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Tanzania: Bomani mining committee issues report

NewsNotes, September-October 2008


Two Canadian companies, Barrick Gold Corporation and Tanzania Royalty Exploration (TRE) Corporation, control over 50 percent of Tanzania’s gold projects. Barrick owns three of the seven major gold mining projects in Tanzania; TRE controls over 60 percent of the mining rights in the mineral rich area of Lake Victoria. These and other foreign corporations have made windfall profits out of the more than $2 billion earned in gold exports in the past decade when tax exemptions were de rigueur. (See NewsNotes, May-June 2008.)

The Bomani Commission, created last year to investigate the mining sector, issued its report early this summer, making numerous recommendations on how Tanzania can increase income from the mining of gold, diamonds, tanzanite and other minerals.

According to Miningreview.com (June 3), Tanzania, Africa’s third-biggest gold producer after South Africa and Ghana, wants to benefit from record metal prices by boosting government revenue from mining to pay for schools and hospitals. Finance Minister Mustafa Mkulo said, “Most mining companies operating in the country are currently exempted from payments, including a 30 percent corporate tax and customs duties.”

When the committee report was issued, chairman Mark Bomani said, “Our committee studied mining industries in other African nations and made recommendations to put Tanzania on a par with these … The panel found that Tanzanian royalties on the value of gold and diamond exports were half those in Ghana and Botswana.”

The committee said that Tanzania should increase royalties and grant fewer tax exemptions for new investors. “Everything in the report is already being implemented in one or other African country,” Bomani claimed. The report also recommends “timely and fair compensation for communities displaced by mining, as well as procedures for repairing environmental damage…Other proposals may result in amendments to current rules that allow duty-free equipment imports, fuel-levy relief and other tax concessions, but the committee rejected a windfall tax on company profits, as this would be difficult to implement.”

Those opposed to the reforms say that raising mining taxes in Tanzania will work against the government’s efforts to attract foreign investment. Instead, according to the Tanzania Chamber of Mines, the government should improve on infrastructure in order to attract more foreign companies.

Meanwhile, according to the East African (Aug. 2), Canada is moving to safeguard its business interests in Tanzania through negotiations towards a Foreign Investment Promotion and Protection Agreement (FIPA), which aims to provide greater predictability and certainty for Canadian investors considering investment opportunities in Tanzania.

According to mining experts, the country has about one billion ounces of gold yet to be exploited. At present, only four percent of Tanzania’s gold potential is being exploited despite the country being Africa’s third largest gold producer.

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