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Policy Paper

Cross Border Mineral Trade in Tanzania

  • Posted by Admin
  • Categories Policy Paper, Reports
  • Date February 1, 2025
  • Comments 0 comment

Introduction

Liberty Sparks is a research-driven think tank dedicated to promoting education and free-market principles. Central to its initiatives is the Ujirani Mwema Project, funded by ATLAS NETWORK and IATP, which focuses on policy reforms to enhance “trading across borders” in Tanzania. This project prioritizes agriculture, manufacturing, and mining, beginning with agricultural trade to modernize industries, increase yields, facilitate exports, and promote value-added processing, followed by a focus on manufacturing trade. This report, therefore, analyzes cross-border mineral trade.

 

The mining sector, contributing 6%-7% of Tanzania’s GDP, has seen significant growth, with its GDP share rising from 6.7% in 2020 to 10.4% in 2023. Government revenue from mining increased from TZS 591.47 billion in 2021–2022 to TZS 690.35 billion in 2023–2024, alongside job creation, which grew from 14,742 in 2021 to 19,165 in 2024. Initiatives such as establishing 42 mineral markets, 100 buying centers, and promoting small-scale mining highlight the sector’s critical role in economic development. However, challenges like limited access to finance, high capital costs, and underexplored resources—only 4% of the country’s potential—hinder full realization of its benefits. To unlock its potential, the sector needs targeted interventions, including workforce training, technological advancements, and industry integration. Stable regulatory frameworks are essential to attract sustainable investments. Mining revenues can catalyze broader economic growth by modernizing agriculture, supplying industrial inputs, and enhancing value addition, fostering economic diversification.

 

Despite progress, obstacles in taxation, permits, and property registration persist, hampering cross-border mining trade. Liberty Sparks emphasizes the need for policy reviews, streamlined processes, and modernization to improve Tanzania’s competitiveness and maximize mining’s contribution to national and regional development. By addressing financial barriers, exploring untapped resources, and ensuring predictable policies, the sector can drive inclusive growth and sustainable economic transformation.

Objective, Approach and Methodology

The objective of this assignment was to identify strategies for improving Tanzania’s business environment to facilitate cross-border minerals trade. The focus was on addressing key issues such as administrative requirements, procedures, costs, and time. Liberty Sparks aims to provide insights to policymakers on the current state of cross-border mining trade, enabling the identification of gaps and formulation of actionable policy recommendations to enhance the business environment. To achieve these objectives, a mixed-methods approach was employed, integrating quantitative and qualitative methodologies, alongside comprehensive desk research and stakeholder input from workshops. The study included an extensive literature review and the analysis of both primary and secondary data. Participatory tools and techniques were utilized for data collection and validation, ensuring a robust and comprehensive understanding of the sector’s challenges and opportunities.

 

Key Findings and Messages

  1. Demographic dynamics in cross-border mineral trade. The cross-border mineral trade is notably dominated by women, who constitute 71% of the participants, compared to 29% being men. This significant gender imbalance highlights the active role women play in this sector, particularly in small-scale and informal trading activities. Women’s participation may stem from their involvement in community-level mining and trade operations, where they often handle sourcing, processing, and marketing of minerals.
  2. Challenges in cross-border mineral trade, most frequently reported are;
  • High taxes and tariffs, which substantially increase transaction costs and erode profit margins, particularly for small and medium-sized traders.
  • Transport and logistics costs pose a significant challenge for mineral traders, primarily due to inadequate infrastructure, inefficient transport systems, and prolonged transit times.
  • Competition from large-scale traders, who often dominate supply chains and markets, limits opportunities for smaller actors, thereby exacerbating inequities in the sector.
  • Although less frequently highlighted, issues such as language and cultural barriers also hinder effective communication and understanding among cross-border partners, potentially leading to disputes and inefficiencies.
  • Policy instability is also less frequently seen it adds another layer of complexity, as sudden regulatory changes or inconsistent policy implementation can disrupt planning and discourage long-term investment in the trade.
  1. Policies and regulations. A significant knowledge gap exists in the cross-border mineral trade sector, with many stakeholders unaware of relevant policies. Among those familiar, confidence in the policies’ effectiveness is limited, reflecting concerns about their ability to support small-scale traders. Ineffectiveness in addressing key issues like market access, credit facilities, and simplified trade procedures may discourage formal trade participation, perpetuating informal practices and undermining regulatory and economic goals.
  2. Training or support on mineral trade. Miners face growth challenges due to limited access to information, education, and training, with institutions like STAMICO providing insufficient support. The lack of capacity-building initiatives, especially for small-scale miners and traders, hinders their ability to navigate the mineral trade’s complexities. Government efforts to support mining investments have been inadequate, emphasizing the need for improved training and resource distribution across the sector.
  3. Minerals can be categorized into industrial minerals, gemstones, and rare minerals, each with distinct trade and policy implications. Industrial minerals are dominated by foreign direct investment (FDI) and focus on value addition. Gemstones, like Tanzanite, face a lack of local cutting skills, resulting in job losses abroad; investing in skills development in Tanzania could increase their value. Rare minerals, with high global value, require capacity building and attracting foreign investors for creative manufacturing, ideally in collaboration with local businesses, to maximize their potential.
  4. Integrating cross-border mineral trade with sustainability goals. Cross-border mineral trade should not only be seen as an economic opportunity but also as a pathway to fostering sustainable development. Aligning trade policies with sustainability objectives, countries can harness the full potential of their mineral resources while ensuring that future generations benefit from a healthy and thriving environment, fair employment, and inclusive growth.
  5. Priority to mineral mapping. Prioritizing minerals mapping is a strategic approach that plays a pivotal role in unlocking the full potential of a country’s mineral resources, driving economic growth, and facilitating the development of the mining sector. Mineral’s mapping refers to the process of identifying, documenting, and evaluating mineral deposits within a specific geographic area. Giving priority to minerals mapping, governments and stakeholders can gain a comprehensive understanding of the mineral wealth available, which is crucial for making informed decisions on resource management, investment attraction, and policy formulation.
  6. Technology as a driver of competitiveness. The adoption of technology is vital for enhancing the competitiveness of Tanzania’s mining sector by improving efficiency, reducing costs, and ensuring sustainability. However, challenges such as high equipment costs, inadequate infrastructure, a lack of skilled labor, and limited access to financing hinder widespread technological integration. These barriers slow the pace of transformation in both large-scale and artisanal mining operations, affecting the sector’s growth and ability to attract investment.

 

 

 

Conclusions and Recommendations

  1. In conclusion, addressing the challenges in cross-border mineral trade through a coordinated approach can unlock Tanzania’s mineral potential. Proactive measures like policy harmonization, infrastructure development, and anti-corruption efforts reflect the government’s commitment to fostering a competitive trade environment. Streamlining processes, easing access to capital, and prioritizing mineral commercialization will empower small-scale miners and boost global competitiveness. A balanced approach to taxation and financial support will incentivize compliance and promote innovation. These initiatives not only enhance trade efficiency but also support job creation, regional integration, and sustainable development, positioning Tanzania as a regional hub for mineral trade and economic prosperity.
  2. Recommendations
  3. a)       Enhance border security: Implement robust and comprehensive measures to strengthen border security, ensuring the prevention of illegal mineral exports.

b)      Establish mineral clinics: Set up specialized mineral clinics to provide comprehensive support and services to stakeholders in the mineral sector.

c)       Introduce tax credits for mineral technology imports: Implement a policy to provide tax credits or incentives for businesses importing advanced mineral exploration, extraction, and processing technologies.

d)      Standardized tax rates: Currently, a uniform tax rate of 9.3% is applied to all gold production, regardless of the quantity of gold extracted or the scale of the mining operation. While this policy simplifies tax administration, it disproportionately impacts small-scale miners and operations with lower production levels, as they face the same rate as larger, more established entities.

e)       The need for financial support in value addition: Currently, miners lack the capacity to perform value addition, particularly for minerals containing significant amounts of uranium, which require advanced processing technologies. For instance, some minerals are processed in offshore facilities to meet specific carbon content standards.

f)       Improving access to bank collateral for mining development: Securing collateral from the central bank remains a significant challenge for many in the mining sector. However, it is essential to recognize the critical role mining plays in the national economy.

g)      Establishing a specialized bank for the mining sector: The mining sector would benefit greatly from the establishment of a dedicated bank that focuses exclusively on mining-related financial matters, similar to how other industries have specialized institutions.

h)      Bright future with policy review: A bright future for Tanzania’s mining sector is possible if current policies are reviewed and aligned with innovations and emerging technologies in the mining industry. This would ensure that the sector remains competitive, sustainable, and adaptable to global trends.

i)        Cross-border mineral trade and taxation: While cross-border mineral trade is a promising opportunity, it must be supported by a favorable tax environment. Taxes should be structured to ensure the business remains economically competitive while ensuring that the government can maximize revenue without stifling growth.

j)        Awareness for a promising future: The future of the mining sector looks promising, but there is a strong need for increased awareness among both the public and miners. Educating stakeholders about new opportunities, policies, and sustainable practices will be key to realizing this potential.

k)      Increased regional integration: Regional integration plays a vital role in expanding Tanzania’s mining trade. Enhanced collaboration with neighboring countries can provide broader market access and stimulate economic growth, especially for valuable resources such as gold, coal, and Tanzanite.

l)        Supporting small-scale miners: To ensure sustainable growth, it is essential to continue supporting small-scale miners by facilitating access to capital. This support could help small-scale miners upgrade their equipment, adopt modern technologies, and increase their output, thereby contributing more significantly to the economy.

m)     Availability of market information: It is essential to ensure that accurate market information is readily available to all stakeholders in the mining sector. Having access to up-to-date information on pricing, demand, and regulations will enable miners and traders to make informed decisions and improve their market competitiveness.

n)      Future success depends on implementation: While the future of Tanzania’s mining sector is bright, its success will depend on the commitment of miners, traders, and the government to effectively implement and adhere to the laws and regulations set out for the industry. Consistent enforcement of these rules will create a stable and fair-trading environment.

o)      Reducing labor costs and empowering women and youth: Reducing labor costs in mines can help improve the overall profitability of the sector, making it more competitive.

p)      Enhance training programs: The government and NGOs should prioritize the development of training programs that equip stakeholders with essential skills for effective participation in the mineral trade.

 

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