{{Tanzania is worried of a double digit drop in mining sector fearing that it could hit the country’s goal of having the sector contributing at least 10% of GDP by 2025.
New statistics indicate that Investiment in the mining sector has dropped by 20% .
The mining industry in Tanzania contributes 3.7% to the national economy currently.}}
PricewaterhouseCoopers (PwC) says in a new report that big mining companies worldwide have this year decreased their capital expenditure by 21%. This had led to projects being deferred or scaled back.
The top 40 mining companies by market capitalisation last year spent $140 billion on capital projects, but the figure has dropped to $110 billion this year.
Mr David Tarimo, PwC Partner, Tax Services, says, Tanzania was likely to see few or no new projects in 2013, and existing ones could be scaled back or scrapped altogether, adding that this could have a great impact on the economy.
He said resource nationalism continues to pose a big threat to mining as governments seek greater shares of profits.
“Governments are now looking at different strategies to extract a greater share from mining operations. These strategies range from increasing taxes and royalties to restricting foreign ownership,” Mr Tarimo said.
This could increase the cost of minerals which could, in turn, reduce economic growth in the jurisdictions that are driving demand for minerals.
The impact of reduced spending had in recent months been seen through the industry’s value chain after many suppliers announced lower than expected profits, Mr Tarimo said.
The future is also not very rosy for smaller miners, who are struggling to raise capital. Even those who are prepared to pay high interest rates on loans cannot get credit.
“If funding does not improve soon, this will have a dramatic impact on new reserves,” Mr Tarimo said.
The PWC report titled Mine: A Confidence Crisis says being tough with mining companies might look good to stakeholders at home in the short run, but governments should consider a broader view of returns from natural resource development.
{Additional reporting NMG}
Leave a Reply