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What Tanzania can learn from Africa`s richest tribe

13th May 2012
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President Jakaya Kikwete

Tanzania, like many African countries blessed with minerals and other natural resources, is poor not because of God’s order, but due to the poor management of its resources caused by both external and internal factors.

In researching these articles, I came across various researches which strongly confirm this school of thought beyond any reasonable doubt.

From Dar es Salaam to Lagos, Accra to Angola, Cape Town to Cairo, Africa is still struggling with massive poverty, though it is surrounded by massive wealth, because it has chosen the path either unknowingly or for being pushed into it by the Masters of the universe.

There are those who argue that Africa’s minerals, oil and gas are beneath the surface and therefore they are not really wealth, which the nation can rely on or boast of because, being poor as we are, we can’t even afford to mine them.

Ironically, all foreign mining firms in this country borrowed huge amount of billions of dollars from the International Finance Corporation, a lending arm of the World Bank, by marketing what was beneath the surface and documented only on papers.

This line of argument is being pushed by those I described in the past four installments of this series as pimps of Western capitalists, who believe that they are more business-oriented than those who question the rush to mine Tanzania’s natural resources at the expense of the majority of its people.

Brainwashed abroad and taught to speak English in an American inflection, they see those who try to question some local policies which blindly favour foreign investors at the expense of Tanzanians as anti-business or anti-investment.

But, while they so often dream of the country having having flyovers, modern schools, modern health centres, modern airports and a strong economy, they don’t stop to wonder why, fifty years after independence, our infrastructure is akin to that of the 19th century.

When they fly to Johannesburg they admire world-class infrastructure, and when in America or Europe they cast the devil who hindered their motherland’s development. When in the United Arab Emirates they kiss the air in admiration of its world-class development.

What they don’t understand is that all the modern infrastructure they see and admire abroad didn’t spring out of nowhere. It was built by men and women who used their natural resources effectively for the benefit of their people. South Africa’s Gauteng Province in which both Johannesburg and Pretoria are situated, was built by minerals, mainly gold and diamonds from Kimberly, during the apartheid regime.

Dubai and Abu Dhabi were built in the early 1980s and 1990s by the oil billions. Don’t forget that in 1970s, the Dubai of the Middle East was Beirut, before it was bombed by the Israelis. It was where the whites from Europe and America used to enjoy modern beaches and living the same way they do today in the United Arab Emirates, Qatar and elsewhere.

Therefore, the pimps of Western capitalists and the self-proclaimed pro-investor group in this country should understand that what they admire abroad as modern development could actually be achieved here if there was equitable sharing of resources.

For instance, to decongest Dar es Salaam city, which is home to an estimated 5 million people, about $3.5 billion is needed, according to the city’s new master plan. If we utilized our resources properly, including minerals and gas, and collected all due taxes, shunned corruption and made the Dar es Salaam port an import and export hub in the Great Lakes region, we could get more than $3.5 billion in a short period.

To revive the central railway line needs something like $500 million, which is over 60 percent the total amount of money allocated for allowances in the 2011/12 national budget. In the 2011/12 budget, the government allocated $800 (Sh1.28 trillion) as allowances, while the very government went abroad begging for mosquito nets to control malaria.

Dar es Salaam port can easily be turned into a regional export and import hub for eastern and southern Africa, a situation that could give Tanzania billions of dollars in revenue. Originally, Julius Nyerere and his team had this dream. Even the colonialists had a similar dream.

But it seems that our current leaders have chosen to make Dar es Salaam port, the central railway line and the Tanzania-Zambia Railway (Tazara) a venue to experiment failed policies.

According to a report of the Controller and Auditor general (CAG) for fiscal year 2010/2011, total tax exemptions reached Sh1 trillion, which is equal to the total amount of money needed by the Tanzania Electric Supply Company (Tanesco) to end the power crisis in the country. Ironically, due to a lack of funds, Tanesco has been forced to borrow Sh 480 billion from a consortium of local banks.

The cost of one Toyota Landcruiser VX-V8 is $120,000 (Sh 192 million), which can buy six tractors. The cost of 55 such vehicles to be used by 55 cabinet ministers and their deputies is Sh 10.2 billion, which could easily buy 330 tractors. A cabinet that consumes 330 tractors in two years in a poor country like Tanzania is an insult and a betrayal of the people.

In Kenya, a country with a stronger economy than ours, ministers and senior government officials are now having to do with cheaper vehicles, each of which costs Sh50 million after then Finance minister Uhuru Kenyatta abolished the use of luxurious fuel guzzlers in the country’s 2010/2011 budget. Rwanda initiated the move seven years ago and no one died because the government had abolished the use of the fuel guzzlers.

Development is about making choices, mainly appropriate and tough choices, which, in the short run, hurt, but in the long run bring prosperity to the nation. It’s about making unpopular choices which may not please some groups of people, but in the long run bring development which everyone enjoys.

In the 1960s, the economies of South Korea, Malaysia, Singapore, Tanzania and Ghana were more or less at par, but fifty years down the lane Tanzania and Ghana have actually become poorer than they then were while Malaysia, South Korea and Singapore have stunned the world by their rapid development. Their development was neither an accident nor a gift from the donors, but a result of tough choices made by their leaders fifty years ago.

When God created this world in six days and rested on the seventh, according to the Christians’ holy book, the Bible, he distributed wealth fairly. He gave the Arabs a desert full of oil and gas and Europe chaotic weather but land full of natural resources and good for farming. He gave Africans a vast, land twice the size of China, and filled it with numerous natural resources and blessed it for agriculture. All the six continents got their share accordingly.

Tanzania is not very late; it still has the opportunity to reform. We erred in our Mining Act of 1998, which was a result of a flawed minerals policy of 1997, which, in turn, was masterminded by the Britton Woods institutions on behalf of foreign investors.

What happened in the mining industry should be taken as a lesson to write a new chapter as we expect to start producing natural gas and, probably, oil. We still have many mineral reserves which are yet to be mined, such as uranium and nickel. There is now some positive development in the mining industry like creating jobs for locals and payment of some taxes, which is a good indication; but this is not enough.

We are told that the mining sector spends about $148 million annually on salaries, and that the majority of employees who get this money are Tanzanians.

That’s fine, but how much does a Tanzanian graduate who works in the sector earn compared to a foreigner with equivalent qualifications? The truth is that if salaries in the industry, especially for the locals, were dished out fairly according to world standards, the amount would be close to $200 million annually.

We are also told that the mining sector contributes a lot to the economy in terms of procurement. If this is the case, then that’s fine. However, statistics might give a contradicting picture of the reality on the ground. Therefore, at the end of the day the people want tangible results, not numbers.

In 2010 when South Africa hosted the World Cup, one of the provinces which hosted the tournament was Rusternburg, or the Platinum Province, home to Africa’s richest tribe.

Located about 180km west of Johannesburg and bordering Botswana, the Royal Bafokeng tribe’s success story is by all standards a model that should be considered by Tanzania, especially in the area of minerals.

I have personally visited the Royal Bafokeng, interviewed some policymakers there as well as the locals in my efforts to learn how Tanzania, as well as Africa, could benefit from its rich mineral resources. The most stunning fact is that the Royal Bafokeng’s success story is not a brainchild of the Britton Woods institutions - the World Bank and the International Monetary Fund.

Like Tanzania, the Royal Bafokeng also started with a tough, humble beginning, before they bounced back, turning their past mistakes into opportunities. Apart from the Royal Bafokeng success story, globally Tanzania can also borrow a leaf from Qatar, a country that produces gas.

According to the Oil & Gas Journal of January 1, 2011, Qatar's proven natural gas reserves stand at approximately 896 trillion cubic feet (25.4 trillion cubic metres). That is almost 14 per cent of all known natural gas reserves in the world and the third largest behind Russia and Iran.

Though the path taken by the Royal Bafokeng to acquire rights in the mining sector might not work a hundred per cent in Tanzanian case, the fact that the government can own shares in the lucrative mineral industry and use the funds accruing from it to develop the people is a credible lesson to this country.

The Royal Bafokeng story

The Royal Bafokeng’s journey from the Central African plateaus to South Africa began in earnest in search for arable land and grazing areas for their animals, but little did they know that they had stumbled upon one of the world’s most mineral-rich zones. Like many other native tribes in Africa, their major economic activities were cattle rearing and subsistence farming, and they depended largely on outdated and poor technology.

From these humbled beginnings, however, the Royal Bafokeng bounced back with a takeover strategy to buy their alienated land from the Boer feudalists, offering an inspiring lesson of perseverance and business acumen.

According to oral tradition, the Bafokeng settled in what is now known as Rustenberg, about 112km north-west of Johannesburg at the foot of the Magliesberg. As the valleys amongst the hills in the area captured heavy overnight dew, the people realised it was fertile and the community would prosper there. In honour of the occasion, the tribe took the name 'Bafokeng,' literally meaning 'people of the dew'.

The Bafokeng are in some ways as remarkable for what they are not known for as for what they are. They are not known for stealing from public coffers or robbing their fellow citizens. Nor did they get involved in shoddy deals or suspicious contracts.

They never squandered their resources, but rather ensured that what came out of their land would materialize in the form of taxes, royalties or dividends, and that those profits would go towards people’s development. Today, their courage has paid off, making them the richest tribe in Africa. When I first visited this province in 2006 as a tourist and as a researcher on how locals can partner with investors to bring development, I couldn’t believe what I saw.

From modern infrastructure to a well-planned residential area, from sophisticated mining plants to international hotels like Sun City, from a crime-free zone to modern schools and hospitals, Rustenburg stands out as an example of how well-exploited and equitably shared resources can change lives in Tanzania and the rest of Africa.

Rustenburg is the third oldest town of the former Transvaal Province and offers numerous places of interest. Its jacaranda tree-lined streets are the hub of a thriving agricultural and mining industry. Rustenburg has a population of about 1 million people.

When the Boers arrived in South Africa, they posed new challenges to the Bafokeng. Ownership of land meant purchase, and purchase meant money. The Boers recruited Bafokeng to work on their farms, but only in return for food, clothing and accommodation.

The recently discovered diamond mines in Kimberley provided the answer and Chief Mokgatle of the Bafokeng sent his young men to work there. They went on foot (a considerably long journey) and worked on contract for six months to a year. At the end they returned home and surrendered their earnings to a tribal 'kitty'. This provided some of the capital to legally buy back their lands.

With the help of the missionaries who were active in the area and the efforts of Chief Mokgatle to build good relations with the missionaries, the Bafokeng’s ancestral lands were bought back. Little did they know what treasures lay hidden beneath the surface!

Unknown to the Bafokeng until 1925, the farms bought both by the tribe and individuals were located on the Merensky Reef - the outcrop rich in numerous minerals, ranging from asbestos to vanadium, the most important of which is platinum.

After discovering that their arable land held huge minerals reserves, the Bafokeng introduced a policy known as ‘use it or lose it’, which, among other things, required mining companies to pay royalties directly to the community’s coffers.

Under this programme, mining companies could utilise the underground rights of the land, but the surface rights belonged to the Bafokeng. The miners had to pay royalties to the tribe and provide job opportunities. The policy has been maintained ever since and has stood the tribe in good stead.

In 1998, the Bafokeng, using taxpayers money, bought one million Implats shares worth about $70 million¬ - a move that allowed them a seat on Implats' board, which is currently occupied by the new king, Kgosi Leruo Molotlegi. The Bafokeng have formed Royal Bafokeng Resources Holdings (RBH) to manage mining-related interests of their communities.

The Bafokeng have used their income from mining to build schools, roads, clinics and other infrastructure such as a sports complex incorporating a soccer stadium with an athletics track, an Olympic-size swimming pool, tennis courts, basketball courts and a gymnasium. Almost all the infrastructure has been planned, designed and funded by the Royal Bafokeng.

For decades, mining royalties and dividends were invested in community development through a single agency: the Royal Bafokeng Administration (RBA), which was responsible for developing and maintaining infrastructure and delivering social services.

RBH is leveraging its new partnerships to produce additional benefits, not only for the Bafokeng community, but also for neighbouring communities in North-West Province.

RBH, Astrapak and investment banker JP Morgan have pooled resources and supported the South African Institute of Entrepreneurs to train 700 teachers to take classes in basic business and economic skills in 80 North-West Province schools, hopefully placing pupils in a better position to become entrepreneurs in a world where opportunities in formal employment are diminishing.

Kgosi Leruo sees his role in particularly ambitious terms. He is of the view that in order to become prosperous, a community must produce one ‘world clas’" entrepreneur from every 20 of its members. With 300,000 Bafokeng living in South Africa and half of them in the Bafokeng area  this means the community must strive to produce no fewer than 15,000 entrepreneurs.

RBEB offers would-be entrepreneurs coaching, advisory services, mentoring, on-the-job training, and formal, in-class training. It has also facilitated the consolidation of numerous micro-enterprises into a few sizeable companies, enabling them to compete for contracts in the Bafokeng area and further afield.

The development of enterprises has in part been spurred by the South African government's black economic empowerment policy. Thus, local entrepreneurs have formed joint ventures with established companies to supply mines in the Bafokeng area.

This has led to the establishment of locally based companies specializing in such enterprises as drilling operations, manufacturing of overalls, and engineering. Thus, Kgosi Leruo Molotlegi is consolidating the gains his people have made over the centuries, establishing a broad base for them to grow and realise the goals of Vision 2020 and beyond.

Interestingly, they funded the construction of a state-of-the-art soccer stadium that was used in the 2010 FIFA World Cup. The Royal Bafokeng Sports Palace will host matches in the tournament, and the 42,000-seat stadium is named after the Bafokeng people who live in the area.

North-West Province has a definite comparative advantage in mining. Known as the Platinum Province, it is responsible for 94 per cent of South Africa's platinum, 46 per cent of granite and 25 per cent of gold produced in the country.

Mining is responsible for more than a third of the province's gross domestic product. Platinum comes from the Rustenburg and Brits districts, which produce more platinum than any single platinum-production plant in the world. Diamonds are mined at Lichtenburg, Koster, Christiana and Bloemhof. Fluorspar is exploited at Zeerust. Granite and marble are also mined, while copper’s and nickel’s by-products yield substantial earnings annually.

Why not Tanzania?

If the Royal Bafokeng tribe turned their past mistakes into opportunities, why can’t Tanzania? The problem with the Tanzanian government, like many African governments, is that it has more political than business skills. Policymakers and politicians think politically about everything. In every deal they sign on behalf of the nation, they first think of financing their election as well as their fancy living.

For instance when African Barrick Gold listed its share on the London Stock Exchange, we tried unsuccessfully to convince former Finance minister Mustafa Mkulo to ensure that the government, through different proxy companies, purchased about 10 percent of the 25 percent shares which were floated.

However, since there wouldn’t be any political gain or any ten percent cut from the deal, no one from the Treasury as well as the Kikwete regime saw this as an opportunity to buy back what we had sold freely to the foreign investors. ABG’s Senior Vice-President Deo Mwanyika tried in vain to convince the government, saying it should even lend ten local businesspeople so they could buy a stake in the company, but his advice fell on deaf ears.

Neither the Treasury nor the central bank saw this as an opportunity. One of the best ways to benefit from the lucrative minerals we have as a country is by ensuring that there’s local ownership through the government or local businesspeople. If a Tanzanian businessman like Bakhresa or Reginald Mengi makes billions in this sector, he will build this country in various ways, contrary to the case where foreigners make their super profits which they later normally repatriate abroad.

In mining, gas and oil, it’s more than just being paid some taxes, accompanied by some corporate social responsibility projects. This is why the Royal Bafokeng opted to acquire stakes in mining companies by using the very same tax monies they were paid by the investors. In a situation where the locals can’t possibly afford it, it’s the responsibility of the state to lend them low interest billions for the purpose of acquiring stakes in the mining, gas and oil sector.

The state should aim at creating local entrepreneurs in the mining sector. The Royal Bafokeng king wants to produce one ‘world class’ entrepreneur from every 20 of his people, which means that with 300,000 Bafokeng living in South Africa — and half of them in the Bafokeng area — the community must strive to produce no fewer than 15,000 entrepreneurs!

Now if President Kikwete and his government aimed to produce one ‘world class’ entrepreneur in every 20 Tanzanians in the mining sector, it means in a few years the country could be awash with world class entrepreneurs. In the mining industry alone we have more than 300,000 small-scale miners dealing in gold, tanzanite, diamonds and other minerals. If we took the ratio of the Royal Bafokeng, it means Tanzania could produce 15,000 mining entrepreneurs to reckon with.

 

SOURCE: GUARDIAN ON SUNDAY
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