Tanzanian President John Magufuli. Picture: REUTERS/SADI SAID
Tanzanian President John Magufuli. Picture: REUTERS/SADI SAID

Two Tanzanian ministers resigned after the country’s President John Magufuli told government officials suspected of wrongdoing in an investigation into the nation’s diamond- and tanzanite-mining industries to step down.

Edwin Ngonyani, a deputy minister of works, transport and communication, resigned on Thursday evening, but declined to comment on the allegations. George Simbachawene, a minister in the office of the president in charge of regional administration and local government, who was also named in the probe, announced his resignation in a YouTube video posted by Azam TV, a Dar es Salaam-based broadcaster.

"I chose to resign because I have been implicated by the two reports presented to the president today and so that the state organs can investigate freely," Ngonyani said by phone.

Magufuli is overhauling the mining industry as the government targets doubling its contribution to GDP to 10% by 2025. In March, he banned mineral exports and ordered an audit that found London-based Acacia Mining understated the taxes it owes Tanzania, a finding the company refuted. In July, the government approved laws that would enable the state to renegotiate contracts with mining and energy companies.

The regulations introduced by Magufuli’s administration, along with its clampdown on companies including Acacia, have weakened the country’s reputation as an investment destination and will curb economic growth, according to BMI Research.

I chose to resign because I have been implicated by the two reports presented to the president today and so that the state organs can investigate freely

Unfavourable contracts

Two committees formed in July to scrutinise the gem-mining industry found widespread irregularities that led to unfavourable contracts and a loss of government revenue, according to a statement posted on the parliament’s website on Wednesday.

In one instance, London-based Petra Diamonds’ Williamson diamond mine (WDL) failed to pay corporate tax between 2007 and 2017 after reporting losses, according to Mussa Azzan, a lawmaker who led one of the committees. Instead, the company paid an alternative mineral tax of 1.96-billion shillings ($875,160).

"The committee asks itself, if WDL has been making losses all this time, why is it investing heavily in mining instead of shutting down the mine and moving on," Azzan said in a video recording of a speech made in the capital, Dodoma, on Wednesday. "The committee believes their continuing to operate for a long time, as per their licence to operate until 2033, means the company is making significant profits" and it should pay the necessary taxes, he said.

Petra said in an e-mailed statement that its operations at the Williamson mine, in which it holds a 75% stake, are conducted in a "transparent manner and in compliance with legislation in Tanzania".

Lost resources

The committee also found contradicting reports between different government agencies about the real value of diamonds exports. Ministry data showed they generated $362m in the 2007-16 period, while information from the Tanzania Minerals Audit Agency valued shipments at $374.6m. The government received royalties worth $18m during the same period, according to the ministry, while the agency’s statistics indicate it got $15m.

The investigations revealed that mining companies have been "playing" with Tanzania, Magufuli said. "Tanzanians, we need to get to a place where we are pained by the lost resources from our country," he said. If the mining industry continues to be a "problem" for the economy, the companies should consider leaving the resources to be developed by future generations, Magufuli said.

"I heard others are reducing their workforce, I wish they would say they are leaving," he said. "Because if they leave, we can just take ordinary citizens who can go in there and mine."

‘No value’

A separate report on tanzanite mining recommended that a joint-venture contract between TanzaniteOne and the State Mining Corporation (Stamico), be scrapped as it has "no value," according to committee chairperson Dotto Biteko. In December 2013, Richland Resources and Stamico signed a 10-year agreement to each hold a 50% share of TanzaniteOne.

"It’s a contract that is exploitative, and it’s as if the contract has been prepared by one side without the involvement of Stamico," Biteko said on Thursday while handing over to Magufuli the report that also recommends an audit of all licences with the view of issuing them afresh.

Tanzanite, a blue gem, is only found in Tanzania. The nation also produces so-called "bubblegum" pink diamonds, including a 23-carat stone extracted from the Williamson mine, according to Petra’s website.

Bloomberg

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