Contract Transparency and Tracking natural resources revenues at the
subnational level in Tanzania
Posted by Semkae Kilonzo on January 10, 2014 at 10:30
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It has been well-documented that over the years, Tanzania has failed
to use the opportunity offered by the mineral sector to improve the
lives of the poor, particularly those in local communities where the
mines exist. In the early 1990s, with the advent of large mineral
discoveries, there was a lot of enthusiasm and widespread belief that
social and economic transformation would come. Towards the end of the
noughties, many Tanzanians were left feeling that the mining sector
environment provided a disproportional share of the benefits of
exploitation to international companies. The fact that mining
contracts or development agreements were being kept out of the public
arena only exacerbated that negative sentiment.
In the wake of recent discoveries of huge reserves of natural gas,
Tanzania is on the verge of becoming a huge gas exporting nation and
there are now quite valid concerns that as it was with mining, we will
not see this new resource benefiting people in the country. In 2008,
a presidential commission to review mining contracts released a report
that pinpointed towards a lack of backward and forward linkages
between the sector and other sectors within the economy, generous tax
exemptions, instances of tax evasions, transfer pricing, as well as
secrecy around negotiated contracts. By means of illustration, tax
exemptions on fuel import inferred a loss of revenues for US $32
million, which is far greater than the US $23 million earned by the
government in royalties.
Going forward, the big question is whether or not we as a country have
learnt anything from the mining experience. There are some modest
inspiring signs that we are gradually learning a thing or two and are
becoming less passive. On January 5th, 2014, Dr. Hamisi Kigwangalla, a
Member of Parliament, led a demonstration of over 2000 citizens from
his Nzega Constituency to their District Commissioner's office to
protest the local council's change of plans to spend TZS 2.4 billion
(US $ 1.4 million) that came in as service levy paid by Australian
gold mining company Resolute Tanzania Limited.
In Tanzania, an annual service levy of 0.3% of a company's total
turnover is charged by municipals. The levy was actually paid last
year by Resolute Tanzania Ltd as a result of several demonstrations
and rallies that culminated in talks where the company agreed to pay
arrears from since 2006. Still, there is a disputed unpaid amount of
around US $3.2 million covering the period from 1997 to 2005 [when
service levy by-laws had not been gazetted]).
Kigwangalla and his constituents were objecting to district councilors
reneging on an earlier resolution arrived at a Full Council meeting in
April 2013 where it was decided that the amount paid by the mining
company would be spent on among other things, the establishment of
Nzega Community Bank and Nzega Construction Corporation. For some
reason, on January 4th, 2014, the district councilors changed their
minds about these projects aimed for the entire district and thought
it best to divvy up the money by distributing it to each of their
electoral wards with the purpose of completing some 'unfinished
projects'. "This was, in fact, a decision that was contrary to the
laws, regulations and procedures governing financial operations of
local governments," he stressed, in a written note to me.
"History and experience has shown that when councilors are given funds
in this way, they implement projects in their wards poorly and there
have been instances of corruption. Secondly, this decision has not
taken to account the benefits of implementing a few manageable,
sustainable and income-generating projects that would benefit people
of the entire district versus spending on many smaller one-off
unverifiable activities," he explained.
On the 6th of January, 2014, he successfully filed an application in
court for an interim injunction to block Nzega District from using the
funds collected from Resolute Limited on the grounds that it was
confusing that the council now had two contradictory resolutions on
how the money should be spent, as seen from his twitter announcement:
But what does this wrangle about what some might consider a measly
$1.4 million tell us about moving towards breaking the pattern of
mismanagement of revenues from the extractives at the local level?
Kigwangalla and his constituents would not have marched the streets
nor gone to court had they not known about the money.
Actually, Kigwangalla's hunt for this amount only began when he saw
the contract between the Government of Tanzania and Resolute Tanzania
Limited. "The contract was silent about a US $200,000 that the company
was paying annually as Local Government Levy. However, mining
companies are meant to pay a service levy equivalent to 0.3% of their
annual turnover to local governments in areas they operate, according
to the Local Government Finances Act of 1982. They claimed they opted
to pay US $200,000 annually because our council had not yet enacted a
by-law to operationalize the service levy law," he outlined in his
note.
As the company's 'Golden Pride Project' mine had been operational
since 1997, the MP was convinced that there were billions of shillings
at stake in uncollected service levy. Further follow-up with the
Deputy Minister for Energy and Minerals, Steven Massele and the
company established that total service levy that was due amounted to
around TZS 8.7 billion.
As the mine is due to close down later this year, Kigwangalla and the
citizens are perhaps getting into the 'follow the money' game a little
late in the day. As they say, however, better late than never. It was
their responsibility as true owners of the wealth in Nzega to push for
access to the contract and press their local authority towards
allocation and spending that is responsive to community needs.
Such monitoring work is not easy. Kigwangalla as a Member of
Parliament was better placed than most ordinary citizens of rural
Tanzania to access the contract. Also, many a times, the information
obtained requires the capacity to analyze and see exactly how much
comes in to the council coffers from the mining companies and track to
see how the local authorities plan to spend that money according to
the priorities set.
I do believe, however, with more interest and progressive knowledge
enhanced in this type of work, citizens can overcome the obstacles
with the appropriate help, as witnessed through Kigwangalla.
Caption: Kigwangalla being cheered by his constituents after the
successful injunction.
--
"Vision is the ability to see the invisible!"
Hamisi A. Kigwangalla, MD, MPH, MBA
P.O.Box 22499,
Dar es salaam.
Tanzania.
Phone No: +255 754 636963
+255 782 636963
website: www.peercorpstrust.org or www.hamisikigwangalla.com
Email: hamisi.kigwangalla@peercorpstrust.org or info@hamisikigwangalla.com
Skype ID: hkigwangalla
Blog: blog.hamisikigwangalla.com
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