Mineral experts have advised the government to revise the new prospecting licence fees and rents set by the Ministry of Energy and Minerals, saying in ten years the country will not have any new mines if they remain in place.
They argue that during the early stages of mining like preliminary exploration and excavation, the work is mainly done by artisanal miners whose efforts are responsible for most of Tanzania’s mines.
“…more than 80 percent of Prospecting Licences are owned by small-scale prospectors…´ argued one of the experts who chose to remain anonymous. The expert who once worked with the Ministry of Energy and Minerals noted that it is these Tanzanians whose prospecting activities have contributed a lot to mine development.
Mineral prospecting is a risk that requires very large capital for feasibility study and it takes up to 10 years before a mine is up and running and even then profits are not realized in no less than three to four years. Given the facts it is very difficult for artisanal miners to establish and develop new mines and need government empowerment.
Encouragement of local participation in the country’s mining industry is of great importance and would benefit the nation and hence the need to stimulate exploration and mining activities, regulate and improve artisanal mining, as well as ensure that the wealth generated from mining is applied to support sustainable economic and social development.
Less fees are hoped to encourage exploration which in turn will lead to the development of new mines and that means employment and government revenue in form taxes while hiking fees and rents has the reverse effect.
He advised the government not to use the Mining Act as a fiscal tool with which to generate revenue but to instead use it to regulate and promote local participation in mining.
“We don’t say, they should not collect fees and rents, they should…,” clarified the expert who went on to say the huge increases are going to affect small-scale prospectors who possess some 43,967 Prospecting Licences as well as 7,970 Primary Licences.
Compared to other African countries such as South Africa, Botswana, Ghana and Mali it is only Tanzania which has these high fees and rents and the down side has already emerged in form inadequate capital for investment, the expert noted.
“The government has to give due consideration to these Tanzanians who work tirelessly with simple tools to explore such wealth. Even if there was a need to increase the fees and rents, the ministry could have involved them in discussing the matter to reach a consensus…” advised the expert.
Local stakeholders recently protested the notice on the new fees and rents, as published in Issue No. 30 Volume 93 of the Government Gazette dated July 27, 2012, saying they were aimed at shutting them out of the sector.
Under the new subsidiary legislation, application fees for prospecting licences (PLS) for various minerals have more than tripled from between US$50 and US$100 (80,000/- - 160,000/-) to between US$200 and US$300. Preparation fees for PLS have also been raised from US$200 to US$500.
The annual rent for PLS for most minerals has also risen drastically from US$40 to US$100 per square km of the licence area. For instance, a holder of a 400 square km prospecting licence will now have to pay rent amounting to US$40,000 each year just to maintain the licence.
If that is drastic, try the 800 per cent jump in licence retention application fees which have shot up from last year’s US$500 to the current US$4000. There is a less dramatic but nonetheless still significant shift in application fees for special mining licences, which has risen to US$5000 from USD2000.
Mineral extraction licences now cost US$2000, twice the previous amount. Another astronomical jump relates to the transfer fee in respect of mineral rights other than primary mining licence, now standing at US$3000 from the previous US$500.
Registering any document with the Commissioner for Minerals as well as documents that need the respective minister’s approval now costs up to US$500 for each document, compared to US$200 paid prior to July 2012.
The annual rent for first renewal of a prospecting licence calls for US$150 per sq km, while the second renewal costs US$200 – compared to last year’s rates which were US$50 and US$60, respectively.
The annual retention licence rent has gone up to US$2000 from last year’s US$500, while the special mining licence now costs US$5000, up from US$2000. The mining licence for metallic minerals, gemstones and kimberlitic diamonds is up from US$1000 to US$3000.
The Mining sector contributes about 2.3 percent of the country’s GDP, which is projected to account 10 percent by2025 as stated in the Development Vision 2025.
It is said that a total of 6,000 prospecting licences are to be forfeited in an area totaling 400,000 sq kms owned by local miners. When the government revokes these licenses, chances are, only large corporations stand a chance of securing them leaving little if any room for Tanzanians.