Tanzania’s bold shift from raw mineral exporting to domestic mineral refining
Tanzania’s bold shift from raw mineral exporting to domestic mineral refining
The mining sector remains to be among the major contributors to the Gross Domestic Product (GDP) in Tanzania. According to multiple news sources, in year 2024 the mining sector contributed 10.1% to the national GDP surpassing the Government target of 10% for the fiscal year 2025/26. This level of contribution to the economy manifests that the mining sector in Tanzania is among the key drivers to the economic transformation, growth and development.
Over a period of time, we have seen Tanzania actively shift focus from relying heavily on raw mineral exports to refining them locally in order to drive in-country mineral beneficiation and value addition to strategically maximize economic benefits in Tanzania. Mineral beneficiation is a process of separating economically essential minerals from their ore by removing unwanted materials. Mineral value addition processes the beneficiated minerals into valuable intermediate or finished products. The extracted minerals are processed and refined domestically.
Mineral beneficiation and refining activities are generally administered by the prevalent legislations for mineral beneficiation and value addition within Tanzania such as the Mining Act, the Mining (Value Addition) Regulations, 2020 and the Mining (Mineral Beneficiations) Regulations, 2018 with its subsequent amendments.
To substantiate the matter under discussion, there are various mineral refinery plants in Tanzania such as Mwanza Precious Metals Refinery Company Limited located in Mwanza for smelting and refining gold and silver, Geita Gold Refinery Limited located in Geita for refining gold and silver and Eyes of Africa Limited located in Dodoma for refining gold. There are plans to build Tembo Nickel Refinery Plant in Kahama, Shinyanga region for processing high-grade nickel, copper, and cobalt sulfide ore to produce refined metals for battery and other industrial applications. This trend may see more of these refineries construction in future depending on needs.
In an effort to transform and develop mineral refinery business in Tanzania, the Government has designated Special Economic Zones (SEZ) that offer economic benefits including tax incentives for attracting investment in refinery projects in Tanzania. For example, the Buzwagi Mining Area within the Kahama District in Shinyanga region has been gazetted as a SEZ which includes the location for the Kahama refinery, which is part of Kabanga Nickel project.
Another supporting measure for mineral value addition by the Government of Tanzania is the introduced Domestic Gold Purchase Programme by the Bank of Tanzania (BOT). On 8 October 2024 BOT issued a public notice for the Domestic Gold Purchase Programme (BOT Programme) with reduced royalties, zero inspection fees and zero rated sales for gold sellers i.e mineral right holders, licensed traders or refinery to sell gold to BOT at competitive world market prices. The BOT Programme requires the gold sellers to deliver the gold to designated refineries which are Geita Gold Refinery Ltd, Mwanza Precious Metals Refinery Co. Ltd and Eyes of Africa Ltd, for refining where BOT covers all refining costs. The BOT Programme without any doubts stimulates mineral refining activities in Tanzania.
Furthermore, the Government of Tanzania has continued to show commitment to support mineral value addition business in Tanzania by introducing amendments in legislations. The Finance Act, 2014 which was effective 1 July 2024 amended the Value Added Tax Act, Cap 148 [RE 2019] (VAT Act) by introducing Sections 55C and 55D of the VAT Act which zero rate VAT on supply of gold to BOT and licensed refinery in Tanzania Mainland.
Apart from the aforesaid commitments demonstrated by the Government of Tanzania, there are other supporting initiatives introduced by foreign governments in an effort to support mineral value addition projects in Tanzania. For example, the GBP 2.1 Manufacturing Africa Initiative is a programme funded by the United Kingdom (UK) to support manufacturing sector including mining sector so as to boost industrialization across 6 African countries including Tanzania. In support of Tanzania’s efforts in mineral value addition, Manufacturing Africa project will establish industries for processing, refining and manufacturing mineral-based products. It is evident that the UK Manufacturing Africa Initiative aligns with Tanzania’s broader industrialization agenda.
There are many economic benefits that come along with mineral beneficiation and value addition in Tanzania as outlined below (the listed benefits are not exhaustive):
Over a period of time, we have seen Tanzania actively shift focus from relying heavily on raw mineral exports to refining them locally in order to drive in-country mineral beneficiation and value addition to strategically maximize economic benefits in Tanzania. Mineral beneficiation is a process of separating economically essential minerals from their ore by removing unwanted materials. Mineral value addition processes the beneficiated minerals into valuable intermediate or finished products. The extracted minerals are processed and refined domestically.
Mineral beneficiation and refining activities are generally administered by the prevalent legislations for mineral beneficiation and value addition within Tanzania such as the Mining Act, the Mining (Value Addition) Regulations, 2020 and the Mining (Mineral Beneficiations) Regulations, 2018 with its subsequent amendments.
To substantiate the matter under discussion, there are various mineral refinery plants in Tanzania such as Mwanza Precious Metals Refinery Company Limited located in Mwanza for smelting and refining gold and silver, Geita Gold Refinery Limited located in Geita for refining gold and silver and Eyes of Africa Limited located in Dodoma for refining gold. There are plans to build Tembo Nickel Refinery Plant in Kahama, Shinyanga region for processing high-grade nickel, copper, and cobalt sulfide ore to produce refined metals for battery and other industrial applications. This trend may see more of these refineries construction in future depending on needs.
In an effort to transform and develop mineral refinery business in Tanzania, the Government has designated Special Economic Zones (SEZ) that offer economic benefits including tax incentives for attracting investment in refinery projects in Tanzania. For example, the Buzwagi Mining Area within the Kahama District in Shinyanga region has been gazetted as a SEZ which includes the location for the Kahama refinery, which is part of Kabanga Nickel project.
Another supporting measure for mineral value addition by the Government of Tanzania is the introduced Domestic Gold Purchase Programme by the Bank of Tanzania (BOT). On 8 October 2024 BOT issued a public notice for the Domestic Gold Purchase Programme (BOT Programme) with reduced royalties, zero inspection fees and zero rated sales for gold sellers i.e mineral right holders, licensed traders or refinery to sell gold to BOT at competitive world market prices. The BOT Programme requires the gold sellers to deliver the gold to designated refineries which are Geita Gold Refinery Ltd, Mwanza Precious Metals Refinery Co. Ltd and Eyes of Africa Ltd, for refining where BOT covers all refining costs. The BOT Programme without any doubts stimulates mineral refining activities in Tanzania.
Furthermore, the Government of Tanzania has continued to show commitment to support mineral value addition business in Tanzania by introducing amendments in legislations. The Finance Act, 2014 which was effective 1 July 2024 amended the Value Added Tax Act, Cap 148 [RE 2019] (VAT Act) by introducing Sections 55C and 55D of the VAT Act which zero rate VAT on supply of gold to BOT and licensed refinery in Tanzania Mainland.
Apart from the aforesaid commitments demonstrated by the Government of Tanzania, there are other supporting initiatives introduced by foreign governments in an effort to support mineral value addition projects in Tanzania. For example, the GBP 2.1 Manufacturing Africa Initiative is a programme funded by the United Kingdom (UK) to support manufacturing sector including mining sector so as to boost industrialization across 6 African countries including Tanzania. In support of Tanzania’s efforts in mineral value addition, Manufacturing Africa project will establish industries for processing, refining and manufacturing mineral-based products. It is evident that the UK Manufacturing Africa Initiative aligns with Tanzania’s broader industrialization agenda.
There are many economic benefits that come along with mineral beneficiation and value addition in Tanzania as outlined below (the listed benefits are not exhaustive):
- Increase mineral market value to international standards enhancing mineral competitiveness in the global market through increased country’s exports of value-added products.
- Improve balance of trade due to increase in export of high value finished mineral products and reduce reliance on foreign/imported finished mineral products.
- Reduce raw mineral exports and increase government revenue through increased exports revenue, taxes, inspection fees, local government levies and royalties due to high value of mineral products.
- Technology transfer and capacity building/skills development due to adopting advanced technologies for processing minerals and manufacturing semi-finished and finished mineral products which also requires training individuals.
- Enhancement of economy diversification by reducing dependence on one sector and build a more inclusive and resilient economy in Tanzania i.e mine to metals supply chain.
- Reduction of mineral smuggling due to more valuable minerals which increase profitability hence, incentivize miners and mineral traders to participate legally in mining and trade activities in Tanzania.
- Create employment opportunities to individuals which improve their standard of living hence, reducing poverty in Tanzania.
- Boost business and trade activities domestically as miners and mineral traders sell their commodities to refineries as well as gold to BOT. In addition, other stakeholders and suppliers such as banks, insurance companies, logistics companies, other goods and services providers generate business from the local mineral beneficiation and value addition activities in Tanzania.
- Enhance infrastructural and social services development due to established mineral processing, refining and manufacturing industries in Tanzania.
- Attract domestic and foreign direct investments in mineral processing, refining and manufacturing industrial sectors in Tanzania, which boost economic growth and development.
- Position Tanzania as a hub for mineral processing, refining and mineral products manufacturing which strengthen mining sector and drive sectoral economic transformation in Tanzania.
We are optimistic that the prevalent mineral policies, tax legislations and business environment will continue to be accommodative in enhancing sustainable mineral beneficiation and value addition activities so as to drive sustainable and inclusive sectoral economic growth and development in Tanzania.
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Aneth Mushokolwa is a Senior Tax Manager at BDO EAST AFRICA. The views expressed here are the author’s and do not necessarily represent the views and opinions of BDO East Africa. You can reach Aneth through: aneth.mushokolwa@bdo-ea.co.tz
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Aneth Mushokolwa is a Senior Tax Manager at BDO EAST AFRICA. The views expressed here are the author’s and do not necessarily represent the views and opinions of BDO East Africa. You can reach Aneth through: aneth.mushokolwa@bdo-ea.co.tz