TRANSPARENCY SNAPSHOT

A lack of transparency has been the norm in Tanzania's extractive industries, though officials privately acknowledge the need for change. In recent months, the public outcry for greater transparency has grown , in the wake of several scandals related to the procurement and enforcement of contracts and fiscal obligations. One such scandal actually led to the sacking of the prime minister and the dissolution of the cabinet in February 2008.

Mining accounted for 3.8% of Tanzania's GDP in 2006, and gold represented 90% of mineral exports. Tanzania is also richly endowed with several other minerals, including cobalt, copper, nickel, platinum group metals, and silver, as well as diamonds and a variety of gemstones. The petroleum sector is dominated by natural gas, of which there are currently two producing fields. Commercial quantities of oil have yet to be discovered.

Tanzania has sustained strong economic performance for several years, solidifying its position as a mature stabilizer. Since 2000, real GDP has grown by 6.3% a year on average. Growth has been broad based and driven largely by productivity gains; a sharp contrast from the long period of economic stagnation experienced previously. Annual inflation, which had averaged 30% in the past two decades, fell to single digits in 1998 and has remained around 5% since then. Despite these strong numbers, 90% of population is still living under $2 per day

Revenue Transparency

The level of revenue transparency in Tanzania is currently quite low. Local civil society focused on mining issues in Tanzania have only recently begun to look at revenues generally-with a growing chorus of discontent over Tanzania's royalty rate and overall government take from mining-and at revenue transparency specifically. Under-collection of revenues in the extractive industries, including the forestry sector, is a significant challenge in Tanzania. The Tanzanian Revenue Authority produces good data allowing the tracking of revenues, but this information is largely unavailable to the public.

Tanzania has taken no formal steps to become a candidate country for EITI, though government officials have stated a clear intention to move forward on that front, emphasizing their hope to use EITI as a framework for improving business development and not simply as a means to reconcile revenue payments and receipts. Whether Tanzania pursues any such innovations in the implementation of EITI remains to be seen.

Expenditure Transparency

Despite widely held perceptions of corruption in Tanzania, the country has excellent scores on the Public Expenditure and Financial Accountability (PEFA) assessment, a framework developed to assess the possibility and risks of direct budget support. The creation of a legislative commission to investigate a recent scandal with involving the electricity company provider Richmond is another positive step towards new checks and balances and stronger accountability of the executive to the Bunge.

Though the relative strength of public financial management systems and institutions is a necessary element in better resource and revenue management in Tanzania, the ability of the donor benchmark to capture policy and administrative issues on domestic revenue mobilization is limited. For instance, a recent report on the logging sector in Tanzania estimates that the treasury fails to collect 33 million US$ a year. There has not been any similar study in the mining sector.

Tanzania scores 48% out of a possible 100 on the Open Budget Index 2006, indicating that there is much room for improvement. For instance, the Bunge does not hold public debate on the budget, and while audit reports are produced and made available to the public, no information on the success of the audit report's recommendations is publicly available. Tanzania scores 15% above the average for neighboring countries on World Bank measures of public expenditure and financial accountability. However, recent efforts to strengthen public financial management systems have been disappointing and the government has developed new strategies that will attempt to address these weaknesses.

Contract Review and Contract Transparency

The pro-business advice received from the World Bank is often cited as a major reason for the unfavorable fiscal regime in the mining sector and the historically low government take. The appointment of a Mining Contracts Review Committee represents an important step towards striking a more balanced division of resource rents in the mining sector. Members of the Committee include legislators from the ruling Chama Cha Mapinduzi (CCM), opposition parties, senior government officials and the private sector. Its terms of reference include a review of all mining-related documents, the tax regime in the mining sector and the rights of investors and those of the government. Though the Committee includes opposition members and technocrats, it is worth emphasizing the absence of civil society organizations representatives.

Despite this progress, contracts signed in the extractive industries remain secret. The freedom of information bill proposed to the Parliament does not address this gap and may even reinforce the criminal nature of public disclosure of contracts. For example, in 2006 Mr. Zitto Kabwe, MP for Kigoma, was suspended for disclosing the details of a mining contract. The dissemination of the conclusions of the Mining Contracts Review Committee will be a major test of Government's commitment to foster a more open debate on the extractive industries.

Freedom of Information

A freedom of information law-which Tanzania is currently lacking and which would be a key step toward meaningful transparency and accountability in the extractive industries-is expected by some observers to be tabled in 2008. Debate within the Bunge, Tanzania's Parliament, has by all accounts increased lately at the same time that the government has undertaken a review of mining contracts, the report for such review being slated for submission to Parliament in late March 2008.