Concept Note - MS-TCDC

The discovery of minerals in Eastern Africa: towards a more transparent &
accountable extractive sector
A seminar from 29th to 31st July 2013 MS TCDC Arusha
Concept Paper
1. Introduction
Extractive industries1 in most developing countries have significantly grown in the last ten (10)
years. In the East African region, Tanzania’s gold export volumes have increased to 40.2 tonnes
from 37.9 tonnes between August 2010 and August 2011.2 In Kenya there is about 37 oil
exploration blocks of which 24 are licensed to 14 international companies. In Rwanda there is
existence of sedimentary basins of petroleum in the western part of the country around Lake
Kivu while in Uganda there are 6 sedimentary basins of petroleum. The discovery of the
minerals has come with a lot of expectations from ordinary citizens on their governments. Many
expect that the new mineral wealth will translate into improved fiscal revenues, increased foreign
exchange earnings and surpluses to finance much needed socio-economic development. Reality
on the ground is far more complex however. To begin with, studies and surveys indicate that
many developing countries have been unable to use effectively the resources from extractive
industries and have ended up with poor economic performance indicators compared to countries
without the mineral wealth. For instance, despite being the country's leading sector in export and
Foreign Direct Investment (FDI) earner, the extractive industry in Tanzania has failed to spur
economic growth and create new job opportunities.3 Although the sector is quite elaborate with
active exploitation of non-renewable natural resources ranging from Tanzanite, gold, diamond,
uranium and iron ore to natural gas and fossil fuels, its contribution of less than 1%4 of the
country's labor force goes to show how its contribution to overall economic development is still
scant. This is due to a number of factors, which can be broadly categorized into economic and
Extractive industries are those related to mineral and hydrocarbon products such as gold, phosphates, diamonds,
oil, gas, etc.
Bank of Tanzania's Monthly Economic Review of September, 2012
Presentation jointly made by Dr Adolf Mkenda, head of department of economics from the University of Dar es
Salaam and Mr. Zitto Kabwe, a shadow minister for Finance during the post 2015 global development agenda
national consultations dialogue organized by the President's Office, Planning Commission in collaboration with the
University of Dar es Salaam Department of Economics
The mining sector contributed 2.8% to Tanzania's GDP and employed about 14,000 people while Mohammed
Enterprises, a local family owned company that deals with manufacturing and distribution of goods and services,
reportedly contributes 3% to GDP and employs about 24,000 people.
governance factors. Under the economic category, these factors include lack of expertise in
technology, inadequate legal and marketing skills necessary for exploitation of natural resources.
The lack of expertise in technology is itself a result of lack of adequate investment in education,
while the unequal relationship between the buyer and seller represents a special challenge since
the buyer ‘knows more than the seller, and the seller needs the buyer just to have the product on
the market (which) gives immense bargaining power to the multinationals and thus makes it very
difficult for governments in developing countries to extract a fair deal.’5
The nature of agreements between the multinationals and governments expose developing
countries to vulnerabilities due to provisions emphasizing fiscal stability. The vulnerability is
also increased due to variation inherent in the prices of natural resources. The extractive sector
also lures governments into ‘living off the capital’ essentially venturing into unsustainable
models of public expenditure that do not add value to the extractive sector and eventually end up
not translating into sustainable development benefits for the population. Additionally, extractive
sectors encourage the concept of spoliation, which in essence entails misuse of resources earned
from extractive industries due to the fact that since they tend to be disconnected from the rest of
the economy, their misuse does not inflict a direct and obvious pain to the population the way a
misuse of tax money does. This is what leads to the negative correlation between natural
resources abundance and political accountability.
Under the governance category on the other hand is the factor of weak and unaccountable states.
Extractive sectors tend to make governments less reliant on taxes for their revenue. This in turn
translates into less reliance on citizens and consequently less inclination in governments towards
accounting to people. In most African countries, the extractive sector is amongst those captured
by the elites in control of the state and their clients, often foreign multinational companies. This
elite capture has in turn rendered it unable to serve the common good, with benefits accruing
from it only confined to elite circles. The results stemming from this capture are exclusionary,
with frameworks regulating the sector discouraging effective citizen and community
participation and leading to governance problems of lack of transparency and accountability in
the generation and utilization of the resources accruing from the sector. As such, the sector’s
growth is attended to by corruption, conflict, environmental degradation, inequality, dislocation
and displacement and general poverty. Studies have shown that it also encourages the growth of
autocratic and authoritarian rather than democratic forms of governance, given that regimes
drawing sustenance from the sector have easier access to assured markets and can therefore
survive most forms of pressure – domestic or international – to behave civilly. Governments
assured of income from extractive sectors may feel less need to invest in a diversified economy
and pour money into oppressive apparatus. Multinationals can easily buy off the elites who
control the state and thus implicitly deny citizens of their democratic rights to enforce oversight
over the government.
Although governments have attempted to cope with the new developments in the extractive
sector through development of appropriate policy and legal frameworks, these have not had the
effect of transforming it into an engine of growth that many had expected. The sectors are as yet
to be properly integrated into the broader economy since they tend to be far removed from
contributing to other sectors within the economy. Additionally, governments need to have
adequate capability to negotiate fair deals from extractive companies. In fact, it has been noted
that companies working in the extractive sector do not pay taxes on what they extract but rather
on their employees’ earnings. From a regional integration perspective, although policy
harmonization across the region has been promoted to create an attractive investment
environment, this could have been at the expense of revenue collection for governments. Most of
the doubts about mining companies' contribution to the economy stem from a perceived lack of
transparency. These could be removed through making all payments and contracts public. All
these make the demand for inclusive, transparent, accountable and people-centred governance of
the extractive sector urgent and imperative.
2. Purpose of the Seminar
It is in view of this that MS TCDC has organized a three-day seminar between the 29th and 31st
of July 2013 at Centre’s campus in Arusha Tanzania. The seminar’s main objective is to bring
together experts and stakeholders in the sector to deliberate on ways of making it address some
of the outstanding issues emerging from its growth. Specifically the Seminar will interrogate
three broad issues as follows:
1. What challenges does the sector faces and how citizens can harness greater benefit.
2. The best practices in equitable management of extractive sector and lessons for the
extractive sector in the East African region?
3. How the sector can promote public participation and economic benefits for all?
Within the broad frame of these issues additional emphasis will also focus on:
The state of governance particularly the legal, policy and institutional frameworks in the
extractive industries in developing countries, with special focus on how they promote
transparency and accountability and citizen involvement in the sector;
The relationship between human rights and the extractive sector in developing countries;
The benefits accruing from the extractive sector and how this is used in developing
Ways of harmonizing the extractive sector in Eastern Africa to enhance regional
integration; and,
Possible spaces for influencing change in the governance of the sector to make it
inclusive and people-centred
3. Seminar Participants and Speakers
The seminar is expected to bring together prominent scholars studying the sector, politicians
representing the interests of communities interested in the extractive sector, community
representatives, and Government officials responsible for policies in the sector, CSO
practitioners working in the sector, donors, students of the sector and other interested
participants. Possible guest speakers shall be:
1. The Minister for Energy and Minerals, Republic of Tanzania (Chief
guest/government perspective)
2. A representative of the communities within areas where mining activities are taking
place (community perspective)
3. Mr. Amani Mustafa, Executive Director, Haki Madini, Dar es Salaam Tanzania (legal
4. Mr. Mumo Kivuitu, Executive Director, Ufadhili Trust, Nairobi Kenya (civil society
5. Mr. Godbar Tumushabe, Executive Director, Uganda (civil society perspective)
6. Dr Adolf Mkenda, Head of Department of Economics, University of Dar es Salaam
(academic perspective)
7. A speaker from one of the mining firms across East Africa – Tullow Oil, Barrick etc
(private sector perspective)
4. Seminar outcomes
As in the tradition of MS TCDC, lessons from the forthcoming Extractive Industry and Governance
Seminar will inform the Centre’s future programming and training courses in Governance and the
Extractive Sector, as well as in Accountability and popular participation. A perspective report will be
produced that will inform future debate and action by both those who participate in the seminar and others
who may not have had the chance to participate. This way, MS TCDC will contribute to a post Seminar
effort to conscientize citizens about fair and justice in the governance of the extractive industries.