A golden opportunity?: How Tanzania is failing to benefit from gold mining
Posted by markcurtis on December 22, 2008
New report by Mark Curtis and Tundu Lissu
To read the full report click here
Introduction
Gold mining is the fastest growing sector of Tanzania’s economy. Minerals now account for nearly half the country’s exports and Tanzania is Africa’s third largest gold producer. Yet ordinary Tanzanians are not benefiting from this boom both because the government has implemented tax laws that are overly favourable to multinational mining companies and because of the practices of these companies. Tanzania is being plundered of its natural resources and wealth.
Between 1997 and 2005, Tanzania exported gold worth more than US$2.54 billion (bn). The government has received around $28m a year in royalties and taxes on these exports, amounting to just 10 per cent over the nine year period. The 3 per cent royalty has brought the government only an average of US$17.4m a year in recent years. Raising the royalty rate to, say, 5 per cent would have increased government revenues by around US$58m over the past five years.
We calculate that Tanzania has lost at least $265.5m in recent years as a result of an excessively low royalty rate, government tax concessions that allow companies’ to avoid paying corporation tax and possibly even tax evasion by some companies if allegations are true. This is a very conservative estimate, in that it does not cover all the gold mining companies or all figures for recent years (which are not publicly available). Neither does it cover the financial costs of other tax incentives such as VAT exemption, which are extremely difficult to estimate. These extra revenues could of course provide a huge boost to tackling poverty in Tanzania. We also estimate that the prioritisation of large-scale gold mining in the country has come at the expense of small-scale artisan miners, around 400,000 of whom have been put out of work.
This report identifies three severe problems with gold mining in Tanzania, namely:
• It provides the government with very low tax revenues
• It is subject to minimal governmental and popular democratic scrutiny and is associated with the problem of corruption
• People in the gold mining areas are barely benefiting and many are being made poorer.
Tanzania is one of the ten poorest countries in the world. Some 12m of the country’s 39m people live in poverty, surviving on average incomes of 399,873 Tanzanian Shillings (Shs) (US$307) a year. At the same time, Tanzania possesses around 45m ounces of gold, which at the current gold price means the country is sitting on a fortune of up to US$39bn, although extraction costs must of course be taken into account.
