Dynamic Business Environment in the Tanzanian Mining Sector

Developing countries strive to market their business environments so as to attract investment. However, the business environment is always dynamic and full of uncertainties. This article investigates the dynamic environment of the mining sector, highlighting on the case of Barrick Gold Corporation, Anglo Gold Ashanti and Shanta Gold which are the three dominant mining companies in Tanzania. The study also uniquely encompasses the Tanzanian Government position in instituting the changes in policy in efforts to improve the citizen’s welfare and boost the revenues emanating from the sector. A qualitative design was used in this paper and findings indicate that the mining environment in Tanzania is very favorable for investors, although few un-honest government officials have used the loopholes in the legal framework to benefit out of the situation. Lessons are learnt from the investor’s perspective and the government side and constructive dialogue is on the way to ensure that concerns from both parts are encompassed so as to attract further investment in the extractive sector and to ensure that the mining FDI abide to the laws without any potential room for deviating. Finally, the study predicts a bright future for Tanzania mining sector due to remarkable infrastructure projects that are under way including; the standard gauge project, hydroelectric power station and roads. These projects are likely to lower the costs of operation to the potential mining companies.


Introduction
Mining is an important component in the global economy, and plays a key role in the economic growth of many countries. However, mining is a very expensive venture requiring huge capital to be invested in exploration and production operations [21,22]. Hence companies opting to invest in the sector, thoroughly scan the business environment to make sure that the investment is in a safe and lucrative location. Although the African business environment has been previously viewed as a hostile business environment, recently there has been a change in notion among majority of investors and they are currently investing in the Africa Mining sector. Recent developments in the mining sector and regulatory frameworks have heightened the interest of the Multinational Corporations to invest in the sector.
Mining in Africa is mostly conducted by multinational companies originating from Canada, Australia and America. This is due to the fact that the venture requires heavy financial investment which is a great challenge to many African investors. However, the foreign firms manage to secure capital through bank debt, private investor's equity and business bonds [23]. Despite the increasing growth of Foreign Direct Investment (FDI) inflows in Africa in the mining sector, trends indicate that the growth in Africa is at an arithmetic rate whereas the global FDI flows grows at a geometric rate [24].
The Tanzania Mining Industry guide (2015) reports that the mineral sector in Tanzania has experienced a boom that coincided with high and stable economic growth. The sector has also expanded rapidly following the mineral policy reforms of 1997. Similarly, more than 3 billion USD have been invested in mining by 2015. Furthermore, the reforms in the mineral sector have resulted to growth of the sector and export earnings from an average of 1% of total export in 1997 to 52% in 2013, Similarly, the number of employment in large scale mining operations have increased from 1,700 to 15,000 in 2013, gold exports increased from less than 1 tone in 1997 to 50 tons in 2013, also the contribution of mining to the gross domestic product (GDP) was less than 1% in 1997 as compared to 3.5% achieved in 2013 [26]. In, the light of the growth of the sector, the Tanzanian Business environment have played a very great role.

Mining Business Environment
Several studies have been done discussing the business environment, but very few have focused in exploring the mining business environment. Majority of literature in mining is focused on FDI entry decisions and the ownership structure. Moreover, for the case of Tanzania, there is very limited literature discussing the business environment as a whole. This is a very big challenge for the Government of Tanzania as it faces the problem of limited scientific literature to aid the decision making process when it wants to make policy adjustments. Hence, this article intends to add some literature in the area which can be useful to policy makers and other decision makers including the Government.
Despite the success of Tanzania in the mining sector, there has recently been a mild concern among investors regarding the suitability of the Tanzanian business environment for their operations. Though, evidence indicates that many corporations have been able to circumvent the challenges to be flourishing enterprises [11]. To date, there are still limited examples of pure satisfaction between the MNCs and the government regarding issues relating to taxes. The Government has the impression that it is getting less in terms of taxes and the MNCs think that they are overpaying. These notions leave both parties dissatisfied with the situation. This situation affects the investor's decision in choosing the mining locations and also sometimes make the Governments to enact new laws to enhance revenue collections which are not feasible to investors.
In Tanzania, the debate about constant policy reforms in the mining sector gained fresh prominence in 2018 when the country started making some amendments to her mining policies. However, many experts argue that the reforms were aimed at making sure that the business environment is suitable for investors and also to enable the Government to collect reasonable revenue from the mining operations, but some have viewed the reform to be accompanied with a nationalist agenda [18]. But, it is evident that corruption of the Government officials played a great role in the formulation of very poor regulations which gave multinational investors a loophole to benefit more at the expense of the Government.
Despite the controversy of whether Tanzania is a good place for investors to invest, the United Nations Conference on Trade and Development (UNCTAD) survey in 2000 pointed out Tanzania to be a very attractive destination for Foreign Direct Investment (FDI) in the Sub Saharan Africa [15]. It is important to realize that, some important aspects of the business environment which were designed by the Government of Tanzania for the sole reason of attracting investors were successful in attracting investors but due to some loop holes, the Government of Tanzania found itself to be a victim of these regulations which were aimed to be an attraction to investors. Hence, the Government of Tanzania decided to amend the mining regulations in attempts to rectify the challenges that emerged. However, little attention has been paid to some aspects of the regulatory framework during regulatory changes. In addition, whilst some studies have only focused only on the general impacts brought forth by the changes, this article investigates the motivations that triggered the changes of individual aspects of the regulatory framework. Notwithstanding the wealth of knowledge from previous research, many previous studies failed to discuss some important aspects of the mining environment which are discussed in this article.

Fiscal Incentives
The Government of Tanzania embarked in reforms and restructuring aiming to attract investments in the mining sector between the mid-1980s and the 1990's [9]. Fiscal incentives have been an important tool in attracting foreign direct investments for the period 1990 -2000 [29]. However, it has been noted that the incentives have been favoring the mining corporations more than the host country [1]. This have resulted to the amendments of the mining regulations by the Government of Tanzania at different periods. However, the regulatory changes have not been well received by investors, as the new regulations aim to ensure that the Government of Tanzania also gets a reasonable portion of revenue from the mining operations. One of the aspects that raised concern is the fact that the mining multinational corporations are allowed to offset 100% of their capital expenditure against tax [12].
Mineral development agreements (MDAs) were a new feature in the 1998 mining act, which aimed at giving a legislative loophole to investors to negotiate fixed tax rates throughout the life of the project. In the case of legislative changes, the investors also have the opportunity to negotiate various incentives and special guarantees [30][31][32].
Mining development agreements and other confidential contracts in Tanzania have been in serious scrutiny lately, after noting that the country is successful in attracting foreign direct investment (FDI), but does not benefit from the extractive industry [28,18]. Massive frauds have been detected in the mining, as a result of low government involvement. For instance, an audit conducted by Alex Stewart Assayers (ASA) in 2003 revealed that some mining companies operating in Tanzania overstated their losses by US $502million over the period 1999-2003, resulting in government loss of US$132.5million in revenues.

Regulatory Environment
Chandler (2013) classifies mining regulations into public international law, domestic law (host and home country) and transnational law. Hence, the MNE have to abide to all the domestic and international regulations whilst pursuing the mining activities. The latest mining legislative changes in Tanzania took place in 2018, and the objective of the changes was to ensure increased revenue collection and increased participation of local citizens in the mining value chain (mining local content regulations, 2018). In due time, many African nations are restructuring their regulations particularly in the mining sector after spotting cracks in the regulations which facilitated illicit flows, low citizen involvement and massive corruption. This is in line with the study conducted by Akabzaa and Darimani (2001) who reported that the mineral reforms in Ghana have contributed to an enormous increase in mining and exploration activities which have also resulted to significant increase in gold production and the generation of external earnings. Similarly, the major drive for regulatory changes in many countries is aiming to address the tensions of sovereign control and harmonizing the regulations in regard to the impact that mining operations brings forth [13]. Moreover, artisanal mining is also recently being largely promoted due to re-emergence of resource nationalism and a concern of politicians to please their electorates depending on the sector for survival as there are more than one million people doing artisanal mining [16,18].

Technological Environment
Most large-scale mining operations utilize open pit technology, very few operations use underground technology in Tanzania [10]. Furthermore, smelting facilities do not exist in Africa due to various reasons like limited energy power to run the smelters and also low level of concentrates to process. However, it still very economical to operate in Africa despite the challenges.
For artisanal miners in Tanzania the efficiency of mercury-based gold extraction has been paramount in their success. However, the technology brings forth unrelated challenges of environmental and health problems to the surrounding community. Hence, the Tanzania regulation dictates the use of retorts which is poorly adapted in the artisanal miner's community [14].
However, the Stigler's Gorger Hydro Electricity project which is still in construction offers new prospects in terms of stable power for advanced technological tools that will be used in mining sites. Furthermore, the standard gauge railway line which is also still in construction, will greatly facilitate the transportation of mining equipment's at a very cheaper price.

Geographic Environment
The National Environment Management Council Act of 1983 was replaced by the Environmental Management (EM) Act No. 20 of 2004 following global concerns instigated by the United Nations (UN) Conference on the Environment and Development in 1992. The main aspect of the act is to instill obligations on companies to address environmental issues [2]. However, most compelling evidence suggest that pollution and environmental degradation have increased in the mining areas [3]. For instance, in North Mara, the local communities have accused Barrick Gold for causing water pollution which have resulted to the deaths of 20 people and 700 heads of cattle and in another instance the same company have been accused of water pollution resulting to the deaths of 43 people, 401 head of cattle, 523 goats, 185 sheep and 227 dogs in Nyakunguru, Nyarwana, Waigita and Nyangoto villages [15].
The Tanzania Minerals Audit Agency (TMAA) was tasked to conduct environmental monitoring and auditing activities in mining areas to ensure sound environmental management during life of mine and after closure. By 2011, 5 large scale mines, 21 medium scale mines and 17 small scale mines were audited and the results point out some flaws in protecting the environment [32].
The lack of Environmental Impact Assessment (EIA) legislation and institutional framework resulted to the tendency of impact assessments to be conducted on ad hoc basis for more than two decades. In most cases EIA's are conducted to fulfill donor requirements [10]. In addition, some studies argue that the outcomes of the EIAs are likely to be swayed by investors as the mining companies are the ones responsible to hire and pay the experts conducting the assessments and in most cases the communities surrounding the mining sites are not consulted to give out their views which in turn paves way for fabrication of results for some of the assessments [15].
Furthermore, the Government of Tanzania acknowledges that limited funds also play a crucial part in addressing the shortcomings emanating from poor enforcement of the environmental regulations [15,34].
Similarly, it has been noted that significant environmental impacts are prevalent in areas where new mine operations are established or in the mining operations closure [9]. This is because of the deforestation of the mining sites, the constant use of cyanide and significant emissions of sulfur dioxide, which ultimately leaves behind a degraded land which pose threat to human life and wild life [15]. Even though mining is usually associated with environmental degradation, some mining projects have shown hope that mining projects can take place and still the environment can be conserved. For, the case of Tanzania, the Golden Pride Mining project is greatly appreciated for its efforts to restore the vegetation to its original status [19].

Socio-Economic and Cultural Environment
Socio-economic and environmental crises, corporate failures and collapses have posed challenge to businesssociety relationships resulting to enhanced corporate accountability and social responsibility of many multinational firms including mining firms [5,6]. However, despite the extraction industry being accused of violating human rights, corruption and tailing dam accidents, some companies have still failed to behave sustainably [7,8].
Correspondingly, mining operations in Tanzanian environment have resulted to displacement of people, child labor and influx of migrants searching for jobs which in turn have disrupted the indigenous people's lifestyle due to increased incidents of prostitution and banditry [9].
However, the mining industry greatly contributes to the economy of the respective country. The contribution ranges from providing employment to the citizens to the fact that mining companies contribute a lot in strengthening foreign reserves for the host Governments [20].

Tanzania Mining Sector Veracity
Tanzania has been among the best performers in attracting mining FDI [35]. The motivation for the FDI to locate in an area is generally influenced by labor costs, infrastructure, fiscal incentives and policies of the country of origin [36,37]. Similarly, Tanzania has been the third largest gold producer in Africa after South Africa and Ghana [38]. This is influenced by the fact that, Tanzania is very endowed with precious metallic minerals like gold, silver, copper, nickel, iron, platinum, and tin; gemstones like tanzanite, diamonds, emerald, garnet, ruby, alexandrite and sapphire; industrial minerals like kaolin, phosphate, lime, gypsum, diatomite, bentonite, vermiculite, salt and beach sand; building materials such as stone aggregates and sand; and energy minerals such as coal and uranium [39]. By, all means, it is evident that the mining sector have grown tremendously since the late ninety's (90's) where mining operations restarted in Tanzania.

Regulatory Changes and Firms Performance
Tanzania expected spillovers from the mining industry, however, the sector have created a very small ripple effect in term of revenues to the government and growth of other sectors. Taking note of this, the Government of Tanzania decided to create local content policies in 2017 so as to stimulate the growth of local companies and service providers [17]. In addition, other mining regulations have been amended so as to address the weaknesses that existed.
Although it is still questionable on how the Government of Tanzania can use regulatory frameworks to govern and promote the mining sector, there are efforts from the Tanzanian government to amend the existing mining regulations to account for the weaknesses that were spotted in the implementation. In general, the challenge that most governments face in taking drastic measures in regulatory changes is the fear of losing FDI in the respective countries [2]. This fear has made very few countries to take bold steps in changing the regulations governing the sector. In, addition it is practical for mining companies to voice out their dissatisfaction towards the changes in regulations as the companies were previously enjoying navigating in weak institutional environment giving them room to earn more profit, and the changes in regulations is likely to compromise that situation.
There have been mild outcries from investors in some aspects, including the stabilization clause of the contract which they signed with the Government of Tanzania. This is due to the fact that the stabilization clause is aimed at providing stable operation environment to investors in the case of turbulent changes. The investors are confident that the Government of Tanzania is violating the legal framework which it has put in place. However, some literature have pointed out that the stabilization clauses have made investors immune against fiscal and legislative terms thus reducing the legislative sovereignty of the respective host country [4].
Following the 2018 mining regulatory changes in Tanzania, the three major gold mining companies were affected differently; some took a big hit in their operations including Acacia whereas others were mildly affected. Acacia reported that the ban of raw minerals exportation has resulted into a stockpile of copper concentrates of more than US$265 million resulting into cash flow problems for the company.
Anglo Gold Ashanti reported that the new regulations had minor impacts in their operations. However, the company is seeking a constructive dialogue with the Government of Tanzania, to gain assurances that the Geita Gold Mine will not be affected by the legal and fiscal changes, given the fact that; their mine development agreement (MDA) with the Government of Tanzania guarantees them fiscal and regulatory stability.
Shanta gold company reported that there are minimum challenges in their operations posed by the legislation changes. The fluctuation in gold production and sales at Shanta gold was a result of internal environment operational plans and nothing to do with the regulatory changes in the mining sector. The company pointed out that the changes in the legislation have proven to be a poignant catalyst for streamlining the company's cost structure and significant strides have been taken since the implementation of these new laws to reshape the supplier base and headcount in order to ensure cost optimization across the business.

Mining and Community Relations
Mining companies in Tanzania and Africa in general tend to engage in corporate social responsibility (CSR) activities like building schools, health centers and roads. The CSR activities are sometimes amplified by the politicians to their electorates on the importance of the existence of the companies in their locale. Over the course of time an assumption has emerged that the transnational mining companies have fully engaged in CSR practices and there is no need to monitor their activities. However, that is not the case, literature indicates that the transnational mining companies usually are more active in CSR practices in developing countries due to the pressures that they face from regulations, non-government organizations and other activist groups [2]. Unfortunately, may African countries including Tanzania do not have clearly set regulations that mandate the mining companies to have CSR practices, thus the decision to engage in the practices is left entirely to the company to decide whether to do it or not.
Lauwo et al., (2016) interviews noted a concern among the interview respondents who pointed out that: "The mining companies' interaction with the local community is poor; they make promises which they never fulfil. To be accountable to the local community, companies should support local procurement at the community level instead of importing most of their consumables from outside the country. For example, they import food products such as meat, vegetables, rice, chicken, which can be found locally.
Small tenders should prioritize the local people; training should be provided for the local people" This concern was noted by the Government and was adopted in the 2017 local content regulations. However, there are some aspects that some mining companies have been doing well prior to the introduction of local content regulations. For instance, the two major mining companies, Acacia and Anglo Gold Ashanti, together with the government authorities, established the Integrated Mine Technical Training Program (IMTT) at Arusha Technical College (ATEC) and Moshi VETA College in 2009. IMTT is an apprenticeship program where apprentices spend three months at the Centre and six months at the work place [40].
Despite appreciating this milestone some critics view it to be the cheapest option to build capacity for people to work in the mines and it has nothing to do with local content. In addition, some literature view capacity building to employees only is not enough, and they recommend capacity building to be extended to artisanal miners as the policies that govern the large scale mining operations have tremendous effects to artisanal miners as well [18].

Regulatory Compliance in Tanzania
The mining regulatory environment in Tanzania and Africa is known to have some shortcomings. These shortcomings are usually exploited by the mining multinational companies for their own private gain. However, despite the weak institutions, the Governments of African countries have made very little effort to ensure the compliance of the existing institutions. For instance, there have always been outcries from workers in the Tanzanian mining sector regarding the poor working environment. But very little have been done by the Government to ensure that the mining companies adhere to the laid regulations. For instance, the interviews of the study by Lauwo et. al., (2016), some employees expressed concerns regarding the Government relaxed role in ensuring compliance.
Despite the companies' claims to be complying with local rules and regulations, no regular monitoring on the part of the government has been done to substantiate the companies' claims about compliance. Who is responsible for ensuring that the companies' implementation complies with all the labor laws in Tanzania? Who is checking whether the companies are implementing what has been stipulated by the law?
Another respondent added: There is a need for a review of the institutions and regulations in Tanzania to reflect the nature of and the risk involved in the mining sector. Companies utilize the weaknesses in our regulations as a loophole, as they work towards maximizing their profits. For example, mineral development agreements (MDAs) rarely specify what is expected from companies in relation to employee welfare.
Another respondent stated: Despite companies' efforts on compliance with local rules and regulations in Tanzania, still there are a number of problems in the workplace. For example, health-wise, when you go to the underground mining area, the area is very smoky and unsafe, and there are not enough air and ventilation systems. The company pressure to meet production targets and [ensure] turnover maximization often jeopardizes health and safety issues. People are forced to work in some unbearable working conditions.
Even though the complaints of non-compliance to the regulations are directed solely to the Government, most compelling evidence suggests that the global multinational companies in Africa have private initiatives governing them towards ensuring regulatory compliance [21].

Investors Perspective -Environmental Preservation
Barrick Gold Corporation (BGC) stipulates its accountability in preserving the environment in the following way Respect for the environment is at the heart of our management approach to environmental protection and stewardship. Barrick's Corporate Social Responsibility Charter drives this approach. The environmental management system in place at Bulyanhulu helps us achieve our Charter goals of protection and stewardship, and performance indicators help us measure how well we have done (BGC, 2009, p. 1).
Similarly, BGC's Bulyanhulu Gold Mine "social responsibility report" (2009) stated its commitment to promoting the health and safety of its employees and stipulates that they are committed to eliminating and/or controlling all workplace hazards for the protection of our workers. they believe that everyone is responsible for workplace safety. Health and safety training programs are in place for managers, employees and contractors at Bulyanhulu. These programs provide all employees and contractors with a clear understanding of their rights, responsibilities and accountabilities in creating and maintaining a safe workplace for all.
On the other hand, Anglo Gold Ashanti claims its sensitivity in environmental protection in the following way The company is committed to working in an environmentally responsible way, 5 recognizing that the long-term sustainability of its business is dependent upon good stewardships in both the protection of the environment and the efficient management of the exploration and extraction of mineral resources (AngloGold Ashanti (AGA), 2006, pp. [16][17].
Similarly, AngloGold Ashanti (2008) has reported that: they place people first and correspondingly put the highest priority on safe and healthy practices and systems of work. They are also responsible for seeking out new and innovative ways to ensure that our workplaces are free of occupational injury and illness (p. 14).

Future Prospects of Mining
With the exploration of the Tanzanian mining environment from the Government, Investor and citizen perspectives, it is clear that there are some small grievances that need to be addressed. However the prospect of mining in Tanzania is very promising, this is due to the fact that extraction in some minerals like tin, gas, diamond, tanzanite, coal and gas has still not reached its full potential. Furthermore, the Government initiatives in big infrastructure projects like railways, roads and power stations gives insights of the bright future in the mining sector due to reduced costs in operations in term of transportation and power.
On t4he other hand the mining policies enacted and others which follow will likely try to seal loopholes that can probably be utilized by un-honest government officials and investors. However, further research can be directed in investigating suitable ways of implementing policy changes in the mining sector.
By all means, it is vivid that the Tanzanian mining environment has come a great way since 1998, a lot have been learned and a lot of changes have also been made. Efforts made by the Tanzanian Government interim of formalizing land allocation to citizen will probably minimize land conflicts with investors. Similarly, attractive incentives like mineral development agreements are more transparent now so as to minimize possibilities of corruption. Therefore, this article provides a clear snapshot of the current environment and more can be done on the sector to make it more fruitful.