The reforms in Tanzania’s mining sector have come as a boon for the small-scale miners, as the government has set its sights on multinational firms, on whom it has placed a heavier tax burden.
The changes seem to have spared artisanal miners as the government seeks more revenue from the big players to raise the sector’s contribution to GDP from 4.8 per cent to 10 per cent by 2025.
Early this month, parliament approved a Bill designed to relieve small-scale miners of the burden of paying withholding tax of 5 per cent and 18 per cent value added tax.
This leaves the holders of a primary licence with a 7 per cent tax obligation only.
Section 55b (i) of the Mining Act states, “Supply of precious metals, gemstones and other precious stones by a small-scale miner at the buying station designated by the Mining Commission under the Mining Act or at the Mineral and Gem House shall be zero-rated.”
While the big investors continue to express their displeasure at the changes, more than 6 million holders of primary mining licences are a happier lot.
John Bina, president of the Federation of Miners Association of Tanzania said that the zero-rating on their supplies “will ease a heavy burden of taxes that miners were forced to shoulder.”
The association members met with President John Magufuli and appealed for the removal of the VAT imposed on minerals.
They also called for a reduction of tariffs and other charges, saying it would not only promote small-scale miners but also minimise instances of tax evasion and smuggling, which have become rampant.
The government said that amendments are expected to put in place mechanisms to enable small-scale miners to operate smoothly.
Since taking the office in late 2015, President Magufuli has focused on foreign investors in a drive to increase the country’s revenues, fight corruption, tax evasion and dubious contracts, and reduce inefficiency in public service delivery.
In 2016, the president ordered withdrawal of licences for the country’s two biggest mining companies, Barrick Gold Corp and London-listed Glencore Plc, from the gold-rich areas in northwestern Tanzania to allow more that 5,000 small-scale miners to gain access to the fields.
Dr Magufuli moved farther to Mwakitoria in Mwanza region, where he ordered revocation of big investors’ licences to make way for small miners.
The president has maintained that for years, Tanzanians have not been benefiting from the country’s natural resources, especially minerals, because of dubious investors supported by corrupt officials.
Tanzania has gold, tin, nickel, iron, copper, zinc, lead, diamonds, uranium and a wide variety of gemstones, including tanzanite, coal and industrial minerals such as soda, kaolin, gypsum, phosphate and dimension stones.
The government has announced that it will set up mineral buying stations by April, to make it easy to control the trade in minerals and ensure that dealers pay the stipulated taxes due to the government.
The classification of large, medium and small-scale mining in Tanzania is typically based on the amount invested, according to the Mining Act, 2010.
If the investment is less than $100,000 or its equivalent in Tanzanian shillings, it is referred to as a small-scale mine and needs a primary mining licence from the Zonal Mines Officer.
The country has more 6 million artisanal and small-scale miners and more than 50,000 brokers.
In the effort to clean up the sector, Minister for Minerals Dotto Biteko has instructed 18,341 mining licence holders to pay up or risk losing their licences.
Mining firms and individuals owe the government close to $50 million, including $26 million for prospecting, $12 million for mining, and $8 million for the primary mining licences.
Mr Biteko has asked the Mining Commission to revoke at least 110 prospecting licences and 52 mining licences that have already been issued.
“We pledged to empower small-scale miners, revoked licences for firms and individuals who breached the law and identified more special areas for small-scale miners. However, we found big foreign companies have also been issued licences to special areas allocated to Tanzanians,” Mr Biteko added.
Rwanda, too, has instituted reforms in its mining sector although theirs appear to empower the big players and push out artisanal miners.
Late last year, Kigali licensed mining companies in an exercise that was meant to spur growth in the sector, making it the country’s predominant foreign exchange earner.
In Kenya, miners called for a review of the Mining Act, 2016, saying that the law was unfavourable to investment.