According to yesterday’s article on the Financial Times, AngloGold is reported to have also reached a contract renegotiation settlement with government of Tanzania . The move follows similar renegotiations with Barrick Gold and Resolute mining companies. Lately, there has been a growing public outcry that the country benefits little from the growing mining sector. The newly elected government promised to roll back some concessions and renegotiate all mining contracts to arrive at a “win win” situation between government and investors.Some of the gains from renegotiation excerise are:

a) Removal of 15% additional capital allowance on unredeemed qualifying capital expenditure. This tax holiday had effectively delayed payment of 30% corporate tax until the mining company had recouped costs of their initial capital. The removal of the clause will move forward the day when companies with start paying the corporate tax. Barrick Gold has agreed to pay $7 million a year for 5 years as advance payment for corporate tax. AngloGold will start paying the corporate tax in year 2011, four years earlier than initially expected.

b) Mining companies will pay yearly $200,000 to the local government near their respective gold mine to be used for community projects.

c) Removal of exemption to Resolute from paying corporate tax on foreign employees. The removal of this clause will force Rosolute to pay $2.2 million yearly in corporate tax.

d) The mining royalty will remain unchanged at 3% despite claims that it is one of the lowest compared to other gold producing African countries.

A Government-formed committee came up with the following recommendations to be incorporated in existing and future mining contracts: 

a)  100% depreciation in capital for the first year reduced to 80%, and then 50% the year after.

b) Withholding tax on technical services increased from 3% to 5%.c) Service fees for administrative expenses increased from 3% to 15%.

d) Contribution to the “Empowerment Fund” for $125,000 a year.

e) Provisions requiring mining companies to buy local products and services.

The following is a Kiswahili excerpt of a speech by Hon. Nazir Karamagi, Minister of Energy and Minerals, delivered in the National Assembly a few months ago in response to a debate over Buzwagi gold mine project. The Minister highlighted the gains from contract renegotiations: Mheshimiwa Rais aliagiza mikataba yote ya madini kufanyiwa mapitio ili kubaini maeneo yanayoweza kurekebishwa kwa faida ya pande zote mbili – faida ya Nchi na faida kwa Mwekezaji (win-win situation). Kamati iliundwa kwa ajili hiyo na baada ya kukamilisha kazi iliyopewa, iliwasilisha mapendekezo yake Serikalini tarehe 14 Septemba, 2006. Baadhi ya mapendekezo ya Kamati hiyo yalitumika katika majadiliano na makampuni ya madini yenye mikataba ya zamani. Mafanikio ya majadiliano hayo niliyataja kwenye hotuba yangu wakati nawasilisha bajeti ya Wizara ya Nishati na Madini ya mwaka 2007/08 kuwa ni:-

· Kuondoa nyongeza ya asilimia 15 kwenye mtaji wa uwekezaji ambao haujarejeshwa (15% additional capital allowance on unredeemed qualifying capital expenditure). Hatua hii itawezesha kampuni hizi kukomboa gharama zao za uwekezaji mapema na hivyo kuweza kulipa kodi ya mapato (corporation tax). Kwa hili, ningependa kumsahihisha Mheshimiwa Kabwe Z. Zitto kwamba kuondolewa kipengele hicho siyo automatic kwamba kampuni inaanza kulipa kodi, isipokuwa inaharakisha muda wa kampuni kulipa kodi.

· Kulipa kiasi cha Dola za Marekani 200,000 kwa mwaka kwa Halmashauri zinazohusika na migodi hiyo. Kampuni ya Barrick Gold Corporation imekubali na imeanza kulipa Dola za Marekani milioni 7 kila mwaka kama malipo ya awali ya kodi ya mapato ya kampuni hadi migodi yake itakapoanza kulipa kodi stahili.

· Kampuni ya Resolute (Tanzania) Limited imeondoa kipengele kwenye mkataba wake kilichokuwa kinairuhusu kutokulipa kodi ya mapato kwa wafanyakazi wake wa kigeni. Kuondolewa kwa kipengele hiki kutailazimu kampuni hii kulipa takriban Dola za Marekani milioni 2.2 kila mwaka kama malipo ya kodi ya mapato. Katika mwaka 2006/07 kampuni hiyo imelipa Dola za Marekani milioni 2.3.

· Kampuni ya AngloGold Ashanti inayomiliki mgodi wa Geita imekubali kulipa kiasi cha Dola za Marekani 200,000 kwa mwaka kwa Halmashauri ya Wilaya ya Geita. Aidha, majadiliano katika maeneo mengine ya mkataba wake, yanaendelea.

Mheshimiwa Spika, hivyo, si kweli kuwa zoezi la kudurusu mikataba ya madini bado linaendelea.

Mheshimiwa Spika, nilisema kuwa mkataba mpya kuhusu Buzwagi hauna upungufu uliokuwemo kwenye mikataba ya zamani – Ikiwa na maana kuwa kwa kutumia ushauri wa Kamati niliyoitaja hapo juu, mkataba wa Buzwagi umeboreshwa kwa maslahi ya Taifa ukilinganisha na mikataba ya zamani.

Mheshimiwa Spika, naomba ninukuu baadhi ya vipengele vilivyoboreshwa:-

· Depreciation ya gharama ya uwekezaji ni asilimia 80 mwaka wa kwanza, na baadaye asilimia 50 miaka inayofuata, katika Mikataba ya awali depreciation allowance ni asilimia 100 mwaka wa kwanza.

· Withholding taxes zimeongezwa kiwango kama ifuatavyo:-

· Technical services kodi ya zuio itakuwa asilimia 5 badala ya asilimia 3 zilizoko kwenye Mikataba (MDAs) ya zamani na hii ni kwa kila malipo yanayozidi asilimia 2 ya gharama za uzalishaji.

· Service fees kwa ajili ya gharama za utawala itakuwa asilimia 15 ikilinganishwa na asilimia 3 za Mikataba (MDAs) ya awali na hii ni kwa gharama ya uzalishaji. (Makofi)

· Kuna masharti ambayo hayakuwemo kuhusu kununua bidhaa na huduma mbalimbali hapa nchini.

· Kuna masharti kuhusu kuchangia mfuko wa uwezeshaji (empowerment fund) ambao haukuwepo katika mikataba ya zamani, kupitia Wizara ya Mipango, Uchumi na Uwezeshaji, USD 125,000 kwa mwaka. (Makofi)

Mheshimiwa Spika, utaona kuwa kuna vipengele vilivyowekwa kwenye mkataba huu ambavyo utekelezaji wake utafanyika baada ya kuleta Bungeni mapendekezo ya kurebisha vifungu husika kwenye sheria inayohusu mfumo wa kodi katika sekta ya Madini.

Mheshimiwa Spika, Mheshimiwa Kabwe Zitto, anasisitiza kuwa zoezi la kudurusu mikataba bado linaendelea. Mtoa hoja labda anachanganya tena zoezi la kudurusu mikataba na zoezi linaloendelea na kudurusu Sheria ya Madini ya Mwaka 1998 na Sheria zinahusu mfumo wa kodi katika sekta ya madini kitu ambacho ni kipana zaidi na kinawahusu wadau wote yaani, wawekezaji wakubwa, wawekezaji wadogo na wote wanaojihusisha na utafiti katika sekta ya madini. Akielewa hili mtoa hoja atabaini kuwa maagizo ya Rais yalitekelezwa kikamilifu na matokeo yake yameishaanza kujitokeza kama faida nilizozieleza hapo juu. (Makofi)

The following are comments by “Mzee Mbegu” posted in YoungAfrican.com (http://www.youngafrican.com/yaforum/topic.asp?TOPIC_ID=13487) in relation to events surrounding the private motion in Parliament submitted by opposition MP, Zitto Kabwe, regarding the signing of Buzwagi gold mine:

“What a public relations debacle for the CCM dominated Bunge! This had the unintended consequence of making Zitto a martyr more than he could have imagined himself to be. CCM’s Bunge seems to have lost the public touch by demonstrating the ugly side of its parliamentary majority. In many ways Zitto case was weak, and I thought Karamagi did a pretty darn good job of demolishing most of his arguments. However, few can question Zitto’s patriotic intentions for bringing the motion. It no longer matters whether the questions he raised were fictitious or circumstantial; what we saw is that finally somebody put himself on the line to demand answers when answers had not been forthcoming.Zitto may have been wrong in questioning Karamagi’s integrity the way that he did (I quote, “…Waziri ameeleza maelezo ambayo siyo sahihi, amedanganya na ameeleza vitu ambavyo kwa kweli sivyo ambavyo vipo katika mkataba ambao ameusaini“) but ganging up on him while questioning his intelligence, his motive, belittling his experience and his research abilities on an issue of substance backfired on CCM MPs.People and their MPs are facing, as we like to call it, ‘information starvation’. Clearly, majority of the public was not fully aware that the mineral contract review process had come to and end, were unaware of the findings, improvements and modifications in the reviewed contracts, and were under the impression that signing of new mineral agreements and contracts was suspended until the review process was complete. I myself remember asking on a different topic in here if indeed a moratorium on new mineral contracts had been ordered by the President…Therefore, the crisis is borne out of information starvation that has created a lot of speculation among the public on what is happening within the mining sector. There is lack of transparency not only in mining contracts but in all other stormy issues, such as corruption allegations at BOT etc. It has made the public agitated and yearning for answers. So its no wonder that folks like Zitto, on behalf of the public, are forced to go out looking for any informaton they could find and use that to raise questions or doubts with hope of prompting satisfactory answers from the Govt. And when neither side wants to reveal its sources and the basis of its arguments, the result is the unecessary brinkmanship on the part of the opposition and showmanship on the part of CCM that we witnessed in the Bunge last week.All of this could have been avoided if information was readily available. Karamagi should have made available to Parliament copy of the Buzwagi contract so that any doubts over its favorability could be put to rest. Bunge needs to have subpoena powers to demand Govt documents such as contracts made available to them. Currently the Constitutional powers it has to demand such documents seems to be flatly ignored by the Govt. The question is why? How does this behaviour conform to good governance principles?And I wish goodluck to any CCM leader who tries to justify the merits of signing a mineral contract at a hotel in London! Thats a political minefield right there. Indeed there may no longer be legal differences or contractual constraints between signing it over there or at Golden Tulip in Oysterbay or Tujivinjari Guest House in Manzese. Signing in London can make sense in today’s fast paced business deal making environment but its just not politically or symbolically tasteful. Its interesting to see how the opposition is gradually mastering the 101 of African politics – empathize with the common folk even when you know you are bullshitting…”