SPEECH BY H.E. JAKAYA MRISHO KIKWETE, PRESIDENT OF THE UNITED REPUBLIC OF TANZANIA, AT THE INVESTING IN AFRICAN MINING INDABA XII, CAPE TOWN – SOUTH AFRICA

February 6, 2007

Honourable Chairperson;

Honourable Ministers and Representatives of Government

Chief Executive Officers of International Mining Companies and Related Services Representatives of Financing Institutions;

Distinguished Participants;

Ladies and Gentlemen;

I feel greatly honoured to be given this rare privileged to participate in this year’s Mining Indaba being held at this beautiful and historic city of Cape Town, in this great friendly nation of South Africa.

My delegation and I thank the host for receiving us so

warmly. I applaud the organizers for selecting meritorious themes and discussion topics for this year’s conference.

Ladies and Gentlemen;

I have been made to understand that I may be the first Head of State to be afforded the opportunity to speak at this most prestigious annual forum of the mining fraternity in Africa. I am touched by this gesture of friendship. It is indeed delightful to see so many old acquaintances from my days as Minister in charge of the mining and energy sectors. The six years I spent in the Ministry (1988-1990 as Deputy Minister and 1990-1994 as full Minister) was a very rewarding experience indeed. It was the time when Tanzania took to the path of reform.

It was during this time when we started the process of opening up the sector to the private sector for both trading in minerals and for exploration and exploitation. I remember my marketing journeys to New York, Denver, Toronto, Vancouver, Calgary and London. I went to tell the world about what Tanzania has to offer as an emerging market and invite them to come and invest in Tanzania.

Today, when I look back at what happened then and what is on the ground in Tanzania I feel so warm in my heart that my sweat and toil has been rewarded. Indeed, rewarded so handsomely.

Ladies and Gentlemen;

My message to the world then was about partnership, progress and prosperity. I wanted prospective investors to come to Tanzania, enter into partnership with us in the exploration and exploitation of the mineral wealth that God so kindly bequeathed to us, for us all. This will engender progress to the Tanzanian economy which in turn will translate into prosperity to the Tanzanian people whom God endowed the minerals unto them.

What a coincidence, that today, at the XII Mining Indaba, I am asked to do exactly what I did almost two decades ago. I have been asked to speak on partnership, progress, and prosperity with regard to African Mining.

My dear friend;

I hope you will agree with me that I am not that much of an expert to speak to the best of your satisfaction about mining in the whole of the African continent. I feel, and indeed I am, most qualified to speak about Tanzania. In this regard, I seek your understanding and indulgence when I appear to be talking about Tanzania. I believe Tanzania is a representative case of the prospects and opportunities in mining that Africa offers to itself and to rest of the world.

Resource Endowment

Chairperson, Ladies and Gentlemen;

Africa is richly endowed with minerals and other natural resources. The continent ranks second in quantity of world reserves of bauxite, cobalt, diamonds, gold, phosphate rock, platinum-group metals (PGM), vermiculite, and zirconium. For instance, Africa produces about 49 percent by volume of the world’s total diamond production, about 30 percent by volume of the world’s phosphate rock production, about 19 percent by volume of world’s uranium production and about 12 percent by volume of crude oil.

I will not be bragging in saying that my country, Tanzania, contributes a sizeable share of Africa’s mineral wealth. Tanzania is richly endowed with minerals of all kinds. Almost every mineral known to exist in the earth’s crust can be found in Tanzania, and some exist in large quantities. Tanzania offers a stable political environment with sound legal and fiscal policies.

In terms of potential, the following is what we have to offer:

1. Excess of 45 million ounces of gold, 1.5 million tonnes of nickel and 50 million carats of tanzanite.

2. An extensive Proterozoic terrain containing lode and near-surface gold deposit types.

3. Potential for epithermal gold deposits in the faulted younger rocks on the coastal plain.

4. A world-class diamondiferous kimberlite at Maude and more than 200 other kimberlite pipes many of which are yet to be thoroughly evaluated.

5. Scores of occurrences of high-value coloured gemstones, such as emerald, ruby, tsavorite, sapphire, tanzanite and alexandrite.

6. A wealth of other opportunities in minerals, particularly industrial minerals including coal, iron, tin, graphite, evaporites, kaolin, limestones, dimension stones, phosphates and gypsum, and,

7. More than a dozen carbonatites, only a few of which have been thoroughly explored.

8. Hydrocarbons do exist. So far, we have found sizeable quantities of gas in three places. The third field was discovered about four weeks ago. There is a lot of exploration for oil and gas that is ongoing onshore, offshore and in the shallow waters and in the deep sea.

Ladies and Gentlem;

With such vast resources, Tanzania can become one of Africa’s mining powerhouses. What was lacking then was serious investments in the sector to do exploration and exploitation. Related to this as well, was the lack of policy framework to allow and attract the private sector to come and invest in Tanzania’s mining sector. To overcome these deficits has been part of the reform agenda initiated in the 1990s. A new policy framework was instituted providing for private sector participation and a package of incentives was provided. At the same time, a serious marketing drive was undertaken. As alluded to earlier, many promotional meetings were undertaken all over the world particularly in North America, Europe and Australia. A number of publications and documentations on Tanzania’s mining potential were published and disseminated. At home, the government and the geological surveyors continued with scientific work and research to discover new information and update old data. All these efforts paid dividends, and surprisingly quickly. To date, the mining industry is one the fastest growing sectors in Tanzania. It is one of the leading sectors in terms of attracting foreign direct investments. Statistics show that mining has attracted over USD 2.5 billion of Foreign Direct Investment since 1998. Tanzania has been receiving the largest proportion of FDI to Africa in the mining sector. Because of this, Tanzania has risen from an insignificant gold producer in early 1990s to become the third largest producer of gold in Africa after South Africa and Ghana. We are currently producing over 50 tones of gold per annum. There are ample opportunities for significant increase. A lot of exploration is going on, new finds are being made everyday, new licences are being issued for gold and other minerals and new mines are being opened.

But the resources we have are certainly vast and the

flow of investment capital is still wanting. I am here to invite those of you who are not yet in Tanzania to come and join hands with us and your other colleagues in the exploration and exploitation of our vast mineral resources.

The benefits brought to the country by mining within this short period of time are phenomenal. A lot of new jobs have been created and are being created by the investment in the sector. When one combines investment in the large and medium scale mining with artisanal mining, the sector is the second largest employer in Tanzania after agriculture. Mining has become an important and dependable sector in the economy. Its share of the GDP at constant 1992 prices has risen from to 2.3 percent to 3.5 percent in 2005. At the moment, it contributes 42 percent to the total value of exports but this is set to increase in the coming years.

Fiscal Incentives

I would like to assure you that you will find in Tanzania a very attractive investment destination. This is,

indeed, the case today in many African countries. You are assured of a rewarding association and partnership with us. We are keen to maintain and improve on investors’ confidence in Tanzania. We listen and care about your views and concerns. We want to ensure a steady flow of investment capital into the country. It is good and beneficial to all of us.

Tanzania offers internationally competitive fiscal incentives. We guarantee investors’ security of tenure and ownership as well as repatriation of dividends and profits. There is transparency in the issuance and administration of mineral rights.

Tax incentives offered in Tanzania fiscal regimes for mining include 100 percent depreciation allowance in the year of expenditure, import and excise duty for mining equipment is at 0% during the period of exploration and development up to the first anniversary of commercial operation. Thereafter, a cap limit of 5% applies. There is a 30% corporate tax after capital allowances and adjustment for loses carried forward, royalty payment of 5 percent on diamonds and rough gemstone, 0% on cut gemstone and 3% for gold and other minerals.

Withholding tax is 10 percent on dividends, 3 percent on technical services and 15 percent if management fees exceed 2% of operating costs. Value added tax does not apply to mining companies, which produce minerals for exports.

Ladies and Gentlemen;

I understand for a taxpayer no tax regime is too generous. But, comparatively, you will agree with me that we offer one of the most competitive fiscal incentives in the world. We do understand as well that, to become competitive in attracting capital, fiscal incentives need to be coupled with some other important initiatives to enhance the attractiveness of the investment climate.

Investment Climate

We have improved the investment climate remarkably

since the introduction of economic reforms in the mid 1980’s. These reforms have transformed the national economic philosophy from state ownership of the commanding heights of the economy to a market-based economy with the private sector becoming the anchor.

Since then private sector has been allowed to operate more freely and grow and measures to create a business friendly environment have been taken. There has also been a process of divestiture of state enterprises under the guiding principle of “let government govern and private sector do business”. Consequently, and continuously, we have been taking measures to improve on the business environment to make it easy for the private sector to prosper. Indeed, we have been making successes which are been recognised.

Last year, for example, the World Bank Report on Doing Business categorised Tanzania among the top ten best reforming countries in the world. The cost of doing business is being reduced steadily. Two years ago the Financial

Times considered Tanzania as a country of the future. I recall over a decade ago the Mining Journal characterised Tanzania as the prospective emerging market in mining in Africa.

As a move towards consolidating and further opening up the economy, in June 1990, the Tanzania Parliament enacted the National Investment (Promotion and Protection) Act of 1990. This legislation created the friendly environment for investors and established the Tanzania Investment Centre (TIC), the provider, overseer, supervisor and coordinator of investment activities in the country. So far things are progressing well.

With regard to Mining, the Tanzanian Parliament also enacted the Mining Act of 1998 This is he law that has made the difference. It has enhanced Tanzania’s competitiveness and paved the way for the mining boom. The Act also made some specific fiscal adjustments that now make Tanzania a globally competitive country in mining investment.

Subsequent legislations have established mining as a priority area for investment.

Chairperson,

The thrust of our country’s new economic orientation emphasizes the centrality of the private sector in running the economy. To underscore the commitment to protection and guarantee private investment against nationalization and expropriation, Tanzania is a member of World Bank’s Multilateral Investment Guarantee Agency (MIGA) as well as the International Centre for Settlements of Investment Disputes (ICSID).

At the same time, Tanzania has signed bilateral agreements with many countries on promotion and protection of investments as well as avoidance of double taxation.

I say all this to underscore the fact that we know our obligation to our partners and we are committed to play our part. Tanzania is open for business. I invite all of you to

come, see for yourself and join hands with us. We are relatively new in this business, so not many people are there at the moment. But the traffic is very high. And we are working hard on improving the climate to make Tanzania a great investment destination of choice.

Review of the Mining Development Agreements

Chairperson, Ladies and Gentlemen;

Some months back, the government began conducting dialogue with mining companies in Tanzania. The essence of the dialogue has been to look at some aspects of the mining development agreements with the view of making some adjustments that would make our partnership mutually beneficial. The main thrust of the dialogue has been about how to ensure that the exploitation of mineral resources benefit equitably the investor, the government and the local communities.

I am glad that we have successfully concluded with Barrick Gold Tanzania and Resolute Mining Tanzania

Limited. Everybody is happy now. We look forward to reaching out to other companies.

Friends, Ladies and Gentlemen;

Sourcing Locally

Beside tax revenue that accrues to government, the other important factor is the forward and backward linkages that mining activities would create to the national and local economies. It is of utmost importance that mining is seen to be creating that. People will celebrate and will feel the benefits of mining in their nation and their communities.

One important factor in this regard is for the mining companies to source services locally. As much as possible, source your labour locally, source your food locally and source other services locally. Where this is done, you can imagine the impact it has to making the living condition of the people in the country and the communities who live near or around the mines. Take interest in the communities around you. Live well with them in and particular ensure that you deliver on corporate social responsibility.

Doing all this all endears you to the people, reduces resentments and curtails negative publicity. You deny your enemies ammunition to attack you.

Value Addition

Ladies and Gentlemen:

There are two other issues that I would like you to give thought as you continue to partner with us in Africa in mining. The first one is with regard to value addition. It will be very beneficial if we tried as much as possible to increase the value addition processes for minerals coming out of Africa. This will increase Africa’s share of the proceeds from their natural resources. For sure, this will go a long way towards alleviation of poverty and improving the living condition of the African peoples.

Artisanal Miners ,

The other thing is related to artisanal mining. Artisanal mining is a reality that we all have to face. Most of these are

young, self-employed people trying to survive. For example, it is worth noting that Tanzania has over one million artisanal and small-scale miners, most of them are involved in gold and gemstone mining. They lack in skills and lucrative market where they can get a fair return for their sweat and toil. You can help. We together can do something to help them.

We in Tanzania would gratefully welcome technical and financial assistance from large scale mining companies with the aim of transforming this sub-sector into a modern undertaking. You can provide small-scale miners with technical skills, technology, capital and a reliable market for their stones.

At this juncture, I pay tribute to DeBeers for a very innovative initiative in Mwadui area that does just that. The lives of artisanal miners there is bound to change for the better. The relations between the ming and artisanal miners will improve and constant intrusions, complaints and counter-complaints are bound to seize. Indeed, this is an example of partnership we applaud and encourage. De Beers has shown the way. I believe others can follow.

Complaints by the mining community

Friends;

It will be remiss of me to end my remarks without acknowledging the challenges facing mining companies in our continent.

I want to assure you that we, in Tanzania, understand the concerns of mining companies and we are doing all within our means to address them. We are happy that mining companies in Tanzania appreciate that the problem of capacity and expertise in our public service is impeding efficiency and effectiveness in administrative matters necessary for smooth operation of their business. This problem is cross-cutting, frustrating even to some of us in the government who are keen on faster delivery. The important fact is that we are doing something about.

The question of poor infrastructure has been with us for ages. I understand that this increases production cost. Some people are keen on convincing others that we have neglected this major responsibility because mining companies have arrived. This is not true!

My government has embarked on a major infrastructure improvement programme to improve roads, railways and telecommunications systems in the country. Though the process is slow we believe that taking incremental steps will enhance the economic viability of some of the industrial mineral deposits. Mining or no mining, it is also in our best interest to network our country with roads and railways and open up it up for commerce.

Conclusion

Chairperson, Friends, Ladies and Gentlemen,

I thank you for your kind attention!