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Tanzania's Jengo wants mine listings on African exchanges
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27th July 2010
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JOHANNESBURG (miningweekly.com) – Tanzanian minerals executive Emmanuel Jengo on Tuesday strongly denounced mine nationalisation as an industry destroyer; said that State mining companies had no place in market economies; condemned free-carried government mining venture ownership as "just another tax" – and called on gobal miners in Africa to list on African stock exchanges to facilitate wider public participation in investment opportunities.

Jengo, who is the Tanzania Chamber of Minerals & Energy executive secretary, drew thunderous applause at the Terrappin's African Mining Congress 2010 in Johannesburg, along with comments of "hallelujah" from the congress' chairperson Tom Blom, and "amens" from an audience that included a significant number of foreign visitors from Asia, Africa and Europe.

"Once the mines are nationalised, you can forget about the mining industry," Jengo said, in reference to the nationalisation of the mining industry finding its way onto the agenda of an upcoming congress of South Africa's ruling African National Congress party.

On the efficacy of the creation of State mining companies, he said: "I'm not for State mining companies. I worked in a State mining company myself for a number of years. I know what happens there."

On the incidence of African governments legislating free-carried interest in mining ventures, he added: "I consider it as just another tax, because the government's not putting in a nickel."

He recalled the history of Tanzania's own mining industry being privatised, nationalised and then privatised again, and provided statistics that illustrated the crushing blow that nationalisation gave to the East African country's gold production.

Tanzania's mining industry, he said, had been established through private capital when under the German administration in 1884, and was producing gold at a rate of 3 t a year as Tanganyika under British administration.

However, soon after gaining independence in 1961, there was a mobilisation to nationalise the mines, which culminated in the nationalisation of the industry in 1967.

"By 1970, gold production dropped from 3 t a year to 10 kg – that's what nationalisation can do," Jengo said.

Later, "common sense" prevailed and the government came up in 1998 with a new legislative environment and incentive packages for the mining sector.

"That's when we began to see mining being revived in Tanzania. As I speak now, in the last decade, Tanzania has been able to attract $2,5-billion in investments in the construction of five gold-mining operations, producing 60 t of gold.

"In the case of South Africa, I cannot say much. It's a huge economy with many mines in operation, but my take is once the mines are nationalised, you can forget about the industry."

On South Africa going ahead with a State mining company, he said: "In a free-market economy, why do you want a State mining company? You don't need it. Private capital flows directly to where it's needed. It doesn't have to go through a State mining company, which only takes money out of the government that would have been used for other purposes, like building a school or a dispensary."

Governments, in his view, should desist from making direct investments in mining and focus their spending on much-needed social services.

On the question of legislating free-carried interest in mining ventures, he said: "I consider it as just another tax, because the government is not putting in a nickel. An investor comes in with all the money, technology and management, builds up the mine, and governments say, ‘Well, because I have minerals in the ground, that should constitute my free-carried interest.'

"The minerals have been there since Adam and Eve. Here comes an investor with the money, technology and management, and then they demand a free-carried interest. A 15% commercial interest yes, but not a free-carry," he reiterated.

On wider public participation in mining, Jengo said that governments needed to work towards creating the enabling legislations that would allow international mining companies to list on the stock exchanges of the countries where they were mining, in order to "quench that desire to own a part of the companies that are working in Africa".

Stock exchange involvement would allow Africa to witness the participation of African people in international financing through their respective stock exchanges.

"Both governments and private companies must spearhead the promotion of harmonious coexistence among the stakeholders. We are likely to see a liberalisation of the capital account in most African countries to allow shares to be purchased by local people," he added.

Governments were constantly seeking visible signs of mining-induced revenue streams. While the glib answer was that mining revenue was obtained from taxation – which was why governments constantly sought to raise mining-related taxes – Jengo contended that the revenue spin-off from mining lay in the industry's linkages and in the transport and energy infrastructure that resulted from mining activity.

"There's tons of money from infrastructure and linkages, not taxes," he said.

 

Edited by: Creamer Media Reporter

 

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Tanzania Chamber of Minerals & Energy executive secretary Emmanuel Jengo tells Mining Weekly Online’s Martin Creamer that African governments should be creating enabling legislation for greater stock-exchange participation of the African public.
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