Speech by his Excellency Benjamin William Mkapa, President of the United Republic of Tanzania, at the Dialogue with Chief Executives of International Mining Companies, Arusha, February 11, 1998

Mr. Chairman;
Honourable Ministers;
Your Excellencies Members of the Diplomatic Corps;
Distinguished Chief Executives of International
Mining Companies;
Chief Executives of Local Tanzanian Mining Companies;
Distinguished Guests;
Ladies and Gentlemen.

I should like to begin by welcoming all of you to this important dialogue. I would like, in particular, to offer a special welcome to those Chief Executives from such far away places as Australia, Canada, the United States, Europe, Ghana and South Africa. I know there must have been competing demands on the time you are spending in Tanzania, but you chose to accept my invitation. For me and my government, this is a most welcome sign of your faith and commitment to the public-private partnership that we are forging for the development of our economy in general, and the mineral sector in particular, for our mutual benefit. To you all I say, Karibu!! And since you are here, I hope after our dialogue many of you will wish to wind down and sample the rich and varied tourist attractions in this part of Tanzania.

Let me also express my Government's deepest appreciation to the World Bank and the many corporate sponsors who worked closely with the Ministry of Energy and Minerals to make this occasion not only possible, but, judging by the attendance, very successful as well. In this regard, I wish to recognise the contributions of:

The Tanzania Chamber of Mines;
The Tanzania Mineral Dealers' Association;
Stanbic Bank (Tanzania) Limited;
The Standard Chartered Bank (Tanzania) Limited;
Citibank (Tanzania) Limited;
National Bank of Commerce (1997) Limited;
Gailey Roberts (Tanzania) Limited;
Skanska Jensen International Civil Engineering, AB
(Tanzania) Limited;
Sutton Resources Limited;
Placer Dome Exploration Inc.;
ENV Consultants;
Parastatal Pension Fund; and
Tanzania Central Freight Bureau.

To all of you, our generous corporate sponsors, I say Ahsanteni Sana !!

I want also to pay tribute to the officials of the Mineral Resources Department of the Ministry of Energy and Minerals whose dedication to the promotion of Tanzania's mineral potential and development to the global community has made immense contributions to our presence here today.

Mr. Chairman,
I should like, at the outset, to emphasize the nature of this gathering. It is a dialogue between the Government of the United Republic of Tanzania and the international mining investment community assembled here today. Over the next day and a half, we would like, in a frank manner, to exchange views, share with you the various steps that my government has taken, and intends to take, to create an effectively welcoming and friendly environment for private sector investments in our mineral potential. But, perhaps, the more important goal of this dialogue is for us to hear from you how best we can continue to improve the environment to speed up your investment operations. For, we know that the more we can continue to align government policies and services to your needs, the more efficient your investment operations will become, and the greater the benefits for your companies as well as for Tanzania.

To this end, my ministers and senior officials, particularly those whose scope of responsibilities have a direct bearing on your activities - the Minister for Energy and Minerals, the Minister for Finance, the Minister for Home Affairs, the Attorney-General, the Commissioner General of the Tanzania Revenue Authority and others, as well as myself, will be available for one-on-one discussions with you.

As many of you here know, Tanzania is a country richly endowed with varied minerals, ranging from gold, diamonds, tanzanite, ruby and other gemstones to nickel, copper, cobalt and other base metals, as well as a range of industrial minerals most of which are unexploited so far.

It is now over a decade since we embarked on major economic reforms, marking a clear shift towards private sector led development, and market-oriented economic management. Since then, we have taken concerted actions aimed at creating an environment that will attract new investment while retaining existing ones in Tanzania. We realised, at the outset of our reforms, that important as they are, peace, political stability and unique social harmony and concord which our country has enjoyed since attaining independence in 1961, are in themselves not enough to attract investors and ensure a steady inflow of investment capital. Likewise, endowment of natural resources, however large, as is the case with our mining sector, is also not enough. Other equally important factors include:

• A sound macro-economic management, based on a framework ensuring economic stability and market-driven foreign exchange and trade regimes;

• Internationally competitive, transparent, predictable and stable legal and fiscal framework;

• A development infrastructure;

• An efficient and effective administrative machinery; and

• Good governance, including persistent attention to the removal of corruption.

Distinguished Ladies and Gentlemen;

These are the fundamental guiding principles that are shaping the management of the country and its economy. We view them as a firm foundation upon which we are committed to improving continuously in order to keep Tanzania a globally competitive destination for private investment. Those of you who have been observing us in recent years must be aware of some of the key gains that have already been accomplished by the country in this regard.

We are aware that there are a great many challenges that still need to be tackled by the country: the challenge of providing reliable, cost-efficient infrastructure such as roads, rail and port services, telephone services, power and water supplies; the challenge of improving the delivery of the government services which you need to facilitate your investment; the challenge of creating an educated and better trained workforce to provide the basis for worker productivity; the challenge of continuing to create wider space for the private sector to flourish; the challenge of removing corruption from public service delivery; the challenge of promoting greater transparency, accountability and responsiveness, as well as many other challenges that may frustrate your ability to make your investments worthwhile and profitable.

Ladies and Gentlemen;

My Government is alive to all of these challenges and, while we do not expect to solve these overnight, I can assure you that, with your support, my Government feels quite up to the task and is fully committed and charged to doing whatever it takes to resolve these constraints. Eliminating them is as much in our direct national interest as it is in facilitating a smoother operation of your investments in Tanzania.

In the course of the next day and a half, we shall be attentive to any ideas and suggestions you may have to help us do an even better job working at these challenges. We have begun a dialogue - let it be an on-going one.

Mr. Chairman,
Earlier, I referred to the gains that the country has already made in improving Tanzania's global competitiveness as a good business address for private investment. Seeing that our dialogue is with people from the mining investment community, I want now to focus on what we have achieved in making Tanzania's mineral sector attractive for private investment.

In August of 1997, Parliament repealed the old, restrictive National Investment (Promotion and Protection) Act of 1990 replacing it with the Tanzania Investment Act of 1997. The new Act benefited from the experience of the previous seven years and the concerns raised in that period by pioneering investors. In doing so our goal is to make our country internationally competitive in attracting foreign direct investment. The new Act, for instance, offers even better tax and fiscal incentives and generally responds to the suggestions of private investors, and the experience of our now renamed Tanzania Investment Centre. It is my Government's resolve to keep on improving the investment climate through an on-going constructive dialogue with the private sector.

In October 1997, Parliament approved a new special fiscal package for the mining sector as further testimony to our commitment to encourage private investment in this sector. This new package was designed in direct consultation with many of you, and with an eye on making the new fiscal regime globally competitive, while ensuring a proper balance of the benefits to investors and the country.

Ladies and Gentlemen,
Some of the features of this new package are:

• Full exemption on sales tax, and import and excise duty, on equipment directly related to mineral exploration, development and production;

• Repatriation of incomes directly related to mining;

• Recovery of all expenses directly related to mining; and
  

• Exemption from withholding taxes on goods and technical services directly related to mining.

This very week, Parliament which is currently sitting in the capital Dodoma, is debating the new Mining Act, a draft of which has been made available to you. Like the fiscal package approved by Parliament, the draft Mining Act being debated by Parliament is the direct outcome of active consultations between the Government, the mining investment community, as well as the various communities of our country in which minerals are found.
Side by side with these legislative actions, we have pursued vigorously the divestiture of state ownership in operating mines in line with the changed role of Government, and in order to increase the scope of private sector participation in the economy. Todate, we have privatized the Buckreef gold mine in Geita, the Williamson Diamond mine in Shinyanga, and the Pugu Kaolin Mine in Coast region. As I speak now, there are three other state-owned mining companies whose transfer to private investors is under negotiation. These are: the Nyanza Salt Mines in Kigoma, Coastal Salt Works in Coast Region and the Tanzania Gemstone Industry in Moshi. By the end of the first quarter of this year, the transfer of these state-owned mines to private hands should have been completed.


The only state-owned mine that is left to be privatized is the Minjingu phosphate mine here in Arusha Region. I am hoping you, Ladies and Gentlemen, will before the day is over make me an offer I cannot refuse for that too! Nothing will please me more than completing the pull out of government from direct investment competition with you in the mining sector.
This will then leave us free to concentrate on the new role of the government, in partnership with all of you, to make the mining sector in Tanzania a vibrant and strong engine of growth for our mutual benefit. The government will retain only the role of regulator - not for purposes of controlling or hindering your activities - but to ensure all stake holders benefit : the investor, the employees and the society.

My Government's faith in continuing to move in this direction has been reinforced by the response that we have seen from the mining investor community, both local and foreign. Exploration activities undertaken in the past five years have started to yield very encouraging results. Over 15 million ounces of gold have been proven and, from the various conversations we have already had, we feel encouraged that four producing mines can be expected to be in operation by the year 2000. Last November 27, I had the privilege of inaugurating the Golden Pride Project in Nzega District, the first of the four mines to begin development. Here, I wish to take the liberty of asking you all to join me in applauding Mr. Michael Carrick, Chief Executive of Resolute Limited of Australia and Dr. Michael Martineau, Chief Executive of SAMAX, United Kingdom, the primary investors in the Golden Pride Project, for taking the lead.

I would also like you to join me in commending Mr. Michael Kenyon, President, and Dr. Roman Shklanka, Chairman, of Sutton Resources of Canada for the excellent progress that Sutton Resources are making in the development of their US$ 135 million investment in their Bulyankulu gold mine under their locally incorporated subsidiary of Kahama Mining Corporation. My Government is very pleased that by the end of next year, this mine, with a rated capacity of 200,000 ounces per year, will start production. Tanzania is, indeed, quite proud of this development because of the volume of proven resources putting it in a world class league of gold mines.

Ladies and Gentlemen,
Forgive me and my Government for thrusting this justifiable pride in the positive responses that we have witnessed in the last few years from the mining investor community. It confirms to us that, while we still have challenges ahead of us, we are doing the right things to make Tanzania a good business address for mining investments.

In addition to these two gold mines expected to start production this year and next, my Government has been informed by Ashanti Goldfields Corporation of Ghana that they are due to complete their detailed feasibility study on their Geita concession, and to start mine development almost shortly thereafter with a targeted production date of end - 1999, or early in year 2000. Ladies and Gentlemen, again may I ask you to join me in recognising Mr. Sam Jonah, Chief Executive of Ashanti Goldfields for their consistent commitment in the development of their Geita concession. As I understand it, this is likely to be a US$ 100 million investment with a rated output of 180,000 ounces of gold per annum. Mr. Sam Jonah, as we say in kiswahili, Ahsante Sana!!! for Ashanti's commitment.

Mr. Chairman,
It is not my intention to leave out any company. Several other companies have ongoing exploration projects in Tanzania whose efforts we fully recognise and acknowledge. These include Anglo American Corporation, Randgold Resources, Pangea Minerals, Tanganyika Gold, East Africa Mines, Africa Mashariki Gold Mines, Tan Range Exploration, Universal Gold, Iscor, JCI and Maiden Gold. To them all, I would like to request you one more time to join me in applauding their efforts.

Distinguished Ladies and Gentlemen,

It is not my Government's intention to limit the development of Tanzania's mineral potential to gold only, happy as we are with the progress being made on this front. The diamond potential in the country is also significant as represented by a world-class diamondiferous kimberlite at Mwadui which has been in production for over 50 years and nown in our history as the old Williamson Diamonds Limited. In line with our commitment to remove the state out of operations in the mining sector, the Williamson Diamond Company was privatised in 1994 to De Beers. The mine has since been rehabilitated and is functioning efficiently. There is a large possibility of new finds in the central parts of Tanzania as indicated by their ongoing exploration programme to widen their investment in the country. As regards coloured gemstones, the country is richly endowed with rubies, saphires, alexandites, tanzanites, garnets, tourmalines, chrysoberyls, zircons, amethysts and many others.

We also have iron ore and base metals. In the recent past, there has been a significant discovery of nickel and cobalt in the north-west of the country, in Ngara District. Anglo American Corporation in partnership with Sutton Resources, are making detailed investigations on the deposit as well as covering the area extending to the north towards the border with Uganda. Further south, Broken Hill Proprietaries of Australia is involved in similar exploration. Tanzania is also endowed with abundant coal reserves. We welcome investment in exploring these resources for power generation, industrial uses and export. Also available is a wide variety of industrial minerals which include huge deposits of soda ash, marbles, mica, kaolin, dimension stone and limestones. Others include phosphate, graphite gypsum, magnesite, vermiculite and bentonite.

Mr. Chairman,
There is clearly a wide scope for increased mining activities in Tanzania. I am here to welcome you all to be part of this process of a birth of what I hope will prove to be the mining boom in Tanzania. I only have a few pleas. First, please try, of your free will, to work in partnership with artisanal miners that give up their areas of operation in favour of large-scale miners. I am informed that a few of you have such programmes. I thank you and I encourage others to do likewise. Alternatively, you could have programmes to assist our artisanal miners with management, operation and equitable marketing arrangements for their products.

My second plea is on environmental protection and preservation. It would be most helpful if each mine would have this as part of its mission. Develop, together with local communities, strategies against pollution and land degradation, including regeneration of forest reserves.

My third plea is that you should consider yourselves part and parcel of the local communities in which you operate. A few of you have been truly responsible corporate members of those communities, contributing generously to improvement of water, education, health, and services. Such symbiotic relationships between mines and local communities will lead to harmonious and happy relations all round.

As I stated early on, this gathering is a dialogue between the mining investing community and Tanzania. I am happy to say that over the past three years, as we moved more vigorously to market our mineral potential to the outside world, dialogue has virtually become a tradition in the sector. In the formulation of government policy on mining, in the development of the fiscal regime, in the crafting of the legal and environmental regulations and the development of the draft new Mining Act, we have had extensive and fruitful consultations and workshops, not only with our domestic stakeholders, but equally with the foreign firms that are interested in the investment potential in Tanzania.

We consider this gathering as one more plank in building the mutual trust that we believe is necessary to sustain continuous investment inflows to this sector. Our goal in this unique approach of public-private partnership is to raise the contribution of the mineral sector in Tanzania's gross domestic product from the current low level of 2% to its potential of 10% within the next five years.

I believe this is a realistic goal which, together - the mining investment community and the government - we can jointly achieve.

Thank you very much for your attention. Asanteni sana!!