Tanzania's mining sector contributed around 2.3% to annual GDP in 2008

Aug. 1, 2009 - PRLog -- As this report went to press, there was still uncertainty surrounding Tanzania’s proposed new Mining Act that was originally scheduled to be presented to parliament in February 2009. The government has given no reason for the delay in tabling this bill, which will reportedly make significant alterations to mining sector legislation. Although the government has said that is in the final process of consultation before tabling the bill, a spokesman for Barrick Gold Tanzania was quoted by Dow Jones in April 2009 as saying that the government had not yet sought advice from his company.

Although the bill is yet to be tabled, reports suggest the government wants to take a 10% stake in all Tanzanian gold mines, remove tax breaks and incentives for mining companies, alongside increasing royalty payments. This follows recommendations made by a presidential review committee.

Certainly, there is an argument that Tanzania is not benefiting from mining activity to the same extent as some of its African neighbours. A 2008 report from the Business & Human Rights Resource Centre estimated that the combined loss to the country over the past seven years, as a result of low royalty rates, unpaid corporation taxes, and tax evasion by major gold mines, amounted to some US$400mn. Although mining companies have disputed the basis for the report, and questioned some of the figures used, it has had the effect of stirring up public anger that somehow Tanzania is not gaining its ‘fair share’ from mining extraction.

The mining industry of Tanzania is relatively small in terms of value, but its importance is highlighted by the fact that mining earns a substantially significant share of the export revenues for the country. At the present time, the mining sector contributes around 2.3% to annual GDP, but the government wishes to expand this to 10% by 2025.

Traditionally, gold and diamond production has been the mainstay of mining production for the country.

The nation is the third-largest gold producer in Africa behind South Africa and Ghana, and ranks among the top producers of diamonds in the world. In recent times, another metal that has been catching the spotlight is uranium – with a significant number of deposits being identified in Tanzania. Besides these, coloured gemstones are also mined extensively in the country.

Following trade liberalisation in the 1990s, the mining industry has been growing rapidly in Tanzania.

Characterised by large-scale mechanised mines owned primarily by foreign entities, the industry is burdened by several negatives. Topping the list is the lack of a good infrastructural system that discourages potential investment in the industry. Adherence to safety and environmental standards in mining is also abysmal. Further, procedural delays substantially increase the cost of business.

Nonetheless, with the government making fervent attempts to streamline the management of resources in the country, prospects look bright for its mining industry. Also, the discovery of substantial uranium deposits has been successful in diverting the focus of the international community to Tanzania – which translates into a strong possibility of much-needed capital inflow into the country.

In June 2009, President Jakaya Kikwere unveiled a TZS1.7trn stimulus package to help the domestic economy weather the ongoing global financial crisis. At the same time, the president said that producers of diamonds and other gemstones will be exempt from paying royalties to the government for the next two years, in an effort to keep production continuing at a time of low demand. This move could see the government lose some US$500,000 from diamond sales and US$2.5mn from tanzanite sales, according to a recent report on Bloomberg.

On page 9 of this report, the phenomenon of increased Chinese activity in the global mining sector is examined and what this means for the industry moving forward.

Alterations have been made to the Company Profile for Williamson Diamonds, to reflect its new ownership by UK-based Petra Diamonds.

Industry Forecast Tanzania’s mineral industry, particularly gold mining, is likely to grow in the near future, with increased production from the North Mara mine and the development of projects such as Buckreef and Tulawaka.

The report forecasts the mining industry in Tanzania to reach a value of US$0.50bn by 2013, contributing around 1.5% to the nation’s GDP.

http://www.companiesandmarkets.com/r.ashx?id=EQXU28X3W145039

# # #

Browse thousands of market research reports covering major markets, companies and countries. Www.companiesandmarkets.com is a central source of market research reports from the world’s leading analysts and report publishers.