Contents 1. Introduction 2. Tanzania's 'Gold Rush' 3. The State, Artisanal Miners and Investors   3.1 The 1920s and First Gold Rush   3.2 The 1970s and Second Gold Rush 4. The Bank and The Mining Industry   4.1 The Bank and Tanzania's Mining Industry   4.2 Tightening the Noose 5. Legislative Developments 6. Reflections on the 1998 Act   6.1 Mining a Union Matter?   6.2 Title to and Control of Minerals 7. 'The Day Hell Broke Loose …': On Human Rights 8. Administration of the Act   8.1 Other Powers of the Minister   8.2 The Mining Advisory Committee   8.3 Categories of Mineral Rights 9. Environmental Considerations   9.1 The Ministerial Regulations 10. Dispute Processing Mechanisms   10.1 Where are the Benefits?   10.2 Foreign Exchange Earnings   10.3 Technology Transfer   10.4 Employment Creation   10.5 Social Services and Community Development 11. Conclusion   11.1 Agenda for Reform   Footnotes and References   Download

In Gold We Trust: The Political Economy of Law, Human Rights and the Environment in Tanzania's Mining Industry
 

Tundu Antiphas Lissu
Environmental and Human Rights Lawyer
 

Abstract

This study seeks to closely examine the nature and character of the boom in Tanzania's mining industry. Taking a longer historical perspective, the study locates the boom within the current developments in the global economy and the transformations in the mining industry globally. This is intended to show the extent to which policies of the first three decades of Tanzania's independence are to blame for the alleged decline in the mining industry and whether the current boom is attributable to policy reforms that began in the mid-1980s. And in the traditions of the political economy analytical framework, the study seeks to uncover the interests and forces at work behind the boom in global mining and the social and environmental costs associated with it. The study covers Mainland Tanzania and relates to the boom in precious minerals particularly gold and gemstones, which have drawn the greatest interest and the attention from investors, governments and multilateral financial institutions alike.

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This is a work in progress published on 19 December 2001.

Citation: Lissu T, 'In Gold We Trust: The Political Economy of Law, Human Rights and Environment in Tanzania's Mining Industry', Work in Progress, Law, Social Justice & Global Development Journal (LGD), 2001 (2) <http://elj.warwick.ac.uk/global/issue/2001-2/lissu.html>. New citation as at 1/1/04: <http://www2.warwick.ac.uk/fac/soc/law/elj/lgd/2001_2/lissu1/>

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1. Introduction

On July 24, 2000, the Financial Times, one of Britain's leading newspapers published a wide-ranging 'survey on Tanzania', in which it boldly declared that Tanzania was, at long last, 'coming out of the shadows'. It argued:

Elsewhere in that survey, the paper quoted Sam Lwakatare, the President of the Tanzania Chamber of Mines, as saying that Tanzania was seeing a transformation in the mining industry.

When asked whether this transformation had not come about because his government was 'too generous to the mining companies', President Benjamin Mkapa himself stated that he was, indeed, 'beginning to think so … because we have had so much praise for the incentives we legislated for'. However, the President asked a rhetorical question:

Time had come, the President argued, 'to correct the mistakes of the past', and his government was 'not going to renege on that' (op. cit.).

President Mkapa's position is echoed by many in the mining industry in Tanzania, who have noted that current interest Tanzania is provoking among some of the industry's main players in South Africa, Canada and Australia has come about 'after a generation of decay and decline'. As the Financial Times survey quoted one industry representative:

Studies of the mining sector in Tanzania have tended to place responsibility for the alleged collapse of the mining sector in the 1960s and 1970s on Tanzania's 'socialist' policies, in particular nationalisation in other sectors (Parker, 1992, Jourdan, 1990). According to these authors, outside investors became interested in investing in minerals only in the 1980s, because the government had by then abandoned its failed policies and changed tax, employment and exchange control regulations. Reflecting these views, the Guardian claims in a recent article that 'a new Mining Act in 1998 opened the sector up for foreign investment and that policy is now bearing fruit, with Tanzania attracting investors even when gold prices have fallen to around 18-month lows'. In support of the claim, the paper cites figures that show that the government has issued over 300 licenses to mining companies while investment in gold exploration since 1998 is estimated at $870 million.

This study seeks to closely examine the nature and character of the boom in Tanzania's mining industry. Taking a longer historical perspective, the study locates the boom within the current developments in the global economy and the transformations in the mining industry globally. This is intended to show the extent to which policies of the first three decades of Tanzania's independence are to blame for the alleged decline in the mining industry and whether the current boom is attributable to policy reforms that began in the mid-1980s. And in the traditions of the political economy analytical framework, the study seeks to uncover the interests and forces at work behind the boom in global mining and the social and environmental costs associated with it. The study covers Mainland Tanzania and relates to the boom in precious minerals particularly gold and gemstones, which have drawn the greatest interest and the attention from investors, governments and multilateral financial institutions alike.

Part One is an overview of the recent developments in Tanzania's mining industry. It surveys changes from an essentially small-scale mining strategy to the corporate one, dominated by large-scale operations conducted by multinational mining giants based in the major industrial countries of the West. This part takes issue with conventional arguments that have charged the small-scale mining sector as being environmentally wasteful and economically inefficient. It argues that available evidence does not support these conclusions, on the contrary it suggests that small-scale mining is environmentally benign and socially sustainable. On the other hand, the study argues that large-scale mining is not only environmentally destructive, it is also economically ruinous and socially irresponsible.

Part Two is a historical survey of the mining industry in Tanzania. This part shows that contrary to popular belief that the current boom is of a recent origin, interest in Tanzania's mining industry is, at least, as old as the gold rushes seen in Canada, Australia and South Africa at the turn of the last century. It also challenges the conventional belief that corporate interest in Tanzania's mining industry declined as a result of the social and economic policies adopted in the 1960s which discouraged foreign investors. It shows that small-scale mining activities have historically been at the centre of Tanzania's mining industry throughout the colonial period and for much of the post-colonial period, and that it is the current corporate interest that is of more recent origins.

In Part Three, the study examines the interests that have been behind the resurgence in corporate mining in the country. It looks at the policy reform processes spearheaded by multilateral and bilateral financial institutions to create the right conditions for foreign investment in the mining sector. These are not just policy, legal and institutional arrangements but also financial incentives that have been made available to investors in the mining sector.

Part Four deals with legislative and policy developments that have under-girded Tanzania's mining industry. It paints, in broad strokes, the historical evolution of Tanzania's mining policies and their underlying economic rationale. Colonial mining policies and legislative schemes will be analysed, followed by the post-colonial developments, before dealing with the current juncture in the evolution of Tanzania's mining policy.

In Part Five we examine the recent legislative changes brought on by the enactment of the new mining legislation. It looks at the various aspects of the mining law such as issues of control and ownership of minerals; land tenure issues administration of the mining industry; as well environmental issues associated with the industry.

Part Six is an examination of the human rights issues associated with mining in Tanzania. It provides, through the case study method, a highlight of the human rights costs that corporate mining operations impose on nations and communities.

Part Seven returns to the subject of institutional structures and the decision-making processes under the new law; while Part Eight deals in greater detail with the environmental provisions of the law. Part Nine looks at the dispute resolution mechanisms; whereas Part Ten returns to challenge claims that corporate mining ventures represent a future for local and national economies in Tanzania. In Part Eleven, we tie together the major themes of the preceding parts in a conclusion.

2. Tanzania's 'Gold Rush'

Tanzania is extremely rich in minerals. According to a 1998 survey of Africa South of the Sahara, the country currently exploits diamonds, gold, salt, various gemstones, phosphates, coal, gypsum, kaolin and tin. Deposits of lead, iron ore, tungsten, pyrochlore, magnesite, nickel, copper, cobalt, soda ash, uranium, natural gas, niobium, titanium and vanadium have also been identified (Taylor and Francis Group, 1998, 1041). The complex geological environment in Tanzania has resulted in this unparalleled diversity of mineral and gem wealth. Along with tourism and agriculture, mining has, therefore, rightly been designated as being a growth sector in the Tanzanian economy.

That Tanzanian mining is an industry 'on a roll' and has been widely celebrated in both popular and business presses both at home and abroad. According to the authoritative British daily, Financial Times, there has been more than $700m of foreign direct investment in the mining sector since 1997, despite price fluctuations on world markets of the main attraction, gold. Whereas exploration in Africa has previously tended to focus in particular on South Africa and Ghana, the year 1998 saw Tanzania attracting the most exploration expenditure in Africa. According to a South African-based business magazine, Tanzania has been the major focus of Africa's gold exploration and development over the past five years, with up to 15 per cent of the continent's exploration expenditure spent in the country. Consequently, the country has become Africa's third largest gold producer after South Africa and Ghana.

The mining sector grew at an average of 15.8 per cent during the four years ending 1999, compared with a growth rate of 11.7 per cent in 1995. In 1999 alone, the industry grew by over 27 per cent, up from the previous year's 17 per cent, mostly in the gold sector (Taylor and Francis Group, 2001:1156). By 2003, when the three new gold mines of Geita Gold Project, Nzega's Golden Pride and Bulyanhulu Gold Mine are fully operational, the country's gold production will rise to 1.4 million ounces a year. Output at Geita – which started production in June 2000, some three months ahead of schedule - is projected at 500,000 ounces per year when in full capacity. Operated by Ghana's Ashanti Goldfields and South Africa's AngloGold, Geita is reputedly Africa's second largest gold mine.

Meanwhile, Tanzania's Ministry of Energy and Mineral Resources reportedly projected in June 2000, that Tanzania's annual gold output would reach 40 tons by 2002 (Taylor and Francis Group, op. cit.). Output from the two mines in Geita and Kahama districts and the one mines under construction in Tarime district would alone account for about 29.3 tons of the gold production. These figures are far higher than – but consistent with – the earlier predictions that gold production would triple from five to fifteen tons a year over the next five years – and, possibly, considerably more.

By 1998, as a result, some of the big names in the world of mining were making their presence felt in the country, with such industry players as Anglo-American, Rand Gold Resources and Rio Tinto Zinc (RTZ) Mining and Exploration Ltd. already investing particularly in gold mining in the Lake Victoria Zone. Others are Ashanti Goldfields (principally owned by Lonrho, Anglo-American and the Government of Ghana); Sutton Resources Ltd., of Canada which used to own Kahama Mining Corp.; and the British and Canadian consortium, Samax/Resolute Joint Venture Co., which runs the Golden Pride Mine in Nzega District. Golden Pride is now run jointly by Resolute and Ashanti Goldfields after the latter bought Samax. There is also the Australian-owned Afrika Mashariki Mines Ltd. with significant interests in Buhemba and Tarime, to the east of Lake Victoria.

Such has been the rush for gold in Tanzania that expenditure by mining companies on exploration programmes in the country (which totaled about $6 million in 1992) reportedly exceeded $80million in 1997 (Taylor and Francis Group, op. cit.) By 1998, spending on exploration had dropped to some US$ 58 million, further dropping, as expected, to around US$ 45 million in 1999. Mine development spending, however, soared from US$ 50 million in 1998 to a whopping US$ 400 million in the next two years.

Other sources have shown that more than US$545 million was used to construct three modern gold mines at Geita and Bulyanhulu and the ongoing construction of the Buhemba gold mine in Tarime district. The Geita, Golden Pride and Tarime mines are expected to cost a total of $870 million when the last of those mines comes on-stream in 2002. In total, in order to develop other deposits, an investment capital totalling USD 655 million is envisaged. Thus, as leading watcher of Tanzania's mining industry argued in March 1999, 'with more money spent on non-ferrous minerals exploration (in 1998) than in any other African country, the first commercial gold mine starting operations in November (1998), and the prospect of another four to seven projects coming on-stream over the next year and half, Tanzania is undoubtedly the flavour of the month in African mining circles….'.

It is Tanzania's rich mineral deposits that appear to have been one of the major factors behind the recent surge in foreign investment in the mining sector. According to Mark Turner, a leading industry watcher, the first project to start operations – Golden Pride, operated by Australia's Resolute in joint venture with Ashanti (which bought out Samax Resources in 1998) – boasts an estimated 2.4m ounces and was expected to produce 180,000 troy ounces a year. However, proven reserves are now said to total 2.7 million ounces and in its first of production in 1999 the mine produced 220,000 ounces, well above expectations.

The Bulyanhulu project, now owned by Barrick which bought out Sutton Resources in 1999, was said to be a world class deposit with 9 million ounces in proven reserves, and – although underground – boasted a highly attractive grade of 12-13 grams/ton. However, Bulyanhulu's proven gold reserves have recently been appraised upwards to about 10.5 million ounces and still growing, a 40 per cent increase from year-end 1999. Its already attractive gold-to-ore ratio has also been appraised at 14 grams per ton of rock ore, making it one of the richest deposits in the world (see Lissu, forthcoming).

Ashanti Goldfields, East Africa Mines and Anglo-American are all exploring and developing another contained 9m ounces of estimated resources around the Geita and Rwamagaza Greenstone belts, and Afrika Mashariki is expected to press ahead with the Tarime gold project in northern Tanzania, with well over a million troy ounces. Total estimated gold deposits now stand at around 30m ounces – with 8m discovered last year. This is an increase of some 5 million ounces from earlier estimates that had put the gold reserves at a conservative total of 25 million ounces. Given the attractive geology of the region – said not to be unlike that of western Australia – industry pundits believe that further exploration will reveal considerably more.

Export earnings from minerals appear to have also risen apace with increases in investment in exploration and mine development. Although statistics for export earnings from minerals vary widely depending on the sources of information, they nevertheless consistently show dramatic increases in export earnings. For instance, according to the latest survey of Africa South of the Sahara conducted by the London-based Taylor and Francis Group's Europa Publications Ltd., mineral exports earned US$103 million in 1998, compared with earnings of $27 million in 1990. This is an increase of over 380 per cent in eight years. Exports of gold alone rose seven-fold from $7.6 million in the year ending 30 April 1999 to $53.4 million in the year ending 30 April 2000, according to Bank of Tanzania figures, as exports commenced from the Golden Pride mine at Nzega (Taylor and Francis Group, op. cit.)

Other figures for the year 1999 have showed that mineral exports fetched $80.4 million, up from $22.6 million in 1998, according to the Business in Africa magazine. Similarly, recent reports from the state-owned Daily News quoted the President of the Tanzania Chamber of Mines as telling a parliamentary seminar, that the country's export earnings from minerals in 2000 increased to US$184.86 million from US$22.57 million in 1998. According to the report, gold accounted for the lion's share of the earnings, registering a dramatic increase from US$3.33 million to US$120.41 million in the two consecutive years. Projections for 2002 predict that mineral exports will rise to US$400 million of which US$326 million will come from gold, over 240% increase from this year's total of US$134 million. These developments have increased the contribution of the mining sector to total GDP from 1.4 per cent in 1995, to 2.1 per cent in 1999. The Tanzanian government aims for it to contribute 10 per cent of the Gross Domestic Product by 2025.

3. The State, Artisanal Miners and Investors

We have seen the claims that the current boom in Tanzanian mining is traceable to the generous macro-economic and fiscal policies pursued by the Third Phase government aimed at attracting foreign investment in the sector; as well as the new liberal legislative framework brought about by the Mining Act, 1998 which allegedly opened up the sector to foreign investors. However, closer scrutiny of the available evidence reveals that the boom was well underway long before President Mkapa was even considered for the presidency and that it had very little to do with foreign investors as such. Whereas it is true, as various commentators have contended, that gold production virtually ceased in the early 1970s; and that renewed interest in the 1990s has led to the revitalisation we are seeing now, the reasons for both the collapse and the current revitalisation lie deeper in the recesses of the global economy and not necessarily to any particular state policy or a set of policies.

Mining, particularly of precious minerals such as gold, has always been and continues to be susceptible to general trends in the global economy. Gold production has a long history in Tanzania that goes back to the pre-colonial era when Arab traders from the coast were to be involved in gold exploitation on some scale. These activities became more significant during the German colonial period (1884-1917), with renewed interest in gold and the discovery of other minerals such as mica, garnet, coal and uranium (World Bank, 1961, 253). Of particular importance to the German colonial rulers were mica deposits in the Uluguru mountains in Morogoro – because of its use in electrical insulation and the making of bomb casings – and gold in the Lake Victoria zone, Germany having entered the gold standard in 1870.

To encourage private companies to exploit minerals, the German colonial government introduced the concession system, whereby companies were given exclusive mining rights to large areas. It was through these concessions that the gold syndicate, Koncession fur Edelmineralien (the Concession for Precious Metals) discovered the 'Bismarck Reef' near present-day Geita town. The company worked the reef outcrops for sometime but later abandoned it. By 1910, there were some 76 prospecting fields of various minerals – with gold clearly dominating – on which 111 claims had been pegged. Just before the outbreak of the First World War in 1914, there were six mining companies operating in Tanganyika and gold valued at GBP 250,000 had already been extracted in Geita and Sekenke in Mwanza and Singida region respectively (Lemelle, 1986, 54; Frankel, 1938, 164).

3.1 The 1920s and First Gold Rush

The British colonial period (1918-1961) was associated with a resumption and intensification of mineral prospecting following the disruptions caused by the First World War. This was propelled by the dramatic increases in gold prices between 1920 and 1925, leading to gold rushes in the colonies. In Tanganyika, reports had been circulating since 1902 that there were rich gold deposits in Lupa, an area north of Mbeya, and the rush started there in earnest in 1922. According to a contemporary observer:

There were no big mining companies during these years as German companies operating during the pre-war years had been confiscated as 'enemy property', and so it was basically artisanal miners of all races who became central to the mining industry. By 1923 there were nearly 150 European small-scale miners in Lupa, all in search of alluvial gold. This number rose to 300 by the end of 1931 and to over 1,000 by 1936. During the same period, the number of exclusive prospecting licenses increased from 75 to over 400 (Lemelle, Ibid, 291, Department of Mines, 1931-36, Oates, 1934, 48). The total labour force at Lupa grew from 5,000 to over 20,000 over the same period; and, according to estimates, there were 32,000 Africans employed in mining sector as a whole by 1938, of whom 27,580 were employed in gold mining alone.

The African natives were not employed as labourers in mines alone, as some native entrepreneurs began to emerge in the sector as well. According to the records of the colonial Department of Mines, by late 1936 there were 58 Africans (54 'natives' and 4 'Somalis') with prospecting rights on the Lupa goldfields. Out of the 93 alluvial gold miners in Lupa in 1951, 51 were natives. Although their overall numbers were small, these African small-scale miners were a source of competition and agitation by European miners, because of the competition for labour and the fear that their existence encouraged 'illicit' transactions in gold. Already by 1920s, as Reid notes in his Tanganyika without Prejudice, 'illicit dealings in gold between the Natives and the shadier elements of the mixed population had come to light' (Reid, Ibid, 166). These fears were not without reasons. By 1936 African small-scale miners constituted a permanent force, and as a result 'two years later, several Asian artisans had been displaced by Africans' (Roberts, 1985, 559).

Despite the awareness of the alluvial and reef deposits in Lupa and the Lake Victoria areas during the early 1920s, large corporate interest in Tanganyika or its gold supply was conspicuously absent. Among the reasons for this state of affairs was the fact that the alluvial fields were generally considered unsuitable for large-scale operations, while the reefs were not of proven depth. Another reason was that the price of gold had been fixed at $4.86 and that the colonial state apparatus was too weak during this period to be able to facilitate capitalist production on a large enough scale for it to be profitable (Lemelle, Ibid., 79; Frankel, Ibid ., 259). The colonial state looked to largely peasant agriculture, rather than mining, as the source of raw materials.

Corporate disinterest in mining began to change in the second half of the 1920s when the government began to actively encourage large-scale concerns to invest in mining. However, not much came of these efforts. In 1927, a South African company – Serenge Concessions – took an interest in Lupa, but it was hampered by low prices and lack of state-sponsored investment incentives and therefore wound up within a few months. The following year, a London-based Indian miners' syndicate tried to establish itself in the same area, but left almost immediately because of communication problems and the difficult local conditions. Another company from South Africa, the Central Mining and Investment Corporation, attempted to do some exploratory work in 1930, but wound up almost immediately given the world recession and the fixed price of gold.

The field was, therefore, left to the artisanal miners and with the continuing gold rush, by 1932 production had doubled from the 1929 levels and continued to rise until 1936. By this time, however, the rush began to subside due to the emergence of other more reliable sources of income in other sectors as well to the growing costs of alluvial production which began to be replaced by the more technically demanding reef mining. Once again, big capital began to renew interest in gold mining. There was, as a result, a spate of big investments in gold production in the late 1930s that by the early 1940s, gold was well established as the most economically important mineral and its export value was only exceeded by that of sisal. Annual gold production during this period averaged about four tons.

There was, however, little government revenue from this increase in production in terms of royalties, rents and fees, and out of its revenues from the industry, the government was only able to compensate 'for earlier deficits incurred by the Offices of Mines and Geological Survey.' Gold prices remained low throughout this period, since gold was mainly purchased by financial institutions such as the Bank of England, which had a low demand for the commodity. As a result, the government invested little in the industry, either in the form of labour recruitment, provision of infrastructure or economic protection. In the case of the Lake Victoria area the government's attitude towards the industry was largely negative, reflecting the greater importance attached to cotton production.

With the advent of the Second World War gold production began to decline, mainly because of the 'war economy' supply priorities. From 1941, 'mining companies were denied priority of supplies of machinery, gold prospecting was banned until the end of the war, and labour became genuinely scarce' (Roberts, Ibid., 560). The relative fortunes of gold declined even further with the discovery of diamonds at Mwadui in Shinyanga in 1939. By 1945 diamond exports accounted for the single largest component of exports, whereas gold production had declined to about two tons a year.

Production of diamonds was able to rise steadily because it was backed by a 'number of Indian merchants in Tanganyika and a task force of Italian prisoners of war…. By 1946 (there were) 6,000 workers … with their families … and over 200 armed guards' at Mwadui (Epstein, 1982, 89). Active government support for diamond mining, including taking up of equity in the private companies and even proposing nationalisation (in 1946) was due to the fact that diamonds 'earned at that time more foreign exchange for the colonial government than almost any other export, and the British … were understandably concerned with preserving its value' (Ibid., 90).

Minerals contributed a record three per cent of GDP by 1950 and at around 15 per cent of the total exports by value, their export earnings were nearly as much as those of coffee or cotton. Diamonds accounted roughly for two thirds of mineral production by 1960, although by this time gold production had again risen to 3.5 tons from its previously low levels (World Bank, Ibid.) However, there was little underlying improvement in the significance of gold which – with government actions in the 1940s, coupled with the relative unimportance of gold in the international monetary system which was to last until 1970 – remained unprofitable for large companies to invest in. Throughout the period prior to 1970, the gold price stood at below $35 per ounce.

Many of the most important gold mines of the inter-war period, including Sekenke, were closed by the late 1940s. The only big mine which continued to operate until the early 1960s and produced well over half of total gold production was that owned by Tanganyika Concessions at Geita. This remained the largest gold mine in East Africa, employing around 2,200 miners until it was closed in 1966. Thus commercial gold mining declined rapidly before and soon after independence from three tons per annum in the early 1960s to 10 kg in the early 1970s. It officially ceased entirely in 1972.

It is clear from the foregoing that gold mining in Tanzania ceased not because of Mwalimu Nyerere's 'socialist' policies, rather it declined and finally collapsed altogether for reasons that were almost completely outside the government's control. Indeed those who claim otherwise have never cited a single example of a gold mine nationalised even after the spate of nationalisation that followed Arusha Declaration in February 1967. It is also instructive that Tanganyika's first Three Year Development Plan (1961-1964) prepared by the World Bank on the morrow of Tanganyika's independence considered that the development of Tanganyika depended not on the abundant mineral resources but fundamentally on the transformation of agriculture and animal husbandry.

As far as the mining industry was concerned, the plan's authors advised the newly-independent government to modify mining policies it inherited from its colonial predecessor 'as necessary, to increase the attraction and (give) encouragement to further prospecting by private interests', chiefly through providing favourable tax incentives in the early stages of mine development (World Bank, 1961:8, 269). In any case, since many of the companies which had previously been interested in gold prospecting were South African-based, trade sanctions against apartheid South Africa from 1961 made it impossible for them to operate in Tanzania irrespective of the tax regime. Those which were not South African were also disadvantaged by the fact that they could not import cheap mining inputs from South Africa.

3.2 The 1970s and Second Gold Rush

The international scene in regard to gold demand began to change from 1969. From that year, the demand for industrial gold began to rise by 12 per cent per annum. Simultaneously, there was a huge increase in the US budget deficit and a corresponding decline in US gold stocks, which created a crisis in the confidence of dollar standard that had come into being during the post World War Two period. Consequently, the price of gold began to rise from 1971. Further price increases were to be fuelled by a surge in speculation on the free gold market, as a result of which the price rose to $49.25 by 1972 (Green, 1987, 3).

The international financial chaos of 1973 – which officially marked the end of the dollar standard – together with inflationary fears accompanying the threat to devalue the dollar sent the gold prices soaring to $132 an ounce, whereafter it fluctuated inversely with the movements in the dollar value. The price rose dramatically from $330 to $507 an ounce in 1982, before falling back to $400 after 1986. Since then it has fluctuated between $300 and $400 an ounce. As a result of these factors as well as substantial changes in the nature of the gold market after 1971, there was a renaissance in gold mining internationally from the early 1970s reminiscent of the nineteenth century gold boom.

Tanzanian government's own attempts to take advantage of new profitability in gold production through the establishment of the State Mining Corporation (STAMICO) in 1970 proved to be doomed. STAMICO took over the Buck Reef Mine in Geita in 1971 and attempted to reactivate production of gold from alluvial sources by using large-scale techniques (Jones, op. cit., 111). Production did not actually begin until 1981 and lasted only until 1989, with eight years of production yielding just 800 kg of gold, including only 116 kg in its last year of production. Irrespective of other problems faced, such large-scale operations required massive injections of capital from the government if they were to bear fruit; which was not possible given the economic downturn of the period.

Attempts by STAMICO to attract large capital in the 1970s and early 1980s in the form of aid or joint ventures with private investors also failed, even with the introduction of a new mining law in 1979. Under this law, government participation in such ventures was made no longer mandatory, and local small-scale miners could legally peg claims and work on them. Independent mining companies began to appear in 1984, on the basis of the framework set by the Mining Act, 1979. This framework was further liberalised in 1987 and 1989 when a gemstone and gold trade rationalisation policy – allowing for privatisation of minerals trading – was introduced. Associated with the introduction of this policy, the Bank of Tanzania itself entered the gold buying market on the basis of offering world market prices with 'no questions asked'.

It is necessary to underscore the fact that the disappearance of large-scale operations and officially recorded production did not eliminate gold mining and other mining activities. The large number of skilled people experienced in setting charges, gold prospecting and underground mining methods who were laid off by the companies which closed down increasingly moved into artisanal mining. Most of the gold produced in this way was smuggled into Kenya before being trans-shipped elsewhere (Jones, 1981, 113, 122). Intensification of artisanal mining further increased with the laying off of more miners in 1976 as a result of decline in diamond production.

Activities of small-scale miners in recent years have mainly been undertaken at old mines and areas where known alluvial deposits existed up to the early 1970s. Their numbers experienced a spectacular boom in 1976 with the discovery of the Bulyanhulu deposits in Shinyanga and the influx to it of workers who had been retrenched from diamond mining…. Since then the small miners have continued making totally new discoveries in many parts of the country every year, to the extent that by 1992 it was estimated that there were about 500 gold mining sites and about 300 gemstone mining sites operated by small-scale miners. Officially in 1993 there were 1,440 small-scale claim holders and 480 holders of prospecting certificates. At a very conservative estimate of 10,000 people per site, it is possible that there are about 900,000 people involved in small-scale mining and auxiliary activities – a number that is larger than the official figures for those in the formal wage sector.

The boom in artisanal mining was given greater impetus in April 1990 when the government of President Ali Hassan Mwinyi officially endorsed small-scale mining and directed the miners to sell gold to the Bank of Tanzania without fear of harassment. BoT was instructed to buy the gold at parallel market prices to undercut smugglers. This policy change bore immediate fruits as official gold and gemstone exports went up, bringing in foreign exchange windfalls never seen before in the history of Tanzanian mining. Official statements and statistics are instructive.

In 1992, the ruling Chama cha Mapinduzi party published its programme in which it detailed the general direction of its policies for the 1990s (CCM, 1992). Given the long history of generally negative official attitudes towards the small-scale miners, CCM broke new ground in that document when it generously promised that:

What are these 'benefits to the nation' that had become 'much clearer'? According to Chachage (1995a, 254), in 1988 the mining sector accounted for only 0.5% of the GDP and 0.8% of formal employment, about 8500 people. In 1989, the sector grew by a meagre 1.1%. Yet two years later mining was growing at the rate of 20% annually and gold was on its way to becoming the major official exchange earning commodity. In the wake of the government's policy of buying gold from small-scale miners 'with no questions asked', cumulative official gold purchases increased from 116 kg in 1989 to 1.65 tons in 1990, 3.6 tons in 1991, 7.24 tons in 1992 and 11.2 tons by the first half of 1993.

In 1989 – a year before the policy change – total mineral exports amounted to about $17 million, of which gold accounted for slightly over $1 million or less than one per cent of the total exports. Within months of the policy change in 1990, total mineral exports rose to slightly over $26 million, with gold contributing close to $14 million or about 52 per cent of the total! By 1991, total mineral exports had risen to over $44 million with gold accounting for over $29 million of that figure or nearly 66 per cent of the total; whereas in 1992 total exports fetched over $53 million, of which gold accounted for over $40 million or over three quarters of the total (Ibid., 256) (Table 1). Within a period of hardly three years, official gold exports had increased nearly 40 times! As a result, by 1991 the official export value of gold had already surpassed the value of coffee, for a long time the leading export commodity.

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Table 1: Tanzania's Mineral Exports 1989-92 (US$'000)
Source: Ministry of Water, Energy and Mineral Resources, Dar es Salaam, 1993, Chachage (1995, 256)

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Other sources have given higher figures for Tanzania's gold output and foreign exchange earnings from exports, a discrepancy that can only be explained by widespread smuggling and under-declaration of exports that has historically been a notorious feature of Tanzania's mining industry. For example, in its most recent survey of Africa South of the Sahara, Taylor and Francis Group's Europa Publications asserts that output totalled 6.5 tons in 1994, 5.3 tons in 1995 and 5.5 tons in 1996. Official purchases were only 41kg in 1988, but rose to 1,640 kg in 1990, to 3,770 kg in 1991, to 4,100 kg in 1992 and, by more than 70%, to 7,000 kg in 1993.

Likewise, official gold exports earned $26.25m in 1990, a 52% increase over 1989. Purchases rose sharply in early 1991, as reforms to the official buying mechanism began to take effect, with a value of$35 million in 1991, $44.3 million in 1992 and $55 million in 1993. Foreign exchange earnings declined dramatically in 1995 to $3.2 million from $25.7 million in 1994. This was:

The contribution of the artisanal miners to the national economy continued to grow throughout the early 1990s as did their official recognition. Various leaders of the ruling party and government at the highest levels visited the mining areas to encourage the miners and paid tribute to their contribution to national coffers (Lissu, forthcoming). In February 1998, the National Executive Committee of CCM published its assessment of CCM's first 20 years in power. In a wide-ranging and rather candid assessment, the party admitted that '… in the period between 1977 and 1996 mining activities continued to rise (see Tables 2 and 3).

This has come about as a result of general policy reforms to conform to the current circumstances of the market economy. In the mining sector, various laws have been amended particularly those in respect of taxation of the foreign investors. Likewise, the requirements for exploration, mining and trading licenses have been streamlined. The minerals market has been made open and regulations for the conduct of mining activities put in place. The existence of conducive environment for exploration, mining and trading in minerals attracted both national and foreign investors in the mining sector' (CCM, 1998, paragraph 101).

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Table 2: Growth Rates in the Mining Sector (%)
Source, Planning Commission, Bureau of Statistics, Dar es Salaam (1998), CCM (1998, 73).

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Table 3: Mining Production: By Quantity, Source, Department of Mining (undated), CCM (1998, 74)

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According to CCM, in 1993, the growth of the mining sector was the highest (in terms of export earnings) of all years since 1977 (see Table 4).

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Table 4: Value of Mineral Exports (In TShs. '000,000), Source: Department of Mining (undated); CCM (1998:75).

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To be true, the CCM assessment had pointed out that in spite of Tanzania's considerable wealth in a variety of precious and industrial minerals, the exploitation of these minerals was well below capacity, resulting in the minimal contribution of the sector to the national economy (Ibid., paragraph 101). That despite the high growth rates for several years in this sector, its contribution to the overall national economy has continued to be small (Ibid., paragraph 102). The party had thus urged that 'mining should be given particular importance in our country's economy (and) governments should provide various incentives to both national and foreign investors….' (Ibid., paragraph 188).

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Table 5: Contribution of the Mining Sector to the GDP (%)
Source: Planning Commission, Bureau of Statistics, Dar es Salaam (1998), CCM (1998, 72).
Figures for the period 1977-83 are based on 1976 price index; while those for 1986-96 are based on 1992 price index.

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Indeed, CCM was already blaming the small-scale miners for a host of problems facing the mining sector, including 'trespassing into mining concessions (and) avoiding the official channels and instead selling the minerals to smugglers, thereby depriving the nation of foreign exchange revenue' (Ibid., 74). This – coming over a year after one of the bloodiest episodes in Tanzania's post-colonial history when security forces and agents or employees of Kahama Mining Corporation Ltd., forcibly evicted hundreds of thousands of small-scale miners from the Bulyanhulu area (Lissu, forthcoming) - was a clear signal that the government had already changed policy in favour of foreign corporate investors. Nevertheless, even CCM could not 'hide from numbers like that (i.e. the statistics cited above) or spin them some other way'!

It thus had to concede that the increase in the contribution of the mining sector to the GDP (see Table 5 above) that reached 1.5 percent in 1996, up from one percent in 1977 'was a result of a rise in production of certain minerals particularly gemstones and gold', precisely those minerals where small-scale miners were most active. To paraphrase Chachage (Ibid., loc. cit.), therefore, it was essentially because of the activities of the small-scale miners and the liberalisation in gold and gemstone buying that the government was able to export more minerals officially, rather than the result of the 'large-scale' miners or foreign investors.

All this began to change in the mid-1990s when the government under the tutelage of the World Bank decisively changed course and decided to embrace corporate investors in the mining industry and thereby destroy the basis of artisanal mining. This is the subject of the next part.

4. The Bank and The Mining Industry

The World Bank has been at the center of the renaissance of the corporate interest in African mining industry in the 1990s. In its 1989 prognosis that Sub-Saharan Africa was moving away 'from crisis to sustainable growth', the Bank had argued that large-scale investment in non-ferrous metals and gemstones was necessary if any meaningful development of the sector was to take place. Blaming past policies it was instrumental in putting in place, the Bank had observed that past experience in mining in Africa has been marked by stagnation and loss of markets, caused by low levels of private investment. Investors were scared off by government restrictions and controls, cumbersome regulatory procedures, punitive taxation arrangements and unstable macro-economic performance (1989).

As a result, the Bank boldly declared, Sub-Saharan Africa missed the benefits of the boom in the prices of precious minerals in the 1970s and 1980s. Accordingly, there was a need to create an 'enabling environment' for the mining industry, if the 1990s were not to be another 'lost decade' for these countries! This 'enabling environment' would usher in a new type of partnership between foreign mining companies which have the capital and the know-how and cash-strapped African governments (World Bank, 1989, 122; Chachage, Ibid., 251).

This partnership would not, however, be a partnership of equals as the Bank advised African governments that 'taking a minority interest in new ventures is sufficient for governments to keep abreast of mine developments and protect national interests.' All this will require African governments to rethink their roles and their policies for the mining sector. The main elements of an enabling environment relate to foreign exchange regime, taxation, repatriation of profits and the regulatory and institutional framework. By financing specialised advisory services, the donor community could help African governments to negotiate technically sound and fair mining agreements' (World Bank, Ibid , 122).

4.1 The Bank and Tanzania's Mining Industry

The World Bank has supported Tanzania's development strategy for almost four decades. As the country entered the post-colonial era complete with a constitutional order crafted in London, it also did so with a complete economic blueprint prepared in Washington DC. In a surprisingly candid examination of the four decades of the Bank's Tanzanian strategy, a recent publication of the Bank's Operations Evaluation Department (OED) concludes that in the first two decades, the strategy – though in line with the development thinking of that time – 'was flawed' (World Bank, 2000). In those first two decades of independence (1961-80) Bank commitments totalled about $1 billion, tripling to $3 billion in the next two decades (1981-99) (Ibid).

According to OED, the outcome of the Bank's assistance strategy during those first 20 years (1964-85) was unsatisfactory, 'primarily because the strategy lacked relevance and was not sustainable' (Ibid). Consequently, the outcome of the majority of Bank projects approved through 1985 was rated unsatisfactory by OED (and) … after 35 years of Bank (and donor) assistance to Tanzania, poverty alleviation remains an elusive goal' (Ibid).

We have seen that part of that 'flawed and irrelevant' strategy the Bank prescribed for Tanganyika at independence related to the mining industry. The strategy urged the newly-independent state to modify mining policies it inherited from colonialism 'to increase the attraction and (give) encouragement to further prospecting by private interests', chiefly through providing favourable tax incentives in the early stages of mine development (World Bank, 1961, 8, 269). The strategy, faithfully carried out, according to Chachage, never bore any fruit primarily because gold prices remained in the doldrums and the corporate interest in Tanzanian mining eventually petered out.

During the next ten years (1986-95) the Bank claims to have taken effective steps to increase the relevance of its assistance and improve the policy environment (World Bank, 2000, Ibid.) In September 1990, the Bank published a Mining Sector Review for Tanzania. That review set the tone for the Mineral Sector Development Strategy prepared a few years later which set as the order of the day the review of the legal, regulatory and fiscal framework for the mining sector. The reviews were undertaken by Trans-border Investment Ltd., British investment firm based in London. According to David K. Jairo, a correspondent writing in the Mining Annual Review of 1997, these reviews - which culminated in the enactment of the Mining Act, 1998 - were financed by the World Bank.

4.2 Tightening the Noose

The reforms intended to secure and protect corporate profits in the mining sector have been augmented and complemented by further reforms in the regulatory and fiscal regime for foreign investment generally. That regulatory and fiscal regime, created 'to provide for more favourable conditions for investors', offers investors extraordinarily generous incentives. These are in the form of tax relief and concessional tax rates; and guarantees and protections in the form of unconditional transfer of capital, profits, etc. There are, in addition, guarantees against expropriation, nationalisation or compulsory acquisition. Investors are even entitled to an initial automatic immigration quota of up to five persons during the start up period which quota may be raised under certain circumstances (Lissu, 2000, 4). This quota is unlimited in the case of investments in the mining industry.

However, these reforms do not appear to have satisfied the World Bank which has continued to push for ever deeper reforms. According to the country impact review prepared by the Operations Evaluation Group of the Bank's International Finance Corporation (IFC):

It is against this perceived hostility to foreign investors that the Bank has sought to tie the Tanzanian government's hands even tighter in relation to the mining sector. The Bank has accomplished this through its investment guarantee arm, the Multilateral Investment Guarantee Agency (MIGA) and the latter's provision of political risk insurance to mining investors. This requires careful examination.

According to West (1999, 27), the economic turmoil of the recent past in Asia, Latin America and Eastern Europe have served to remind investors that political and economic events do not merely have a potential to cause losses, but actually do cause losses. As the prospect of further losses loom, many investors are now paying more careful attention to political risk assessment and management. Project sponsors are finding that to assemble the financing for new ventures, especially for large infrastructure projects, they now must pay considerably more attention to political risk management issues.

Although rarely discussed and much less analysed, the role of an investment insurer in the settlement of investment disputes is extremely important to foreign investors. For companies operating overseas, a range of public institutions – from multilateral development banks, such as the World Bank, to bilateral aid agencies and government-backed export credit agencies and investment insurance agencies – have long offered a range of services that perfectly match the needs of companies seeking to offload onto the taxpayer the commercial risks of doing business abroad. As a result, a whole industry has now grown up to direct companies to the easiest source of ready subsidy and to help them obtain the funds on offer (Hildyard, 1999,3).

The system is simple. To obtain an investment guarantee, the investor takes out insurance with any of the agencies mentioned above, which undertakes to pay the investor for the cost of the investment guaranteed should the host government impose restrictions on transfer of capital or profits or should it act to expropriate, nationalize or compulsory acquire the operations or property of the foreign investor. If it does have to pay up, the agency passes on any debt that is not covered by the premiums it has received to the government of the host country, adding to its bilateral or multilateral debt (Hildyard, loc. Cit, Maurer and Bhandari, 2000, 2, FoE et al, 2001).

Political risk insurance, especially from national and multilateral agencies, can therefore act as an effective deterrent against the host government interference with insured private investments. Moreover, as MIGA's Gerald West argues in a recent article, should an expropriation or currency transfer dispute occur, buyers of political risk insurance 'clearly believe that … the investor stands a much better chance of successfully resolving the matter if a national government or multilateral agency is involved as an insurer …(op. cit, p.29-30).

From the perspective of the buyer of political risk insurance, according to West (Ibid), there are both 'positive' and 'negative' aspects to this deterrent effect. First, with respect to positive aspects, one must remember that there is often a complex web of political, economic, and commercial relationships between the investor's home country and the host developing country. These relationships are endangered by messy disputes of claims involving national insurers. Moreover, bilateral trade and investment treaties potentially may be violated; national security arrangements (actual or pending) may be threatened or inhibited; and on-going trade discussions may be disrupted. All these actions have real and 'reputational' costs to the host country (Ibid)

If the host country is undergoing a severe economic downturn and needs credits and loans, it has little choice but to approach industrialised countries or multilateral development institutions where industrialised countries have significant influence. Ironically, if the host country wishes to attract new foreign investment, it needs these national investment insurers and the multilateral insurers. Those insurers, in turn, need to be prepared to issue new coverage, which they would obviously not do while dealing with a serious investment dispute or actively seeking compensation from the host government for a loss.

There are also some negative components of this deterrent effect as well. Some home countries have, by legislation or practice, introduced nearly automatic sanctions against countries that have not effectively compensated their national insurers who have assumed (through subrogation) the rights of the insured investor's assets or shares (in the case of expropriation claim) or to the local currency (in the case of a currency transfer claim). These sanctions can range from temporary suspension of a specific government program to complete cessation of all investment insurance, export credit, and foreign assistance. Moreover, in the case of a dispute or claim with a multilateral insurer or guarantor that is not resolved, there is the risk of a complete suspension of on-going credit or loan activity (e.g. in the case of MIGA, a member of the World Bank Group, possible suspension of new IDA credits or IBRD loans):

Tanzania is now enmeshed in this web of 'deterrence.' In August 2000, MIGA issued a guarantee totalling $115.8 million to Societe Generale S.A. as an agent for a syndicate of international banks for their non-shareholder loan investment to KMCL to build and operate the Bulyanhulu Gold Mine. The MIGA guarantee will, according to their website 'cover the investment against the risks of transfer restriction, expropriation, and war and civil disturbance'.

A few months later, MIGA's guarantee had risen to some $172 million, making it 'the largest amount issued to date for a single contract', according to a World Bank press release. Canada's Export Development Corporation is co-insuring the project with MIGA, with an exposure of $173 million. Reinsurance is being provided by Lloyd's of London and Munich Re (Ibid).

To conclude on this part, it is because of this 'intellectual leadership in the development field' by the World Bank that foreign direct investment in the mining industry has flowed. Indeed, the Financial Times of London underscored the above factors as being responsible for Tanzania becoming 'a modern-day Klondyke'. These include, the paper noted:

This brings us to the examination of the evolution of the legislative developments that have shaped the mining industry in Tanzania.

5. Legislative Developments

Although substantial mineral deposits were discovered during German rule and the prospecting and exploitation of gold deposits encouraged, the German colonial state refused to involve itself in the provision of infrastructure for the mining industry. German mining ordinances were basically geared towards small reef gold miners rather than large-scale ventures and generally there were hardly any incentives to warrant large-scale miners (Lemelle, Ibid, 56). British colonial policies in the early 1920s remained broadly and similarly indifferent to large-scale mining. For instance, the Mining Ordinance enacted by the British in 1920 was basically formulated in the same terms as those of the German period.

It was with the discovery of alluvial deposits in Lupa and the Lake Victoria Zone in 1921 that British colonial policies began to be slightly more supportive of the industry. In 1923 the Department of Geologial Survey was established in Dodoma and general geological mapping and prospecting commenced. A significant increase in revenue from mining in the late 1920s brought with further changes in official attitudes mining industry. Colonial officials were forced to reconsider their policies, particularly in terms of investment protection and incentives with regard to land acquisition for mineral production. As regards the latter, the Tanganyika Order-in-Council, 1920 had declared that:

By now the government was in favour of larger concerns, which meant large-scale mining operators based in South Africa and Britain and so the Mining Ordinance, 1920, was repealed and replaced by the Mining Ordinance, 1929. The latter legislation was intended to encourage large-scale investments in mining, while at the same time discouraging both large-scale speculative capital out for 'quick kill' and small 'penniless' miners (Lemelle, Ibid, 93). As then Secretary for Native Affairs, PE Mitchell cynically put it, the new law was intended at controlling the accelerated gold rush so as to prevent the emergence of a 'class of poor whites', that is, the settler-diggers who eked out a bare subsistence.

It was for this reason that section 28 of the Ordinance went as far as to limit the number of alluvial claims that could be held by an individual prospector. Under the Ordinance, prospecting by private firms was supposed to be done in collaboration with the government, which in turn granted licenses to qualified adults at its own discretion for a nominal fee. The government could issue an exclusive prospecting licence for an area of eight square miles or a negotiated special exclusive prospecting license over a larger area. It could also control prospecting activities by formally closing any district or a whole territory for any specified minerals or simply by withholding prospecting licenses.

Because of the world recession of the late 1920s, however, most of the companies that had shown interest in mining withdrew and consequently, the rising production levels of the late 1920s and early 1930s were a result of the small-scale miners. Reflecting this fact, a 1931 amendment to the 1929 legislation repealed section 28 that had placed obstacles to individual prospectors. Except for minor amendments in 1969 giving the minister greater discretion to renew or refuse to renew exclusive prospecting licenses, the Mining Ordinance 1929 remained largely intact until 1979 when it was repealed and replaced by the more liberal Mining Act, 1979.

Under the latter law, as with former, ownership of the mineral resources continued to be vested in the state, which also set the framework for licensing of all prospecting and mining activities. However, that law stated unequivocally that state domination of mining ventures was not mandatory, and even if the state wanted to acquire some shares in a mining venture, it could only do so on negotiated terms. In this respect, it can be argued with justification that the 1979 Act was the first statute to usher in the liberalisation that was to sweep other sectors of the economy from the mid-1980s onwards.

The 1979 Act also designated two types of mining rights that could be granted, namely the long-term mining licenses which were essentially intended for foreign investors and were for a period of 15 years with options for renewal. These licenses could be granted for a maximum area of 150 square km. The licenses could only be granted by the minister responsible for mining. By 1990 with the enactment of the National Investment (Promotion and Protection) Act, 1990, and the establishment of the Investment Promotion Centre (IPC), the mining industry was even more significantly deregulated with a complete removal of the last remnants of the government monopoly in mining and the removal of government intervention in mining operations even where the government held some shares (Ibid, 63).

Although the Mining Act 1979 was by and large intended to attract large-scale investments in mining, it nevertheless made provisions for small-scale mining activities. These related to grants of shorter-term mining rights, intended for small-scale miners and locally registered companies in which majority of shares were held by Tanzanians. The rights could only be granted by the Commissioner for Minerals and were for the duration of one year with options for renewal. They were also for much smaller area, covering a maximum of 400ft by 400ft for gold and 900ft by 900ft for gemstones.

The Third Five Development Plan (1976-1981) – though never implemented – had earlier indicated although the majority of mining operations were to be carried out by STAMICO in collaboration with local or foreign companies, small-scale mining would be allowed for individuals, co-operatives and Ujamaa villages. The Act was complemented by the Mineral Policy Paper prepared by the government in 1983. Incorporated in the latter was a small-scale mining policy which officially encouraged participation by Tanzanians in mining alongside their other activities. While emphasising the improvement of prospecting and exploration technology as well as marketing skills the policy anticipated that mining activities would go hand in hand with such activities as farming. Hand in hand with the growing importance of mining to the economy, the government took further steps to liberalise the industry particularly in respect of entry by foreign mining interests.

In 1987, the 1979 Act was significantly to allow private mining interests to deal in gold and other precious minerals (Chachage, 1995b, 254). As a result, by 1992 the government had granted 8 reconnaissance licenses, 75 prospecting licenses and 17 mining licenses as well as some 67 companies licensed to carry out mineral drilling (Ibid ., 255). By 1996, according to Taylor and Francis Group (1998, Ibid.), 15 gold mining companies were active in Tanzania, with a combined exploration budget of $25m. This is the situation the Mining Act, 1998 found when it was enacted that year.

To conclude on this part, it is clear from the foregoing that those who look to the post-Arusha Declaration 'socialist' policies as a source for the ills that afflicted the mining industry ignore this long and rich history. But most importantly, these views forget that Tanzania's mining legislation remained largely unchanged for fifty years from 1929 to 1979 and that the latter liberalised entry into the mining sector by foreign investors even before other sectors of the Tanzanian economy were opened to foreign corporate interests in the wave of liberalisation that started in the mid-1980s. Indeed, by the time the new Act was enacted in 1998, almost all the projects that have now become operational had already been approved under the framework of the 1979 Act! Which brings us to a consideration of what is new about the new Act.

6. Reflections on the 1998 Act

6.1 Mining a Union Matter?

The Act is applicable throughout the United Republic and it, therefore, makes mining generally part of Union matters. This is of particular interest in that although the Constitution of the United Republic of Tanzania, 1977, provides for mineral oil resources (including crude oil and natural gas) as being a Union matter; the Mining Act expressly excludes in its application, 'the search for and production of petroleum'.

It is for this very reason that this provision was hotly debated in the National Assembly when the Bill for the Mining Act came before the Assembly during the its 11^th Meeting of the 6^th Session held on 23^rd April 1998. Hon. Danhi B. Makanga, MP, is on record as saying the following in connection with the above issue:

To this the Attorney General replied at length:

When further pressed by Hon. Makanga to be specific as to whether this law will apply to Zanzibar or not, the Attorney General unambiguously stated that '… this Bill will not apply to Zanzibar' (Ibid, 33-34).

It would appear implicit in the Attorney General's formulation that the jurisdiction of the Revolutionary Government of Zanzibar does not extend beyond mainland Zanzibar and Pemba Islands; that since Zanzibar is not a sovereign state it cannot, therefore, claim to have territorial waters nor a continental shelf of its own. It logically follows from this view that the waters off the two main islands of Zanzibar thus fall under the jurisdiction of the Union Government which has jurisdiction on both the Union matters and the non-union matters for Tanzania Mainland. In this view the Mining Act would, therefore, cover the continental shelf and the territorial waters of the United Republic but not mainland Zanzibar.

It is submitted, however, that the Attorney General's interpretation of section 2 is incorrect. That section states, in no uncertain terms, that the Act is applicable throughout the United Republic and if it was not intended to apply in mainland Zanzibar, the draftsperson would have easily stated so and would have completely left it out. Secondly, if - as the Attorney General contended - it was not meant to apply in mainland Zanzibar why has it been retained in the statute book in exactly the same formulation even after its legal propriety had been challenged? Be that as it may, this provision has great potential of attracting political controversy as it seems to amount to one more addition (through the back door, as it were) in the list of Union matters whose constitutionality has previously been challenged in academic literature.

6.2 Title to and Control of Minerals

The 1998 Act also contains provisions with far reaching consequences in respect of land tenure rights of the rural land-holders. The provisions relate to the ownership and control of the mineral wealth of the country and the management and regulation of mining activities and the industry itself. These matters have become a major source of conflicts between the state and the corporate mining interests on the one hand and local communities living in mineral rich areas on the other, as corporate mining activities have caused considerable insecurity of rural land and resource tenure rights.

Under section 5 of the latter, 'the entire mineral property and control over minerals on, in or under the land to which this Act applies is vested in the United Republic'. This provision has its roots in Article 8(3) of the Tanganyika Order-in-Council, 1920 that – as we have seen - had vested 'all mines and minerals being in, under, or on any lands' in the colonial governor. As Roderick Paul Neumann (1992, 1997) has argued in his critical studies of the natural resource laws and policies in colonial Tanganyika, the state used law to appropriate resource-rich areas as part of a general claim to all land and resources within its boundaries.

This historical 'red thread' is not broken by the Mining Act, 1998. No wonder the provisions in respect of these issues were the subject of a lengthy and bitter debate in the National Assembly when the Bill for the Act came for legislative scrutiny as the official record of the debate shows (Tanzania, Ibid, 25 - 7). For instance, many Members of Parliament appear to have been worried by the likelihood of increased land-grabbing by the Government on behalf of mining interests and the consequent intensification of tenure-related conflicts.

In dismissing these fears, the Minister stated:

Apart from the misconception that land is government property in Tanzania, the Minister completely missed the point of the Members' arguments which was that it is precisely the development of the mineral resources that interferes with land rights leading to land tenure disputes and conflicts. The Minister's reply was also disingenuous in that hardly one year had passed since the biggest and bloodiest forced eviction in the country's history, a matter which was very much fresh in the minds of many members as the Hansard amply shows.

Indeed, the Minister appears to have been very much aware of the rising discontent and conflicts in numerous mining areas in the country but sought to cast the blame onto the victims:

Having thus 'nationalised' the mineral property, the Act further criminalises the prospecting for minerals or the carrying on mining operations in, on or under the land to which the Act is applicable, without the authority of a Mineral Right granted or deemed to have been granted under the Act. Contravention of this prohibition attracts harsh penalties: a fine not exceeding two million shillings or imprisonment not exceeding three years or both in the case of individual offenders; or a fine not exceeding ten million shillings in the case of corporate offenders.

As well as the prohibitions on unlicensed prospecting for minerals and carrying on mining operations, there are also prohibitions relating to unauthorised trading of minerals. Under section 15(1), no person other than an authorised miner, a licensed dealer, a licensed broker or an authorised lapidary shall buy or otherwise acquire, or sell or otherwise dispose of any raw gold or gemstones. Even possession of these minerals is criminalised unless the possessor thereof is an employee, agent or contractor of an authorised miner, licensed dealer, licensed broker or an authorised lapidary and has acquired and holds the minerals for or on behalf of the authorised miner, licensed dealer, licensed broker or authorised lapidary.

Furthermore, the Minister has powers to extend the provisions of this section to cover other minerals upon such limitations or exceptions as may be specified in an Order published in the Gazette. Contravention of these restrictions is even costlier, for it attracts a fine not exceeding five million shillings or imprisonment for a period not exceeding five years or to both in case of individual offenders; and a fine not exceeding twenty five million shillings in the case of corporate offenders.

These prohibitions are without doubt directed against the small artisanal miners who have neither the financial clout nor the political leverage to buy the protection of the law, unlike the corporate, mostly foreign, interests which have rushed into the country in recent years. As with the 'nationalisation' of other natural resources such as wildlife and forestry, licensing powers have historically been an instrument through which local communities were forced out of the mainstream economic activities as independent actors and reduced to a marginal role of labourers. Thus, like local communities in wildlife-rich areas, the local people in mineral-rich areas can only benefit from the natural resource wealth found in their lands by breaching the law and at the pain of harsh criminal sanctions.

6.3 Right of Entry

The Act, however, imposes significant restrictions on the right of entry of holders of mineral rights into areas they intend to carry on mining operations. The most important provisions in this regard are to be found in Part VII of the Act. Under section 95(1)(b), the holder of mineral right:

Written consent is also mandatory in respect of entry into any land within 50 meters of land which has been cleared or ploughed or otherwise prepared in good faith for the growing of agricultural crops or upon which agricultural crops are growing; or any land which during the year immediately preceding, agricultural crops have been reaped.

There are further restrictions on the right of entry. The holder of a mineral right is furthermore prohibited from entering any land except with the written consent of the lawful occupier thereof in respect of any land within any … township, registered villages or demarcated settlement except with the written consent of holders of surface rights and of the responsible Minister or the authority having control over the township, registered villages or demarcated settlement. Restrictions on the right of entry also extend to entry into any street, road or highway or any land within 100 meters of any street, road or highway, etc. Here the written consent of the responsible Minister or of the authority having the control of the street, road or highway is required.

There are also requirements that the right of entry - where lawfully obtained after compliance with the consent requirements above - must be exercised reasonably and should not be exercised so as to affect injuriously the interests of any owner or occupier of the land over which those rights extend. And where in the course of prospecting or mining operations, any disturbance of the rights of the lawful occupier of any land or damage to any crops, trees, buildings, stock or works thereon is caused, the registered holder of the mineral right by virtue of which the operations are carried on, is liable to pay the lawful occupier fair and reasonable compensation in respect of the disturbance or damage according to the respective rights or interests of the lawful occupier in the property concerned.

When the Bill for the Mining Act came up for debate in the National Assembly the issue of payment of compensation featured prominently in the parliamentary debates. Given the propensity of the mining activities to evict local communities from their lands without fair and adequate compensation, Members of Parliament had demanded that compensation should include resettlement cost. These demands, though accepted by the Government as reasonable, were however not included in the final Bill which was enacted into law (Tanzania, Ibid, 21). Instead, the Deputy Minister for Energy and Minerals dwelt at length on the need for MPs to 'educate' their voters to, presumably, accept relocation to make room for the mining companies! (Ibid, 21).

As we have argued herein, central to the appropriation of natural resources by both the colonial and post-colonial state was the 'nationalisation' of those resources through the vesting of the radical title over the same in the state (Tanzania, 1994, Shivji, 1996, 1996a, 1998, Shivji and Kapinga, 1997, Lissu, 1999). In the mining sector it is through this nationalisation, under the framework of the 1979 Act, that hundreds of thousands of rural people in mineral-rich areas of Tanzania have been brutally evicted from their lands and settlements; numerous lives lost and livelihoods and property destroyed and local economies rendered nugatory. Human rights abuses have thus been rampant, with utter disregard for the rule of law and legality the norm rather than an aberration. Bulyanhulu is a classic case of what the corporate 'gold rush' has come to mean to millions of rural Tanzanians who live and work the land in mineral-rich areas of the country. The 1998 Act was enacted with its shadow still hanging over the minds of many and it is, therefore, worth considering in some detail.

7. 'The Day Hell Broke Loose …': On Human Rights

When it comes to mining, particularly of precious minerals such as gold, the past portends a frightening future for indigenous communities, environmentalists and anyone interested in a more sustainable and humane society. The mining industry has and continues to have a huge toll on the planet and peoples as it wreaks a heavy environmental and social havoc in many Southern countries and peoples. One and a half centuries ago, gold miners known as argonauts or the 49ers arrived in droves in California and decimated the native population of American Indians whilst destroying rivers, mountains and most anything in their path. Of course, a similar fate had met the Incas 350 years before them, with the invasion of the Conquistadors into Latin America scouring the Andes for gold. In short, murder and mayhem have been the fate of indigenous peoples and places in this pursuit of gold and other metals.

But what most people do not realise is that this is still going on today in the new global economy. And what is more, it is getting worse rather than better, with more dollars spent on mining development in the Third World; technological advancements in digging up peoples backyards quicker, cheaper and deeper; and a dangerous trend in the increased collusion of the corporate interests and the state and its instruments of violence in pursuit of precious metals. Bulyanhulu typifies this latest trend.

Mining activities in the Bulyanhulu area started in the 1970s after the local artisanal miners discovered the deposits in 1975. Activities at that time were dominated by artisanal miners. In the early 1990s, after more deposits were discovered at Bulyanhulu, there was a gold rush. From that time on, Bulyanhulu and neighboring villages changed. According to project documents prepared for Kahama Mining Corporation Ltd. (KMCL), the Tanzanian subsidiary of Canada's Barrick Gold Corporation (BGC) that owns the Bulyanhulu gold mine:

Although no clear data exists of the true magnitude of this 'massive influx' of small-scale miners, KMCL's own estimates 'range between 30,000 and 400,000' (BGC and KMCL, 1999:20). The importance of the artisanal gold mining to the local economy also appears to have been indisputable:

And contrary to propaganda that often holds artisanal miners as hordes of smugglers carrying on illegal mining and depriving the nation of revenue, we learn from KMCL's own documents that the artisanal miners in Bulyanhulu 'paid taxes and levies which were used for community development purposes, such as the construction of two classrooms for the Kakola Primary School' (BGC and KMCL, 1999, op. cit, 20).

Available documentary evidence suggests that the Bulyanhulu workings did attract some government and corporate interest, but this was minimal at best. KMCL's brief 'historical sketch of Kakola' claims that the area was declared a government mineral reserve in 1977 and artisanal mining was abolished (Ibid, 21). Government geologists were then brought in to map the site and conducted limited drilling work in the late 1970s. The State Mining Corporation continued with exploratory drilling between 1980 and 1982. In 1982 STAMICO entered into a joint venture with Outokumpu and Kone Corporation of Finland to conduct further drilling work. By 1985, however, the Finnish company had left the area and for the next four years not much appears to have happened. In December 1989, Placer Dome, a Canadian exploration and mining company, acquired the property and conducted further exploratory work until 1992 when they also gave up (BGC and KMCL, 1999, Ibid, 4). For the next two years the field was again left open to the small-scale miners.

In 1994, however, there were dramatic changes. On 5^th of August that year, the government granted a three-year prospecting license to KMCL, a subsidiary of Sutton Resources, then a Vancouver-based company. Careful examination of the license – known as Prospecting License #214/94 - does not show that KMCL had any rights to operate in the Bulyanhulu area, which is not even mentioned in the entire document. On the contrary, the license – signed on September 6, 1994 by Mr. Jakaya Mrisho Kikwete, then Minister for Water, Energy and Minerals – describes the prospecting area as being 'Butobela Area, Geita District …'.

This omission could not have been caused by a slip of the pen for two subsequent renewals of PL 216/94 on July 24, 1997 and October 6, 1998 similarly described the contract area as being in Butobela, Geita District. In addition, a list of all prospecting licenses granted to various mining companies between 1993 and 1996 which was published by the Ministry of Water, Energy and Minerals in 1996 also shows that the license granted to KMCL was in respect of Butobela area. The list shows that a total of 39 prospecting licenses were granted in respect of various areas in Kahama District. Not a single one of these licenses was granted in respect of the Bulyanhulu area, which is not even mentioned in the entire list. In addition, not a single prospecting license over any area of Kahama District was ever granted to KMCL during the period under consideration.

Be that it may, in June 1995, acting on the basis of PL 216/94, KMCL commenced legal proceedings in the High Court of Tanzania against the small-scale miners seeking to evict them from, and permanently restrain them from interfering with, what the company claimed to be its concession area. In their defense and counter-claim, the miners claimed to be in lawful occupation of the suit 'property' since 1975. They claimed to have not only title to the area by customary law but that their village had existed even before colonial days and has their ancestral graves, residential houses, livestock, farms and gold mining shafts. They also objected to being dispossessed without even being consulted and alleged that the government of Tanzania had connived KMCL to grab land from indigenous people without compensating them or even resettling them elsewhere.

The miners counter-claimed compensation if their land and mines were to be taken over by KMCL. They further applied to have the Attorney General joined as a co-defendant as their defense had raised constitutional and basic rights issues. On September 29, 1995 the High Court of Tanzania ruled in favour of the miners' application. In the ruling, Mr. Justice Mchome observed that:

On October 9, 1995, KMCL which according to Mr. Justice Mchome had throughout maintained that the defendants were '… illegal miners and trespassers who deserved nothing but eviction from the 'property', filed a notice of appeal in the Court of Appeal of Tanzania seeking to have the High Court ruling overturned. It would appear, however, that soon thereafter, KMCL realised the courts of law were not as sympathetic to its cause as it had perhaps hoped and decided to opt for extra-judicial processes to evict the miners. On May 22, 1996, the company's lawyers wrote a letter to the Registrar of the Court of Appeal in which they stated that KMCL did not 'intend to prosecute the appeal' and requested that the Notice of Appeal lodged at the Tabora Sub-registry on 9^th October, 1995, … be marked withdrawn….' KMCL's lawyers also indicated that their clients intended to 'withdraw the suit in respect of which the ruling was made….' The letter was accepted the following day by the then Chief Justice Francis Nyalali who ordered that the notice of appeal be 'marked withdrawn….'.

Soon after the withdrawal of KMCL's notice of appeal, news stories with such headlines as 'Company to Evict 7,000 Illegal Miners' started to appear in the print press. On July 30, 1996, the then Minister of Minerals and Energy, Dr. William Shija called a press conference in Dodoma in which he reportedly gave a one month's notice for the Bulyanhulu miners to leave the area. What happened next was captured thus by one of the newspapers of the time:

When the evictions had started, representatives of the miners who had been defending the suit in the High Court rushed to Tabora consult their lawyers. On 2^nd August 1996, the their lawyers filed as a matter of urgency an application in the High Court seeking a temporary injunction to restrain KMCL and the Government from evicting the miners before the main suit was determined. Arguing that 'the affair cries haste and speed must answer it', the High Court held ex parte hearings of the application that same afternoon and issued an injunction order against the Government and KMCL. In the ruling, the Court quoted with approval the miners' claims that 'what the 1^st respondent (KMCL) has failed to achieve in court he has decided to short-circuit the law by using the executive wing of government to get'.

The Court also observed that given the fact that the suit between KMCL and the miners was still pending in the High Court, the government decision to evict the miners was 'quite uncalled for.' It added:

The Court further described the case as being the most relevant to invoke its inherent powers 'to prevent abuse of the process of the court by the government'. The Court felt entitled to use these powers and issue an injunction particularly 'when it is necessary for the ends of justice and to prevent abuse of the process of the court like in this case'.

Although the order of the High Court was later challenged by the Government and eventually overturned by the Court of Appeal of Tanzania, it is significant that the latter Court did not find fault with the evidence on the record and instead dwelt on technicalities.

Although the government must have been aware of the widespread reports of the killings, its position was at first contradictory. According to one report, when asked about the killings, the then Shinyanga Regional Commissioner, Maj. Gen. Kiwelu is reported to have said that he did not have any reports of the miners being buried, though he admitted there were numerous policemen in the area. He reportedly said, however, that all he knew were reports that a mine pit had collapsed and buried 5 miners and only one of them was saved by other miners who were in the area. He reportedly refused to go into details of the allegations of killings. The Regional Commissioner is also reported to have denied that there were any small-scale miners in Bulyanhulu 'without explaining, however, when or where had the 200,000 people who were in those mines only recently gone…'.

But while the Regional Commissioner, who had himself ordered and supervised the forced removal of the small-scale miners, was pleading ignorance, the same newspaper reported that the then Minister for Internal Affairs had told the paper he personally had received the reports of the killings from one of the Members of Parliament from Kahama District and he already had ordered an investigation. For his part, the Minister of Water, Energy and Minerals who had issued a month's notice against the miners said he knew of some powerful people he did not name who he said were fomenting conflicts in Bulyanhulu but that he was otherwise unaware of reports of miners being buried in the mine pits.

As more details of the killings began to emerge, it soon became clear that the police and KMCL employees were actively collaborating to obstruct or hinder the efforts to exhume the bodies. The papers reported that the police were preventing people from going anywhere near the areas where the miners were buried, with the result that 8 bodies that had already been exhumed in those areas were left lying in the open and were decomposing. Three of the dead were identified while five other bodies could not be identified. In another incident, it was reported that digging for bodies had stopped in one pit after the diggers were overcome by powerful stench of rotting bodies coming from inside the pit. According to the report, the diggers asked for permission from policemen in the area to dig a side window leading into another pit in order for fresh air to enter but the policemen in charge refused to allow that, stating that they needed the necessary orders from their superiors.

As far as KMCL is concerned, while the digging for bodies was continuing, their employees reportedly continued to level the other pits where more miners feared were buried, thus making the digging exercise even more difficult. In Reef #1 where the greatest number of the dead were reported to be in, KMCL had reportedly built a road over the pit to make the digging impossible. Weeks later, a Bulyanhulu miner, one William Mussa, told a press conference in Dar es Salaam that exhumation of the dead bodies was discontinued after terrible smell of rotting bodies started to waft through from the pits. 'When the bad smell starting coming out, I went out to try and get a compressor machine to blow fresh air into the pit, but when I returned I found the digging had stopped and the pit was being filled in again'.

Then on August 21, 1996 the efforts to exhume the bodies were stopped altogether by the police who reportedly said they had orders to that effect from their superiors. Reports also cited a police statement saying that the exercise to exhume the bodies would have cost the government lots of money when there was no sufficient evidence of the killings. Reflecting contradictions in the government's story, the police statement reportedly attempted to lay the blame for the deaths on the miners, stating that:

There were reports of the miners and relatives of the dead organising voluntary efforts to continue to exhume the but in the face of the hostility from the police these efforts came a standstill too. And as time went on, the death toll rose to 62 as ten other miners were reportedly killed during the fracas and chaos that broke out during the eviction exercise. According to one leader of the miners' federation 'those who think the (eviction) exercise went on peacefully have been deceived, there are people who were killed in that exercise, apart from those buried. He added that the'Government should establish an independent commission so that all the dead are exhumed and reburied with dignity'.

It took almost five weeks for those who had directly supervised the evictions to come out in the open and make categorical denials that the killings took place. On September 17, 1996, Shinyanga Regional Commissioner, Maj. Gen. Kiwelu denied the allegations of the killings and described those making the allegations as 'liars and rumour-mongers'! He claimed that one Hamisi Mrisho who had survived after the pit he was in allegedly collapsed and buried four of his colleagues as being responsible for the rumors and that the police were looking for him and the owner of pit #86C one Nyembe Musobi to state the exact circumstances of the burial of the miners. On reports that the pits that were said to contain the bodies of the dead miners were being filled in again, the RC is reported to have said he personally was not aware of any persons wanting to exhume the bodies.

And so it came to pass that KMCL gained possession of the Bulyanhulu area and the small-scale miners were cleared from the area. To its credit, KMCL admits that the consequences were disastrous to the local economy and society:

8. Administration of the Act

The Mining Act is generally administered by the Minister responsible for mining affairs and the Commissioner for Mines or his Deputy, both appointed by the President under section 16; and by the zonal mines officers and other public officers with delegated powers under section 17 of the Act. The Minister responsible for mining is the most important figure in the administration of the Act. S/he, in consultation with the Commissioner, appoints zonal mines officers; as well as establishing zonal mines offices and appointing the areas for which the latter shall be responsible. Under section 23(1), the latter powers of the minister are exercised in consultation with yet another organ, the Mining Advisory Committee, established under section 20 of the Act.

Under section 24(2), applications for a prospecting licence must be submitted to the minister; while prospecting licences by tender must be submitted to the Mining Advisory Committee, which in turn advises the minister. The latter also applies to applications for gemstone and other mining licences by tender. The minister has the final say in the grants of applications for prospecting licences; as well as the grant of retention licences. The minister is, furthermore, a licensing authority in respect of applications for grants of special mining licence, mining licence and gemstone mining licence under Division B of Part IV of the Act.

8.1 Other Powers of the Minister

Apart from the provisions we have examined above in respect of applications for, and grant of, mining licences and the conditions thereof, the new Mining Act also confers wide discretionary powers to the Minister. Under section 10(1), for instance, the Minister may enter into a development agreement not inconsistent with the Act with a holder or an applicant for a mineral right relating to the grant of mineral rights, the conduct of mining operations under the special mining licence or the financing of any mining operations under the special mining licence. The agreement above may contain provisions which are binding on the Government relating to the special mining licence or the mining operations to be conducted under the said licence which guarantee fiscal stability of a long term mining project and for that purpose make special provisions for payment of royalties, taxes, fees, etc.

Hardly a year after the enactment of the Mining Act and it had been amended. Under the Written Laws (Miscellaneous Amendments) Act, 1999, section 10(2)(a) was repealed and replaced with another provision to the effect that the agreement (between the minister and a licensee or an applicant for a mineral right) may contain provisions which are binding on the Government relating to the special mining licence or the mining operations to be conducted under the said licence:

It is the obvious intention of the amendment to protect agreements entered into under the old Mining Act, 1979 from tax liability under the new legislation 'Fiscal stability' of mining operations which commenced under the repealed Act are intended to be guaranteed by making sure that any 'fiscal imposts' that may be levied on those operations are calculated on the basis of the range and applicable rates of the former legislation! This provision is further strengthened by the provisions of Part VI of the new Mining Act which deals with financial provisions. Under this part the minister even has powers to settle, by agreement with the licence holder, the market value of the minerals for the purposes of calculating the amount of royalties payable by the holder of the licence! He may also defer payment of royalty due upon application by the licence holder if his cash operating margin in respect of mining operations concerned falls below zero.

The effect of this provision is that where, say, the holder of a special mining licence informs the Minister that payment of royalties, taxes or mining fees in respect of his mining operations will cause 'fiscal instability' to his project the Minister may enter into an agreement with the holder of the licence to waive or defer the payment of the royalties, taxes or fees, thus restoring the mining project to 'fiscal stability'! Given the often secretive, usually technocratic and generally unaccountable ministerial decision-making processes in this country, the opportunities for 'grand corruption', favouritism and malpractice abound in the exercise of discretion under this section.

The agreement between the Minister and the holder or applicant of a mineral right may also contain provisions relating to the circumstances or manner in which the Minister or the Commissioner of Mines may exercise discretion conferred upon them by the Act or the Regulations. To understand the full import of this provision, one has to take into consideration the vast discretion that the minister enjoys under the Act, thus creating a great danger of the various provisions which impose environmental and other obligations upon holders of mineral rights being held hostage of the 'development agreement' between the Minister and the mining companies at the expense of the national interests and the environment.

8.2 The Mining Advisory Committee

As we seen hereinabove, the Mining Act also creates an advisory body under section 20 to advise the minister on various matters related to the exercise of his powers under the Act. We have also seen matters which may be referred to the Committee for its advice, i.e. application of mining licences by tender and the cancellation, suspension or termination of the licences, etc. The advice of the Committee is not binding upon the minister who may decide as he wishes. Under section 20(3):

He is obliged to give reasons for departing from the advice of the Committee in the annual report of his ministry!

The Mining Advisory Committee consists of the chairman who is a presidential appointee, and six other members of which two shall be appointed by the minister responsible for mining who shall also appoint two alternates and one each by the Minister of Finance, the ministers responsible for environmental protection, lands and the Attorney General who shall also appoint an alternate. There shall also be a representative from the Ministry of Industries and Trade.

It might appear at first sight that the composition of the Mining Advisory Committee is such that it represents the views and interests of the relevant sectors and stakeholders within the Government. In fact this is not the case as the Act makes it crystal clear that:

Since the Committee and its members are outside the disciplinary ambit of the governmental departments they come from, they, therefore, represent nobody other than themselves! This is all the more true since the Committee can regulate its own procedure; and it is not even vested with any meaningful powers nor even with any clear functions!

The situation is likely to be further worsened by the fact that this law has even removed the need for departmental discipline by members of the Mining Advisory Committee. Indeed, one might be forgiven asking why should there be a Committee composed of members from ministries and departments whose opinions or interests they are not bound to represent or defend and to which they cannot be accountable for their decisions in the Committee? It also seems bitterly ironic that a law should stipulate that the minister is not bound by the decision of a Committee made up of public officials but he is totally bound by any agreement he may enter into with private individuals or bodies with respect to the exercise of powers granted to him/her by law! Again the result here is likely not to be the elimination of corruption and inefficiency but the creation of new networks of patronage that encourage their own forms of political corruption and cronyism.

8.3 Categories of Mineral Rights

The Mineral Rights that may be granted under the Act are of three categories, namely, prospecting or retention licenses under Division A of Part IV of the Act; special mining licence, mining licence or gemstone mining licence under Division B of Part IV of the Act; and primary prospecting or primary mining licenses under Division D of Part IV of the Act. The scheme of the Act is such that licenses under Divisions A and B respectively of Part IV are most likely to be granted only to foreign corporate interests. The provisions as to capital outlay of the holders, the length of the periods for the licenses therein and the various obligations imposed upon the holders of those licenses all point to an inescapable conclusion that these are intended for the powerful foreign mining companies. Indeed, all the companies which have so far made substantial investments in the mining sector have been mostly Australian, South African or Canadian owned.

The third category of mining licenses is reserved to the citizens of the United Republic only. These are indigenous capitalists who have invested in mining – particularly of precious minerals such as gemstones – and the provisions are intended to protect their interests against the overwhelmingly powerful foreign mining houses. The Minister of Energy and Minerals stated as much when the Bill for the Act was being debated in the National Assembly (Tanzania, Ibid, 20, 22, 28 - 9).

Thus, under section 8(2), no primary prospecting licence or primary mining licence may be granted to an individual, partnership or company unless, in the case of the individual, he is a citizen of Tanzania; or, in the case of a partnership, it is composed exclusively of citizens of Tanzania; or, in the case of a company, its membership is composed exclusively of citizens of Tanzania, its directors are all citizens of Tanzania and its control both direct and indirect is exercised from within Tanzania by persons all of whom are citizens of Tanzania. There is also restriction on the grant of gemstone mining licence to non-citizens who may only hold these licenses in partnership with citizens with participating shares of not less than twenty five per cent.

In addition, the Minister is empowered to designate, after consultation with the Mining Advisory Committee, any vacant area as an area exclusively reserved for prospecting and mining operations by persons holding primary mining licenses issued under Division D of Part IV of the Act. And just as in colonial times short-term granted rights of occupancy (of year to year) could only be granted to the natives in urban areas, so is in independent Tanzania on the eve of the 21^st century can primary mining licenses of between one to five years be granted to the citizens!

Now, since the citizens are envisaged under the Act as being basically small operators, no substantial environmental or safety conditions have been imposed on their primary mining licenses. And as it is well known, the native holders of the former rights were no better than squatters whose occupation was dependent upon the whims and caprices of the colonial bureaucrats. It can also be asserted with certainty that holders of the latter rights would derive little comfort from their licenses were they to clash with the interests of the powerful foreign mining houses.

9. Environmental Considerations

The provisions relating to environmental management and protection under the new Mining Act as well as the evolving practice have been examined by this author in an earlier work (Lissu, 2000, 5-7, 19-22). Suffice it to say that the Act makes extensive provisions for environmental matters in relation to mining activities, such as preparation of environmental impact assessment studies and environmental management plans as a condition for granting various categories of mining licences. Failure to comply with these requirements is apparently fatal, for the Minister shall grant the special mining licence to the entitled applicant only if:

Holders of mineral rights must also substantially comply with the environmental management plans and environmental impact assessment studies prepared for their project. Non-compliance on their part may attract the requirement to post rehabilitation bonds to finance the costs of rehabilitating and making safe the mining area on termination of the mining operations (Ibid., 5-6). Although holders of the various categories of licences under this Act have the option to surrender their licences to avoid being bound by the strict rigours of these provisions, the Minister is nevertheless empowered to refuse the surrender of the licence if he is satisfied that the applicant will not leave the land to be surrendered in a condition which is safe and conforms to the requirements of the EMP or of the applicable Regulations relating to the safety and environmental management (Ibid., 6).

The minister is also a licensing authority in respect of applications for amendments to the environmental management plans appended to the licence. The particulars of the amendments, including … particulars of any significant impacts to the environment that any amendment could endanger, must be submitted to the minister. An amendment which substantially alters any provision which forms part of the licence, or which will adversely affect environmental management cannot be effective without the express approval of the minister who is required, where any such amendment appears to him to make such a substantial alteration, to refer it to the Mining Advisory Committee for its advice. The decision of the minister upon receiving advice of the Committee shall be subject to any relevant development agreement between him and the holder of the licence but any terms and conditions for the approval, if any, must be complied with.

The stringent requirements that we have seen above in relation to special mining licences apply as well to the shorter duration concessions such as the mining licence and the gemstone mining licence, whose maximum life span is ten years. For example, applicants for these licences must include a feasibility study which would set out measures the applicants propose to take in relation to any adverse impacts on the environment. If the application for any of these licences falls under section 64 it must include the EIA on the proposed mining operations by independent consultants of international standing as well as an EMP. Section 64 requires applicants for licences to commission and submit EIAs and EMPs as set out in the Regulations where mining operations to be carried out fall within the scale of mining operations set out in the Regulations discussed below.

Renewals of mining licences are also under the ministerial power in respect of environmental matters. Under section 50(1), an application for renewal of a mining licence for minerals other than gemstones accompanied by the environmental management plan in respect of the operations to be conducted during the renewal period must be granted unless:

The minister also has powers to cancel, suspend or terminate the various categories of mining licences after, inter alia, prior advice of the Mining Advisory Committee on a referral of the matter to the Committee.

Licenses granted under the former Mining Act, 1979 have not escaped the environmental rigours of the new law. Schedule 4 of the latter which deals with savings and transitional provisions in respect of the 1979 Act, provides that mining licenses held under that Act may be transformed into 'provisional licenses' under the new Act. These have duration of up to one year after the commencement of the new Act. Holders of provisional licenses are entitled to apply for their licenses to be transformed into mineral rights under the new Act.

The applications above are, however, subject to the requirements for environmental management plans just like other applications under the Act. Under clause 5(1), for instance, where a special mining licence or a mining licence or a gemstone mining licence granted to a holder of a provisional licence falls within section 64 of the Act, it shall be a condition of the licence that the holder draw up and submit to the Minister for approval an environmental management plan which satisfies the requirements of sections 39(1)(d), 48(1)(e) and 52(1)(g). And following the approval the Minister may require the holder to conduct mining operations in substantial compliance with the plan as approved.

Where these requirements are not met and the Minister declines to approve the EMP, the matter(s) in issue shall, if not sooner resolved by negotiation, be referred to a third party expert chosen by agreement between them whose opinion on the issue(s) shall be final and binding. Should the Minister and the holder be unable to agree on the choice of a third party expert, the latter will be chosen by the Secretary General of the International Centre for the Settlement of Investment Disputes.

The wide discretion that the Act grants to the Minister to enter into agreements with holders or applicants for mineral rights that may contain provisions relating to environmental matters has also been subject of critical scrutiny (Lissu, Ibid , 6-7). That the Minister has powers to exempt holders of mineral rights from the requirements to commission and submit to him an environmental impact assessment on the proposed mining operations has been identified as a matter of major concern, given the history of abuse of ministerial discretion in Tanzania (loc. cit.).

Other shortcomings, particularly those pertaining to the manner in which EIA and EMP reports are prepared, presented and approved for implementation have also been subject of contentious debates (Ibid, 22-24). The evolving practice appears to be that where the EIA studies for mining projects are commissioned by the project proponents who also identify, hire and pay the consultants, significant misrepresentations of the project's true impacts often occur with consultants appearing 'to justify rather than assess' the issues associated with the project (Ibid , 19-20, Lissu, forthcoming). The independence and objectivity of the EIA consultants has, therefore, become a contested terrain in the debate on the role of EIA in project design and implementation in Tanzania.

The Mining Act further grants the Minister considerable law-making powers to make regulations for the avoidance of the pollution of air, surface and ground waters and soils and for regulation of all matters relating to the protection of the environment and for minimisation of all adverse impacts to environment including the restoration of land on which mining operations have been conducted. In exercise of these powers, on July 20, 1999 the then Minister for Energy and Minerals, Dr. Abdallah Kigoda promulgated regulations dealing with wide-ranging matters such as grants of provisional licenses;mineral trading;salt production and iodation; grants of mineral rights; environmental management and protection;and safety and occupational health issues. The Regulations were published in the Government Gazette on July 30, 1999. We deal here with the Environmental Management and Protection Regulations.

9.1 The Ministerial Regulations

The ministerial power to exempt particular applications for mineral rights from the rigours of the law is once again reiterated in these Regulations. All the Minister is required to do is to give due consideration to the objectives of the Regulations and the nature of the proposed mine; as well as to state reasons for his decision, which shall be available for public scrutiny. But where no exemption is granted, an environmental impact statement (EIS) and environmental management plan (EMP)

The operations specified in the First Schedule for which EIS and EMP are mandatory are all mines in all national parks, game reserves and sanctuaries, conservation areas, forest reserves or any other reserved areas, monuments and marines parks or reserves. Others are mines with an application area exceeding sixty hectares in all mining areas that are not sensitive areas or those exceeding thirty hectares in sensitive areas; mines with pre-processing production capacity exceeding 100,000 tons in all mining areas other than sensitive areas, or those with annual pre-processing production capacity exceeding 50,000 tons in sensitive areas.

'Sensitive areas' are defined in the Schedule as areas prone to natural disasters; wetlands; mangrove swamps; areas susceptible to erosion; and areas of importance to threatened cultural groups. Others are areas with rare, endangered or threatened plants and animals; areas of unique socio-cultural history, archaeological, scientific purposes or areas with potential tourist value. Also including in this list are polluted areas; areas subject to desertification and bush fires; coastal areas and marine ecosystems; areas declared as watershed reserves, sacred areas, hot-springs; water catchment and recharge areas of aquifers. Greenbelts or public open spaces in urban areas; and burial sites and graves are also considered as sensitive.

All Schedule 1 must be accompanied by EIS and EMP and where they are so accompanied, the Minister is duty-bound to require the applicants to submit the said EIS and EMP. Failure by applicants to comply with this requirement is sufficient ground for rejecting the applications. There are further requirements as to publication of notices for the submission of EIS and EMPs and the content thereof; as well as opportunities for inspection and comment by members of the public. There are also procedures for when an EIS and EMP are received; for further information; for submission of amendments to EIS and EMP; and for failure to submit amendments or revisions.

Part Three of the Regulations relate to environmental standards and monitoring. Here there are prohibitions and limitations of discharges, emissions or deposits of pollutants from mines. These prohibitions and limitations have to be read together with the standards for water effluents and receiving waters; for air quality and for deposition of wet and dry contaminants in Schedule 5. There are provisions for reclamation requirements; rehabilitation pond; and the requirements for artisanal and small-scale miners. As well as these, the other Schedules relate to consultation procedures; contents of environmental impact statements; contents of environmental management plans; and information to be provided with applications for authorisation.

10. Dispute Processing Mechanisms

Given the multiplicity of disputes that often accompany the mining industry, the Mining Act, 1998, also contains a fairly elaborate dispute settlement mechanism. The Act has taken a dual approach in dispute settlement, with two distinct mechanisms for resolving disputes arising out of its implementation. The first mechanism is found under Part VIII of the Act which vests the Commissioner for Minerals with quasi-judicial powers to deal with disputes which may not involve investors and the Government as opposing parties. The Commissioner is empowered, under this Part, to inquire into and decide all disputes between persons engaged in prospecting or mining operations, either among themselves or in relation to themselves and third parties other than the Government not so engaged. The disputes may be in respect of boundaries of mineral rights; claims of water rights for mining purposes; assessment and payment of compensation pursuant to this Act; etc.

The Commissioner is, in addition, empowered to make such orders as may be necessary for the purpose of giving effect to the decision in proceedings pursuant to this Part and may order the payment, by any party to the dispute, of such compensation as may be reasonable, to any other party to the dispute. An order made by the Commissioner in exercise of his powers under this Part may be executed by any civil court within whose jurisdiction the subject matter of the order is situate in the same manner as that court shall enforce its own order. Appeals against orders of the Commissioner go the High Court. However, and ominously, the Commissioner for Mines enjoys discretion to refuse to entertain any dispute referred to him under this Part; which decision is not open to appeal in the High Court!

Disputes between holders of mineral rights and local land-owners and rural communities fall under this category. Now we have seen that the Commissioner for Mines and his subordinates – the zonal mines officers - as appointees of the President or the Minister as the case may be are not neutral figures under the Act. They have delegated powers to issue mineral rights of various categories and the issuance of these rights impacts directly on the land and resource rights of individual land-holders and communities. They have vested interests, both institutional and personal, for they derive income, personal power and prestige from their legal powers to grant mining rights. Now where disputes arise between land-holders or communities and the holders of mineral rights over the consequences of the exercise of power by the Commissioner or his subordinates, it is the Commissioner who plays judge! It is not difficult to predict that in such a dispute it is the local people and communities who end up on the losing side.

These provisions were challenged in the National Assembly when the Bill for the Act was sent for debate. The Government sought to justify them by arguing that they in fact limited the powers of the Commissioner for Minerals who was not thus constrained under the repealed Mining Act, 1979. In any event, the Government argued, '… there is no reason for compelling the Commissioner to hear and determine a dispute he deems he cannot deal with' (Tanzania, op. cit., 31). That may, indeed, be correct; but why then prevent parties from proceeding to the courts of law if they feel aggrieved by the decision of the Commissioner not to entertain disputes sent to him? Is this not directed at frustrating recourse to the courts by local land-owners in cases of contested boundaries and compensation claims which, as evidence increasingly show, are widespread in areas where mining companies have been given concessions?

The second dispute settlement mechanism envisaged by the Mining Act relates to disputes concerning matters of compliance with the environmental management provisions of the Act. The provisions presumably cover non-citizen parties such as foreign investors for they ultimately seek to prevent recourse to the local courts of law by either party. Under Schedule 4 of the Act, where the requirements of the environmental management plan are not complied with and the Minister declines to approve the EMP, the matter(s) in issue shall, if not sooner resolved by negotiation, be referred to a third party expert chosen by agreement between them whose opinion on the issue(s) shall be final and binding. Should the Minister and the holder be unable to agree on the choice of a third party expert, the latter will be chosen by the Secretary General of the International Centre for the Settlement of Investment Disputes.

Writers and publicists have observed recent trends in the international economic law regime, particularly since the ratification of the latest round of the General Agreement on Tariffs and Trade (GATT) in 1994, and the subsequent establishment of the World Trade Organization (WTO) under which limitations on the free movement of goods and capital between countries have not only been stripped away through international agreements, but also national courts have been stripped of their powers to adjudicate on disputes involving powerful multinational corporate investors and national governments.

The powers to adjudicate on these disputes have instead been entrusted to such institutions as the WTO and ICSID which are largely controlled by the powerful Northern countries and are accountable to the latter and not to Southern Governments and peoples who bear the negative consequences of foreign investments (See Lissu, 1996, Ch. 2; Hildyard, 1998: 7-8).

10.1 Where are the Benefits?

Apologists of the corporate mining industry have lauded the industry for its potential contribution to the foreign exchange coffers of African countries; technology transfer in value added activities; increased government revenue and employment creation in this day and age of permanent layoffs and down-sizing. MIGA, for instance seeks to justify its subsidy to Barrick Gold Corporation's Bulyanhulu venture by arguing that the guarantee 'taps the potential of the underdeveloped mining sector, helping Tanzania to diversify its economy and offering solid developmental benefits for the country's 33 million residents' (Ibid.)

10.2 Foreign Exchange Earnings

As we have seen, as a result of large-scale corporate mineral production, export earnings from minerals have risen exponentially in the past few years, reportedly reaching to $185 million in 2000 with gold alone accounting for about two-thirds of this figure. These numbers are, however, misleading for they do not tell anything about whose money it is, nor whether it is retained invested inside the country or is repatriated outside the country in the form of profits, share-holder dividends, etc. They do not tell anything about the contribution of these export earnings to meeting local and national social needs. As the United Nations Economic Commission for Africa (UNECA), has argued, 'the African mining sector is still not making a decisive contribution to the social and economic development of Africans. The sector needs reshaping to ensure that; (i) it supplies essential needs to the people (ii) sustains other sectors of the economy (iii) intensifies regional integration (iv) consolidates the financial position of the producer country' (quoted from Abugre and Akabzaa, 1997: 12).

Indeed, besides the foreign exchange objective, the contribution of mining to economic development in Africa has been recently challenged. The 'Ghana miracle' of gold production since 1986 which has often been touted by the World Bank as the best example of the successful implementation of its policies in the mining sector has been found wanting in material respects. For example, export earnings from mining (primarily gold) has overtaken cocoa as the main export earner in Ghana, rising from US$ 107.9 million in 1992 to US$ 682.2 million in 1995. However, 'the effect on the current of the balance of payments is less clear. Imports of both capital and consumer goods enjoying tax and tariff concessions equally ballooned, leading ultimately to a deterioration of the current account deficit in 1995 and 1996' (Abugre and Akabzaa, Ibid., 12).

10.3 Technology Transfer

The effect on technology transfer is equally suspect. Mining operations are predominantly surface operations, requiring heavy earth-moving equipment and minimum innovative technology. Namdeb, the Namibian Diamond Company with significant De Beers interests owns (according to The Financial Times of London dated June 28, 1997) the largest fleet of earth moving equipment in the whole of southern hemisphere. Processing is, however, minor and where, as in Zimbabwe and Ghana, some intermediate technology potentially useful for small and medium scale miners have been developed for secondary processing purposes, their distribution and assimilation within the mining community has been limited (Abugre and Akabzaa, Ibid ., 12). The diffusion of other technological innovations have been severely constrained by patent laws and capital shortage to such extent that most of the ores are exported in raw form, thus denying African countries both value added derived from processing and technology.

10.4 Employment Creation

The contribution of the mining industry to employment creation is mostly marginal if not totally negative. As Chachage (Ibid., 256) has shown, in Tanzania gold mining has been totally dominated by small-scale miners who were responsible for the entire gold exports until very recently. By official figures for 1993, there were possibly by conservative estimates about 900,000 people involved in mining of gold and gemstones alone! These are now fast being kicked out of the areas which have been licensed to the big mining houses in order to create – as in the case of the Geita Gold Mine - between 300 and 400 jobs for which surrounding communities will be given priority 'but if they have requisite qualifications'!

For its part, the Bulyanhulu Mine had originally been predicted by MIGA to create about 1500 jobs during construction and 1000 after construction but the latter has now been revised downwards to 900 jobs. That is to say, on average MIGA would have spent $191,111.11 per job created in Bulyanhulu! And in an echo of the MIGA's report (supra.), we also learn that the mine will 'indirectly provide jobs to thousands of suppliers and other businesses around'. These claims of 'indirect' job-creation have to be treated with some scepticism. As one Member of Parliament argued, recently, corporate mining operations ''… employ very few local people; they build their own infrastructures, and develop their own supply chains connected to their home countries'.

KMCL, for one, who brag about their 'buy local' policy in their project documents, are importing almost all supplies, including food, from outside the mine area, the district and even outside the region and the country. So any indirect job-creation opportunities accrue outside the immediate areas that have bore the brunt of its operations. In addition, they themselves have conceded that the 'low levels of skills and literacy possessed by the local population will restrict their ability to realise employment opportunities offered by the mining development and will also reduce their ability to seize entrepreneurial opportunities' (BGC and KMCL, op. cit., 21).

Continued in Part 2