JOHANNESBURG (miningweekly.com) – Recent policies aimed at bolstering fiscal revenues, and a crackdown on tax evasion by the Tanzanian government, will increase investor uncertainty across various sectors and have a direct negative impact on the country's future growth, BMI Research's Africa Country Risk team said on Thursday.
The John Magufuli-led administration earlier this month introduced a mining ore export ban, aimed at increasing value-added beneficiation within the country.
“We expect Tanzania's mining sector growth to be the third-fastest in the region from 2017 to 2018 at 8.25%, but it will drop off considerably thereafter until 2021,” the research firm noted, adding that, while the country’s gross domestic product was set to grow from 6.3% to 6.5% in the next year, this would slow down to 5.8% in 2021.
“The mining ore export ban is yet another sign of growing governmental regulations that may limit future investment and growth in the mining sector,” the firm said.
However, BMI noted that the ban was unlikely to be implemented and that a compromise similar to the January 2017 export ban moderation in Indonesia would be more probable, owing to several factors.
BMI cites a $41-million tax dispute between gold miner Acacia Mining, the largest miner in the country, and the local government, saying it is likely that the recent export ban is a means for the government to gain leverage to obtain a favourable outcome in the litigation.
“Further, a precedent was set last year when a government proposal to end various tax incentives granted to Dangote Cement ended in a compromise, following the suspension of production [in the country] by the company,” BMI said.
Further, BMI highlighted that Tanzania currently had no gold refineries and only one copper refinery, which meant the country exported a very limited amount of refined copper, worth $480 000 in 2015, compared with $46.5-million worth of copper ore exports.
“Because refining facilities take several years to build, the country will not be in a position to refine all the ore it produces for now, meaning its export revenues will significantly decrease.
“For example, mining ores (excluding gold) accounted for 8% of Tanzania's total exports in 2015. Further, a 2011 study by the Ministry of Energy and Minerals concluded that, for a copper smelter to be commercially viable in the country, there needs to be a feedstock of at least 150 000 t/y, significantly more than the 6 500 t produced in the country in 2016,” said BMI.