A NEW report issued by several faith-based and civil society
organisations has slammed the Buzwagi gold mine deal, saying members of
parliament and the general public were hoodwinked by ex-minister for
energy and minerals Nazir Karamagi into thinking that the upcoming
project would pay huge taxes to the government.
’’The (former) Minister for Energy and Minerals, Nazir Karamagi,
has told parliament that the Buzwagi gold mine will yield $198.9m
(approx. 240bn/-) in royalties and other taxes over a 10-year period,
which is around $20m (approx. 24bn/-) per year,’’ says part of the
report titled ’A Golden Opportunity - How Tanzania is Failing to
Benefit from Gold Mining’ unveiled this week.
It adds: ’’He (Karamagi) also said that the mine would pay an
additional $50.3m (approx. 60bn/-) in payroll taxes over the ten years
- this revenue is about 16.6 per cent of total turnover from the mine,
based on current gold prices.’’
However, none of these projected revenue collections forms any part
of the signed contract itself, and according to the report: ’’It
appears they have been put forward to hoodwink parliament and silence
calls for parliamentary scrutiny of the contract.’’
According to calculations made by the report authors Mark Curtis
and Tundu Lissu, the total amount that the Buzwagi mine owners,
Canada’s Barrick Gold Corp., would pay in tax (minus royalty) amounts
to just $583,980 (approx. 700m/-) per year for the duration of the
’’This figure is derived from $200,000 in district council rates
and taxes, $200,000 in road toll contributions, $125,000 in
contributions to the empowerment fund, $10,000 in other taxes, duties,
fees or imposts of general application, and $48,980 in land rent at the
rate of $2,000 per square kilometre,’’ says the report.
When contacted for comment, Barrick Gold Tanzania spokesman Teweli
K. Teweli dismissed the report findings as fabrications and mere
’’The figures quoted in the report are just fabrications - there is
nothing factual. The authors did not even take the trouble to talk to
Barrick and ask for correct figures on the amount of taxes we shall pay
from the Buzwagi mine,’’ Teweli told THISDAY.
The report authors are heavily critical of the contents of the
Buzwagi mineral development agreement, saying the deal was of
’’extraordinary benefit to Barrick while offering decidedly little to
Tanzania’’, just like other controversial mining agreements signed
between the government and foreign companies.
It notes that, among other things, the 25-year Buzwagi contract
commits the government to maintain the current tax levels in the
country throughout the lifespan of the project, which is estimated at
10 years at least.
’’Perhaps most bizarrely, the contract commits the parties, in the
case of a dispute, to enter into arbitration in London, not Tanzania,’’
says the report.
It adds: ’’A clause states that the London Court of International
Arbitration be the administering body. This is consistent with
paragraph 5(3) of Schedule 4 to the 1998 Mining Act, which stipulates
that disputes between investors and Tanzania government shall be
settled under the aegis of the International Centre for the Settlement
of Investment Disputes (ICSID), an arm of the World Bank’’
The report further notes that the contract was signed in a hotel in
London, rather than in Dar es Salaam, ’’which aroused considerable
critical media and parliamentary comment.’’
Buzwagi, which will become Barrick’s fourth gold mine in Tanzania,
has proven and probable gold reserves pegged at 3.6 million ounces.
The mine is scheduled to begin production mid-next year at a cash
cost of $300 per ounce, and is expected to produce 250,000 ounces of
gold per year in the first five years of production.
Barrick plans to invest up to $400m (approx. 480bn/-) in the mine located in Shinyanga Region.
The report highlights millions of dollars in lost government income
from the mining sector occasioned by a combination of reasons,
including tax loopholes, an unfavourable mining regime, and tax
’’Tanzania is one of the ten poorest countries in the world. At the
same time, Tanzania possesses around 45 million ounces of gold, which
at the current gold price means this country is sitting on a fortune of
up to $39bn,’’ says the report.
It warns that since minerals are a dwindling resource, it is
important for the country to earn a windfall from gold while reserves
’’The country’s proven reserves of 45 million ounces are being
extracted at a rate of over 1.6m ounces a year, meaning that they may
last 28 years. But three of the country’s six large-scale gold mines
are set to close within ten years,’’ cautions the report.
It recommends major policy changes by the government in the mining
sector, including a review of mining and tax laws, engaging donor
support, developing a strategy document to outline how government plans
to harness mining revenues for national development, strengthening
parliamentary scrutiny, introducing independent audit, enforcing public
disclosure, and creating local accountability.
The report published by the Christian Council of Tanzania, National
Muslims Council of Tanzania (BAKWATA), and the Tanzania Episcopal
Conference (TEC) was financed by the Norwegian Church Aid and Christian