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Wednesday, 7 November 2012

My impressions: Tanzania Mining, Energy/Oil & Gas and Infrastructure Indaba 2012.

I had the pleasure of attending the Tanzania Mining, Energy/Oil & Gas and Infrastructure Indaba from the 24th to 26th of October 2012 in Arusha. An Indaba is a term used in Southern Africa for a major meeting or gathering. Though, the word has its origins among the Zulu, Xhosa & Swazi peoples of South Africa, where Indaba describes an important meeting among principal men of the community.

The Theme was:  “Turning Tanzania’s latent Mining and Energy Resources into wealth for the benefit of Tanzania and its future generations”

The event was endorsed by the Tanzania Ministry of Minerals and Energy and the Tanzania Chamber of Minerals and Energy.

Present were top officials in the Mining, Energy & Infrastructure sectors from senior government officials to CEOs and top executives at companies in these sectors in Tanzania. Also in attendance were key personnel from top audit, consulting firms, legal, Logistics, HSSE, Geo seismic mapping, CSR and other support services to these sectors.

I presented a 15 minutes presentation on: Operational Challenges & Opportunities: Mining, Energy & Infrastructure in Africa. My presentation was themed around Operational challenges and opportunities for operational improvements to grow resource based companies.

My personal impressions of Tanzania and the industries covered by the Indaba is that Tanzania is an extremely mineral wealthy country with mineral wealth in all corners of the country. Despite the country having this numerous wealth, a lot of it is under-exploited due to a weak regulatory environment (though the government is working very hard to remedy this and it’s in fact ahead of the other eastern Africa countries in this respect), Poor infrastructure to the remote areas where these minerals could be found also hurts these industries and a lack of relevant skills in its labour force cannot be overstated.

This has led to many Tanzanians constantly commenting that “We have a lot of wealth underground which is being mined by foreigners and we do not benefit from it”. A middle aged gentleman attending the Indaba summed it up for me “We were not ready to begin exploring this wealth, our policies were not mature enough and our government wasn’t ready”, this lead to many developed world miners converging on Tanzania in the late 1990s/ early 2000s. Their contract terms are skewed towards them because of the lack policy and regulation when they came into the market, leading to the comments made above.

The main aim of the Indaba was to address some of these issues.

Looking at the key highlights from the speech of the Deputy Minister of Energy and Minerals key note speech.

Tanzania has 6 large scale gold mines in north eastern Tanzania around the shores of Lake Victoria and one medium sized gold mine in the same area.
Tanzania has 2 diamond mines (one large scale and the other medium).
It has a medium scale Tanzanite mine. (Tanzanite is a rare gemstone only naturally found in Tanzania, in the areas to the north of the country around Mt Kilimanjaro and Mt. Meru)

Minerals contribute 3.3% of GDP which is very low. The target is 10% of GDP by 2025. Currently value addition is only 49% but they hope to increase this. 96% of Tanzania’s minerals are not exploited so there is potential for exploration and mining. Gemstone mining is only permitted to Tanzanians.

In terms of oil and gas, 25,000m square feet is under exploration with 62 wells having been drilled, 10 have been successful and are moving towards development. There are 18 oil and gas explorers in Tanzania 5 of them local, while 8 of them exploring offshore.

33 billion cubic feet of natural gas has been discovered offshore. Conservative estimates say 28 billion cubic feet. The arrangement is exploration and development under production share agreements especially with Majors.

In terms of railway infrastructure this is lagging behind as Tanzania has an old metre gauge railway line laid by the German colonialists in the early 1900s. There is also a cape gauge line  famously known as the TAZARA railway that was constructed by socialist China in the 1980s to connect Zambia and Southern Tanzania to the port of Dar es salam. An interesting thing to note is that these two railway systems are mutually exclusively and do not interface.

The government hopes increased revenue will lead to increased profit for mining companies which will lead to higher taxation income.

All in all the Indaba was a success with companies such as Africa Barrick Gold which runs 4 gold mines in the country saying they are bullish about the Tanzania. Having recently acquired gold mining rites in Kenya around the Lake Victoria, in the same geological makeup as their Tanzanian assets.

The Tanzania Ministry of Energy was in the news in September 2012 saying that it was reviewing all its energy and mining contracts, looking to increase taxation especially capital gains taxes. This has caused jitters in the Tanzania energy and mining industry.

For Tanzania to better explore its mineral and energy wealth, it has to improve infrastructure, crystallize a mining policy and regulatory framework and improve the local education policy to train future generations with relevant skills for these sectors.