Tanzania seeks to raise mining royalties

According to the Guardian newspaper of Tanzania, Lowassa told Tanzanians living in Canada that there was a need for both the companies and the government to arrive at a consensus on an upgraded mining royalty.

Lowassa’s comments on mining royalty follows statements made recently by the country’s President Jakaya Kikwete that he wished mining royalties were on two digits in order to ensure more mining wealth remains in Tanzania. Currently mining royalties in Tanzania are pegged at three percent and according to the country’s leadership, this is too generous.

“When the contracts were signed, the price for gold was US$200 per ounce,” Lowassa who was expected to present a paper on Canada’s Role in the 21st century at the Natural Resources and African Economic Development told Tanzanians living in Canada. “Today the price has increased to US$600.”

Meanwhile, according to the Prime Minister two companies Resolute Mining Limited and Barrick Gold Tanzania have agreed to reconsider increasing the royalty. He said what was needed however was to convince them when government meets the companies again.

“Government wants to learn how Canadian gold miners conduct mineral business at home without destroying the environment,” he said. “Once in our country, we would like them to pay corporate tax and contribute to the provision of social services in line with their contracts.”

And in what could be seen as a move towards making strides in reaping enough from its mineral resources, officials from the Ministry of Energy and Minerals have been meeting officials of gold mines since last week to discuss reviewing the tax structure in the mining sector. Minister of Energy and Minerals Nazir Karamagi met officials of Geita Gold Mine (GGM) to discuss this matter last week.

GGM, a subsidiary of AngloGold Ashanti, is Tanzania’s third mining company after Barrick Gold and Resolute’s Golden Pride Mine to forego the 15 percent allowances mines get on unredeemed capital, according to Tanzania’s Daily News. This means that the three companies are now paying corporate tax.

Dar es Salaam exempts mining companies from 20 percent value-added tax on goods and products used exclusively for mining and can offset all equipment and machinery costs against their earnings. This is a government policy meant to attract more foreign companies to venture into its thriving mining industry, which for the past decade has contributed significantly to the country’s economic growth.

Karamagi says the process of meeting gold mines is an on-going one and that after meeting Geita, his ministry will meet other mines.

AngloGold Ashanti Executive Director Fritz Neethling told the media in East Africa that his company sent its proposals on tax to government. He however could not say what the company’s proposal on the same was.

GGM, according to mining information in Tanzania, has an average turnover of US$200 million (Tsh200 billion). The company has already paid Tsh106 billion to government.

On its part Barrick Gold which is Tanzania’s biggest firm and has three mines there to its credit was the first company according to Daily News to negotiate and agree with government on taxes. The company agreed to pay US$7 million every year.

Mining royalty change and tax schedules have the full blessing of the president who says the same should be seen to benefit the two parties involved. Kikwete acknowledges that while Tanzania has minerals, she does not have capital and technical expertise and the opposite holds with companies engaged in mining in his country.

December 2006
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