TRANSPARENCY SNAPSHOT

A lack of transparency has been the norm in Tanzania's extractive industries, but in November 2008, the government took a significant step toward enhancing transparency through the announcement of its intention to join the Extractive Industries Transparency Initiative (EITI).  This represents an important commitment, but Tanzania’s government, civil society, and private sector will need to be vigorous in institutionalizing EITI via an open and inclusive process if it is to have the desired impact.  Over the course of 2008, the public outcry for greater transparency in Tanzania grew, substantially, 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.  Citizens are also paying close attention to a government review of the legal and fiscal rules governing the mining sector, which many Tanzanians believe to provide a disproportional share of the benefits of exploitation to international companies.

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. Interest in Tanzania's oil-production potential is high, and Tanzania has licensed out exploration rights to various on- and off-shore blocks, but commercial quantities of oil have yet to be brought on-line.

Tanzania has sustained strong economic performance for several years, solidifying its position as a mature stabilizer. Since 2001, GDP has grown by 7% 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 groups 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, and the government has announced plans to revise the legal and regulatory framework governing the sector in order to increase the government take. The Tanzanian Revenue Authority produces good data allowing the tracking of revenues, but this information is largely unavailable to the public.

The government's announced intention to join EITI signals an important opportunity for the country to enhance its revenue reporting and increase public dialogue around revenue flows.  In order to realize the promise associated with its participation, the government will have to take steps to establish EITI officers and procedures, and to engage civil society and the private sector in a broad multi-stakeholder process.

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 involving the electricity company provider Richmond is another positive step towards new checks and balances and stronger accountability of the executive to the parliament.

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.

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 parliament 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.

Legal Review and Contract Transparency

In 2008, the government-sponsored Bomani Commission presented its recommendations about potential revisions to the legal, contractual, and policy regime governing the mining sector.  The Commission's recommendations—which included calls to revise tax and royalty mechanisms, promote stronger economy-wide linkages, enhance government contract enforcement capabilities, and improve environmental protection—have helped frame a broad debate around mining law and policy.  As of the beginning of 2009, the government indicated that it was reviewing the national mining policy and would propose reforms to enhance the national benefits derived from the sector.

Despite these developments, 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.

Freedom of Information

Tanzania does not have a freedom of information law, which would represent a key step toward meaningful transparency and accountability in the extractive industries. Civil society advocacy around the right to information has been heavy.  Legislative oversight is playing a growing role in Tanzanian governance; debate within Tanzania's Parliament, has by all accounts increased lately, at the same time that the government has undertaken a review of mining contracts.