Former Commissioner of Minerals defends large scale mining sector

Dr Dallali Peter Kafumu

Former Commissioner for Minerals Dr Dallali Peter Kafumu has strongly defended large-scale mining in the country, saying the sector has contributed a lot in terms of taxes and job creation.
Himself a former director of mines between 2007 and 2011 when he joined politics, Dr Kafumu filed a written reaction to The Guardian this week following a story published by this newspaper last Saturday, in which apart from defending the sector, he also claimed that the Tanzania Minerals Auditing Agency (TMAA) assumed an activist role in releasing unverified tax data sets and indicating that the miners evaded taxes.
According to Dr Kafumu, one may also assume that last week’s TMAA press conference was a campaign to substantiate its tax audits and assessment work … that it was taking steps in line with mandates of the TRA … the only legal entity mandated by the 2004 Income Tax Act to manage taxes in the country.
In his harsh reaction, Dr Kafumu stated that the data released by TMAA were misleading, adding that in reality, large-scale mining dominated by foreign investors had contributed more than what is currently being reported.
But apart from dismissing the TMAA data, Dr Kafumu couldn’t give actual data on how much was paid in terms of taxes during the period under review (2009-2012).
“It is a fact that large-scale gold mining and businesses worldwide are not only expensive but also complex in nature. A smart writer would need to research more before writing such a news report. Rather than rely on an unverified cluster of datasets from a single source to write a one sided story, more balancing information was needed,” Dr Kafumu wrote.
Though it isn’t clear whether he reacted as an expert, lawmaker, consultant or former Commissioner for Minerals, it is a fact that large-scale gold mining and businesses worldwide are not only expensive but also complex in nature.
Dr Kafumu added, “It is incomprehensible for the Staff Writers to assume that the US$7bn gross revenue is all gross profit and that corporate tax is charged from gross profit.”
But, in last week’s article, The Guardian stated clearly that the $7 billion was total exports for years, meaning this wasn’t the gross profit as claimed by one of the country’s best experts in mining.
The export figures are available from the Central Bank of Tanzania (BOT), which is one of the country’s respected institutions.
According to Dr Kafumu, about 60 percent of gross revenues in large scale mining go to operational cost.
If this is true, then $4.2 billion out of a total export earnings of $7 billion was the operational cost -- or in simple language -- the cost of production.
But, according to Dr Kafumu, operational costs in mining do not include taxes.
“It is also a fact about 20% of the revenue is used to pay for other imposts like royalties; fees; and loan repayments and other taxes like withholding, skills development levy, PAYE, service levy etc. Corporate tax is only calculated from the remaining taxable profits and not from gross revenue. In other words, after deducting all costs including operating costs and other charges that are charged from gross revenue, it is then corporate tax can be charged.”
Dr Kafumu further added, “The corporate tax may be low or high depending on the age of the mine and level of profitability of such a mine.”
“To understand what a profitable mine over the life of the mine worldwide would offer, let us assume that the total US$7bn export values were indeed gross revenues from very profitable mines and 60% of this revenue, which is US$4.2bn would be spend as operation costs. About 20% that is US$1.4bn would be spent as other imposts like royalties, other taxes, fees and loan repayments all charged on gross revenue.
The operating costs and others impost charges will all total into US$5.8bn and deducting from the total revenue we obtain a profit of US$1.4bn. Calculating 30% of profit as corporate tax we obtain US$420m.” Dr Kafumu wrote.
“Assuming the TMAA datasets was good quality, but still the difference between US$303m and US$420m is not significant. And this difference may be due to the fact that Tanzania's mines are at their infancy and profit is just beginning to trickle…At the height of profitability a US$7bn revenue may fetch up to close to half a billion; that is US$500m of corporate taxes. Getting only US$303m as corporate taxes as reported is not be alarming as portrayed by the news report.”
But even if this was reality, to Dr Kafumu, the difference of $197 million is nothing to worry about.
Last Saturday, The Guardian reported that major foreign gold mining companies earned gross revenues amounting to $6.967bn (Sh11.495 trillion) between 2009 and 2012, according to the current exchange rate of Sh1,650 against the US dollar, but paid the Tanzanian government corporate tax amounting to only $280million (Sh473.8billion) over that period.
Corporation tax is charged on gross profit of any company doing business in Tanzania under the current law, under which the Tanzania Revenue Authority (TRA) takes 30 percent of the posted profit.
Corporation Income Tax is levied on corporation taxable profit for all companies registered or carrying business in Tanzania. The applicable corporation income tax rate is 30 percent usually paid in two stages. The provisional tax is paid based on taxpayer’s own estimates at the beginning of the business year; and final tax is paid after the official assessment of the total income in the respective year of income.
According to Income Tax Act in arriving at taxable gains or profits a deduction is allowed for all expenditure incurred in such year of income wholly and exclusively for the production of such income.
According to the Act, annual wear and tear deductions are also allowed for machinery owned and used for the business. The linear method of depreciation is used and the following rates are applicable. 37.5 percent for class one machineries, which includes tractors, combine harvesters, heavy earth moving equipment and such other heavy self propelling machines of a similar nature. 25 percent for class two machinery which is other self-propelling vehicles including aircraft. 12.5 percent for all other machinery including ships.
Quoting data released by TMAA, the Guardian reported that Geita Gold Mine was the leading gold mine, which contributed about Sh299.4bn, followed by Resolute Tanzania Ltd which paid a handsome Sh97bn/-. Tulawaka gold mine, owned by African Barrick Gold, came third and paid Sh77.4bn/- during the same period.
Although African Barrick Gold is the largest gold producer in the country, its contribution in corporation tax remains abysmal because the company continues to declare losses at its North Mara, Bulyanhulu and Buzwagi mines. Using data from TMAA and BOT, the Guardian reported that the total taxes paid (corporate tax, royalties, withholding tax, fuel levy and local government levy) were $477 million, in which corporate tax was $280 million between 2009 and 2012.
This amount didn’t include Pay-As-You-Earn and skills development levies.
At the previous rate of 3 per cent in royalties, it means the government has earned a total of $174.17 million over the past four years in royalties from gold earnings of $6.967 billion.
Royalties are calculated on gross earnings regardless whether the mine has posted profit or not.
BOT data – reliably obtained by the Guardian -- show that in 2009 Tanzania’s gold exports rose to $1.076 billion in 2009, up from $932.4 million in 2008 when gold prices per troy ounce reached $972million.
In 2010, the value of gold exports rose by 31 percent, reaching $1.365 billion, thanks to world’s gold prices that reached $1,112 per troy ounce.
Data from the Tanzania Central Bank further shows that in 2011 gold exports rose by 47 percent, reaching $2.226bn/-, when the price per troy ounce also rose to a record $1,568.
In 2012, gold exports rose to $2.300bn as the price per troy ounce surged to $1,700.
Over the same period, production cost per ounce ranged between $650 and $890 per ounce -- depending on the type of the mine as well as the ore grade available.
But the gold prices ironically surged, raising the value of Tanzania’s export earnings, but the country’s corporate tax remained unconvincing as some of the largest gold mines continued to post losses.

Three governments idea driven by self interest, says Ngombale-Mwiru

Veteran politician Kingunge Ngombale-Mwiru speaks with journalists (not in picture) on the draft constitution at his home in Dar es Salaam yesterday. (Photo: Correspondent Atuza Nkurlu)

A long serving CCM cadre yesterday came out to register his objection against the proposed three-tier government structure in the first Constitution Draft, saying the proposal was geared to kill the Union.
Kingunge Ngombale-Mwiru called a press conference yesterday at his home in which he raised serious concern on the proposal in the draft, saying the propagators of the idea were more driven by self interest.
According to Kingunge, the propagators of the three government system ought to understand that such an arrangement would also bring about operational complaints as it is the case with problems facing the current union today.
“It’s strange to say without three governments the existing union will die. We managed to survive with the union under the two governments for the past 50 years and the union is still strong,” he argued.
He warned a few people who take the issue of union grievances as the main cause for demanding three tier governments by breaking the long existing system of two governments, arguing that the proposal is caused by lack of seriousness.
Kingunge explained that every country in this world has its constitutional nuisances and there is no system which will completely remove governmental and other inconveniences since the country is ruled by popular mandate. “Therefore three is no way you can stay away from those grievances,” he asserted.
Kingunge noted that some existing union nuisances are caused by failure of some public officials who have been weak in performing their duties.
“We leaders have the weakness of not liking to speak openly and transparently the problems that face the community, until crises happen, and that is when we start dealing with it and not early on.”
However, Kingunge has rejected adoption of dual nationality arguing that it will cause conflict of interest because the nationality issue goes together with patriotism.
“The matter of dual citizenship is really disappointing me considering that we were fighting to get nationality from the British and we were not freely given,” he said, expressing surprise at the ruling party’s decision of supporting dual citizenship in the constitution. “I strongly reject this proposal,” he declared.
Kingunge commented that those who propose dual citizenship have their interest because they want that nationality for financial interest.
He rejected the point that having dual citizenship will help local people living outside to support the country’s economy by investments, saying there are countries with single citizenship and they still support their countries.
The issue of dual citizenship will completely take out the patriotism as each country has its own policies toward patriotism, the veteran cadre maintained, espousing the values of stalwarts of the Arusha Declaration staunchly opposed to the proposal.
He similarly expressed his disappointment over the increasing gap between rich and poor, which makes the country begin to experience divisions.
He said he is surprised with the constitutional draft failing to address the situation, whereby the disadvantage group in the country was being left out, noting that the number of poor people in the country is increasing, as data show that more than 15 million people live below one dollar a day.
Senior people in Parliament had started campaigning for the presidency, he said, intimating that what happened in Parliament this week is to mislead the society, especially the youth.
In another development, the Tanzania Higher Learning Institutions Students Organization (TAHLISO) has proposed more time to discuss the terms of the union in detail rather than to rush to propose the structure of the union as people have not yet had the opportunity to discuss the union in detail.
TAHLISO chairman Amon Chakushemeire told a press conference yesterday that the union issue is still conflicting and is directly linked with the sense of national identity among Tanzanians.
He said that it is not a government or political parties’ issue but something that all Tanzanians should discuss especially on the importance of the existence of the union.
TAHLISO had suggested that the constitutional review commission (CRC) should advise the president to allow the constitution draft to proceed on other aspects except the element of union.
He however said that the rights of mentally retarded people should be included in the new constitution because they have basic rights like other citizens.
TAHLISO was also suggesting that in the new constitution the rights of men should be identified because men are slightly fewer in the country compared to women.
NCCR-Mageuzi Acting Secretary General Mosena Nyambabe suggested that the terms land and human resources are not explained well in the draft of the constitution, urging the commission to address the issue more directly.
He also thanked the commission for taking many of their recommendations included in the constitution draft, including the issue of having a three tier government system.
“On 7th January 2012 NCCR-Mageuzi recommended 31 issues which had to be included in the new constitution and we are pleased to see many of our recommendations are in the constitution draft,” he declared.

Locals to take shares in irrigation schemes

Kisesa MP, Luhaga Mpina

Locals whose lands are taken up for large-scale irrigation schemes can now have sharing agreements with potential investors.
This is contained in the National Irrigation Bill 2013 whose debate was concluded in Dodoma yesterday after several MPs threatened to shoot down the Bill tabled in the House on Thursday by the Minister for Agriculture, Food Security and Cooperatives, Christopher Chiza.
Strong arguments from a section of MPs argued against a number of sections in the proposed Bill, forcing the government to make several amendments, notably on indigenous villagers holding shares in irrigation lands.
It wasn’t easy as Chiza, his deputy Adam Malima, Attorney General Judge Frederick Werema and at one time Minister of State responsible for Good Governance, George Mkuchika, took turns to give clarifications following threats from MPs to reject the Bill.
And in a situation rare in the House, most of the opposing legislators were from the ruling Chama Cha Mapinduzi (CCM). Even the three out of four amendments moved by the MPs came from CCM lawmakers -- Luhaga Mpina (Kisesa constituency), Selemani Jafo (Kisarawe), Murtaza Mangungu (Kilwa North) – while the fourth was moved by Habib Juma Mnyaa (Mkanyageni- CUF).
Although Werema and Chiza looked set to down play the amendments moved by the four legislators, a section of MPs clearly expressed displeasure at the way the AG wanted the Bill to read, and was finally forced to bow down as the legislators looked ready to shoot it down.
The most contentious were sections 4(1), 17(1 and 5), and 18.
Originally, Section 4(1) stipulates that “subject to the provisions of this Act, the Commission may be itself or in collaboration with the private sector, invest in the irrigation ¬development as the Commission may from time to time vary, withdrawal or realize any such investments”.
Section 17(5) stipulates: “Where any declaration referred in sub-section (1), affecting the existing land rights, the holder of such land shall be entitled to compensation in accordance with the relevant land law or as my be agreed upon.”
The section 18 says “ where it is necessary for better achievement of the objectives of this Act, the Minister may, upon consultation with the Minister responsible for Land and Minister responsible for Local Government , advise the President to acquire , subject to the provisions of the Land Acquisition Act any land or any estate for the purpose of irrigation development.
Section 18 was amended after the AG agreed that advice to the President should incorporate consultations with the villagers through their village general assemblies.
Debating on Section 17(5) Jenister Mhagama suggested that the section should reflect that the land holders should be allowed to be shareholders in the investment with an option to of compensation or both as it was suggested later by Hamad Rashid Mohamed, MP for Wawi (CUF).
On his part, Ole Sendeka said if the major three contentious section were to be passed, the Bill would defeat the whole purpose of Irrigation Act: “As it stands this Bill would result to Tanzanians becoming slaves in their own country, this House is not ready to become a place to approve matters containing ill-will intention, we are ready to shoot it down so as it be re-drafted”
Esther Bulaya argued that the purpose of enacting the Irrigation law was to ensure that Tanzanians benefit from irrigation schemes.
However, Halima Mdee queried: “How can we have a law that enslaves Tanzanians to investors … especially foreigners … in an ideal scenario priority should be given to Tanzanians, and let the Bill read in accordance to the level of understanding of our people if we really want this Law to serve them”
She claimed that the proposed Bill was a result of the SAGGOT (Southern Agricultural Growth Corridor of Tanzania) programme.
However, that claim was refuted by Chiza, who said the Irrigation Bill was in the pipeline even before the formulation of the SAGGOT programme.
And in an unprecedented scenario, AG Werema told the House that he was happy to see that the Parliament was a real debating chamber because the legislators were indeed using their thinking ability in presenting their argument on key matters.
“The voices have been heard … I concur with those who moved for amendments.”
The Bill was finally passed accommodating all moved amendments.
 

Sh 80 billion for two new Dar bus terminals

Gaston Makwembe, Dar es Salaam City Council (DCC) Spokesman

 More than sh80 billion is to be spent to construct two bus terminals at Mbezi Luis and Boko Basihaya in Dar es Salaam that will handle upcountry passengers hitherto served by the Ubungo Bus Terminal (UBT).

After the completion of the terminals the present UBT will serve as one of major stops under the Dar es Salaam Rapid Transport (DART) project, government sources said.

Last December more than 100 traders were removed from the UBT premises after receiving compensations amounting to sh 2.7 billion to pave the way for the DART project.

They were to leave the area by January 15 to pave the way for the DART. Interim temporary kiosks were to be built at Mbezi Louis and at Boko. However, to date none has been set up for lack of funds.

According to feasibility study, each of the new bus terminals, at Mbezi Luis and Boko Basihaya, is expected to cost sh40 billion, Dar es Salaam City Council (DCC) Spokesman Gaston Makwembe, said in an exclusive interview on Tuesday.
According to him the city planned to build a third terminal at Kongowe in the southern suburb of Dar es Salaam city.

The Mbezi Luis terminal would serve passengers travelling to the central zone and the southern highlands while the Boko Basihaya would handle the northern zone bound passengers. The Kongowe Terminal would be people travelling to southern regions, he said.

The project would start with the Mbezi Luis Terminal construction, to be followed by the Bashaya Terminal and then the Kongowe Terminal.
However, construction work for the projects would start after finding financial partners. Makwembe said some partners have been identified, without mentioning them by name.

The city spokesman added that the accomplishment of the bus terminals would help reduce traffic congestion Dar es Salaam city .

Early this year several kiosk and buildings within UBT were demolished to prepare for the new project, creating inconvenience for passengers as social service once found in the premises were not available,
DCC had to open temporary kiosks to provide the passengers with food, drinks, and sanitation and health services.

Participate effectively in Constitutional councils

Angela Kairuki, Justice and Constitutional Affairs Deputy Minister

Despite poverty and other challenges women and underprivileged groups faced, they have generally participated adequately in the ongoing exercise to give views for the new constitution, Justice and Constitutional Affairs Deputy Minister Angela Kairuki said in Dodoma yesterday.
Addressing a constitutional council organised by the Tanzania Rural Women and Children Development institute, the minister noted that there is good chance for the new constitution to contain views of women and children.
She said many women and children have been empowered to speak out their views though the special councils. “We shall have a constitution that contains rights of disadvantaged groups of people such as widows, women in general and street children.”
Tanzania Rural Women and Children Development is an NGO that helps the disadvantaged groups by educating them, providing legal and economic support to widows, children living in difficult environments and sex victims.
Kairuki cited the weak income position as the main challenge the groups faced, but inspite of that, they have taken part to air views in the various councils held across the country.
She praised the NGOs that were involved in organizing and supervising various meetings that enabled the groups to air their views and appealed to more women to come forward to particulate in the exercise even more.
The Dean of the Tanzania Rural Women and Children Development Lediana Mng’ong’o, for her part, said women should get well involved in the process to ensure their rights and interests are included in the constitution.
She said it was high time women made changes concerning their rights because they have long been oppressed; for instance, being denied inheritance when a husband and leadership positions.
A youngster Amina Albert (12) said the new constitution should state the right of every child to further education after completing Standard Seven as opposed to the present situation.

TBS lifts ban on OKI cooking oil

Tanzania Bureau of Standards (TBS)

The Tanzania Bureau of Standards (TBS) has lifted a ban it imposed on sale, distribution and use of OKI palm cooking oil after establishing from Zanzibar counterparts that it was safe enough and that the public can use it.
However, it was learnt that fraudulent traders had at some stage counterfeited the product, with many Zanzibar residents getting worried about oil easily available in the market; which led to the action by TBS to impose a ban.
TBS Director General Joseph Masikitiko authorised a detailed analysis mid this week whose result suggested that OKI Palm Oil was counterfeited by fraudulent traders
But the Zanzibar Food, Drugs and Cosmetics Board maintained that genuine OKI was harmless while the Minister for Trade, Industries and Marketing Nassor Ahmed Marui told the House of Representative that the oil was safe.
Following the developments, Masikitiko said TBS collaborating with the Fair Competition Commission (FCC) and a manufacturer in Singapore, would make certain only the genuine OKI cooking oil enters the local market.
For instance, package volume would be 10 and 20 litre plastic jerry cans and oil certified TBS under the “TBS” mark certification scheme to use the quality mark. Additionally, it would involve selling of OKI brands through specified distribution channels, using appointed distributors.
He, however, said this did not cover OKI cooking oil sold in one litre, two litre, three litre and five litre plastic jerry cans because they have been proved to be substandard.
The OKI cooking oil ban had also included VIKING and ASMA as TBS had not guaranteed their quality as the traders in the products were yet to appear before the hoard of standards, which had also ordered to recall the brands from market. Measures were under way to get rid of the two brands of oil from the mark.
Meanwhile interviewed products users expressed doubts about TBS ability to analyse products before hitting the market and pose a danger to society.
The three types of oils reportedly failed to meet the 559:2010 TZS National Standard and were imported from Malaysia through av unauthorised port at Mbweni in Kinondoni District, Dar es Salaam.