If it is precious and comes out of the ground, you can probably find it in Tanzania.
It would be an understatement to say that Tanzania is rich in minerals. It is the only place where the violet gemstone tanzanite is found, will soon be in the top three gold producers in Africa and has significant reserves of coal and base metals in the south.
But it is gold that is the headline grabber. From nowhere five years ago, Tanzania has attracted a billion dollars' worth of foreign investment and leapt to prominence with the global big names — Ghana's Ashanti, Canada's Barrick and South Africa's AngloGold — opening mines and exploring in the country. With new mines coming on stream, production is estimated to hit 1 million ounces this year, up from 250,000 last year.
The government's mid-90s mining law, which prompted the investment, has been criticized for being too lenient but was undoubtedly successful in kick-starting the sector.
"We have seemed to be very generous because we had to be," says Patrick Rutabanzibwa, permanent secretary at the Ministry for Energy and Minerals, and widely acknowledged as one of the best civil servants in government. "We had to be as competitive as others who are already on the market, some of which already had good infrastructure."
Rutabanzibwa reinforces the point by explaining that the mining sector was contributing less than half of one percent to GDP before they changed the investment policy. Yet within five years, ministry officials estimate that the Treasury will be annually receiving $1 billion in royalty payments, dividends and tax. The mining sector achieved a growth rate of 17 percent on average between 1997 and 1999 and the government is aiming for it to contribute 10 percent of GDP by 2025.
However, criticism of the mining act has come not only from international institutions such as the World Bank, but also from the local miners who were eking out a living on the claims before the big companies arrived. Their protests have gone beyond words and many of the mines have suffered from claim invasions, but the fiercest area of conflict currently comes from a tanzanite mine close to Arusha in the north of the country.
A South African company, Afgem, bought one of four claims to regularize production of the stone, as many of the gems were being smuggled out of the country. The company has subsequently had to cope with invasions as well as spurious legal cases. Afgem insists that it will be bringing in facilities such as electricity and water that it will make available to artisanal miners, so everyone should benefit.
It will also be adding value to the stones in Tanzania, cutting and polishing them on site, thus developing in-country skills and increasing revenues to government coffers. They add that the government has been totally firm on the rights of the contract.
The principal market for tanzanite is the U.S. where it will be branded as a rare, high-quality product with a social dimension, as a portion of revenues will go to social projects in surrounding areas. CEO Mike Nunn says he is trying to combine the luxury of a brand such as Gucci with the environmental conscience of National Geographic.
Examples such as Afgem show how the country has benefited from inward investment but it has not all been one-way traffic into Tanzania. Some local companies are also launching regional offensives beyond their borders. Contract mining and construction company Caspian, which cut its teeth on the Williamson diamond mine in Tanzania, has been short-listed for a major earthmoving contract at Kimberley in South Africa. Winning the contract would be a major coup for the management led by Kenyan GM Alan Mayers.
Such dynamic growth throughout the mining sector is providing an impetus for change in the rest of the economy, as the heavy power requirement of mines is adding pressure to reform of the energy sector.
Yet, with low-cost ore deposits compensating for relatively high infrastructure charges, little is inhibiting mining expansion. In Tanzania, if all that glitters is not gold, then it is probably something even more valuable.
