HomeEast AfricaLow royalty rate costs Tanzania millions

Low royalty rate costs Tanzania millions

A night shot of
North Mara – one of
Barrick Gold’s four
gold mines in
Dar es Salaam, Tanzania — MININGREVIEW.COM — 21 October 2008 – The East African state of Tanzania has lost at least US$ 265.5 million (R2.6 billion) in recent years as a result of an excessively low royalty rate, as well as tax concessions applied to the country’s mining sector.

Reporting from Kampala, allAfrica.com quotes the East African Business Week as saying these facts were revealed in the newly-published second edition of a publication called “A Golden Opportunity? – how Tanzania is failing to benefit from gold mining.”

“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,” the report says. Prepared by Tanzanian lawyer Tundu Lissu and independent author, journalist and consultant Mark Curtis, the report further suggests that the estimates do not cover the financial costs of other tax incentives such as VAT exemption, which are extremely difficult to estimate. The report was commissioned by the Christian Council of Tanzania, Tanzania Episcopal Council and Baraza Kuu la Waislamu, Tanzania.

“We 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 to work," the report adds.

Between 1997 and 2005, Tanzania exported gold worth more than US$ 2.54 billion (R25 billion). The government received around US$28 million (R280 million) a year in royalties and taxes on these exports, amounting to just 10% over the nine year period. The 3% royalty has brought the government an average of only US$17.4 million (R170 million) a year in recent years.

The report suggests that Tanzania’s mining law should be amended to ensure that the national economy and Tanzanians benefit much more from gold mining. It also proposes that no new mining contracts should be signed until this reform has taken place.

Also all the gold mining companies and the government should be required by law to make full public declaration of how much they pay and receive in tax and other remittances from gold mining.