-The burning questions continue to pile up
THISDAY REPORTER
Dar es Salaam
NEW discoveries in the controversial Buzwagi gold mining agreement signed between the government and Barrick Gold Corporation subsidiary company Pangea Minerals Limited suggest even less value in terms of state revenue and national economic benefits from the planned $400m (approx. 520bn/-) investment.
While royalty on exports has been set at the industry standard of 3 per cent (for gold) and 5 per cent (diamonds), there are specific caps set on exactly what the investor company will pay to both the central government and local government authorities in Kahama District, Shinyanga Region where the mine will be located.
The agreement, signed in London last February by Energy and Minerals Minister Nazir Karamagi on behalf of the government and Barrick Gold Tanzania Limited’s executive general manager (operations) Gareth Taylor representing Pangea Minerals Ltd, specifies a set limit of $200,000 (approx. 260m/-) in maximum amount that Pangea Minerals Limited would be legally obliged to pay each year in local government tax.
A similar ceiling is also cited for road toll taxes that the project shall be required to pay every year under the Fuel and Road Tolls Act of 1985.
Furthermore, the project implementing company may not pay more than $10,000 (approx. 13m/-) in any one year for ’’any duty, levy, charge, fee or compulsory contribution’’ that has not been specified in the agreement.
With regard to the land at Buzwagi where the mine is to be set up - an area covering about 24.49 square kilometres Pangea Minerals Ltd is not required to pay any taxes on the property in excess of $2,000 (approx. 2.6m/-) per square kilometre per annum.
Legal experts have confirmed to THISDAY that this means regardless of any developments made on the land or any future increases in the property value, the investor may pay a maximum of just $48,980 (approx. 63m/-) per year in taxes on the land throughout the lifespan of the mine.
Another interesting clause in the agreement is Article 4.1.3, which specifies that Pangea Minerals Ltd will make a fixed contribution of $125,000 (approx. 162.5m/-) by December 31 of each calendar year of production to the state-run national economic empowerment fund.
But as legal experts point out, there is a catch here too. For the document defines a ’’Year of Production’ as a time when production from the mine reaches a ’minimum of 20,000 ounces of gold contained in ore or concentrate, as the case may be, during the applicable calendar year.’’ In other words, for each year that the gold mine management declares production to be less than the stated 20,000 ounces, the government will get no contribution for its empowerment fund.
’’So, minus the 3 per cent royalty which is itself negligible, Tanzania as a country will earn a mere $583,980 (approx. 760m/-) from the Buzwagi gold mine each year,’’ Dar es Salaam-based lawyer Tundu Lissu told a local television talk show earlier this week.
Lissu, who works with the Lawyers Environment Action Team (LEAT) and is noted for his extensive researches into the country’s mining industry, described the Buzwagi deal as ’scandalous’ and asserted that the planned investment would be of little benefit to the national economy.
He cited government figures presented in parliament recently suggesting that out of $2.614bn (approx. 3.4tr/-) in total gold exports over the past ten years, Tanzania earned just $78m (approx. 100bn/-) in royalty.
According to the government’s 2006/07 figures, minerals (almost entirely dominated by gold) accounted for around 63 per cent of the country’s total export revenues. But paradoxically, the minerals sector (particularly gold) contributes a paltry 2.7 per cent to Tanzania’s gross domestic product (GDP), or total economic output.
Meanwhile, minister Karamagi has this week steadfastly avoided making any comment on the Buzwagi deal or his own role in it, especially with regard to the circumstances of its signing in a London hotel on February 17 this year.
Among other things, the agreement legally binds the government to maintain the same taxes and fiscal laws applicable to Pangea Minerals Ltd today for the entire duration of the mine, which is a minimum of the next 25 years and a maximum that by the terms of the pact is more or less indefinite.
The minister responsible for mining is given extraordinary discretionary powers to extend the company’s special mining licence as he or she sees fit, without any limits on duration.
An earlier report by THISDAY revealed that at least one key provision in the original final draft of the agreement, approved by the government’s advisory committee on minerals, was deleted by hand just before the signing, effectively exempting Pangea Minerals Ltd from paying any taxes falling under the East African Customs Management Act of 2004.
And going by the document itself and signatures therein, it appears there were no witnesses to the signing for either of the two parties involved.
At the time the Buzwagi deal was signed, the fourth phase government under President Kikwete had announced the start of a formal review of the various existing gold mining policies, laws and contracts, and the suspension of any new major mining contract signings until the review process was completed.
From ThisDay (Tanzania)
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