THE OVERSIGHT ROLE OF TANZANIA

MINERALS AUDIT AGENCY (TMAA): A Focus

on the Monitoring of Mining Investment,
Production and Transportation of Minerals

By Prof Handley Mpoki Mafwenga

[Ph.D, MSc, LLM, MBA, PGDTM, ADTM, LLB, AICSA (UK)]
Macro-Fiscal Policy, Advocacy and Tax Expert (Gov-URT)
Ministry of Energy and Minerals [TMAA]
 CONTENTS

ABSTRACT ............................................................................................................................................. 2

1.0 INTRODUCTION ........................................................................................................................ 3

2.0 INVESTMENT ............................................................................................................................. 5

3.0 AUDIT OF MINERAL PRODUCTION AND EXPORTS OR TRANSPORTATION OF

MINERALS ............................................................................................................................................. 7

3.1 Scope of Minerals Audit and Monitoring ............................................................................ 7

3.2 Audit and Monitoring Measures .......................................................................................... 8

4.0 FINANCIAL AUDIT AND TAX REVIEW .............................................................................. 12

5.0 MONITORING ENVIRONMENTAL MANAGEMENT ACTIVITIES .................................. 13

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ABSTRACT

Tanzania has a conducive and prospective geological environment with abundant potential of economic
mineral deposits. From 1979 to 1997, the mineral sector was administered under the Mining Act of 1979
which provided insufficient incentives to attract foreign and local investment due to the political instability
caused by war between Uganda and Tanzania including among others, thereby reducing confidence to
investor to come to invest in Tanzania. In 1997, the Government opened doors to FDI in the mineral sector
through capital, technology and expertise. Hence, there were in place the Financial Laws (Miscellaneous
Amendment) No 27 of 1997 which preserved room for fiscal incentives aimed at attracting both local and
foreign investors, formulation of the Mineral Policy of 1997, enactment of the Mining Act of 1998 which
repealed the Mining Act of 1979 and Tanzania Investment Act, 1997. These altogether played a major role
to attract investment in Tanzania.
However, the contribution of the sector to the economy was inadequately monitored causing for the public
outcry. In that, one of the measures taken by the Government was to strengthen the monitoring and auditing
of minerals production and export of major gold mines. M/S Alex Stewart (Assayers) Government Business
Corporation (ASAGBC) was engaged under Section 16 (5) of the Mining Act, Cap. 123 through the
Contract signed with the BOT to undertake gold auditing of the major gold mines in the country from June,
2003 to August, 2007, this included, building capacity of nationals to take over the minerals auditing
activities in the future. However, operation cost under ASAGBC was 1.9% of the market value of the
audited gold exports, which is equivalent to 64% of royalty paid by the major gold mines. This was high
compared to the services rendered; therefore, on 15th August 2007 the Gold Audit Program (GAP) was
formed under the MEM to take over the activities undertaken by ASAGBC.
In July 2009, the Mineral Policy of 2009 came into being stipulating, among other things, the establishment
of the minerals auditing institution that would take over the functions undertaken by the GAP with increased
scope to cover large, medium and small scale mines for all minerals so as to maximize the benefits from the
mining industry, thereby enhancing socio-economic development. On 2nd November, 2009 the Tanzania
Minerals Audit Agency (TMAA) was established as a semi-autonomous Institution through GN No. 362
under the Executive Agencies Act, Cap. 245 to take over the functions undertaken by the GAP under the
Commissioner for Minerals

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1.0 INTRODUCTION

TMAA was established followed the Mineral Policy, 2009 which was responding to weaknesses
identified in the GAP by a 2008 review. These included limited expertise in personnel, limited
scope of work as it only covered gold, inadequate funding, lack of autonomy and weak degree of
harmonization and coordination with other sectors such as, forest, water, environment and financial
institutions (Muganyizi T.K 2012)

TMAA is mandated under the Provisions of the Mining Act, 2010 to monitor and audit mining
operations of large, medium and small scale mines for all minerals in respect of revenue generated,
capital and operating expenditure; environmental management, environmental budget and
expenditure for progressive rehabilitation and mine closure (TMAA, 2011). The aim of TMAA is
to maximize Government revenue from the mining industry through effective monitoring and
auditing of mining operations and ensuring sound environmental management in mining areas. The
major roles and functions of the Agency are shown in Table1 (TMAA, 2011). The Agency is also
mandated to counteract minerals smuggling and minerals royalty evasion in collaboration with
relevant Government authorities, and to examine and monitor implementation of feasibility reports,
mining programs and plans, annual mining performance reports, and environmental management
plans and reports of mining companies (TMAA, 2012).

The TMAA visits major, medium and small mines every year. It checks records, including main
accounting summary records and underlying documentation and invoicing. After the visit, it drafts
a report containing its conclusions both for royalties and other tax purposes (including income
taxes); identifying total amounts affecting each tax liability. Final audit reports by the TMAA are
copied to the Minister responsible for Energy and Minerals, the Minister of Finance and Economic
Affairs and the Commissioner General of the Tanzania Revenue Authority. The TMAA and TRA
have mutually complementary skills (Muganyizi T.K 2012).

The TMAA and TRA do meet quarterly to discuss mutual concerns and all indicators point to
improved mode of cooperation. Some interventions towards addressing this problem have been
initiated, including the signing of a Memorandum of Understanding between the TRA and TMAA
and exploring the possibility of implementing joint audits (Muganyizi T.K 2012).

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 FIGURE 1: TMAA PERFORMANCE VALUE CHAIN IN THE MINERAL SECTOR

SOURCE: Tanzania Minerals Audit Agency (2013)

TABLE 1: TMAA ROLES AND FUNCTIONS

Roles and Functions

1. To monitor and audit quality and quantity of minerals produced and exported by large, medium
and small scale miners; to determine revenue generated to facilitate collection of payable
royalty;
2. To audit capital investment and operating expenditure of the large and medium scale mines for
the purpose of gathering taxable information and providing the same to the Tanzania Revenue
Authority (TRA) and other relevant authorities;
3. To monitor and audit environmental management, environmental budget and expenditure for
progressive rehabilitation and mine closure;
4. To collect, analyse, interpret and disseminate minerals production and exports data for
projecting Government revenue, planning purposes and decision making in the administration
of the mining industry;
5. To counteract minerals smuggling and minerals royalty evasion in collaboration with relevant
Government authorities;
6. To assess values of minerals produced by large, medium and small scale miners to facilitate
collection of payable royalty;
7. To advise the Government on all matters relating to the administration of the mineral sector
with main focus on monitoring and auditing of mining operations to maximize Government
revenue;
8. To promote and conduct research and development in the mineral sector that will lead to
increased Government revenue; and
9. To examine and monitor implementation of feasibility reports; mining programs and plans;
annual mining performance reports; and environmental management plans and reports of
mining companies.

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2.0 INVESTMENT

The formulation of the Mineral Policy of 1997; enactment of the Mining Act of 1998 which
repealed and replaced the Mining Act of 1979; and establishment of fiscal incentives aimed at
attracting both local and foreign investors resulted into increased large scale exploration and
mining activities, including the opening of 6 large scale gold mines (1998 2005)..

TABLE 2: MAJOR GOLD MINES IN TANZANIA (1998-2009)

Name of Mine Location of the Mine Production Inception
Golden Pride Mine Lusu,Nzega-Tabora February,1999
Buhemba Gold Mine Buhemba Musoma Mara 2002
Geita Gold Mine Geita-Mwanza August 2000
Bulyanhulu Gold Mine Bulyanhulu-Kahama-Shinyanga July,2001
North Mara Gold Mine Nyamongo-Tarime Mara August, 2002
Tulawaka Gold Mine Biharamulo-Kagera June,2005
Buzwagi Gold Mine Buzwagi-Kahama-Shinyanga May,2009

Apart from strengthening monitoring and auditing of minerals produced and exported by major
gold mines which gave room for the establishment of the TMAA, the creation of the TMAA was
also motivated in order to absorb capacity challenges facing the TRA. Indeed, as pointed out by the
International Monetary Fund however, TRA itself lacked capacity to audit sophisticated taxpayers
such as mining companies which further contributed to their minimal contributions to revenue
collection, as tax evasion or under-reporting was quite frequent (Nordic et al, 2009)

Since 2005, there has been continued progress made in the development of the Kabanga Nickel
Project with a significant investment to date of over USD 205 million in drilling and evaluation
studies.

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Figure 2: Historical Foreign Direct Investment Flows into Tanzania - Mining (1997 2009)

SOURCE: Tanzania Investment Center (2010)

Foreign Direct Investment (FDI) had significantly increased in Tanzania ranking as one of the top
non-oil African countries in terms of FDI receipts, which was fuelled by the opening up and
development of the countrys mining sector. During this period a number of large gold mines were
established including Bulyanhulu in Kahama district with a capacity of 450,000 ounces and Geita
Gold with a capacity of 650,000 ounces (UNCTAD, 2008).

Figure 3: FDI Flows in Mining As Compared To the Total FDI Flows

SOURCE: Tanzania Investment Center (2013)

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Figure 4: Historical Gold Export For By Seven Major Gold Scale Mine [1999-2012(Toz Mil)]

SOURCE: Tanzania Minerals Audit Agency (2012)

3.0 AUDIT OF MINERAL PRODUCTION AND EXPORTS OR

TRANSPORTATION OF MINERALS

Scope of Minerals Audit and Monitoring

TMAA ensures that mining entities comply with the quality of disclosure pertaining to the Data
and reporting requirements in line with Section 100 of the Mining Act, 2010 which stipulates
clearly reporting requirements by holders of prospecting and mining licenses and the Second
Schedule of the Act which outlines explicitly the information to be submitted to the licensing
authorities (Intergovernmental Forum (IGF), 2010).

TMAA Auditors are always stationed at the mines for witnessing, recording and reporting on a
daily basis mineral production and exports activities undertaken by the mine. Likewise, TMAA in
collaboration with the Zonal Mines Offices, monitor and audit production and sales of building
materials and industrial minerals in the Eastern, Southern, Lake Victoria, Central, Western zones
by using Sales Vouchers. The audit aims at ensuring that the Government collects maximum
royalty from mining activities.

TMAA also monitors and audits gold producers who use vat leaching technology to recover gold
from tailings in Mwanza and Geita regions. During the year 2013, a total of 20 elution plants were
audited from which 410 kilograms of gold worth TZS 24.7 billion were recovered. Total payable

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royalty amounted to TZS 981 million, up 326.5% as compared to TZS 230 million realized in
2012.

FIGURE 5: Vat LEACHING TECHNOLOGY TO RECOVER GOLD FROM TAILINGS

SOURCE: Tanzania Minerals Audit Agency (2013)

Audit and Monitoring Measures

Gold Monitoring by the TMAA in the large, medium and small-scale mines is performed in three
categories namely; (1) External Monitoring where mines are being heisted by bandits, raids or
intruders; this type of Monitoring are focused to purely outsiders or outsiders that would be in
syndicate with insiders; (2) Internal Monitoring where TMAA collaborates with the companies to
monitor Mine employees that could steal gold or gold bearing materials through organized or
networks involving employees; and (3) Smuggling where TMAA Monitors unfaithful miners and
gold traders who would deprive the Government from its revenue in form of royalty.

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Figure 6: Summary of Key Financial Statistics of Major Gold Mines from 1998 to
2011(Amount in USD Mil)

SOURCE: Tanzania Minerals Audit Agency (2011)

TMAA counteracts minerals smuggling, illegal mining1 and minerals royalty evasion in
collaboration with the Minerals Department, Tanzania Airports Authority, Tanzania Police Force,
Tanzania Revenue Authority and Immigration Department. In July 2012, TMAA established
Minerals Auditing Desks at three major airports in the country in order to inspect and verify
minerals transported to and out of the country via Julius Nyerere International Airport (JNIA),
Kilimanjaro International Airport (KIA) and Mwanza Airport (MA). During year 2013, TMAA
seized minerals worth TZS 2 billion in thirty two (32) different minerals smuggling attempts at
JNIA, KIA and MA. Since July 2012 to December 2013, minerals worth TZS 15.03 billion were
seized in thirty seven (37) different minerals smuggling incidents in the three airports.

Possible mechanisms for gold Monitoring include but not limited to (1) Sanctioning a research on
gold theft; by using metallurgical accounting to calculate gold losses through processing; and (2)
Using statistics on mercury and cyanide usage by the small scale miners to estimated total gold
production and compare the same with reported gold production.

The Measures that are currently in place include Sampling of exported gold bars which are
provided to the TMAA modern laboratory which provides laboratory services on behalf of the
1
What is Illegal Mining?

One of the main criteria used to define illegal mining is the absence of land rights, mining license, exploration or
mineral transportation permit or of any document that could legitimate the on-going operations. Illegal mining can be
operated in the surface or underground.

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Government as well as commercial services for mineral explorers, miners, mineral traders, buyers
and exporters for assaying to determine the quality and quantity of fine gold and silver. TMAA
Laboratory receives all sorts of mineral ores, concentrates, bullions, rock and soil samples from
individuals as well as corporate entities to ascertain mineral contents. Thereafter, the gross value of
exported minerals and payable royalty is computed by applying mineral prices obtained from the
London Metal Exchange (LME). Likewise, Mines have CCTV cameras and security guards around
high risk areas at the processing plant. On Gold Bars (Bullion) TMAA Mineral Auditors observe
all smelting sessions in their respective gold rooms which include Pouring, Marking, Weighing and
Sampling of ingots.
TMAA Laboratory provides the following services:
Sampling Sample preparation (crushing, pulverization, splitting, sieving) Moisture analysis
Drying (oven) Fire assay - Gravimetric finish, AAS Finish. XRF analysis AAS analysis
Precious metals identification - gold, silver, Platinum Group Metals Gold Quick Acid Test
Gold Smelting and Refining Rock and mineral identification Jewelry verification for gold
(karat value) Gemstone identification and valuation - diamonds and coloured stones Supply of
de-ionized water (distilled water)
TMAA employs the following procedures, either separately or in a combined package, to meet
specific requirements:
Drying (Oven) Crushing Splitting Pulverization to 95% passing 106 microns using chrome
steel mill Gold Quick Acid Test Determination of gold and silver contents in bullion, rock and
soil samples using fire assay with Gravimetric Finish or AAS Finish Determination of base
metals in bullion, rock and soil samples Acid Digestion, AAS Finish XRF determination of
metallic elements including Gold, Copper, Iron, Nickel, Zinc, Tin, Chromium, Lead

Strict cardinal rules are adopted by the large scale miners, which lead to termination of employees
who are caught stealing gold. In the same vein, the Mining Act of 2010 prohibits any person other
than a mineral right holder or licensed buyer to possess or dispose any minerals and heavy
sanctions and penalties are imposed to offenders. Moreover, measures like Securing gold products
in Vaults and Safes with maximum protection is essential and they are currently in use; this goes in
tandem with the Control of movement of employees and equipment within high security areas.

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Table 1: Physical audit of Minerals Production and Exports (Quantity and Quality of
Minerals)

Other Monitoring measures include, Random schedules for gold bullion shipments using
helicopters/airplanes from the mines airstrips; Intelligence and information sharing among
stakeholders on gold theft prevention; Establishing proper marking and tracking system of bullion
bars; Reducing communication in high risk areas, such as restriction on use of mobile phones;
Gold finger printing profile for the mine so as to be able to prove ownership of gold and reclaim
such; or to have a clear proof of ownership to present in court cases.

Figure 7: Gold Exports Value by Large Scale Gold Mines (2000 -2013)

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SOURCE: Tanzania Minerals Audit Agency (2013)

4.0 FINANCIAL AUDIT AND TAX REVIEW

TMAA audits capital and operating expenditures and revenue generated by the large and medium
scale mines for the purpose of gathering taxable information and providing the same to TRA and
other relevant authorities.

Auditing financial records of Mining entities enables enhancement of the quality assurance on the
Disclosures that would enhance tax base and tax net. In the Financial audit and Analysis, TMAA
Verifies the authenticity of revenue declared, capital and operating expenditure incurred by the
mining companies in the course of mineral production and other supportive operations. In the same
vein, in the Tax Review and Analysis TMAA Examines tax accounting of mining companies in
order to determine whether accounting methods used were appropriate and in compliance with
statutory provisions.

Moreover, given the significance of mining sector to the national economy, TMAA on the large
and medium scale mining projects performs the Revenue Forecasting which is pertinent aspect of
public finance and economic planning based on available historical, current and future economic
variables. TMAA analyses production plans and financial budgets and perform revenue forecasts.
This enables TMAA to share policy recommendations on industry outlook with other Government
organs.

The Government is currently receiving technical assistance from the Norwegian Government in
revenue forecasting and management of revenue flows from the extractive industries (mining, oil
and gas). Representatives from ten Government institutions (MoF, MEM, TRA, BoT, TPDC, NBS,
NDC, Planning Commission, TEITI and TMAA) have been undergoing a 3-year capacity building
program since January, 2012. In that, TMAA has successfully applied acquired knowledge in
modeling to forecast Government revenue from the eight (8) active large scale mines which are:
Bulyanhulu Gold Mine (BGM), Buzwagi Gold Mine (BZGM), Geita Gold Mine (GGM), Golden
Pride Mine (GPM), North Mara Gold Mine (NMGM), Tulawaka Gold Mine (TGM), TanzaniteOne
Tanzanite Mine (TTM) and Williamson Diamonds Mine (WDM).

The forecasts cover mineral royalty, local government service levy, corporate tax, withholding tax
on dividends and interest, and withholding tax on technical service fees except payroll taxes,
mineral rights rents, import and excise duties, stamp duty, fuel levies and VAT.

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Figure 8: Projected Mine Output, Revenue and Government Take (Undiscounted)from Eight Major Scale
Mines (2014-2023)

SOURCE: Tanzania Minerals Audit Agency (2014)

Audit of financial records and tax review conducted by TMAA in collaboration with TRA has
accelerated payments of corporate tax by Geita Gold Mine Limited and Resolute Tanzania Limited
and alternative minimum tax by Williamson Diamonds Limited. The three companies paid a total
of TZS 24.68 billion as corporate tax in 2013.

5.0 MONITORING ENVIRONMENTAL MANAGEMENT ACTIVITIES

Despite the economic importance of the mining industry, there are serious environmental effects
associated with it. The effects start at the exploration stage, extend through the extraction and
processing of minerals, and continue after the mine has closed. The type and extent of the effects
can vary from one stage to another.

An environmental audit is a systematic, documented, periodic and objective evaluation of how well
environmental regulatory requirements and commitments are met. The challenge to the auditor
normally is selecting and determining the scope of the audit. Both large and small-scale mining
operations have an impact on the environment. Mineral resource activities affect all environmental
media land, air, water, and associated flora and fauna as well as the human environment
individual health and safety, local community lifestyles, cultural survival, social order and
economic well-being.

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TMAA monitors environment management activities in mining areas that would reduce or mitigate
environment risks. In that line, the Agency reviews Environmental Management Plans (EMPs) and
rehabilitation programs and environmental reports, conducts physical inspection at mine sites to
verify implementation of EMPs and Verify the Environmental Budget so as to have a high degree
of confidence regarding adequacy of funds set aside in the budget for environmental Conservation
and Progressive rehabilitation and therefore, ensuring sound environmental management during
life of mines and after closure.

In mining activities, TMAA focuses on the six possible areas in which EMA Act, 2004, Mining
Act, 2010, regulations, Mining Licenses and Agreements with the mining companies, as well as
proactive policy interventions, can be designed. The six areas are land and water use; waste
management; chemicals and pollutants; tailings disposal; human health risks; and potential
environmental risks and the plans to mitigate these risks.

TMAA conducts the environmental audit in line with the appropriate environmental standards for
surface and ground water management which are stipulated under Part III and Part VII of the
Environmental Management (Water Quality Standard) Regulations, 2007 provide water quality
standards and penalties respectively. In that, TMAA requires mining entities to submit
Environmental Impacts Statements (EIS) and Environmental Management Plans (EMP)
(Intergovernmental Forum (IGF), 2010). TMAA also ensures that mining entities conduct
environmental monitoring on biodiversity and publish reports that are readily accessible to the
public. This is because, Section 66 (1) of the Environmental Management Act, 2004 requires the
Minister responsible for Environment to ensure that conservation of biological diversity is attained
by project proponents (Intergovernmental Forum (IGF), 2010).

Likewise, TMAA ensure that (1) closure plans are prepared by mining entities to high standard and
are updated regularly in line with the Section 47(d) of the Mining Act, 2010 which require holders
of special mining license to prepare and update mine closure plans in line with Regulation 206(4)
of the Mining (Safety, Occupational Health and Environment Protection) which require mining
entities to review and update their mine closure plans; and Regulation 206(1) of the Mining
(Safety, Occupational Health and Environment Protection) which require holders of special mining
and mining licenses to prepare and submit mine closure plans; (2) have the institutional capacity to
monitor and enforce mine closure provisions and that companies commit provision of adequate
financial assurance prior to commencement of mine operations in line with the Regulation 207 of
the Mining (Safety, Occupational Health and Environment Protection) Regulations, 2010 which

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require mining entities to post environmental rehabilitation bond during mining
phase(Intergovernmental Forum (IGF), 2010).

REFERENCES
Intergovernmental Forum (IGF) on Mining, Minerals, Metals and Sustainable Development,
(2010); Strategies and Implementation Status Made by Tanzania as Per
Mining Policy Framework

INTOSAI Working Group on Environmental Auditing (WGEA) (2010); Auditing Mining:

Guidance for Supreme Audit Institutions

Muganyizi T. K. (2012); Mining Sector Taxation in Tanzania Institute of Development Studies

(ICTD) Research Report 1: Tanzania Revenue Authority

United Nations Conference on Trade and Development (UNCTAD), (2008); Transnational

Corporations, and the Infrastructure Challenge World Investment
Report

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