Presented by

Prof Handley Mpoki Mafwenga,

[PhD, MSc, MBA, PGDTM, ADTM, LLB]

BERLING GERMANY

50TH UNION ANIVERSARY OF THE REPUBLIC OF TANGANYIKA AND

THE REPUBLIC OF ZANZIBAR

FRIDAY, 25 APRIL 2014

THE UNITED REPUBLIC OF TANZANIA MINISTRY OF ENERGY AND MINERALS

1. Vast unexploited mineral resources coupled with Stable political environment; Tanzania has so far extracted less than 10% of the various types of minerals found in the country;

2. Emerging economy with high growth potential which prevail under transparent regulatory and administrative system; It thus satisfies two criteria 1) a rapid pace of economic development and 2) Government policies favoring economic liberalization and the adoption of free-market system-This is in line with NSGRP Cluster 3 which advocates for Good Governance and Transparency and African Mining Vision adopted by AU Head of States in Feb, 2009 which calls for transparency, equitable and optimal exploitation of mineral resources to captures broad based economic growth;

3. Geological resource database with adequate information which is a major assets in mineral resource evaluation; and

4. Fiscal regime that provides incentives which are internationally competitive, non-discriminatory, stable and predictable.

• Mining contributes about 3.5% of GDP as per 2012 prices [Table 2.1].

• Large Scale mines employed 8,024 people in 2013 of which 6% were expatriates. ASM employs directly more than 700,000 people [Table 2.2].

• Large Scale mines paid about TZS 2,070 bil. to the Government in form of taxes and royalties in 2013 [Table 2.4].

• In 2011, seven Large Scale mines (GPM, GGM, BZGM, TGM, BGM, WDL & TTM) voluntarily committed USD 7.44 mil. to CSR projects representing 0.4% of their mineral revenues in the same year [Table 3.5].

• Gold exports accounts not less than 25% of total exports and 51.1% of non-traditional export earnings in 2012 [Table 3.4].

• Spill-over effects of mining: notable sectors that have benefited from mining are Banking/Financial Services; Transport & Logistics; Manufacturing & Fabrication; Hospitality & Catering; Consulting (Environmental & Engineering Services).

1.4 1.4 1.5

1.8

2.1

2.4 2.6

2.9

3.2

3.5 3.4

3.3 3.3 3.3 3.5

0

0.5

1

1.5

2

2.5

3

3.5

4

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

GD

P [

% C

urr

en

t Pri

ces, 1998to

2012]

FISCAL YEARS

GDP

From 1997 through 2000 Tanzania opened door to foreign investment in the mineral sector to attract investors to bring technologies and expertise [Increasing large Scale Mining Exploration and Mining activities];

From 2001 through 2007 there has been a GDP contribution at an increasing rate due to active mining activities and related sub-sectors-incentives contribution from the Government to enhance mining life cycle into productive capacity;

From 2008 through 2010 the sector contribution declined due to significant reduction in the prices of Tanzanite, Diamonds, Aluminium and Nickel while world market declined by 50% and Diamonds prices fell by 26% [$8,870 to $ 6,608 per carat]

However, recovery came into being due to Government intervention through substantial Fiscal Stimulus Package announced on 9th June, 2009 [reduction of VAT from 20% to 18% coupled with efficiency in VAT refund, exemptions from royalty payments for Diamonds and Tanzanite for two years] The economy came to Medium Term Growth Path

6,999 7,139 6,917 7,361

7,753 8,134

7,542

460 567 583 650 718 669 482

7,459 7,706 7,500 8,011

8,471 8,803

8,024

2007 2008 2009 2010 2011 2012 2013

NO

OF E

MPLO

YEES

FISCAL YEARS

Locals Expatriates Total

Export Permits are given to the following:

Mineral right holders that have Special Mining

Licence, Mining Licence, Primary Mining Licence,

Processing Licence, Smelting Licence and

Refining Licence. Additionally, an individual or

company holding a Dealer Licence .

Non-resident who has acquired minerals from an

authorised miner or licensed dealer and has

applied to the Commissioner for Minerals for a

special permit.

Non-resident who has obtained minerals from a Gem Trade Fair in Tanzania .

Non-resident with a Tourist Visa is also permitted to export minerals.

Export Permits are required for all minerals and samples of minerals.

In case of Tanzanite, a Certificate of Origin for Tanzanite is required.

For diamonds, Kimberley Process Certificate is required.

3,853,183

10,776,687

2,385,978 1,036,889

3,975,167

617,991

3,511,676

26,157,571.00

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

GPM GGM BZGM TGM BGM WDL TTM TOTAL

AM

OU

NT

IN

USD

Grand Total

The CSR being the voluntary commitment for mining companies was enhanced by the TMAA through financial audit which facilitated Disclosures to be reliable and intelligible to the users;

The CSR reduced disputes between community members and the mining companies and TMAA was solely engaged to pursue awareness campaign on part of the stakeholders so as to built up confidence on the execution of the scheme.

4.0: AUDITING UNDER TMAA [ROLES & FUNCTIONS OF TMAA]

• Increased Govt. Revenues

• Availability of Reliable Minerals Data • Quality

• Quantity

MINERALS PRODUCTION

& EXPORT AUDIT

•Financial Analysis

•Tax Review

FINANCIAL AUDIT

•Compliance

ENVIRONMENTAL

AUDIT

GOVT TMAA

• Environmental Stewardship

Mining

Entities

Physical audit of minerals production and export (quantity and quality of minerals);

Stationing full time Auditors to witness and record daily production, weighing, packaging, sealing and export of minerals. This helps investors to have a sustainable ethical values to the investors over the employees;

Taking mineral samples and performing logistics for shipments of collected samples from the mine sites to the TMAA laboratory for assaying. This ensures investors over the actual values and quantity of minerals exploited;

Conducting royalty reconciliation by comparing mines’ assay results against those of TMAA. This gives investor high degree of confidence on how much royalty to be paid

Strengthening efforts to counteract minerals smuggling and royalty evasion. This protects investors in the competitive environment to conduct the projects fairly and rationally.

Mineral samples being inserted in the furnaces

Auditing financial records of mining entities so as to attain quality assurance on the disclosures.

Financial audit and analysis: Verifying the authenticity of revenue declared, capital and operating expenditure incurred by the mining companies; So as to help investor to be in the reliable, predictable, stable and neutral fiscal regime.

Tax review and analysis: Reviewing and Analysing the tax accounting of mining companies in order to determine whether accounting methods used were appropriate and in compliance with statutory provisions; So as to broaden tax base and enhance tax net which put fair tax system among the investors .

Revenue forecasting modelling: Performing revenue forecasting based on available historical, current and future economic variables relating to large and medium scale mining projects; So as to have predictable and sustainable fiscal flows on the investors and the Government.

Monitoring environmental management activities around mining areas through:

Reviewing Environmental Management Plans (EMPs), rehabilitation programs and environmental reports. This would help investor to be cost leader in lieu of mitigating environmental risks that would affect the projects on one hand and the environment on the other hand.

Conducting physical inspection at mine sites to verify implementation of EMPs. The aim including among others is to ensure corporate integrity over environmental concern.

Verifying whether mines are setting sufficient funds for environmental conservation, progressive rehabilitation and mine closure. This helps investor to have a sustainable provisions of funds and efficient implementation of environmental obligations.

TMAA is a key instrument to protect investors from the environmental risks which are caused by ASM closer to the mines;

TMAA has also been a key instrument in curbing environmental risks that would affect the Flora and Fauna within the mine sites and closer thereof;

TMAA has also helping investors to abide to the Standards and Regulations under EMA and providing inputs to other stakeholders

The mineral sector remains critical to Tanzanian development, and has been an important contributor to the national economy. TMAA being a key stakeholder in the mineral sector is solely committed to excel its role of ensuring that the Government maximizes benefits from the sector. TMAA has shown positive outcomes through realization of significant revenue in terms of royalty and taxes collected from the mining industry.

THANK YOU FOR YOUR

KIND ATTENTION

www.tmaa.go.tz