Making the Most of the Commodities Boom: Tanzania

Vuyo Mjimba

The Country

• Location: Eastern Africa, bordering the Indian Ocean, between Kenya, Zambia and Mozambique

• Land area 945 000km2

• Population, 40.2m

The Economy

• Import commodities consumer goods, machinery and transportation equipment, industrial raw materials, crude oil.

• Imports – partners China 12%, Kenya 8%, South Africa 7.7%, India 6.9%, UAE 5.9% (2007

• Exports – commodities gold, coffee, cashew nuts, manufactures, cotton

• Exports – partners China 10.3%, India 9.7%, Netherlands 6.5%, Germany 6.3%, UAE 4.9% (2007

Source: CIA WORLD FACTS BOOK

Economic IndicatorsGrowth of the Tanzanian economy: 1965-2004(% Real)

• 1965-2004 2.6

• 1965-1966 7.8

• 1967-1985 2.9

• 1986-2004 3.9

• 1986-1993 3.2

• 1994-2005 4.5

(Mbelle, 2005)

Economic History

1967-1985 1986-1995 1996-PRESENT

UJAMAAMKUKUTA/MKUZA

Socialism:EconomicDecline

LiberalizationPartial Reforms

Macroeconomic StabilizationStructuralReforms

LIBERALIZATION&

PARTIALREFORMS

GROSS DOMESTIC PRODUCTIONGDP (Current US$) for Tanzania and SSA 1960-2007

0100200300400500600700800900

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Year

SSA

GDP

in B

illio

n$

024681012141618

Tanz

ania

GDP

in $

GDP (current US$) SSA GDP (current US$) Tanzania

• Source: World Bank, World development Indicators, WDI (December 2008)

GROSS DOMESTIC PRODUCTION

GDP (Current US$) for Tanzania and SSA 1960-2007

0100200300400500600700800900

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Year

SSA

GDP

in B

illio

n$

024681012141618

Tanz

ania

GDP

in $

GDP (current US$) SSA GDP (current US$) Tanzania

• Source: World Bank, World development Indicators, WDI (December 2008)

!! UJAMAAL % PR

M & M

Allocation of GDP by Sector

• Source: IMF,USGS and UNCTAD 2009

Allocation of GDP by Sector, Tanzania (average 1990-2002)

Agri46%

Manu8%

M&Q1%

Others45%

Agri Manu M&Q Others

% Allocation of GDP by Sector SSA (average 2000-2006)

Agriculture19%

Industry48%

Services33%

Agriculture

Industry

Services

Allocation of GDP by Sector

% Allocation of GDP by Sector, Angola (average 2000-2008)

Agri, 8

Manu, 4.7

Mining*, 3.4

Others, 27Oil and Gas, 57

Agri

Manu

Mining*

Others

Oil and Gas

•Source: IMF

Monetary Policy and Financial Sector

• 1980-No capital or Money markets

• 1991 BFIA and LART

• 1992 Private Banks and NBFIs

• Bank of Tanzania Act, 1995

Inflation.

• Source: World Bank, World development Indicators, WDI (December 2008)

Infalation, consumer prices (annual%) for Tanzania, Kenya and South Africa

-10

0

10

20

30

40

50

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Years

Infla

tion

%

Inflation, consumer prices (annual %) Tanzania Inflation, consumer prices (annual %) Kenya

Inflation, consumer prices (annual %) South Africa

International Trade

• Source:

Exports and Imports of goods and services (% of GDP) Tanzania and SSA 1960-2006

0

10

20

30

40

50

60

Years

% o

f G

DP

Exports of goods and services (% of GDP) (NE.EXP.GNFS.ZS) Tanzania

Imports of goods and services (% of GDP) (NE.IMP.GNFS.ZS) Tanzania

Exports of goods and services (% of GDP) (NE.EXP.GNFS.ZS) 12 Sub-Saharan Africa

Imports of goods and services (% of GDP) (NE.IMP.GNFS.ZS) 12 Sub-Saharan Africa

Savings

• Source: World Bank, World development Indicators, WDI (December 2008)

Adjusted savings:gross savings (%of GNI) for Tanzania, Kenya, South Africa and SSA

0

5

10

15

20

25

30

35

40

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Years

% Sa

vings

Adjusted savings: gross savings (% of GNI) Tanzania Adjusted savings: gross savings (% of GNI) Kenya

Adjusted savings: gross savings (% of GNI) South Africa Adjusted savings: gross savings (% of GNI) SSA

Foreign Direct Investment

• Source: World Bank, World development Indicators, WDI (December 2008)

FDI (% of GDP) Tanzania and SSA 1970-2006

0

1

2

3

4

5

6

7

Years

FDI %

of G

DP

Foreign direct investment, net inflows (% of GDP) Tanz Foreign direct investment, net inflows (% of GDP) SSA

Demographics

Demographics and Employment Tanzania 1960-2006

0

10

20

30

40

50

60

70

80

90

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Years

% P

op

ula

tio

n

Employment in agriculture (% of total employment) Employment in industry (% of total employment)

Employment in services (% of total employment) Population ages 0-14 (% of total)

Population ages 15-64 (% of total) Population ages 65 and above (% of total)

•Source: World Bank, World development Indicators, WDI (December 2008

Demographics and Employment in SSA

0

10

20

30

40

50

60

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Years

% P

op

ula

tio

n

Population ages 0-14 (% of total) Population ages 15-64 (% of total) Population ages 65 and above (% of total)

National Income Distribution

• Source: World Bank, World development Indicators, WDI (December 2008) and Earth Trends

Income Distribution % of Population

010203040506070

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Years

% In

com

e

Income share held by highest 10% Kenya Income share held by highest 10% South Africa Income share held by highest 10% Tanzania

Income share held by highest 20% Kenya Income share held by highest 20% South Africa Income share held by highest 20% Tanzania

Income share held by lowest 10% Kenya Income share held by lowest 10% South Africa Income share held by lowest 10% Tanzania

Income share held by lowest 20% Kenya Income share held by lowest 20% South Africa Income share held by lowest 20% Tanzania

Minerals in the Economy

Gold, Copper, Nickel, Diamond* Gemstone, Iron Ore, Cobalt, Coal and Natural Gas.

Calcite, Cement, Phosphate minerals, Silver, Vanadium, Titanium, Platinum Group Metals, Uranium Salt (of all types), Stone, Sand and Gravel.

Major ActorsMINERAL MAJOR ACTOR

GOLD Barrick Gold, Geita Gold

COPPER Barrick Gold, Xstrata plc

Gemstone TanzaniteOne Ltd, Artisinal miners

Diamond De Beers Group

Iron Ore NDC

Nickel Albidon, BHP Billiton

Coal Tanpower Resources

Natural Gas Orca Exploration Group

Gold Production

Country 1998 2002 2005 2006

WORLD 2,500,000 2,530,000 2,470,000 2,460,000

South Africa

465,100 398,523 294,671 272,128

United States

366,000 298,000 256,000 252,000

China 178,000 192,000 225,000 245,000

Ghana 72,541 69,271 66,852 66,205

Mali 20,562 56,043 49,230 55,484

Papua New Guinea

61,641 61,379 68,483 50,000

Tanzania 427 43,320 52,236 46,000

Source:USGS (2005)

Gold and Gemstones Production

• Source: USGS and Chamber of Mines South Africa

Gold Production( in thousand kg) in Tanzania, South Africa and Ghana 1996-2006

0

100

200

300

400

500

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Years

Tho

usan

d kg

Ghana

Tanzania

South Africa

Gold Production

Gold Production Rankings

Country

% Share in World Production

% Share in World Production

% Share in World Production

% Share in World Production

World Ranking

African Ranking

1998 2002 2005 2006

South Africa

19% 16% 12% 11% 1 1

United States

15% 12% 10% 10% 2

China 7% 8% 9% 10% 3

Ghana 3% 3% 3% 3% 10 2

Mali 1% 2% 2% 2% 11 3

PN Guinea 2% 2% 3% 2% 12 4

Tanzania 0% 2% 2% 2% 13 5

Source:USGS (2005)

Gold Reserves

• Source:USGS, 2006

Mine Production (metric tons gold content)

2005 2006 Reserves

Country

South Africa 793 840 6 000

USA 256 260 2 700

Tanzania 52 47 850 (2%)

World 2 470 2 500 42 000

Gemstone Production• In thousand carats

Country 1999 2004 2005 2006

WORLD 61,100 86,200 91,800 91,300

Botswana 17,200 23,300 23,000 24,000

Russia 11,500 21,400 23,400 23,400

Australia 13,400 6,058 8,577 7,310

Angola 3,600 5,490 6,300 7,000

DR Congo 4,120 6,180 6,100 5,600

South Africa

4,010 5,800 6,400 6,240

Tanzania 200 258 185 200

Source:USGS (2005)

Gemstone Production Rankings

Country

% Share in World Production

% Share in World Production

% Share in World Production

% Share in World Production

World Ranking

African Ranking

1998 2002 2005 2006

Botswana 28% 27% 26% 26% 1 1

Russia 19% 25% 25% 26% 2

Australia 22% 7% 9% 8% 3

DR Congo 7% 7% 7% 6% 7 4

Angola 6% 6% 7% 8% 6 3

South Africa

7% 7% 7% 8% 5 2

Tanzania 0.3% 0.3% 0.2% 0.2% 16 11Source:USGS (2005)

Diamond, Gemstone value chain

• Source: Baartjes, Mintek 2007

Exploration

Production

Cut & Polish

Manufacture

Retail

Mine Set up

Diamond, Gemstone value chain

• Baartjes, Mintek 2007

Cut & Polish

Rough Sales

Rough Dealer

Cut &Polish

Polished Sales

Polished Dealing

COPPER

USGS,2007

Mine Production

2005 2006 Reserves

Country

Chile 5 320 5 400 150 000

USA 1 1440 1 220 35 000

Zambia 436 540 19 000

Tanzania 3.5 3.2 160 (0.03%)

World 15 000 15 300 480 000

Mineral Policy of Tanzania 1997• OBJECTIVES

• to stimulate exploration and mining activities

• to regulate and improve artisanal mining;

• to ensure that wealth generated from mining support sustainable economic and social development; to minimise or eliminate adverse social and environmental impact of mining activities

• to promote and facilitate mineral and mineral based products’ marketing arrangements

• to alleviate poverty especially for artisan and small scale miners;

• to promote and develop Tanzania as the gemstone centre of Africa

• Source: Government of Tanzania Mineral Policy

Government Role

• Policy formulation to accommodate the overall and sectoral government policy framework.

• Advising on legislation, regulation and fiscal matters related to the sector.

• Revenue collection through royalties, annual rents, prospecting rights and licenses.

• Monitoring of mining activities.• Collection and maintenance of geo-technical data for

promotional purposes.• Provision of extension services to small scale miners.• Administration and inspection of mining activities, and• Carrying out research on minerals.

Bank credit to private sector (%of GDP)

2000 2001 2002 2003 2004 2005 2006 2007

TANZ 4.1 4.4 5.5 6.7 7.6 8.9 10.8 10.8

KENYA 25.8 23.6 24.2 23.1 25.4 24.5 24.9 25.5

SA69.2 76.3 58.4 63.9 66.1 70.1 77.8 82.8

S

ource:USGS (2005)

Possibilities• Gold• Copper

• Gemstone• Iron ore

Looting and routing

World($138million)

USA($500million)

Tanzania

($12million)

WHY(NOT) GEMSTONESSole source of Tanzanite ?Reaction of current actors

Tanzania mineral policy ? Researcher safety

Parallels with Botswana

THANK YOU