The ‘Dutch Disease’ ahead of Tanzania’s Economy.

By Gilay Shamika

Days are coming when all mines will be closed and gases companies will be still in immaturity stage. The ripple effects should not be undermined but forecasting and strategizing the economic counterbalance. Which sector(s) will bridge the gap of revenues used to be accrued from mining industry?

It is true that tourism and services sectors are leading ahead of mining industry. But does the effect of missing revenues and other multiplier economic effect from mining industry be fulfilled by these sectors satisfactorily?

Re-investment of revenues derived from mining industry into other traditional economic sector, will make those sectors robust and bridge the gap of mining industry during closure time.

When analyzing the life spans of most of mining companies operating in the country, it is far less than 20 years while the returns from gas companies are

expected after 25 to 30 years to come. That means there is a gap of not less than 5 to 10 years. It is time to plan the alternatives to curb that scenario before it is about to occur.

In all resource-rich countries, either resource curse or Dutch diseases, one of this do inflict the country’s economy at some time. In other countries, both affect the country’s economy.

Resource curse signifies the predicaments facing the community around which the resources are available. Instead of the community to benefit from those recourses, ironically they face predicaments and become

marginalized. In Tanzania to some extent the Government has tried to insist CSR in all communities around the mining operations and get rid of real resource curse. These Government efforts have been recognised into different international reports and recommended other countries to emulate Tanzania’s minerals policy for small scale miners. However, the implementation of the policies takes a lot of time in Tanzania.

Dutch disease is defined as too many expectations of the Government and citizens to the extent that all eyes are on resources sector and abandon the attention on other sectors. In return the Government and the citizens achieve nothing from mining sector because the revenues were used for running the Government and not investing into other economic sectors. Since all efforts were in place for mining industry, other traditional sectors were left unattended. After closure of mining industry, the nation ultimately became like having economic disease, everything paralyzed.

Dutch disease is defined as too many expectations of the Government and citizens to the extent that all eyes are on resources sector and abandon the attention on other sectors. In return the Government and the citizens achieve nothing from mining sector because the revenues used for running the Government and not invested into other economic sectors. Since all efforts were in place for mining industry, other traditional sectors left unattended. After closure of mining industry, the nation ultimately became like having economic disease, everything paralyzed.

That is Dutch disease which occurred in Dutch land when the coal and other mines were at a peak in production and there was neglection of other economic activities since the government was collecting the revenues satisfactorily. After closure, they had to start from zero to revive other sectors.

Tanzania should not be trapped into the same situation. Agriculture, central railway, all ports at Dar es Salaam, Lake Tanganyika, Tanga, Mtwara, Mwanza and Nyasa need to be modernized for fostering services sectors in the country.

Telecommunication sector has proved to be among the potential sources of revenues. More strategies and forecast by TCRA will yield more and more economic benefits when comprehensively integrated with online banking services and e-commerce.

Nigeria has surpassed South Africa economically after changing its vision on its revenues from oils. The Government introduced the sovereignty wealth fund where all revenues from oils are deposited and used to strengthen other sectors. Apparently all sectors have been given equal attention than before where extractive industry was active while there was relaxation in dealing with other sectors. We need to follow this example and better know that;

Extractive Industry is not sustainable by itself, therefore cannot bring sustainable development by itself as well, unless the revenues derived from it are re-invested (integrated) into other traditional economic sector to make them robust. That’s the optimal contribution the extractive industry can do.

Extractive Industry is a ‘temporary assembly’ where all careers convene to work together to produce single line product at a specific solid years. This temporary

assembly needs to be properly organised so that everybody becomes beneficiary before the assembly disperses.

The Government has been working around the clock to integrate mining industry with other traditional sectors and currently has introduced fund to medium and small scale miners to improve their operation and get ready to expand their activities in relation to other economic activities.

The auditing, monitoring and consultations which have been conducted by Tanzania Minerals Audit Agency (TMAA) into large, medium and small scale miners have helped the Government to earn more from mining industry in a way to fulfill the national vision of 2025 of mining industry to contribute 10% in national GDP.

The Bank of Tanzania, Tanzania Revenues Authority and National Bureau of Statistics currently have earmarking the public about the effect of resolute mining company closure and the decrease of Tulawaka goldmine production (stamigold) to the exports of gold which compound the strength of our currency. This sends the signal of Dutch disease gradual approach.

Gilay Shamika is a Senior Minerals Engineer & GemologistTanzania Minerals Audit Agency (TMAA) and Chairman of the Board of Directors for Tanzania Mines, Gas and Oil Company Ltd. Email: gcshamika@yahoo.com,gilayshammy@gmail.com

Disclaimer: The views and opinions expressed in this article are those of the author and do not reflect the position of any institution.