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"Tanzania Mining Law Reforms: The Catch 22 for donor countries Ambassadors”

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The main job of any foreign ambassador is to advance his/her country interests. For a foreign ambassador in a country like Tanzania; which is heavily dependent on Foreign Aid, this is a very easy task to accomplish. The situation gives the Donor country ambassadors very powerful influences in the outcome of any reforms proposed in the country.

In October this year the Tanzanian Parliament is planning to table a Mining Law reform; which is the legitimate right, indeed the duty, of the Tanzanian Parliament towards its own citizens. This is a catch 22 situation for UK and Canadian Ambassadors in which their countries have massive Investments in Mining Industry in the country. In such a situation where they have to balance the interests of their mining companies, while at the same time honoring the independence of Tanzania to exercise it's right of instituting the laws and reforms; which are beneficial to its citizen; I am worried that Tanzania mining law reforms will not completely overhaul and modernise the changes required in the mining Industry for the benefit of the country. This is based on the past history of the influence of Canada in the first mining law reform of 1998.

On the other hand, I am not optimistic nor in favor of Hon. William Ngeleja's proposal for the Tanzanian government to take a stake in Mining companies. We have seen again and again many scandals which have consumed our golden time, it doesn't seem like this move will be immune to new scandals. Reducing the government's stake in commercial firms should be a long term goal, because if it is not reduced, it will only create more uncertainty for investors than assurance.

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In addition, the Tanzanian public is angry about the way the government has failed in managing its stakes in the companies with which it has partial ownership, for example; Tanzania Telecommunications Company Ltd (TTCL). This has placed the Government in a bad position that makes it look irresponsible and incapable of having a say on how such companies are run. As a result, the public doesn't trust the Government operating private companies anymore and for this, it would be unwise for the Government to take stake in mining companies. Instead of creating another unhealthy debate the government should spend its time in revising the privatization process and solving all the problems associated with the existing privatized companies; both the companies that are functional and the nonfunctional ones.

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Regarding the Mining Industry, there has also been public anger against mining companies in Tanzania; that exits because the free market has failed to deliver the opportunity for the public to take stake in the Mining Industry. Mining companies have been able to dig a fortune from public land without giving the appropriate share of the proceeds to the Tanzanian citizens who own it.

To address this I suggest we let the free market system work without government intervention in private businesses. Meaning, instead of the Tanzanian Government to take stake in Mining companies, the government can enact a law which requires the Mining companies to float 10-15% of the shares to the public. If Mining companies float their shares in Dar Es Salaam Stock Exchange, it will improve the image of the Mining companies in the eyes of the public. This will reduce the friction between the two stakeholders, due to the transparency required, and the sense of ownership derived from share ownership by the Tanzanian public which will help in changing the thinking of the public because they will feel the ownership and will enable the Tanzanian shareholders to share the fruits and success of the Mining companies.

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I am sure the Flotation of shares of the Mining companies will stimulate the growth of the Dar es Salaam Stock Exchange (DSE). It will help restore its respect and importance in mobilizing private capital. I find it very frustrating when a company like Artumas fails to operate because of lack of cash to run the company. This is because I can't see any reason why it didn't list itself in Dar es Salaam stock exchange and raise the money it needed to continue its operations. I am not sure if this was due to selfishness of the Artumas management of not wanting to allow the Tanzanian public to have stake in the company or was it a poor Management decision. However, I hope the growth of DSE, will give more confidence for foreign companies to list themselves.

In conclusion, The Listing of Mining companies will foster efficiency and development of DSE by increasing the number of big companies listed in DSE. Mining companies like Anglo Ashanti have taken positive steps in ensuring the public gets a piece of the pie of their mining activities in countries like Ghana and South Africa where they are listed in the Capital Markets. Therefore I think DSE should start to lobby Anglo Ashanti Mining to cross list its shares in Dar es Salaam stock Exchange. I strongly believe that the government should promote reforms that balance between the interests of foreign investors and interests of the public.

 

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The writer is a Tanzanian Young man who has passion for reforms in Tanzania. You can read his columns at Business Times Tanzania every friday
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