Extractive sector in Tanzania

Tanzania is a rich natural resource country with vast wealth of metals (gold, iron ore, nickel, copper, cobalt, silver), industrial minerals (diamond, tanzanite, ruby, garnet, limestone, soda ash, gypsum, salt, phosphate, gravel, sand, dimension stones and lately graphite), fuel minerals (coal and Uranium) and offshore natural gas in quantities potentially to transform the country’s economy. With such abundance, as the country Tanzania is / could be the provider of the raw materials for the global market and the payments can immensely contribute to nation-wide economic growth and social development.
Despite such wealth potential too, majority of Tanzanians continue to live in conditions of material poverty. Recent estimates put the number of those living below the poverty line at 12 million or a quarter of the population. Poverty has persisted, despite reports of relatively stable growth of the economy averaging 7%, for the last five years.

Public expectation for benefits to reach the larger population has never been greater. Persistent poverty, unemployment, inequality and the increasing voice and influence of civil society organizations (CSOs) add to the pressure on governments and investors to rationalize the benefit sharing of extractive resources wealth. This has created a sense of urgency for the government and investors to respond and use the resources to deliver immediate and tangible benefits. However, others see this as migration towards “resource nationalism” and indirect state control on the management of resources. The government is questioned for eroding value and diminishing competitiveness through the political economy while investors are faulted for not integrating projects into the economies of areas hosting extractive-FDIs, negotiating unfair deals, being merely opportunistic and evading tax. The state has been aligning with many regional initiatives including the Africa Mining Vision (AMV), the Land Policy Initiative (LPI) and the African Peer Review Mechanisms (APRM), SADC Mining Protocol among others. However, while the understanding of these problems grows progressively, it is not matched with the capacity to respond.

The actions of financiers, legislators, trade unions, the media, industry analysts and CSOs impact extractive industries projects and require effective policy and regulatory responses. The engagement of CSOs in advocating for sustainability has placed good governance at the centre of the resources management public debate. The 2008 economic crisis and the decrease in trust by the public in governments and large corporations have elevated the subject of ethical business practices. To counter this decline in confidence in the extractive resources sectors of mining, oil and gas , governments and the global community have responded with voluntary self-regulation, prescriptive laws demanding product certification, transparency, elimination of safe havens, fair deals, counter-resource depletion measures and equitable resources access policies. The initiatives include the United Nations (UN) Global Compact, the Kimberley Process, and the Governance Principles of the Organization for Economic Cooperation and Development (OECD) and the Extractives Industry Transparency Initiative (EITI).

For many natural resource rich countries, there are no ready alternatives insights into the management of the resources. While the influence of international CSOs has increased exponentially in the past two decades, capacity, financial independence and the voice of national CSOs remain modest. There is a risk therefore that advocacy and accountability activities are left to international initiatives with limited ability by citizens to fully reflect expectations and development needs of the population and complement international efforts.

The extractive sector has the opportunity and potential to positively contribute to all 17 Sustainable Development Goals (SDGs). The sector can foster economic development by providing opportunities for decent employment, business development, increased fiscal revenues, and infrastructure linkages. It is clear, however, that the extractive sector is prone to fiscal leakages; inflated expectations of massive hidden margins can contribute to policy instability and undermine accountability of government to its citizens. Recent trends in commodity markets have witnessed falling oil prices underpinning the importance of effective governance of natural resources to mitigate such volatility. Initiatives such as the Extractive Industry Transparency Initiative, the Natural Resource Charter, Natural Resource Governance
Institute, Open Government Partnership, PWYP and others have contributed significantly to improve transparency and analysis of extractive revenues at both global and country level. The corrosive impacts of illicit financial flows (IFFs) on economic progress and poverty alleviation efforts have become part of development debate. In July 2015, the Addis Ababa Action Agenda of the Third International Conference on Financing for Development was adopted and commits all nations to “redouble efforts to substantially reduce illicit financial flows by 2030, with a view to eventually eliminating them.” Other issues including corruption, transfer pricing embedded in tax avoidance and tax evasion are important to register. Global debates about the growing challenge of inequality, climate change, gender and youth as well as calls within national politics to pay greater attention to equity have brought issues of how extractive industry serves the needs of vulnerable and disadvantaged populations to the center of the policy agenda. Such concerns are also central to the Sustainable Development Goals.

Within these contexts, civil society engages in numerous efforts to both improve the management of extractive industry revenues, and to increase accountability. An effort to link local and international actors in campaigns is also thought to have been effective in achieving successes.
In order to continue addressing poverty challenges, the extractive sector in Tanzania has undergone major shifts in terms of policy and regulatory framework since 2016. The essence for the shift is for the country to harness the full economic potential from its mining and natural gas sector. The proper use of the revenues from extractives could facilitate the country’s journey towards becoming an industrialised economy by 2025. In 2015, the government enacted three major laws to regulate the sector and increase accountability. Further, in 2017, the country adopted interventional policies in the extractives sector, tabling under certificate of urgency three new extractives laws aimed at facilitating renegotiation of mineral contracts and for operations to adhere to a new regulatory regime. These laws come on the back of Presidential Committee reports that concluded that Tanzania is currently not getting a fair share from its extractive resources.

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