Why value addition is paramount in the country’s mining sector

19Oct 2021
Geoffrey Nangai
Dar es Salaam
The Guardian
Why value addition is paramount in the country’s mining sector

IN 2017, the government made some reforms in the mining sector geared towards optimizing benefits from the extractives industry and enhancing its contribution towards the county’s Growth Domestic Product.

As part of the reforms, the government immediately slapped a ban on the export of concentrates and ores of all metallic minerals. The ban, which caught the defunct Acacia Mining Plc off-guard, intended to ensure value addition for the concentrates hence warranting that the process of smelting and refining is done locally before exporting.

In a bid to complement the value chain addition, Barrick Gold Corporation under its local subsidiary, Twiga Minerals Corporation in partnership with MSALABS Limited last week commissioned Africa’s first Photon Assay Laboratory at its Bulyanhulu Gold Mine in Kahama district.

The gold miner’s President and CEO, Mark Bristow said in a statement that the investment is part of continuing drive to harness technological innovation in operational excellence, occupational safety and environmental care.

Bristow said the new technique will deliver faster, safer and more accurate analysis of gold, silver and complementary elements by non-destructive measurement of larger and more representative samples in as little as two minutes, enabling rapid turnaround of critical operational information that drives optimization throughout the mining value chain.

Tanzania is endowed with vast quantities of mineral resources. It is the 4th largest gold producer in Africa after South Africa, Ghana and Mali. The mining sector’s contribution to GDP has increased tremendously from 3.8 percent recorded in 2014 to 6.4 percent recorded in 2020.

The sector has attracted substantial new foreign investment in mineral development exploration, with local investment surpassing U$1 billion and is expected to account for 10 percent of the GDP by 2025 according to the Tanzania Development Vision 2025 plan.

Apart from Tanzania, other resource-rich countries that include Mongolia and Indonesia, have also implemented policies that encourage domestic mineral “beneficiation”– the processing of mined output into a product of higher value – as an alternative to heavy reliance on the export of unprocessed gems or gold.

It is fair to point out that Tanzania’s reforms have been remarkable but still a lot has to be done in the aspect of value addition to enable the mining industry to have a substantial multiplier effect on the rest of the economy.

This requires deliberate action by all stakeholders including the government and the private sector by ensuring inclusive and transparent mining processes right from the pre-exploration process to mine closure.

All players in the mining industry should however play their part to ensure that Tanzania benefits from value addition of its minerals by ensuring that companies increase their production capacities and mine life span.

Until now, value addition has been narrowly conceived as the further processing of minerals, i.e., the refining of ores or smelting of metals, but this model is no longer sufficient. African countries including Tanzania need to go beyond processing to manufacture intermediate and final products to improve people’s livelihoods, and to strengthen domestic supply chains so that local businesses can effectively participate in the extractive industries.

The African Mining Vision emphasizes the importance of strengthening all mineral-based linkages while resources are available so as to maximize the developmental and inter-generational impact of those resources. This is the true meaning of value addition. If managed appropriately, resource-based investments can lay the foundation for diversified economies.

Equally, if African countries cannot make these linkages then it would be best to leave the resources unexploited until such time that the linkages can be made. African countries however face a significant hurdle in terms of domestic capital, technology and skills. Many countries rely heavily on foreign direct investment to develop the mining sector, which can seriously jeopardize the development of linkages.

Like all companies, mining investors focus on maximizing profit for their shareholders, not host countries. They often have global purchasing strategies, hence, are much less likely to use local suppliers, thereby undermining upstream linkages.

On the other hand, it is equally important for the government to empower small-scale miners in terms of financing so as to boost their production capacity while at the same time intensify the fight against illegal mining.

The author is a corporate communications executive based in Dar es Salaam. Send your feedback via email: [email protected] / +255758897538.

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