cellular telephones, indicating the
boost to communications that the mobile network can provide, catalyzed by the
presence of the mine.
Indirect employment
The figures in Table 3.18 demonstrate that over a two-year period, NMM spent $US4.1
million in Tarime district on service contracts, $US1 million in Mwanza region, and
$US625,000 in the rest of Tanzania, primarily Dar es Salaam, the capital. Division by
two provides a rough annual average that suggests a $2 million local spend, a
$500,000 regional spend, and $310,000 of other national spending. These figures in
turn can be used to make rough calculations of indirect employment created by these
expenditures.
This is based on the same approach as that used earlier for the mining industry as a
whole. (e.g. Figure 3.4 and Table 3.9). It probably requires around $2500 to $3000 of
procurement spending to create one additional Tanzanian job. So if sales of $2,500
generate one Tanzanian job, then about 400 local jobs, 200 regional jobs and 124 other
national jobs would be created, a total of 724 additional Tanzanian jobs.
While accepting that these estimates are, of necessity, extremely crude, it would be
reasonable to expect PDT’s procurement to generate between 362 and 1,810 jobs in
Tanzania, with a midpoint estimate being about 724 jobs, in addition to the 707 direct
jobs for Tanzanians at the mine. The majority of these are in the local district, as
demonstrated in the figures above.
Table 3.18
Procurement Contracts: Value in $US (Jan 2003-May 2005)
Location/service Tarime
Mwanza
Other
Tanzania
International Total
Total
Bus hire
237,000
0
0
0
237,000
Field workers
255,000
0
261,000
0
516,000
Freight
0
190,000
364,000
4,914,000
5,468,000
Plant hire
3,417,000
610,000
0
0
4,027,000
Service
consultants
0
12,000
0
38,354,000
38,366,000
Project
construction
205,000
233,000
0
9,396,000
9,834,000
Total
4,114,000
1,045,000
625,000
47,884,000
53,668,000
Source: North Mara Mine administration. The data are based on bank transactions.
Summary
Overall, the NMM has contributed positively to the important areas of employment
and local business development. PDT has adopted more active measures than its
56
predecessor to enhance the levels of local employment, procurement and business
development, so this positive contribution is likely to increase. Although the creation
of jobs and economic activities may not directly reduce poverty levels, economic
expansion has provided increased income to a wider number of people than would
have had these opportunities without the presence of the large mine. In addition, for
those people in receipt of royalties, or who have received relocation houses, living
standards have almost certainly improved. It is recognition of the fact that the mine’s
presence has raised living standards for many people which leads the Tanzanian
government to refuse to return a proportion of income earned from mining taxes and
royalties directly to the mining regions. Instead the current policy is to distribute the
revenue to needier parts of the country.
2. Achieve universal primary education
In the section on the general impacts of the mining above, human development
indicators for the mining regions from the HBS were noted, including the distances to
educational facilities. The data for the Tanzania mainland and for Mara region are
referenced again below so that they can be compared with some of the data from the
2004 NMM SIA.
Table 3.19
Distances from Schools (km)
REGION
Tanzania Mainland
Mara
Primary school
1.8
1.8
Secondary school
12.6
6.9
Source: United Republic of Tanzania, Household Budget Survey, 2001/2, Appendix C, p.
170.
In the 2004 NMM SIA survey, 76.1% of residents in households in the five wards
surveyed reported that they resided within two kilometers of a primary school, which
places most of the mine impact area in the ballpark of the regional mean distance of
1.8 kilometers to a primary school. 90% of the NMM SIA survey respondents reported
being within five kilometers of a primary school, a greater distance than the regional
average, indicating that some of those in the further reaches of the impact area may be
under-represented for the provision of schools. As there are both primary and
secondary schools within meters of the mine, no-one who is very close to the mine is
far from educational facilities.
In regards to secondary schools, only 16.1% of the NMM SIA households were within
two kilometers of those institutions and 29.7% within five kilometers. Almost 40%
resided 10km or more from secondary schools, whereas for rural Tanzania, the
equivalent percentage was a higher 53.4%. In addition, as 17 of the 21 Tanzanian
regions had rural mean distances to secondary schools of greater than 10 kilometers,
and the national rural average was 15.4 kilometers, the NMM figures are not
remarkable, and perhaps quite favorable. 35
UDSM Consultancy Bureau and URS Sustainable Development, Social Baseline Study and
Impact Assessment of the North Mara Mine, prepared for PDT, issued July 2005, Q. 56 and United
35
Republic of Tanzania, Household Budget Survey, 2001/2, Appendix C, p. 170.
57
NMM has done a great deal of work in providing local community development
infrastructure, as described in Table 3.20. These projects and others, such as
renovations to local government offices, doctors’ and the circuit judge’s houses and
the police station, road and water system maintenance etc. had costs amounting to
$US483,056 in 2004 and the first half of 2005. 36 Data for community development
projects prior to PDI’s acquisition of NMM is not available, although it was known
that the rehabilitation of the German Road cost $US1.2 million. These are substantial
amounts of community infrastructure expenditure, on schools and other facilities.
Table 3.20
List of NMM community infrastructure projects completed by June 2004
VILLAGE
Genkuru
Nyamwaga/Genkuru
Nyamwaga
Kewanja
Kerende
Source: NMM SIA p. 132.
PROJECT
Renovation of clinic and provision of 5,000 liter waterharvesting tank.
Rehabilitation of road to school, including demolition of rock
outcrop
Renovation and completion of three partly-constructed
teachers’ houses
Construction of three new teachers’ houses
Construct a new classroom block and complete three others
(nine classrooms and three teachers’ offices in total)
Nyansangero Primary School – construction of three new
teachers’ houses and rehabilitation of another
Construction of two new classrooms and renovation of seven
others
Buirege Secondary School (new) – eight new classrooms, five
new teachers’ houses, administration block, toilets
Demolition of three classrooms and two houses at primary
school as unsafe
Completion of two classrooms and construction of four new
classrooms
Construction of three new teachers’ houses and renovation
of principal’s house
Nyabigena Primary School – completion of two classrooms
and extension of four others
Completion of teacher’s house
Construction of toilets
Completion of Ward Office
In addition to educational infrastructure, one of the major difficulties identified by
community members in focus groups discussions for the NMM SIA was the poor
standard of teaching available at local schools. Partly this was ascribed to the low
standard of teachers’ accommodation available, which was a deterrent to teachers to
come to the area. Also important was the lack of opportunity for upgrading skills and
obtaining professional development support for teachers in the remote areas which
form part of the NMM social impact area. In recognition of these deficiencies, NMM
has done much work on upgrading teachers’ residences at local schools (as seen in
Table 3.18 above) and has allocated in excess of $US50,000 per annum for the next four
years to developing and implementing a program of professional teachers capacity
building, in close collaboration with the district vocational training college.
36 NMM Sustainability Department, Placer Dome – North Mara Mine Information Booklet ,
August 2005.
58
Discussions are also being held with educational NGOs to try to design the best
possible program for teacher development. This program has the potential to give an
enormous boost to the educational standards of the communities in the NMM area,
and to assist in achieving the MDG educational goal. 37
Scholarships – the five villages with agreements with NMM are due to receive
substantial royalties from the mine, and are already receiving advances against them.
NMM has advanced monies against these future royalties for the villages to use for
educational scholarships, with 256 students currently receiving these ‘village royalties
scholarships’ as below.
Kewanja – 21 students
Nyangoto – 120 scholarships
Nyamwaga – 57 scholarships
Kerende – 44 Scholarships
Genkuru – 14 scholarships.
In addition, NMM is directly sponsoring 26 students.
Training
Training local people in transferable skills – knowledge and technology transfer – is
one of the most powerful ways in which a modern mining operation can benefit its
host community. NMM has not only embarked upon a very comprehensive minewide training program, it has also established clear goals for localizing positions, i.e.
for replacing expatriate staff with Tanzanian staff.
Table 3.21
Total training numbers and hours of training, NMM 2002-2005
2002
TOTAL NUMBER OF
TRAINED ATTENDEES
TOTAL HOURS OF
TRAINING CONDUCTED
2003
499
17
490
2004
1270
7260
2005
1459
22973
Source: NMM Training department
It is not possible to roll out such an ambitious training and upgrading program
uniformly across all mine departments. NMM has therefore started with a focus on
the mining department by employing 40 previously unskilled local people, including
five women, and commenced training them to be operators of heavy equipment. This
is done through classroom training, but also through practical on-the-job training,
working alongside skilled and experienced operators until such time as each
employee is able to pass stringent tests to qualify as an operator. NMM commenced
this training program after PDT converted to running its own mining department in
September 2004, rather than subcontracting the mining work. By all accounts, the
mining training program is a success.
37 NMM Sustainability Department, Placer Dome – North Mara Mine Information Booklet ,
August 2005.
59
25239
60
Table 3.22
NMM Mining Department Training Program, 2004-2005
Subject
2004
Duration hrs
Pit Induction
4
St.John's first
aid
Isolation &
Tagout
Dump truck
move & test
Basic
overhead
crane
Forklift
Operation
Spotter
20
20
Pit Permit
4
Compactor
10
777 dump
truck
20
2005
PERSONS
HOURS
PERSONS
HOURS
150
600
140
560
8
160
128
2560
16
160
14
280
10
200
20
10
20
20
172
130
520
80
565
TOTAL
150
600
446
5337
Source: NMM Training department. NB Figures only until 11 August 2005.
Note the greatly increased numbers of persons trained, hours of training, and very
importantly, the range of training courses being provided. More courses will be
introduced as the operators gain in skills and progress through the grades and range
of equipment.
3. Promote gender equality and empower women
NMM has 48 full-time female Tanzanian staff, which amounts to about 7% (6.8%) of
employees. This number shows a steady increase in Tanzanian women employees
from 15 in 2002 (5%), 21 in 2003 (6.7%) and 29 in 2004 (6.3%). These women hold
positions ranging from those of the mine operator trainees mentioned in the section
on training, through boilermaker, maintenance planner and environmental scientist to
the more traditional jobs in administration and catering. The salaries paid range from
$US180-200 per month for junior security staff, cooks and gardeners (lower-skilled
occupations) to $US400-500 per month for the technicians and mining trainees to
$US1500-1600 per month for senior administrators.
The most recent Tanzanian study of the national workforce, the Integrated Labor
Force Survey of 2000/01 noted a mean monthly salary range for Tanzanian women
employees of approximately $US10-15 per month for elementary occupations up to
$US107 per month for legislators, administrators and managers. The top of the
equivalent male salary range was $US148 per month. Even taking inflation into
account, it is clear that the NMM pays its staff well and this is economic
empowerment for female employees. 38 If NMM continues to actively train and
engage women in a wide range of occupations, it will be adding to the pool of
empowered women in Tanzanian society who can set examples for others. 39
38
39
NBS<,Integrated Labour Force Survey 2000/01, Dar es Salaam 2002, p. 111.
NMM Accounts department, August 2005.
61
For the broader community, NMM has engaged a full time social development
coordinator, as part of the community affairs team, to focus specifically on
encouraging the development of marginalized groups such as women, young people,
the disabled etc. The position has been filled by an energetic and confident young
woman who is actively engaging with gender issues in the communities surrounding
the Mine.
Further, both the social development coordinator and the business development
coordinator have recently undertaken additional professional training at a university
in Kenya in the latest techniques for involving local communities in planning and
managing their own development, with support from NMM, the government and
others. These techniques known collectively as PRA (Participatory Rapid Appraisal)
are widely recognized for being effective in promoting community participation in
development programs and in building local management capacities. NMM is
planning to host a PRA course in Tarime district so that local government and
community members can also learn the techniques and build their management
capacities.
NMM’s recognition that women’s development and access to small business
opportunities, as evidenced by its appointment of full-time professional staff to each
of these positions, is a clear indication of the mine’s commitment to advancing gender
equality and promoting women’s role in community development. The benefits of the
work of these people will take some time to bear fruit, but it is a very positive step.
4. Reduce child mortality and 5. Improve maternal health
As noted in the section above on the general contribution of the mining sector, mining
companies do not specifically target child mortality and maternal health. However,
they can assist in improving local health conditions by contributing to local health
infrastructure and also improving water supplies, an important component of health.
Table 3.23 compares the data derived from the NMM SIA with the HBS indicators for
access to health-enhancing facilities such as power, water, sanitation and also
household size.
Table 3.23
Data extracted from Table 3.5
Household size and access to facilities for
Tanzanian mining regions, 2000/01.
REGION
Mean HH size
Electricity %
Toilet %
Tanzania
Mainland
Highest region
Lowest region
Mara
NMM SIA
4.9
39
93
Protected
water %
55
6.7 (Mwanza)
3.8 (Mtwara)
5.9
6.73
59 (DSM)
2 (Kagera)
10
negligible
99 (Ruvuma)
81 (Tanga)
86
70.5
94 (DSM)
19 (Lindi)
40
10.8
Clearly, the communities in the NMM area are not well-catered for when compared
with regional and national averages.
62
Table 3.24
NMM SIA sources of water for community members, 2004
SOURCE
%
Piped Water
3.9
Covered/Protected Well
5.4
Uncovered/Unprotected well
47.4
Protected spring
1.5
Unprotected spring
5.1
River/rivulet
35.5
Water dam
0.1
Rain water
0.4
Water sellers
03
Unprotected well and river rivulet
0.3
Unprotected springs and river rivulet
0.1
TOTAL
100.0
Source: SIA Survey 2004 output, Q.51.
The sample shows that only 10.8% of the respondents in the five wards (and
98.1% of the sample responded to this question) had access to safe protected
water which is a very low number indeed.
Table 3.25
NMM SIA distances to water sources for community members, 2004
Distance to water source
%
Less than 0.5 km
24.2
0.5 km
19.3
0.5 km to 1.0 km.
17.7
1.0 km. To 2.0 km.
15.2
Over 2.0 km
22.8
6.0 km
0.2
7.0 km
0.6
Total
100.0
Source: SIA Survey 2004 Output, Q.52.
About 60% of residents obtained water within one kilometer of their residence
(compared to 49% national rural average); 76% had it within two kilometers
(compared to 70% national rural average, see above) of their residences and only 23%
obtained their water from sources farther than two kilometers. So, although the water
sources were not very good quality in general, they were no further away than for
most rural Tanzanians, in fact a bit closer for more people. Work to improve the
management and maintenance of the available water sources could bring great
benefits to the NMM area communities. In 2005, NMM spent about $US3000 to
upgrade the Nyamwaga water system, which had fallen into disrepair. The system
had been constructed some years earlier by an aid organization but, as is common
with donated projects, no-one had taken adequate responsibility for maintaining the
system. In recognition of this, NMM’s social development coordinator is working with
63
the District Water Engineer and local communities to try to revive and enhance the
activities of village water committees. Community participation and ‘ownership’ of
future water projects should help ensure that future projects will be maintained better.
In 2005 , NMM spent US$200,000 to upgrade the Nyamongo medical clinic to a
District Hospital level, to be run by the Lutheran church, with support from the
Tanzanian Government. This is a substantial benefit to the communities in the vicinity
of the NMM, as the next nearest district hospital is in Tarime, 35 kilometers away.
This initiative, taken in close co-operation with both government and NGO partners,
is a significant contribution to helping reach the MDG of improved maternal health
and reduced infant mortality.
6. Combat HIV/AIDS, malaria and other diseases
As shown in Table 3.26, the measured prevalence of HIV/AIDS in the Mara region in
2000 varied significantly between the districts, with Tarime District, the gold mining
area, coming out worst at 11.2%. The 8.2% regional average is also higher than that
recorded in the Tanzania Mainland HIV Indicator Survey, 2003-04, of 3.5%. The later
data should be more reliable, as it was a far more comprehensive, household-based
survey, rather than only surveying blood donors.
Table 3.26
Prevalence of HIV/AIDS among blood donors by sex and by district, Mara
region, 2000
Males
District
Females
Total
Total
No.
%
Total
No.
%
Total
No.
%
Donors
Positive
Positive
Donors
Positive
Positive
Donors
Positive
Positive
2,649
153
5.8
1,087
102
9.4
3,736
255
6.8
574
38
6.6
140
19
13.6
714
57
8.0
3,223
191
5.9
1,227
121
9.9
4,450
312
7.0
Tarime
1,359
134
9.9
1,046
133
12.7
2,405
267
11.1
Bunda
1,566
151
9.6
890
90
10.1
2,456
241
9.8
651
21
3.2
551
18
3.3
1,202
39
3.2
6,799
497
7.3
3,724
362
9.7
10,513
859
8.2
Musoma
Urban
Musoma
Rural
SubTotal
Musoma
Serengeti
Total
Region
Source: URT, Mara Region Socio-Economic Profile, Table IV.12, p. 127.
Although the figures in this earlier survey, shown in Table 3.26, may be inflated due
to being based on a small sample of blood donors, they are useful for showing
differences within the Mara region. The district comparisons in the 2000 blood donor
survey show that Tarime district had the worst problem with HIV/AIDS. NMM has
acknowledged the need to do something about this by committing to support AMREF
programs in the district from 2005. The mine has committed $US60,000 in 2005,
$100,000 for 2006, and $75,000 for each of 2007 and 2008. AMREF’s programs have had
64
success in the other mining districts of Kahama and Geita, so this will be a positive
contribution by NMM to meeting this MDG.
65
7. Ensure environmental sustainability
NMM has undertaken environmental impacts assessment and developed
environmental management plans since before it started operations, as required by
Tanzanian law. These studies and plans were:
•
•
•
Environmental Management Plan, NSR Environmental Consultants, August 2000
(field survey undertaken in November 1998). Referred to as EMP. 40
Supplementary Environmental Management Plan (Nyabirama), Earth Systems
Environmental Research & Consulting, August 2002. Referred to as Nyabirama
SEMP. 41
Supplementary Environmental Management Plan (Gokona-Nyabigena), Earth
Systems, August 2003. Referred to as Nyabigena SEMP. 42
The latter two reports build on information contained in the earlier volumes, and on
comments received from Tanzanian authorities, particularly the National
Environmental Management Council (NEMC), including recommendations for
further studies. The plans cover detailed systems and methods for protecting water
sources, minimizing erosion and dust and noise nuisance, rehabilitating land through
reforestation and a host of other environmental management measures.
In mid-2005, NMM submitted its first annual environmental report to the Tanzanian
authorities, demonstrating its commitment to co-operatively and responsibly
managing its environmental impacts. The mine also initiated the establishment of an
external advisory committee, with the pilot audit visit being undertaken by Professors
from the University of Dar es Salaam and Egerton University in Kenya and WWF.
The external advisory team is expected to be expanded and to take on a fuller role by
the end of 2005, and will provide independent external oversight of NMM’s
environmental and social sustainability performance.
In 2004, NMM instituted a program of mine tours for community members, to
transparently demonstrate to community members the processes being used in the
Mine and the measures being taken to protect the community and environment.
Between September 2004 and July 2005, 411 members of the Tanzanian community
had taken one of these tours, which last the best part of a day and include
opportunities for participants to ask questions of mine staff about any issues which
concern them. The mine’s environmental staff also visit local schools to provide
environmental management education and have started a seedling growing program
with some local schools. On a more prominent scale, the mine is also participating in a
WWF program to promote sustainable management and conservation initiatives in
the Mara River Basin. All of these programs are contributing to enabling
environmental sustainability in the NMM area.
40
Environmental Management Plan, NSR Environmental Consultants, August 2000.
Supplementary Environmental Management Plan (Nyabirama), Earth Systems Environmental
Research & Consulting, August 2002.
41
Supplementary Environmental Management Plan (Gokona-Nyabigena), Earth Systems,
August 2003.
42
66
3.7
STAKEHOLDER PERCEPTIONS OF THE IMPACT OF NMM
The field work underlying this report included a survey interview with 13
businesspeople in Nyangoto village, which lies closest to the NMM. Thirteen
respondents was determined to be reasonable coverage (10%) of the approximately
130 small businesses identified in Nyangoto in an informal census. 43 Eight of the
businesspeople were men and five women. A survey was also conducted with five
officers of the District government in Tarime. The answers for each of these three
groups are presented in separate columns in Figures 3.5 to Figures 3.11 below so as to
draw attention to the differences in perceptions of, from left to right, district
government, business women and businessmen. Clearly this is a small sample,
particularly of government officials (although five is a large proportion of the District
administration). Nonetheless, it is illustrative of the views of the NMM of a group of
the commercial and administrative leaders of the neighboring community.
This survey was conducted on a five-point scale, with an answer of C indicating that
the mine had no impact on the subject of each question. An answer of A indicates a
strong negative impact and an answer of E a strong positive impact. Impacts on the
‘economy’ were explained as commercial or business or income impacts. Impacts on
the ‘community’ referred to community development issues, such as health, education
and general community well-being. The surveys were conducted in Kiswahili with the
exception of the district government representatives who responded in English.
Q1. Does NMM contribute to the local economy?
Figure 3.5
Responses to Question 1.
Quest ion 1
5
4
District government
3
Businesswomen
2
Businessmen
1
0
A
B
C
D
E
RESPONSES
43 This did not include street sellers of fruit, vegetables and cooked food, but only businesses
with some form of permanent premises, which varied from quite salubrious hostelries to bicycle
repair workshops located on the ground outside an office.
67
Q2. Does NMM contribute to the local community?
Figure 3.6
Responses to Question 2
Question 2
4
3
District government
2
Businesswomen
1
0
Businessmen
A
B
C
D
E
RESPONSES
Q3. Will NMM contribute in future to the local economy?
Figure 3.7
Responses to Question 3
Question 3
6
4
Di str i ct gover nment
2
0
Busi nesswomen
A
B
C
D
E
Busi nessmen
R E SP ON SE S
Q4. Will NMM contribute in future to the local community?
Responses to Question 4
Question 4
Number of responses
Figure 3.8
8
7
6
5
4
3
2
1
0
District government
Businesswomen
Businessmen
A
B
C
D
RESPONSES
68
E
Q5. Is it a good thing to have a big mine in the area?
Figure 3.9
Responses to Question 5
Question 5
8
Number of responses
7
6
5
District government
4
Businesswomen
3
Businessmen
2
1
0
A
B
C
D
E
RESPONSES
Q6. Has my business changed since NMM came? (business respondents only)
Figure 3.10
Responses to Question 6
Question 6
6
4
Businesswomen
2
Businessmen
0
A
B
C
D
RE SP ONSE S
69
E
Q7. Have my responsibilities changed since NMM came? (government respondents only)
Figure 3.11
Responses to Question 7
Question 7
6
4
Distr ict gover nment
2
0
A
B
C
D
E
RE SP ONSE S
Summary
Clearly the perceptions of the various stakeholders in Nyangoto are mixed. It is
encouraging that the responses to Q5 about the overall benefits of the mine are
broadly positive. However, even here the views of the district officials are less positive
than those of the business community, primarily because government people have
mixed feelings – the mine has brought development but also created more work for
them in providing staff for schools and clinics etc. It is a puzzle to reconcile these
responses with those to Q 6 where most of the business community are indicating that
their own businesses have fared quite badly since the mine was established. The
explanation offered in discussions with businesspeople was that business was best in
the days when the gold rush from ASM was in full swing, but had declined of late,
especially since employees began having their salaries paid into distant bank
accounts.
However, the expectations of the mine’s local contribution are very evident in the
generally positive responses to Q3 and Q4 about the future economy and community
benefits that are anticipated. This indicates some confidence in the mine’s impact even
though the impacts experienced thus far have been disappointing to some of the
villagers. The wide variability in the responses to Qs 1 and 2 suggests quite strongly
that the benefits so far experienced have been far from universally enjoyed even in
this quite narrow community.
70
4
REASONS BEHIND SUCCESS FACTORS, CHALLENGES AND
CONSTRAINTS
4.1
THE STANDARD EXPLANATIONS – ECONOMIC POLICIES AND GOVERNANCE
Introduction
The assessment from Section 3 was that the various economic reforms from the 1990s
had had broadly positive effects on the key macroeconomic indicators and were also
critical in the greatly improved growth performance that Tanzania has achieved since
1996. The greatly expanded presence of large-scale commercial mining in this same
period had been a significant part of this overall process of recovery. The detailed
examination of mining areas, and the activities of NMM in particular, indicate the
many ways in which the benefits of a mining presence can be, and have been,
manifested at local level.
Section 4 turns from the analysis of such outcomes to the consideration of underlying
causes. First, an examination of the proximate causes only (improved economic
policies and governance) as conventionally measured without probing into how these
improvements came about. Second, an exploration of some further issues – most of
which relate to various areas of ‘governance’ as defined in the Toolkit – that may
have contributed to the generally positive outcomes but may also have reduced the
magnitudes of these benefits below full potential.
4.2
MACROECONOMIC
POLICIES AT THE NATIONAL LEVEL
The next few paragraphs examine specific aspects of macroeconomic policy.
The Exchange Rate
Figure 4.1 shows the record on nominal exchange rate movements and inflation in the
period since 1965 – it is presented on a log scale. The figure shows quite clearly that
Tanzania through the 1970s and 1980s followed a familiar approach with a nominal
(official) exchange rate that was adjusted little, if at all, in spite of the fact that inflation
was cumulatively raising the domestic price base. Specifically, the official rate moved
only from Tsh 7.14 per $ in 1965 to Tsh 8.19 by 1980 in spite of the fact that prices rose
in that same period by over 600%. The consequences in terms of illegal foreign
exchange activity and smuggling are familiar and were inevitable in the Tanzanian
case as elsewhere.
From 1980 onwards the authorities showed a much greater willingness to allow the
nominal exchange rate to adjust. But for several more years, until around 1998, the
exchange rate movements were insufficient to offset the still high rates of inflation.
Specifically in the period from 1980 to 1986, the exchange rate moved from 8.19 to Tsh
32.7 per dollar (a 300% change) but prices rose by 400%. Hence the tradable sectors of
activity, including mining, continued to face falling profit margins and the strong
incentives for smuggling and the use of parallel foreign exchange markets persisted.
This period included the boom years for the ASM sector of mining and would help to
explain why the economy-wide effects of that boom were quite limited.
71
The Exchange Rate and the Price Level, 1965 to 2004
1000
Figure 4: Exchange Rates and Inflation, 1965 to 2004.
100
10
Nominal ER Index 2000 = 100
Inflation (CPI) Index 2000 =100
1
19
65
Figure 4.1
0.1
Source: IMF, International Financial Statistics, Washington DC, annual
Only since around 1987 have the movements of the official exchange rate broadly kept
pace with movements of the price level. So although pressures for the real exchange
rate to appreciate have not been wholly absent 44, the period since then has broadly
avoided the major misalignments that characterize the Dutch Disease component of
the ‘resource curse’ propositions. This conclusion is supported too by Tanzania’s
positive growth rate of non-mineral GDP during this period (see the Phase 1 report)
including the growth of manufactured output: 61% cumulatively from 1996 to 2002
according to the IMF data sources. 45
Budget Revenues and Deficits
The budgetary situation that was out of control during the 1970s and 1980s, began to
improve significantly during the 1990s. This is one very important part of the
improved governance in Tanzania since 1996 and is discussed more fully below 46.
44 Tanzania has also received generous aid in that period and this too has been a source of
pressure for exchange rate appreciation. There is a growing literature on the way in which aid
flows to an economy can produce the same negative impact associated with large windfall
revenues from hydrocarbons and minerals. See for example, Gunning and Collier (1999).
45
The latest IMF data shows these numbers only through 2002.
46
The restoration of sound public finances was one of the five key themes of the Mkapa
Presidency following his re-election in 2000. As of 2004, public debt accounted for 5% of GDP
which is a very respectable number in terms of the general macro economic picture. In 2004,
external debt was $7.3 billion. In 2004, government revenue was $1.985 billion and expenditure
$2.074 billion including expenditure on capital projects.
72
The narrowly statistical implications of this improvement are summarized in Figure
4.2 which shows both the changing share of government revenue in total GDP and
also the evolution of the fiscal deficit.
Government Revenue and Deficits, 1968 to 2002
30%
Figure 5: Government Revenues and Deficits 1968 to 2002
25%
20%
15%
10%
5%
0%
19
68
Figure 4.2
-5%
-10%
Revenue (excl. donor grants) % of GDP
Revenue (incl. donor grants) % of GDP
Deficit (Inc. donor grants) % of GDP
-15%
Source: IMF, International Financial Statistics, Washington DC, annual
Figure 4.2 clearly shows Tanzania’s success in moving towards a more nearly
balanced budget after the large inflationary deficits of the 1980s. Indeed from 1995, the
domestic financing requirement fell to almost zero as the fiscal adjustment was
combined with a more secure level of donor program assistance of around 2.5% of
GDP (Treichel, 2005). This has been an important aspect of the greater
macroeconomic stability seen in the period since the mid-1990s.
At the same time, Tanzania has not shown the same spectacular success in building its
revenue base as we see in the Ghanaian experience in particular (and also in Peru).
One important reason for this difference is that Tanzania never saw the fundamental
collapse of the state – and its power to raise revenues – that featured in Ghana in the
1970s when revenues fell to less than 5% of GDP. Nonetheless, Tanzania’s record on
revenue mobilization is lack-luster to say the least – the revenue share falls far short of
that now achieved in Ghana - and various other components of fiscal management
have been called for to achieve the overall improvement. Among the most important
of these has been the strong support that Tanzania has been able to attract from the
aid-donor community on a very favorable grant basis. The economy still remains
highly dependent on aid receipts (CIA, 2005) and this is clearly seen in Figure 4.2
where the gap between the two revenue plots is as much as 4% of GDP in some of the
post-reform years.
The Revenue Contribution of Mining
In spite of this mixed record, the contribution of the mining sector to the overall fiscal
position has become significant. The record from 1997 to 2004 is summarized in Table
73
4.1 below. It shows that although the overall tax collection record has been relatively
weak, the contribution of mining to that record has risen sharply.
Table 4.1
Year
Summary of Mining Sector Contributions to IRS Collections, 1997-2004[
PAYE
NSSF
Import
($ thou)
($ thou)
Duty ($ thou)
Royalties
Income
Leases
($ thou) Taxes ($ thou) ($ thou )
Other
Total
Total Domestic
Mining %
($ thou)
($ thou)
Revenue (T sh bill)
of Total
1997
730
275
166
707
-
52
177
2,107
619
0.00%
1998
885
274
200
475
-
71
174
2,078
689
0.21%
1999
1,556
520
201
1,247
-
150
856
4,529
778
0.47%
2000
5,545
1,103
381
4,652
-
307
1,070
13,057
930
1.63%
2001
9,189
1,027
251
7,052
-
314
1,042
18,875
1,043
2.05%
2002
12,485
2,083
1,496
10,917
-
337
1,533
28,851
1,218
2.73%
2003
13,774
3,465
971
16,522
1,112
190
2,994
39,028
1,393
3.30%
2004
9,642
4,296
2,385
21,452
2,204
457
3,102
43,538
1,572
3.22%
Total
53,805
13,044
6,050
63,024
3,317
1,877
10,946
152,063
8,242
Source, Ministry of Finance data provided to team
The mineral revenue numbers now account for over 3% of total domestic revenues as
against almost nothing in 1997. The royalty element dominates and accounts for
almost half the total. Income taxes remain modest partly because of the initial
generous depreciation allowances accorded to the companies.
Inflation
As was noted earlier, the budget and other reforms, especially since 1996, have
contributed to a significant reduction in the rate of inflation. This reduction can be
linked to the curbing of excessively high rates of monetary expansion that were earlier
caused by the imprudent credit policies of the authorities and the management
practices of large state-owned banks and notably the National Bank of Commerce.
These reforms have, in turn, helped to establish a far better environment for private
investment activity including those investments that can complement the large
investments in new mines. The record on inflation is set out in Figure 4.3 below.
It can be seen that in the last three years, inflation has averaged only 5% and the target
for the PRSP period through 2007 is now set, probably realistically, at only 4%.
Furthermore, financial sector reform, which is essential to promote private sector
involvement, has been effective. For example, there has been a narrowing of the
interest spread between lending and deposit rates from 18.4% in 1997 to 11.4% in 2003.
This is a clear sign of a more efficient financial market.
74
Consumer Price Inflation, 1966-2004
40
Figure 7: CPI Inflation 1966-2004 (% per annum)
35
30
25
20
15
10
5
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
19
78
19
76
19
74
19
72
19
70
19
68
0
19
66
Figure 4.3
Source: IMF International Financial Statistics
External Debt Management
Tanzania is a highly indebted poor country (HIPC) which means that prior to recent
debt forgiveness policies, its debt was considered to be unsustainable in present value
terms. However, the sound macroeconomic policies as sustained through the late
1990s enabled the country to reach the ‘completion point’ under the HIPC initiative by
the very early date of November 2001. The debt relief that was subsequently
forthcoming has enabled the authorities to bring the debt to exports ratio to well
under the critical value for ‘sustainability’ of 150%. It is now projected to remain there
during the PRSP period through 2007 and can do so even if there is some falling away
of the currently high levels of concessional donor financing. This gives the authorities
a cushion for its public expenditure policies that was formerly lacking.
Main conclusions - economic policy reforms have helped the private sector
The macroeconomic and sector reforms that the Tanzanian authorities undertook in
the mid-1990s were important factors behind both the resurgence of mining and the
improvement in economic performance more generally.
The economic history of Tanzania follows what has become a classic pattern; certainly
in post-colonial Africa. In the early years there was a strong socialist orientation
leading to excessive state involvement in the economy. The formal/legal private
sector was more or less destroyed as a result of increasing restrictions and regulations
plus very unattractive investment conditions linked into control of international trade
and currency transactions. As a result, the economy stagnated (see Figure 2.1) with
low rates of growth, high inflation, unsustainable debt and rising poverty. Eventually,
new thinking led to government policies aimed at reducing the role of the state and
encouraging private sector activity both in terms of domestic investment and FDI.
However, the process of recovery is invariably difficult and halting and not least
because such macroeconomic measures do nothing initially to reduce poverty and
75
indeed, in the short term, may make it worse (as in Tanzania in the early 1990s).
Eventually, however, the reforms bear fruit. A new regulatory framework encourages
private sector investment and the formal economy grows. Inflation is controlled, debt
is reduced and fiscal prudence provides for more sustainable public expenditure
programs. However, the problems of poverty are slower to adjust and remain a
serious challenge.
In the case of Tanzania, it can be said fairly that mining played little or no role in
defining the disastrous experiences of the 1970s and 1980s. By contrast, the postreform contributions of mining to growth, government revenue and exports have all
been positive. Mining has certainly been a central part of this private sector recovery
and accounts for $1.3 billion of Tanzania’s total FDI of around $1.6 billion in the five
years since 2000. It is too early to tell whether the expanding mining sector could
eventually cause macroeconomic problems of the sort associated with the ‘resource
curse’. However, there has not been much evidence of this negative macroeconomic
impact in the record through 2004. This record has included a reasonable sustained
real exchange rate; a low rate of general inflation; a relatively strong growth rate of
manufactures and other non-mineral outputs. There is no particular reason to believe
that a negative outcome will follow.
At the same time, the mining sector’s contribution to the wider economy via forward
and backward linkages has been fairly limited. This is probably best explained by the
short lead times since the rapid mining growth began and the very embryonic initial
state of Tanzania’s supply capacity, certainly in the regions affected by mining. As to
poverty, this remains a serious challenge in Tanzania and it is far too early to tell
whether the recent expansion in mining will in fact make a contribution to its
reduction.
4.3
GOVERNANCE, LEGAL AND INSTITUTIONAL DEVELOPMENT
It is an important component of the ‘resources curse’ argument that the quality of a
country’s governance may be adversely impacted by the scramble for the rents
associated with large mineral investments. Conversely, it can be argued that sound
governance may be one of the key success factors that can ensure significant and
positive social and economic impacts from such investments. This section examines
the evidence on this point for Tanzania in the period from 1996 through 2004.
The starting point is the most recent World Bank assessment of the qualities of
Tanzania’s governance as based on the Bank’s six standard indicators as listed in
Table 4.2 and Figure 4.4 below. These indicators are compiled as the composite of a
number of different surveys and polls and are scored on the scale running from minus
2.5 (worse) to plus 2.5 (best). The scores are shown in the fourth column of Table 4.2.
76
Table 4.2
World Bank Governance Indicators, 1996 to 2004
Governance Indicators
Tanzania
Year Percentile Rank Score
Number of
(0-100)
(-2.5 to + 2.5) surveys/
polls
Voice and Accountability
2004 38.3
-0.35
11
2002 37.9
-0.41
8
2000 45.5
-0.15
6
1998 36.1
-0.40
5
1996 25.1
-0.77
4
2004 35.0
-0.38
9
2002 35.1
-0.25
7
2000 40.0
-0.33
6
1998 62.4
+0.42
6
1996 46.3
+0.02
4
2004 40.4
-0.37
13
2002 34.8
-0.50
9
2000 44.1
-0.28
7
1998 38.8
-0.39
7
1996 8.4
-1.18
4
2004 29.1
-0.55
11
2002 34.2
-0.50
8
2000 50.8
+0.07
6
1998 51.6
+0.21
6
1996 27.1
-0.52
5
2004 39.6
-0.49
15
2002 38.3
-0.46
12
2000 50.8
-0.28
10
1998 48.6
-0.28
9
1996 25.3
-0.70
6
2004 36.0
-0.57
12
2002 15.3
-0.97
10
2000 12.9
-0.97
8
1998 8.7
-0.95
7
1996 9.3
-1.03
4
Political Stability
Government Effectiveness
Regulatory Quality
Rule of Law
Control of Corruption
Source: World Bank. Details are on Figure 4.4
In spite of some impressive improvements in some areas in the eight years since 1996,
governance in Tanzania remains generally quite weak with the 2004 scores on all six
indicators being in the negative region of the scale.
However, when Tanzania is compared with Sub- Saharan Africa generally, the
position looks better with the country appearing consistently in higher (but not high)
percentiles of the overall distribution of countries compared to the rest of the region.
That comparison is in Figure 4.4. It clearly does not tell us that Tanzania is well
governed in some absolute sense (scores of close to plus 2.5 would be needed for that
77
conclusion). It does suggest, however, that the country’s standard of governance now
compares very favorably with those seen in Sub-Saharan Africa more generally.
Figure 4.4
Governance: Tanzania and Sub-Saharan Africa
The most striking evidence from this data relates, however, to the changes over time
as summarized in Figure 4.5. This shows very substantial improvements in Tanzania’s
relative performance in the period from 1996 to 2004. This is especially evident in
those indicators that relate to:
•
•
•
Voice and accountability;
Government effectiveness; and
Control of corruption.
78
Figure 4.5
Governance – Tanzania’s Relative Position over Time
Therefore, in the period when Tanzania’s mining industry was taking off, the quality
of governance in these dimensions above all was improving both absolutely (reference
the actual scores) and relative to the situation in comparator countries. There is no
evidence in this data that the boom in mining has so far been associated with any
deterioration in the quality of Tanzania’s governance as some variants of the ‘resource
curse’ hypothesis would have predicted. But it is also worth repeating that the
absolute standard of governance in Tanzania still leaves much room for further
improvement: they are better but not yet “good”.
79
4.4
OVERVIEW
Because the governance indicators in Tanzania were so relatively poor in the mid1990s, it is a reasonable presumption that poor governance contributed to the serious
economic difficulties that Tanzania faced in that earlier period. The economic reform
and recovery since 1996 have been associated with some important improvements in
governance. It cannot be established whether these arose as a cause or as an effect of the
economic recovery: most likely there were synergistic effects running in both
directions. What is absolutely clear is that a period of rapid growth in the mining
sector has not been associated with any obvious deterioration in the standards of the
country’s governance. Even dimensions of governance such as corruption that are
often linked to mining’s potentially harmful effects have improved during this eight
year period.
However, this is not to say that the evolution to “fully reformed” governance has been
achieved in Tanzania - clearly that is not the case. It can even be hypothesized that
some of the remaining difficulties and controversies surrounding mining are
associated in some way or another with the ongoing weaknesses in some of the
dimensions where reform is incomplete. This possibility is reviewed further in Section
5.
80
5
UNDERSTANDING THE ROUTES TO ENHANCED IMPACTS
5.1
INTRODUCTION
The previous sections of this report have provided analysis and a description of the
way in which large-scale commercial mining in Tanzania has contributed to the
economic and social development of the economy. It is acknowledged that the major
recovery of the large-scale commercial sector is still only a few years old and that
some of its possible effects on economic and social development have yet to emerge. It
is nonetheless useful to use the remaining sections of this report to elaborate on some
of the key issues that still need to be addressed if the sector is to play a full role in
contributing to Tanzania’s long-term development.
The starting point for this further discussion is the fact that mining’s impact on socioeconomic development has several facets, including:
A. The main economic impacts:
•
•
The contribution to GDP growth, employment creation and to foreign
exchange earning; and
The contribution to the government’s revenues.
B. Effects that depend on Public Expenditure Programs and Policies:
•
•
The ability of Government to translate its revenues through its budgetary
process to meet its policy objectives and deliver services to its people. This
will include the quality of the accountability at both national and local levels
of government; and
The development at the local community level, which in turn is dependent on
the effectiveness of the sub-national government institutions.
C. Effects from the other linkages within the economic and social system:
•
•
•
•
Social cohesion between different segments of society;
The depth and quality of mining’s linkages to the private sector;
The degree of synergy, or lack of it, between different sub-sectors of mining
and in particular between the large-scale commercial mining activity and the
artisanal miners 47; and
The ability to effectively manage the environment degradation impacts,
especially of large surface mining operation.
The “A” topics have been quite fully discussed in earlier sections of this case study
and so this current section focuses mainly on the “B” and “C” issues. These relate in
large measure to the set of governance problems that were classified in the Toolkit
developed as part of the Phase 1 output of this initiative. The discussion is most easily
motivated by referring to a number of the problems that have emerged in the eight
years since the resurgence of large-scale mining began in the mid-1990s.
47 In the Tanzanian context where the new investments in large scale commercial mining took
place after an earlier period in which the artisanal sub-sector had been providing significant
livelihoods for large numbers of people, the interface between this sub-sector and large-scale
mining is a particularly important but difficult issue.
81
5.2
PUBLIC BUDGET MANAGEMENT AT NATIONAL LEVEL
The revenue that the Government collects from the mining sector is already large but
not yet a dominant source of national revenue. Because of Tanzania’s revenue
allocation system, mineral revenues play no direct role in local government revenue
streams. However, the national mineral revenues seem certain to rise significantly in
future years because of higher output levels and also because of a higher gold price.
The manner in which those national revenues are utilized certainly plays an important
part in influencing the overall impact of the mining industry both nationally and
locally.
The Tanzanian fiscal system involves all mining sector revenues being collected and
deposited in the central government’s Consolidated Fund. From there they are
allocated through the national budget (which includes responsibilities to the local
communities) and through statutory funds. In the absence of any special ‘mineral
funds’ in Tanzania, the quality of management of these ‘general’ funds and their
effective allocation to beneficiaries plays an absolutely central part in determining the
socio-economic outcomes of mining and other tax-paying activities. Since 1996 the
improvements in governance summarized in Table 4.2 and Figure 4.4 above - that
include ‘government effectiveness’ as one area – have had public finance management
as one very important element of undoubted improvement.
Indeed, the improvements in public finance management have been touted by the
World Bank and the Fund as the most successful reform programs in Africa.
Tanzania’s budget formulation process is now explicitly policy driven. In particular,
Tanzania’s National Strategy for Growth and Reduction of Poverty (NSGRP)
articulates a national policy framework for development and defines a system for
monitoring measurable indicators that are in conformity with, and expand upon, the
Millennium Development Goals. This is also the policy framework for the preparation
of the national budget. The Strategic Budget Allocation System, based upon poverty
cluster interventions by the different sectors is well suited to translate the policy
framework into implemented actions.
Box 5.1 fills out further detail of recent reforms and the present system of national
public finance at the national level.
82
Box 5.1
Key Features of National Budget Management
The annual budget is based upon a comprehensive and consistent quantitative
framework. A medium term expenditure framework (MTEF) presentation is adopted.
This is backed up by financial management and expenditure controls. There is emphasis
on regular financial reporting, including the monthly gazetting of expenditure versus
budget estimates. The procurement law is designed to promote transparency,
accountability, open competition, and provides for the redress of complaints to
procurement malpractice and anomaly. Under the Constitution, the mandate of the
Controller and Auditor General of Tanzania is very comprehensive. The independence
of the Auditor General is enshrined in the Constitution, and such independence is
further guaranteed by the Public Finance Act, 2001. Direct parliamentary oversight over
expenditure performance is also well provided for.
As regards budget execution, including accounting and reporting, this still involves
problems in areas such as procurement, internal and external audit. Independent
reviews suggest that procurement practice lacks transparency and still shows evidence
of corruption. However, the successful implementation of IFMIS, with the ongoing
rollout to the districts, has brought improvements and, above all has helped to address
the earlier acute problem of arrears of payments.
Fourteen bilateral donors have agreed with the Government of Tanzania to provide
direct budgetary support through the General Budgetary Support (GBS) Program.
Apart from ensuring more stable funding, the disbursements are more regular and have
had a positive impact on discretionary budgetary elements, public finance management
reform, the implementation of IFMIS, budget releases and expenditure management.
More significantly, the GBS is performance based and includes a framework for the
engagement of the cooperating partners with the government, and forms as a basis for
continued dialogue on the continuing improvement of public finance management.
Also very significant in the outlook for public finance management practice is
Tanzania’s qualification for debt relief under the HIPC funds program. Under this
program Tanzania qualifies for about 7% of GDP in debt relief and continuing debt
relief is conditioned upon the application of the savings to poverty areas identified and
tracked within the budget. The allocation of these funds to service delivery and
development projects where they are most needed should have positive impacts on the
local communities. The conditionalities for HIPC force the scrutiny of actual expenditure
by the cooperating partners which means greater transparency in budget execution.
Source: materials compiled by the project team
Overall
It is fair to conclude that Tanzania, at the central government level, has achieved a
very significant first step by way of its legal and regulatory framework reforms and
the implementation of the IFMIS. This system is reasonably well set up to spend
mineral and other revenues soundly. Procurement, internal and external audit are
ongoing weaknesses but there are mechanisms in place including capacity building
initiatives, the GBS Program and the HIPC Relief Fund that will exert ongoing
83
pressure for deepening the improvements in public finance management practices.
There is a reasonable degree of delivery of publicly stated objectives – including
poverty reduction programs-through the budgetary process. The government is now
reasonably well equipped to make good use of those revenues that it raises from
mining activities. But the systems and their implementation remain problematic in
some respects and significant leakages are still occurring. The control of corruption,
although much improved, remains one aspect of this. It is discussed further in Box 5.2.
Box 5.2
Corruption erodes the benefits
The cultural context of a country strongly influences the level of fiduciary control
that any public finance management system can achieve. When corruption and the
fiduciary risks are high, it is unlikely that even large revenue contributions to the
government budget will have a positive development impact.
Tanzania has put in place a national anti-corruption strategy where ministries are
supposed to report on cases of corruption as a means to combat corruption.
However, it is not clear if this has yet had a significant impact in curbing corruption.
The government has also recently stepped up its efforts to promote ethical standards
for the civil service. A minister of state for good governance was appointed in 2000
and a Good Governance Unit was formally constituted within the President’s Office
in 2001. The Ethics Inspectorate of the Civil Service Department has been very active
in promoting a code of ethics for the civil service. It has distributed over 30,000
copies of its Code of Ethics and Conduct to the public service.
A multi-sectoral Business Environment Strengthening for Tanzania (BEST) program
has been launched. It is endorsed by the government of Tanzania. It is to be funded
by a common basket through the Ministry of Finance and administered by the
President’s Office – Planning and Privatization. Formulated with the involvement
of both public and private sector stakeholders and development partners, the BEST
program should continue to reduce the cost of doing business by easing controls and
administrative constraints on private sector operations and improving public service
delivery to the private sector. The BEST program has five components: better
regulation, dispute resolution, enhancing capacity of Tanzania Investment Centre,
changing the attitude of public servants and private sector advocacy.
In spite of these achievements corruption continues to be a prominent feature of the
Tanzanian public sector. Where does Tanzania stand as regards its corruption in
comparison to other countries? The answer is that the TI Corruption Perceptions
Index (CPI) ranks Tanzania 90 out of 140 countries with a score of only 2.8 –
comparable mining countries such as Botswana and Ghana were ranked at 31 and 64
with scores of 6.0 and 3.6 respectively. It may just be a matter of time before the
improved public management procedures and the specific institutional
arrangements already put in place begin to curb corruption. In the meantime this
remains a problematic issue in Tanzania.
Source: materials compiled by the project team
84
5.3
LOCAL GOVERNMENT FINANCING AND DECENTRALIZATION
Mining is characterized by operations that are inherently very local in nature. In
Tanzania, the majority of all mining revenue comes from just 6 out of a total of 117
local districts. These are Nzega, Geita, Kahama, Tarime, Biharamulo and Shinyanga
districts. Seven of the main eight operating mines in Tanzania are located narrowly in
these districts to the south and east of Lake Victoria. Hence the quality of regional and
local administration in these regions is a critically important factor in helping to
capture the benefits of mining and avoid the possible downside effects.
How well does the Tanzanian system resource and support these local
administrations to do an effective job for their communities, either on their own or in
partnership with the mining companies? We know that they receive no direct
allocations from the mineral taxes themselves but they do participate, along with all of
Tanzania’s local districts, in the general revenue allocation system.
The first answer to this question is that Tanzania is fairly unusual in Africa for its
dismantling of the traditional political administration structures that elsewhere
compete with the local councils but are often non-transparent or only weakly
accountable for the funds they receive. The multi-layered complexities of, for example,
Ghana are absent. This suggests a better than normal opportunity for a more rapid
development of sub-national structures to effectively manage development of the
local communities. However, this potential can hardly be taken for granted. It has
also been commented that the removal of the former local government structures may
have also removed all available local administrative expertise and that it is taking a
long time to recreate the human resources capabilities required for effective
desentralized governance. Reform progress at the local level is, understandably,
behind that of central government although what is being proposed seems eminently
sensible. 48 So for the moment there is still much evidence of weaknesses in public
finance management.
The rest of the answer relates to what would seem to be the numerous ongoing
weaknesses, notwithstanding recent reforms, that color the abilities of local
administrations to serve their communities effectively. These weaknesses include the
following:
•
•
Although local government authorities (LGAs) are responsible for preparing
their own budgets, and independently managing and controlling their own
expenditure, there is still a large amount of control centrally. In particular, the
personnel emoluments element (67% of the total central to local allocations
under the MTEF in 2004/05) is paid for directly by the central government
and many of the other recurrent expenditures are made directly by the central
government.
Weaknesses in the system of budget releases compound this first problem.
Releases from the central budget office go mainly to the line ministries, and
then, via the Financial Administration Network to the spending units. This
network links headquarters and regions; the regions and the 117 districts; and
Efforts are underway to improve the local budgeting situation by introducing the MTEF
process to local governments; however this will need to ensure that it fosters strategic decision
making by council, rather than become just a technocratic costing exercise. The approach is
required to be “bottom-up”, emphasizing the element of democratic participation of the local
people, civil society organizations and the private sector.
48
85
•
•
•
•
•
•
finally the districts and the implementing units such as district schools or
clinics. In Tanzania such intra-ministry releases are fraught with difficulty
and are difficult to track. When this factor is coupled with a still high-level of
central procurement and with a poor distribution network, questions are
raised about the quality of the local allocation of resources that emanate from
the main line ministries. This issue is particularly important in regards to the
big and socially significant ministries such as health and education where the
interfaces with mining companies are likely to be especially important.
The amounts that each local community receives from the central government
are based upon a formula and are set out in the MTEF. But since the ‘own-tax’
revenues average less than 2% of national tax revenue, the central government
allocations have critically important impacts on the planning, budgeting and
consequently expenditure management at the district levels. There is wide
variability across the mining districts with their ‘own’ revenues ranging from
4% (Tarime in 2003) to 31% (Biharamulo) of total receipts in the period 2001 to
2003 (see Table 5.1 below).
There is also considerable year-on-year variability in the revenues actually
generated from own-revenues and from grants. See, for example, the three
year record on own-revenues in Biharamula District as shown in Table 5.1
below (Tsh 322; 954; and 242 million respectively). Because of the associated
difficulty of predicting these variable revenues, effective budgeting and
financial planning in those districts where own revenues constitute a
significant proportion of the overall funds is made more difficult.
Another critical issue is the inelasticity of the own-revenue sources. Growth of
local incomes – even very rapid growth as in some mining districts - does not
guarantee a proportionate increase in local budgets.
The main own-sources of revenue are from a variety of taxes, levies, rents and
investments in commercial activities, but the most important is the property
tax. This is especially so in urban councils. In most of the mining areas,
housing is provided for the mining employees; however it is not clear that
such housing is subject to property taxes since the property tax collections for
the 6 mining districts remain very low. Property taxes average only 1.5% of
total revenues in the 6 mining districts as compared to 6.5% in the country as
a whole (see Table 5.1 below).
At the same time, mining districts obtain a relatively high percentage of their
total revenue from produce cesses, levies and royalties. (see Table 5.2). This
points to a potentially serious threat to revenue due to possible environmental
degradation. The formula basis of revenue allocation presently ignores the
compensatory requirements of mining activity in respect of environmental
degradation, pollution etc. and this gives rise to difficulties.
The majority of local spending is executed from tied grants. In addition some
of the donor funding that supports this spending operates with procedures
that pay scant attention to overall district plans and even to the national
poverty reduction strategies. This segmentation of the funding is also inimical
to sound and useful reporting procedures.
86
Table 5.1
Own Revenue Sources for Seven Mining Districts versus National
Aggregates
Year
Own Source Revenues
2003
National Total Total
Development Levy
Property Tax
Produce cesses, levies and royalties
Service and other levies
Land Rent
Licences, fees and permits
Charges
Others
3,186,251
3,164,072
8,976,788
7,785,164
764,739
12,064,634
5,250,254
7,171,183
220,868
37,168
963,980
200,954
56,429
395,371
116,529
472,902
Total
48,363,085
2,464,201
Development Levy
Property Tax
Produce cesses, levies and royalties
Service and other levies
Land Rent
Licences, fees and permits
Charges
Others
Total
6.6%
6.5%
18.6%
16.1%
1.6%
24.9%
10.9%
14.8%
9.0%
1.5%
39.1%
8.2%
2.3%
16.0%
4.7%
19.2%
100.0%
100.0%
Nzega
Amounts
21,679
164,390
70,684
131,352
Geita
59,793
13,071
192,850
801
42,908
51,086
19,090
4,649
388,105
384,248
Percentages
5.6%
15.6%
0.0%
3.4%
42.4%
50.2%
0.0%
0.2%
0.0%
11.2%
18.2%
13.3%
0.0%
5.0%
33.8%
1.2%
100.0%
100.0%
Mining Districts
Kahama
Tarime
Biharamulo Shinyanga Simangiro
27,060
943
309,208
154,205
7,212
124,420
27,689
133,881
1,925
1,393
16,479
27,657
7,200
30,668
39,110
75,493
673
31,113
39,487
56,247
65,012
173,912
35
25,379
113,848
6,289
21,761
31,648
45,275
6,274
65,032
23,063
2,257
784,618
85,322
242,123
378,186
201,599
3.4%
0.1%
39.4%
19.7%
0.9%
15.9%
3.5%
17.1%
2.3%
1.6%
19.3%
0.0%
0.0%
32.4%
8.4%
35.9%
16.2%
0.0%
31.2%
0.3%
0.0%
12.9%
16.3%
23.2%
17.2%
0.0%
46.0%
0.0%
0.0%
6.7%
0.0%
30.1%
3.1%
10.8%
15.7%
22.5%
3.1%
32.3%
11.4%
1.1%
100.0%
100.0%
100.0%
100.0%
100.0%
Source: materials assembled by team members based on information from Ministry of Finance
87
2003
2002
2001
Table 5.2
Central Government Grants versus Own Resources for Seven Mining
Districts
Central Government Grants
Amount
%
2,173,686
80.6%
2,892,655
85.3%
2,491,527
79.7%
1,597,823
88.3%
2,096,336
86.7%
2,678,802
83.2%
1,253,723
85.1%
District
Nzega
Geita
Kahama
Tarime
Biharamulo
Shinyanga
Simangiro
Own Revenues
Amount
%
522,345
19.4%
497,236
14.7%
632,863
20.3%
212,397
11.7%
322,748
13.3%
539,906
16.8%
218,979
14.9%
Total
Resources
2,696,031
3,389,891
3,124,390
1,810,220
2,419,084
3,218,708
1,472,702
Total Mining Districts
National Total
Nzega
Geita
Kahama
Tarime
Biharamulo
Shinyanga
Simangiro
15,184,552
238,236,523
3,465,202
5,035,725
5,855,500
1,803,004
2,104,856
3,143,230
1,780,179
83.7%
82.3%
86.7%
90.8%
88.6%
92.2%
68.8%
84.2%
92.5%
2,946,474
51,221,636
533,674
508,504
753,969
152,520
954,900
591,791
145,028
16.3%
17.7%
13.3%
9.2%
11.4%
7.8%
31.2%
15.8%
7.5%
18,131,026
289,458,159
3,998,876
5,544,229
6,609,469
1,955,524
3,059,756
3,735,021
1,925,207
Total Mining Districts
National Total
Nzega
Geita
Kahama
Tarime
Biharamulo
Shinyanga
Simangiro
23,187,696
341,002,505
2,906,105
4,015,507
5,131,240
1,932,429
2,385,720
3,864,589
1,196,659
86.4%
85.5%
88.2%
91.3%
86.9%
95.8%
90.8%
91.1%
85.6%
3,640,386
57,752,113
388,105
384,247
773,914
85,322
242,122
378,185
201,599
13.6%
14.5%
11.8%
8.7%
13.1%
4.2%
9.2%
8.9%
14.4%
26,828,082
398,754,618
3,294,210
4,399,754
5,905,154
2,017,751
2,627,842
4,242,774
1,398,258
Total Mining Districts
National Total
21,432,249
385,675,868
89.7%
88.9%
2,453,494
48,363,085
10.3%
11.1%
23,885,743
434,038,953
Source: materials compiled by the project team
Overall
The present system of local authority financing is improving but does not yet provide
a wholly satisfactory basis for the effective bottom-up planning and financing of local
economic and social development. The distribution of fiscal functions between the
central and local levels of government is well established within the legal and
regulatory framework. However, most local government funding (70% to 90%) comes
from the central government. The central government funds most local government
salaries directly. Both central and own-revenue funding are subject to significant yearon-year variability and to low levels of elasticity. Hence local administrations do not
easily capture any part of the benefits of more rapid income growth in their areas,
whether induced by large mining development or by other activities. Hence consistent
locally-driven programs of development – especially in the context of overall
expansion - are difficult to design, execute and finance.
When the mining companies become key players in a local area, they create major
new challenges to be dealt with as well as large new volumes of funding. But the
institutional structures that can accommodate these changes are less than ideal and so
ad hoc solutions seem more likely that systematic strategic ones. This then creates
88
difficulties and vacuums that the mining companies and supportive NGOs may need
to fill.
5.4
THE ABSENCE OF EXPLICIT FISCAL TRANSFERS FOR MINING REGIONS
The Tanzanian authorities have so far taken the decision not to provide any special
local transfers to deal with the particular problems of mining-dependent localities.
The logic behind this decision commands widespread support. In brief, since
Tanzania is such a desperately poor country, it is argued that there is no reason to
provide scarce fiscal resources disproportionately to help mining-dependent regions.
The assumption behind this is that such regions will, if anything, enjoy higher levels
of incomes than other regions. So there is no real basis to establish special mining
compensation or development funds in addition to the mainstream central to local
transfers from which all Tanzanian local authorities can expect some benefit.
The present policy does however create certain difficulties for the partnership
arrangements between mining companies and local authorities. This is best explained
as follows.
There are two main arguments to justify special transfer funds for mining dependent
regions:
•
•
Compensation. There may be necessary expenditures to compensate the local
communities for damage, disruption including population expansion that go
beyond any likely commitments of the mining companies in their formal license
agreements. An example would be the need to provide housing and basic
infrastructure services for new populations that enter the mining region but
who are not the direct responsibility of the mining companies.
Development. A mining community may constitute an important new pole
for development that could justify some explicit help with development
planning and new projects. This could magnify the development support that
mining companies themselves might be willing and able to provide.
The Tanzanian approach regarding the first point assumes that there are no issues of
damage and disruption that are not the responsibility of the mining companies OR
alternatively that the mainstream funds-transfer formula will automatically provide
funds to deal with these problems. Both of these propositions are unrealistic in
practice. The formal agreements entered into by mining companies will inevitably
omit some issues over which the mining companies themselves have no possible
control. At the same time the very low elasticity of the local authorities’ tax bases –
based on property taxes and product cesses – means that rising local prosperity (based
on mining) will fail to deliver proportionate increases in revenues to local authorities.
The Tanzanian approach to the second point assumes that all complementary
development funding (to support the spending of the mining companies) can come
from additional locally generated resources, OR from reliably available ad hoc funding
from the centre. This assumption is also flawed for the same reasons, namely the low
income-elasticity of local tax and other revenue receipts.
5.5
THE CONFLICTS OVER LAND USE WITH THE ASM SECTOR
The rapid escalation of investment in large-scale mines since the mid-1990’s has
coincided with a reduction or loss of income for many ASM in a number of regions.
89
Some of this has been due to the displacement of ASM from government-allocated
concessions as a condition of the concession agreements between companies and
national government. Some is likely the result of ASM reaching the limits of their
technical abilities to mine further within their areas of operation without the benefit of
large machinery and/or more modern methods 49.
The closer examination of the situation in Mara as discussed earlier shows that the
pre-existing small-scale mining in that area had tended to stagnate in the years prior
to the arrival of the larger mining company. The compensation arrangements for those
who were displaced included: agreed compensation and royalty payments to several
existing mineral rights holders and villages in both Nyabirama and Nyabigena;
compulsory purchase compensation for many families who were displaced; and
compensation for loss of crops and access. There were several examples of
compensation offers being contested and resulting in litigation. On the whole,
however, the record on this matter in that region has not been excessively contentious.
Unfortunately this has not been true of all the newer mining areas in Tanzania. In
many cases, conflict may arise from the fact that the majority of ASM workers are
employed as labourers by claim owners and may not have compensation benfits
passed on to them, leaving them economically as well as physically displaced. In
particular the controversy related to the Bulyanhulu mining area in Shinyanga Region
during August 1996 have called into question the practices that were used to remove
ASM from concession areas. In 1994 the Government of Tanzania (GOT) granted a
prospecting license to Kahama Mining Corporation Limited (KHMC), a subsidiary of
Sutton Resources. In July 1995 GOT decreed that all small-scale miners should leave
the area, but action was not taken to ensure that the land was vacated until almost one
year later during August 1996 50, following the resolution of a legal challenge by the
ASM. A number of the more serious allegations concerning the treatment of ASMs
were eventually referred to the Office of the Compliance Advisor/Ombudsman
(CAO) for IFC and MIGA 51. The CAO’s in-depth report failed to find credible
evidence to back up these more serious allegations (see archive section of www.caoombudsman.org).
It is well beyond the scope of this case study to discuss in detail, let alone resolve, the
issues arising from the Bulyanhulu case. But the example is important in indicating at
49
Conflict between large-scale mines and ASMs is not uncommon and is frequently resolved by
Tanzanian security force intervention and results in the prosecution and incarceration of some
members of the public. At North Mara in August 2001 a large number of artisanal miners
occupied the Nyabigena pit without permission and were eventually removed by members of
the Field Force Unit of the Mara Police, having refused to respond to AMGM, village leaders,
district officials or the district police. Buckreef has also had protests by ASMs not wanting to be
removed from lease areas they were illegally working. Bulyanhulu has also been subject to
controversy relating to the involuntary removal of illegal miners. But in general, local
government leaders (at district level and above) are very co-operative with the large miners.
50
The GOT’s decree was challenged in court by the Small Scale Miners Committee (SSMC). On
July 30, 1996, the GOT announced a process of clearance, and issued a final decree that the
concession area be vacated by “illegal miners”. The decree was challenged by the SSMC and an
st
injunction was issued on July 31 . This was overturned on August 2, 1996 and the process went
ahead.
51
MIGA, the Multilateral Investment Guarantee Agency, had issued a political risk guarantee
to Barrick Gold, who acquired Sutton Resources interests in the Bulyanhulu property in 1999.
90
least two problems that at least in 1996 – and probably still today - tend to undermine
the potentially positive socio-economic impacts of mining in Tanzania.
First, it seems reasonably clear that although small scale mining had been present in
the Bulyanhulu area for many years after gold was found in 1975, the numbers of
miners involved rose sharply after about 1993 when then-President Hassan Mwinyi
visited the site and gave what seems to have been verbal instructions permitting
miners to return to, or continue mining, in areas from which they had started to be
excluded. This raises larger question about the lines of decision-making and the
checks and balances that were then, and seem even today, to be a part of the
governance system in Tanzania.
The ongoing studies on accountability seem to confirm the hypothesis that the
executive, the president and a small number of senior ministers still closely control
power. This is reinforced by the presidential powers of appointment and by the party
structure and it happens irrespective of the formal design of the democratic system
that is now in place. This weakness in governance is problematic not only for the
realization of the potential impacts of mining but in many other ways as well. In
particular, if the checks and balance on the exercise of high level executive power are
weak, the likelihood of arbitrary and populist ad hoc solutions to local problems will
be so much the greater.
Second, this example raises questions about the formal links between central and local
administrations and how the mining companies need to position themselves in
relation to these two parts of government. Clearly the mining company’s authority to
mine, as well as the specific mineral concessions involved, derive from agreements
entered into at national level and in accordance with national law (initially the law of
1979 and then the new law of 1988). The impact of those agreements, however, when
some displacement of ASM is involved is an inherently local matter that is informed
best by government authorities at the local level. In between these two levels are a
variety of specific actions that need to be taken in order to get the new international
mine up and running. These actions are partly taken by the company themselves but
some at least are taken by local officials acting either as agents of the company or on
the instructions of central government authority.
It seems likely that many of the problems that arose in Bulanyhulu derived from a
poor level of communication between the high level decision-makers who were
dealing with the mining companies and the local officials, including the police, who
needed to implement particular aspects of the decisions that had been taken. Such
situations are inherently conflicted and can only be resolved if there is the highest
possible levels of understanding of the problems of individuals as well as high-quality
communication between all relevant authorities who have responsibility for the
enforcement actions. This seems to have been absent in the Bulanyahulu case. In cases
such as this, where there is a possible void in authority or in communication channels,
mining companies are probably well-advised to intensify greatly their own duediligence in order to avoid the type of circumstances that arose in Bulanyahulu.
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5.6
SOCIAL COHESION MORE GENERALLY
Tanzania is a cohesive society by African standards: a fact that is especially
remarkable given the large number of different tribal and other groups that constitute
its total population. Mining, however, whether large or small scale, introduces fissions
in primarily remote, stable and agricultural communities. It does so because of the
arrival of newcomers who may have no particular commitment to the local area. More
importantly, some members of the community (successful artisanal miners, wellcompensated land-owners or employers of larger mines) may make relatively large
sums of money, thus separating themselves from their peers and potentially giving
rise to jealousies and inequities.
In the case of North Mara, many of the artisanal miners who flocked to the area
during the 1980s gold rush seem to have departed once the alluvial mining became
too difficult. In general, the ASMs who remain are longstanding community members.
Some people have indeed become very wealthy as a result either of their own gold
mining, or because of the royalties they now receive from the PDT Mine. NMM
Community Affairs has been very constructive in the way it has tried to engage with
the receivers of royalties, an approach that could do much to enhance social cohesion
if it succeeds. The company has encouraged a wealthy individual royalty recipient,
and the five villages in receipt of royalty agreements, to join forces with the company
in forming a community development trust fund. The company has also engaged an
experienced international lawyer to work through the intricacies of the arrangements
with all stakeholders, in order to ensure that all parties are fairly represented. The
company declined to contribute its own equal share to the fund unless all other parties
agreed to it. These arrangements were still being forged as this report was being
written but are an example of the positive influence that a creative and engaged
mining company can have in mitigating what might otherwise be significant social
tensions.
However, a company alone can only do so much to address the inherent social
tensions and economic rifts that a major new investment may create. A rounded
solution to these incipient problems needs, above all, a coherent local and regional
capacity that can both analyze and address effectively the problems that can and do
arise. The position of all segments of local society need to be effectively and coherently
addressed and their changes in situation (positive or negative) recognized if major
fractures are to be avoided. This in turn speaks to the earlier point about the present
limitations of local government capacity and empowerment in Tanzania. All parties
would be well advised to regard this as a major constraint on the benefits that mining
can potentially bring to local society.
5.7
SYNERGIES BETWEEN MINING AND THE REST OF THE PRIVATE SECTOR
Tanzania, at the time when large-scale mining investment began, had a very weak and
undiversified economy. Mining has quickly become one of the largest new sources of
private investment and easily the dominant source of FDI. Mining, and especially
gold mining, has certain characteristics that single it out as an ideal early-stage
investment in a previously weak and investor unfriendly environment. These include
the following:
•
Mining is relatively independent of the requirement for a broad based
national infrastructure. When the mines started operating in 1998 the
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infrastructure, including the roads network, was in very poor condition. It
did require clear access to the country’s port for the importation and transport
of equipment and ore processing consumables, and possibly connection to the
national electric grid, but did not require a vast network of roads to support a
local market for instance.
•
Given that all of the output produced was exported, not only did the sector
quickly become an important foreign exchange earner, it was also
independent of the constraints of the local markets which of course were very
weak at the time.
•
With only seven mining localities, its concentration of activity offers no
special challenges to tax and non tax collection by government agencies. This
fact has facilitated highly efficient collection for what now constitutes some
3.6% of total tax revenues.
Although there has been some welcome growth of manufacturing and other nonmining and non-agricultural activity since the mid 1990s, the economy remains
relatively undiversified today. This is not really surprising. The same arguments as
listed above that help gold mining to emerge as one of the most promising early-stage
investments, also suggest that other major activities (especially larger scale
manufacturing) are likely to be delayed until many of the infrastructural and other
weaknesses of the economy are more fully resolved.
One consequence of the low level of economic diversification is that the direct local
procurement of goods and services by the mining companies is still quite limited (see
data provided earlier) and certainly relative to the situation in more fully established
mining economies such as the RSA and Chile 52. Another consequence is that the range
of spin-off activities from mining and the backward and forward linkages that have so
far emerged have also been relatively limited. Although the surveys based around the
North Mara Mine indicate a good level of active businesses (for example some 130
businesses in the Nyangoto village, many of which have high dependence on the
presence of mining), these are typically quite small and focused on areas such as
hotels, bars and bicycle repair. There is, nonetheless, a great desire amongst local
businesses to become more involved in supplying the mine. Hence, increased efforts
to foster local procurement could provide a substantial additional positive economic
impact.
The issues for debate in this area should be about the future opportunities for higher
levels of goods and services supply to mining, and the related infrastructure and
financing opportunities as economies of scale open up potential new possibilities
based on the growth in the mining sector itself. A significant responsibility in this
matter lies with the possible partnership between the companies and the relevant
strategic planning authorities in the regions. The regional authorities need improved
structures and mechanisms to assess and help promote some of the supporting
activities. The mining companies, for their part, need to deepen their promotional
activities to forge strong linkages with the private sector in Tanzania. There is also a
key role to be played by donor agencies in facilitating and implementing the programs
made possible by such partnerships.
52 Nor does the mining sector yet have many strong linkages of other sorts with the private
sector in Tanzania. For example, none of the mines operating in the country are listed on the
local stock exchange.
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6
MAIN CONCLUSION AND LESSONS FOR POLICY REFORMS AND
MINING COMPANIES
6.1
INTRODUCTION
The example of Tanzania illustrates par excellence the potential gains, but also the
problems that arise, as a result of the arrival of large scale international mining into a
poor and still fragile economy. This final section of the report attempts to distil some
key conclusion and messages about the impact of mining from the more detailed
analysis presented earlier.
As in the other case study countries, Tanzania has had a long history of serious
macroeconomic mismanagement combined with obvious deficiencies of governance.
But unlike the other countries, these problems have occurred at a much lower income
level with a total population that is relatively large. The co-existence through the
1990s of improving macroeconomic and structural policies and much higher mining
activity on the one hand, with still weak governance on the other, represents the key
to understanding the positive, and the less positive aspects about mining’s impact. In
Tanzania we can study this over only a short period, since the late 1990s, when the
current boom in mining investment began. The period is too short to reach final
conclusions and so the conclusions that are reached here need to be regarded as
somewhat preliminary in nature.
Tanzania is also different from the other case study countries in that the earlier
liberalizing reforms of the authorities (in the 1980s) stimulated an artisanal mining
boom that preceded the boom associated with the large international companies.
Current debate about mining’s impact in Tanzania is rather clouded by issues related
to the interactions as between these two segments of the mining industry. However,
the study of North Mara is helpful in that the evidence from that region indicates a
general decline of the artisanal sector that precedes the large international
investments. However, this case study cannot claim that this same result would
generalize for mining in Tanzania as a whole.
The rest of the discussion follows the logic of the Toolkit beginning with evidence on
outcomes and then moving to causes and then to the remaining gaps in governance that
need to be addressed if the socio-economic impacts of mining are going to be
increased beyond the levels already being achieved.
6.2
OUTCOMES
Growth
Once the international mining companies encountered broadly favorable conditions
for renewed investment and growth in the late 1990s (to tap the undoubted mining
potential in Tanzania) their investment activities certainly supported the improved
GDP growth that Tanzania has experienced since 1996. It is very significant that the
period since then has seen uninterrupted growth of per capita incomes at a reasonably
high level but also at rates that have been broadly stable from one year to the next.
This represents a major contrast with most of the history from 1960 to 1995. It is
difficult to establish a strong causal link from mining activity to the growth of total
incomes and not least because mining in Tanzania is still only a relatively small part of
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GDP (3.2%). The fact that mining has contributed such as large proportion of the
country’s exports (over 40%) and FDI (over 75% ) since 1996, however, testifies to the
point that this has been an important sector in overall economic performance.
Independent estimates also confirm a small but important statistical contribution of
mining to the improved overall growth of GDP that was achieved.
It is also noteworthy that during the years of Tanzania’s economic malaise in the 1970s
and 1980s, there is no evidence that the poor macroeconomic performance could be
attributed in any way to the presence of mining. Equally, when mining investments
enjoyed a revival after the systematic economic reform programs, there is no evidence
at all that the resurgence of mining undermined the general economic recovery that
was achieved. On the contrary the mining investments were easily the most visible of
the new productive investments that supported the improved growth.
Poverty and Social Effects
These effects come from both the direct local spend of the companies and also the
indirect effects of that spend both locally and nationally. The general national record
on poverty alleviation in Tanzania has been disappointing so far. But this is an area
above all where the statistical record is not sufficiently up-to-date to enable a sound
judgment to be made about the impact of mining. The time periods since the
resurgence of mining are too short to reach strong conclusions for Tanzania.
However, the evidence at the local, and particularly at the company level (NMM),
does show that there are some strong direct income generating benefits for some local
people. The indirect effects that could extend the benefits to the communities
generally, however, are not guaranteed and for the moment seem to be relatively
limited in the Tanzanian case. This is perhaps not surprising given that Tanzania is
indeed such a poor country and one where the breadth and depth of productive
capacities is still limited. Certainly it does not have a well developed mining supply
industry of the type that has developed in more advanced mining economies such as
South Africa and Chile.
It is also noted that the mechanisms of trickle-down that can enable mining activities
to contribute to general poverty reduction and help redress income inequalities do not
arise automatically and inevitably. They need time to emerge as the evidence from
more advanced mining countries indicates. They also need help from forward-looking
and supportive polices by both the companies and the government.
The analysis of the specific activities of the individual mining companies and
especially NMM, provides additional information about how the presence of mining
is contributing to the realization of the Millennium Development Goals (MDGs - see
discussion below).
6.3
CAUSES AND EXPLANATIONS
Mineral Legislation and Macroeconomic Reform
A fundamental reform of mineral legislation has been the first key ingredient of the
successful resurgence of mining in Tanzania as it was also in the other three case
study countries. It has also been a recent sequel to the launch of systematic policies of
macroeconomic stabilization and structural adjustment. The more investor-friendly
mineral legislation from 1998 represented the first part of the success package and the
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macroeconomic stabilizing reforms at about that same time represented the second
part.
But how strong did the improvements in these two areas need to be? Critics of
mining argue that the mining legislation has increasingly been slanted in favor of
international mining companies and against the interests of the countries. These
criticisms are certainly heard loud and clear in Tanzania. The impression is sometimes
given that the fiscal benefits of mining in particular are far too small. However the
objective reality is rather different from such perceptions of the problem, and for two
main reasons.
First, in a very short space of time, the government revenues from mining in Tanzania
have grown to become almost 4% of total tax revenues and over 3% of total domestic
budget revenues. Tanzania has a generally disappointing record on tax collection and
this growth from zero to over 3% as represented by mining is a significant
contribution to resolving that general problem. The mining revenues have also been
very stable so far (much more so than the dominant donor aid flows) and will soon
overtake HIPC debt relief as a source of government revenue.
Second, it is particularly significant that in the two poorest countries in this initiative –
Tanzania and Ghana – the objective assessment from investors is that these countries’
tax regimes represent a significant deterrent to investment relative to the similar
regimes of countries that compete for the same investments It would seem that the
setting of the right legislative framework – including the tax regime - is a matter of
balance with both Tanzania and Ghana achieving their ‘success’ with arrangements
that are not perceived to be as attractive to investors as the critics claim them to be.
In relation to macroeconomic policies, Tanzania has now achieved a lower and more
stable inflation climate and a fiscal balance that is much more easily financed without
inflation. The dilemma now for Tanzania is that the new budget equilibrium relies far
more than is desirable on donor aid flows which are both unreliable for the longer
term and unpredictable in magnitude in the short term. Nonetheless the maintenance
of this lower inflation equilibrium in the past decade has been an important ingredient
of the stability that has encouraged higher levels of new mineral and other
investments. But even more important than this is the fact that Tanzania has, for a
decade, sustained a reasonably reliable commercial regime that gives investors
confidence that payments and receipts in foreign currency – a key factor in
commercial mining - will not be associated with unreasonably high risks. This has
been supported by a much more realistic exchange rate than in the years before 1996
and, above all, by the avoidance of the serious real exchange rate misalignments that
plagued those earlier years.
Governance
Significantly, and relative to the international benchmarks of ‘good governance’,
Tanzania seems to have needed only quite modest gains in governance relative to the
previous situation in order to trigger and support the mining recovery. Some critical
components of improved governance such as the establishment of stronger and more
effective executive power have been present – and also necessary in order to achieve
the gains in economic policy performance referred to above. However, as was argued
in the body of the case study, some aspects of this strong executive power may have
resulted in decisions that are problematic for the overall successful impact of mining.
Particularly important in the case of Tanzania have been the undoubted
96
improvements in the efficiency of government in the conduct of many aspects of
policy and, in particular, in the central management of fiscal and budgetary policies.
The Contributions of the Companies
The macro level causes of Tanzania’s broadly successful incorporation of a higher
level of mining activity have been complemented by the work done at regional and
mine level by the companies themselves. These have been analyzed in considerable
detail in the body of the report with close attention paid to the policies and activities
of the NMM.
The case study has revealed the substantial direct and indirect contribution of the
companies to the overall successes of the host country. In relation to the main MDG –
the eradication of extreme poverty, it is noted that although NMM and other mining
companies do not focus specifically on eradicating poverty and hunger, they have
nonetheless contributed to this first MDG, by increasing economic activity
significantly in the remote areas where they operate. By providing direct employment
and initiating the multiplier effects to create significant indirect employment, the
presence of large-scale mines has almost certainly helped to reduce poverty in the
areas in which they operate in Tanzania. This conclusion is qualified only by the
uncertainty about the number of ASM jobs that could plausibly have survived longer
term given the inherent limitations of this sub-sector of activity. Certainly in North
Mara, the amount of such sustainable activity is thought to be very limited indeed.
In addition to their direct contributions to output and employment (as well as
government revenues and exports), the large mines in Tanzania have also adopted a
range of corporate policies relating to social investment and have supported a diverse
range of related investments in social and economic infrastructure. As newer arrivals
on the scene, the companies and certainly Placer Dome have committed to social
responsibility agendas that are quite advanced relative to industry averages.
Although the mines certainly face difficulties and criticisms in relation to some of the
component MDGs, the general but brief experience in Tanzania is that the new
international mining investors are adopting sound and helpful approaches to the
difficult issues such as HIV/AIDS, gender empowerment and the mitigation of
environmental side effects. They have also become an important part of the delivery
in social areas such as health and education. However, embedding these contributions
sustainably into the mainstream public provision of social and economic services is a
difficult matter and the long-term arrangements for this still need to be developed.
The policies and practices of the mining companies involve varying degrees of
‘structure’ and partnering arrangements with local communities. It is generally
acknowledged that these need further work and refinement before they can be said to
truly serve the needs of the communities to which they relate.
A particular area of difficulty relates to the point made earlier about the still limited
trickle-down effects of mining through the creation of productive activities linked to
the main mining activity. The arrangements necessary to support local economic
development and economic diversification – including the long-term sustainability of
mining communities when mines close – remain incomplete. Both the mining
companies and the authorities still have some way to go in developing effective ways
to address this very difficult set of problems. The case study has revealed investment
in interesting individual projects but little evidence of consistent planning by mining
firms and other stakeholders (including local and national governments) to consider
the broader economic potential that mining can catalyze, or indeed the economic
future for local economies, after mines close.
97
98
6.4
UNDERSTANDING THE STEPS TO ENHANCE IMPACTS
General
It is a central proposition of this report that some of the remaining difficulties and
controversies surrounding mining are associated with the ongoing weaknesses in
some of the dimensions of governance where reform is incomplete. The institutional
and other reforms in Tanzania of the past few years now ensure a reasonable degree
of delivery of publicly stated objectives – including poverty reduction programs through the budgetary process. As a result, the government is now reasonably well
equipped to make good use of those revenues that it raises from mining activities. But
the systems and their implementation remain problematic in some respects and
significant leakages are still occurring. The control of corruption, although much
improved, remains one aspect of this.
The needs of Local Government
To understand this we need to note that in Tanzania, the majority of all mining
revenue comes from just seven out of a total of 117 local districts. Seven of the main
eight operating mines in Tanzania are located narrowly in these districts. Hence the
quality of regional and local administration in these regions is a critically important
factor in helping to capture the benefits of mining and avoiding the possible downside
effects. As a matter of government policy these districts do not receive any direct
allocations from the mineral taxes themselves. However, they do participate, along
with all of Tanzania’s local districts, in the general revenue allocation system of the
country.
The report has concluded that although the system of local authority financing is
improving, it does not yet provide a satisfactory basis for the effective bottom-up
planning and financing of local economic and social development. Nor does it provide
sufficiently well-equipped interlocutors for the mining companies in local and
regional administrations to ensure the maximum economic and social benefits from
the spending done by those companies.
The distribution of fiscal functions between the central and local levels of government
is well established within the legal and regulatory framework of Tanzania. However,
most local government funding (70% to 90%) still comes from the central government.
Both central and own-revenue funding are subject to significant year-on-year
variability and to low levels of elasticity. Hence local administrations do not easily or
automatically capture any part of the benefits of more rapid income growth in their
areas whether induced by large mining development or by other activities. Hence
consistent locally-driven programs of development – especially in the context of
overall expansion - are difficult to design, execute and finance.
When the mining companies become key players in a local area, they create major
new challenges to be dealt with in addition to the large new volumes of funding. The
institutional structures that can accommodate these changes, however, are less than
ideal and so ad hoc solutions seem more likely than systematic strategic ones. This then
creates difficulties and vacuums that the mining companies and supportive NGOs
may need to fill.
This in turn argues for the possible reconsideration of the present Tanzanian policy of
no explicit transfer of mineral revenues to the mining areas. The Tanzanian approach
assumes that:
99
(a) all issues of local damage and disruption are the responsibility of the mining
companies OR alternatively that the mainstream funds-transfer formula will
automatically provide the local governments with funds to deal with these
problems; and
(b) all complementary development funding (to support the spending of the
mining companies) can come from additional locally generated resources, OR
from reliably available ad hoc funding from the Central Government including
donors.
Both of these propositions are unrealistic in practice and their failings leave vacuums
in both financing and decision-making that can compromise the realization of the
fullest possible local benefits from mining activities.
It seems to follow that improved local impacts from mining will require the greater
empowerment of local authorities through both greater independence of their finances
and greater local management and other capabilities. How this further reform is best
achieved, and with what sequencing, is a large question in its own right and is beyond
the scope of this case study. But we would certainly argue for a degree of greater
decentralization of decision making authority combined, as a prior step, with in-depth
training to more fully extend the excellent reforms of public finance already achieved
down to local levels.
Managing the Interface with Artisanal Mining
This subject is hugely controversial in Tanzania and possibly the single most
important factor that negatively colors attitudes to the international mines. The
limited analysis of this topic that is included in this case study cannot begin to resolve
particular controversies, but it can indicate some of the broader issues of what goes
wrong.
In particular, this analysis raises important questions about the lines of decisionmaking and the checks and balances that still seem, even today, to be a part of the
governance system in Tanzania. The ongoing studies on accountability seem to
confirm the hypothesis that the executive, the president and a small number of senior
ministers still closely control power. This is reinforced by the presidential powers of
appointment and by the party structure. These arrangements are problematic not only
for the realization of the potential impacts of mining but in many other ways as well.
In particular, if the checks and balance on the exercise of high level executive power
are weak, the likelihood of arbitrary and populist ad hoc solutions to local problems
will be so much the greater.
It also raises questions about the formal links between central and local
administrations and how the mining companies need to position themselves in
relation to these two parts of government. Clearly the mining company’s authority to
mine, as well as the specific mineral concessions they enjoy, derive from agreements
entered into at national level and in accordance with national law. But the impact of
those agreements, when some displacement of ASM miners is involved, is an
inherently local matter that is informed best by government authorities at the local
level. It seems likely that many of the problems with ASMs that have arisen in the past
derived from a poor level of communications as between the high level decisionmakers who were dealing with the mining companies and the local officials including
the police who needed to implement particular aspects of the decisions that had been
taken. Such situations are inherently conflicted and can only be resolved if there is the
highest possible levels of understanding of the problems of individuals as well as
100
high-quality communication between all relevant authorities who have responsibility
for the enforcement actions. This seems to have been absent in some of the high
profile cases of the past.
In cases such as this where there is a possible void in authority or in communication
channels, mining companies were and are probably well-advised to intensify greatly
their own due-diligence in order to avoid the type of acute problems that have
negatively affected perceptions of mining in the past.
Social cohesion more generally
Tanzania is a cohesive society by African standards: a fact that is especially
remarkable given the large number of different tribal and other groups in the country.
Mining, whether it is large or small in scale, introduces fissions in previously remote,
stable and agricultural communities. There are several well understood reasons why
this is the case.
The mining companies can only do so much on their own to address the inherent social
tensions, and economic rifts, that a major new investment may create. A rounded
solution to these incipient problems needs, above all, a coherent local and regional
governance capacity that can effectively represent all segments of local society and
address their changes in situation (positive or negative) so as to avoid major fractures.
This in turn reflects the earlier point about the present limitations of local government
capacity and empowerment in Tanzania. All parties would be well advised to regard
this as a major constraint on the benefits that mining can potentially bring to local
communities.
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7
ACKNOWLEDGEMENTS
ICMM team
Kathryn McPhail led the initiative under the direction of John Groom and Paul
Mitchell, with valuable support from Liz Cohen and Victoria Howse. Guidance was
provided by Wayne Murdy, (Chair, ICMM and Chairman and Chief Executive
Officer, Newmont Mining Corporation), Sir Mark Moody-Stuart, (Chairman, Anglo
American plc), and Paul Skinner, (Chairman, Rio Tinto plc). The entire ICMM team
thanks all the individuals, governments and organizations that contributed to the case
study as listed below.
Consulting team
The consulting team for this case study was led by Oxford Policy Management
(OPM). The OPM team was led by Alan Roe and included Catherine Macdonald
(Social Sustainability Services, Australia) and Ron Quist (independent consultant).
Daniel Litvin (independent consultant) also contributed to the case study.
Country Contributors 53
Government of Tanzania including representatives of Tarime District Government
(five departmental heads including the District Commissioner), Geita District
Executive Director; the Tanzania Chamber of Mines and Energy (Emmanuel Jengo),
Barrick Gold, who acquired Placer Dome in 2005 (Peter Sinclair); Placer Dome ( Jim
Cooney, Jonas Kipokola, Ila Temu, Greg McNee and Reward Tenga); North Mara
Mine (NMM) (two trade union representatives and personnel within the
Sustainability, Training and Mining Departments); and local interviewees for the
NMM Social Impact Assessment (SIA) including 753 households in the NMM project
area, 304 individuals who participated in 20 focus groups, focus group participants in
five other communities in Geita District (in the potential impact area of other gold
mines), and 13 businesses in Nyangoto village.
Country Case Studies Peer Review Team
Glen Armstrong (Sustainable Finance), Aidan Davy (independent consultant),
Kathryn McPhail (ICMM), Andrew Stoeckel (Centre for International Economics,
Adelaide), Warwick McKibbin (ICMM International Advisory Group).
ICMM Working Group
John Groom (Chair) (Anglo American), Carlos Aranda (Southern Peru Copper
Corporation), Joyce Aryee (Chamber of Mines of Ghana), Dave Baker (Newmont),
Tim Baker (Placer Dome), Britt Banks (Newmont), Fred Bantubonse (Chamber of
Mines Zambia), Stan Batey (Freeport McMoRan), Roger Baxter (Chamber of Mines of
South Africa), Edward Bickham (Anglo American), Steven Botts (Compañia Minera
Antamina S.A.), Reinoud Boers (Mining Industry Associations of Southern Africa),
Jim Cooney (Placer Dome), Nicolas di Boscio (Rio Tinto), Ian Emsley (Anglo
American), Dorothy Gyamfi (Newmont), Paul Hollesen (AngloGold Ashanti),
Emmanuel Jengo (Chamber of Mines of Tanzania), Niks Lesufi (Chamber of Mines of
South Africa), Holly Lindsay (BHP Billiton), Helen Macdonald (Newmont), Greg
McNee (Placer Dome), Jim Miller (Freeport McMoRan), Sixtus Mulenga (Konkola
53 ‘Country Contributors’ includes contributors to the North Mara Mine SIA, which formed a
key contribution to the case study overall.
102
Copper Mines plc), Richard Ness (Newmont), Gordon Peeling (Mining Association of
Canada), Dave Rodier (Noranda), Eduardo Rubio (Minera Quellaveco S.A.).
International Advisory Group
Georg Kell (Executive Head, United Nations Global Compact Office), Pedro Pablo
Kuczynski (Minister of Economy and Finance, Peru) (until 2005), Hon. Mamadou
Lamine Loum (Independent consultant and former Prime Minister of Senegal),
Warwick McKibbin (Executive Director Centre for Applied Macroeconomic Analysis
and Professor of International Economics, Research School of Pacific & Asian Studies,
Australian National University; Member, Board of the Reserve Bank of Australia),
Hon. Felix Mutati (Deputy Minister of Finance and National Planning, Republic of
Zambia), Jane Nelson (Director, Corporate Social Responsibility Initiative, Kennedy
School of Government, Harvard University and Director, Business Strategy,
International Business Leaders Forum).
Partners
United Nations Conference on Trade and Development: Olle Östensson
World Bank Group: Craig Andrews, Clive Armstrong, Kent Lupberger, Rashad
Kaldany, Leo Maraboli, Meg Taylor, Peter Van der Veen.
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8
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Prepared for PDT
United Republic of Tanzania National Bureau of Statistics (NBS) and Mara Regional
Commissioner’s Office (2003)
Mara Region Socio-economic Profile 2nd ed.
United Republic of Tanzania National Bureau of Statistics (NBS) and Mwanza
Regional Commissioner’s Office (2003)
Mwanza Region Socio-economic Profile 2nd ed.,
Joint publication by United Republic of Tanzania National Bureau of Statistics (NBS)
and Mwanza Regional Commissioner’s Office (2003)
United Republic of Tanzania National Bureau of Statistics (NBS) (2002)
United Republic of Tanzania, Household Budget Survey, 2002
United Republic of Tanzania National Bureau of Statistics (NBS) (2002)
United Republic of Tanzania, Integrated Labor Force Survey
2000/01, Dar es Salaam
United Republic of Tanzania (2003)
Poverty and Human Development Report
United Republic of Tanzania, Regional Government of Shinyanga (1998)
Shinyanga Human Development Report
Shinyanga Region, Tanzania, December 1998, funded by UNDP.
Note: Many references were obtained from Placer Dome International’s (PDI) web
sites, e.g. http://www.placerdome.com/operations/tanzania/northmara.htm. Since
Barrick Gold took PDI over in early 2006, these sites are no longer accessible.
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