Local content gaps threaten Tanzania’s mining revenue

Read: Mining sector contribution to GDP rises to 10 percent

The mining sector contributed 9.1 percent to Tanzania’s gross domestic product (GDP) in 2023, according to the Ministry of Minerals, with a target of reaching 10 percent next year.

According to the Tanzania Extractive Industry Transparency Initiative (TEITI), the value of minerals rose from Sh8.18 trillion in 2020/21 to Sh8.73 trillion in 2021/22. Gold remains the dominant mineral.

In 2022/23, mining exports generated $3.1 billion, representing 56 percent of Tanzania’s foreign earnings.

Read: Tanzania earns Sh1.877 trillion from extractive sector

The sector also contributed 15 percent of domestic tax revenue, amounting to Sh2.1 trillion.

University of Dar es Salaam lecturer, Prof Abel Kinyondo, highlighted how gaps in implementing local content policies can lead to revenue loss in the mining sector, leaving the country dependent on taxes paid only after companies declare profits.

He warned that the model leaves the country vulnerable, with operating costs consuming between 85 percent and 95 percent of the total mining revenues.

“We need forward and backward linkages to retain value within the country. At the moment, much of the retained value is in the form of taxes,” said Prof Kinyondo.

As an example of backward linkages, he highlighted the need for locally produced mining equipment.

“A caterpillar used in mining requires tyres costing $20,000 each, and with four tyres per vehicle, annual replacement costs can reach $400,000. Why not revive our General Tyre factory to produce these tyres locally and reduce inflated costs?” he questioned.

Prof Kinyondo also emphasised the importance of processing minerals domestically, instead of exporting raw minerals.

He cited an example of gold mined in Tanzania which often contains by-products like copper and lithium.

“If we processed these locally, we would capture more value and prevent illicit financial flows,” he noted.

Tanzania’s local content regulations and guidelines direct investors to procure goods and services from local suppliers in efforts to empower citizens, including farmers, entrepreneurs, and professionals, and include them in the natural resource-related economy.

However, mining and oil and gas analyst Silas Olang argues that it is challenging for Tanzania to meet the requirements of mining companies domestically due to the stringent standards they impose.

“In terms of expertise, we still have limited capacity to recruit and remunerate professionals at the same level as mining companies. Are our universities producing graduates who meet the necessary standards?” he questioned.

“There are areas where we can compete, such as food services, mine security, and transportation. However, when it comes to machinery and spare parts for mining equipment, we continue to fall short,” he said. To enhance accountability, the government introduced amendments to the Mining Act in 2017, requiring licence holders to work closely with communities.

The minister for Minerals Anthony Mavunde said the amendments aimed to shift decision-making on projects from companies to residents.

“Previously, licence holders might decide to build a toilet while the community needed a health centre. These amendments ensure projects align with the actual needs of the people,” he said in an interview.

Claims of violations

Barrick Gold, one of the largest gold mining companies operating in Tanzania, reported that by September 2024, total local expenditure had reached 82 percent, surpassing the annual target of 61 percent.

Barrick is the majority owner of Twiga Minerals Corporation which oversees operations at the North Mara and Bulyanhulu mines. The Tanzanian government holds a 16 percent stake. Despite such expenditure achievements, residents near the North Mara gold mine raised concerns, accusing it of land dispossession and mistreatment.

However, Barrick denied the accusations, attributing them to campaigns by international non-governmental organisations.

One reported incident involved the death of Emmanuel Nyakoringa (36), who, along with others, allegedly trespassed into the mine in May 2024. The special zone police commander for Tarime-Rorya, Mr Mark Njera, confirmed the incident, adding that an officer was also injured.

According to him, individuals armed with traditional weapons clashed with police who attempted to prevent them from invading the mine. “The situation was brought under control, and the group was dispersed,” he said.

In another incident, Neema Omari (16), a resident of Kewanja village, sustained gunshot injuries. She is currently receiving treatment at the Mwalimu Nyerere Memorial Regional Referral Hospital in Mara. Speaking at the hospital on March 4, 2024, orthopaedic specialist, Dr Elias Nguti, confirmed that preliminary examinations revealed metal fragments in both of Neema’s legs.

Mr Njera did not comment on the issue despite efforts to contact him.

Call for reconciliation

A lawyer empasised the need for reconciliation between the mine and the local community.

“The solution lies in fostering better relationships with the community, addressing grievances, and ensuring inclusivity,” said the director of advocacy and reforms at the Legal and Human Rights Centre (LHRC), Fulgence Massawe.

Barrick Gold did not respond to the claims despite efforts to reach them. However, Mr Mavunde said during an interview with DW Kiswahili recently that the major complaints alleged by the international organisations are “rarely substantiated.” “The concerns residents raised were unrelated to these allegations. Their main issues involve access to mining areas, economic participation and the improvement of social services,” he said.

The Ontario Superior Court of Justice in Canada recently dismissed a lawsuit filed by Tanzanian residents alleging human rights violations by the Tanzanian police near the North Mara mine.

In a decision issued on November 28, 2024, the court ruled that Ontario was not the appropriate forum for hearing the claims.

“The project received support from the Thomson Reuters Foundation as part of its global work aiming to strengthen free, fair and informed societies

The project received support from the Thomson Reuters Foundation