The Case of Tanzanite

SAVED BY THE
BIRTH STONE

HOW THE DISCOVERY OF TANZANITE CHANGED THE
5/1/2010 LIVES OF THE ORDINARY PEOPLE THROUGH FOREIGN
DIRECT INVESTMENT.

“Thousands of years ago, on the quiet plains of the Maasai Steppe in Tanzania,
lived the Maasai. Many years of drought caused their king great pain. After a

Saved by the birth stone

mysterious dream, he announced that he would journey to the misty summit of
Mount Kilimanjaro, home of the gods. He told his beloved daughter, Ayanda, to
care for the people until his return. Heavy of heart, Ayanda watched her father
walk towards the distant slopes. Ayanda cared for her people and they, in turn,
adored their beautiful queen.
One hot and dry night, Ayanda too was visited by a dream. Her father took her
by the hand and guided her to the edge of a vast lake of violet- blue depths.
Ayanda understood that her father would never return but that he was showing her
the means to save their people. Ayanda set off to find the life-giving waters. For
weeks she travelled arid lands. Finally she reached the foothill of Kilimanjaro
where nestled in a shallow valley was the promised lake. Ayanda leaned over to
drink from the waters: her father’s image shone up at her from the crystal blue-
violet depths. She reached to touch his face, but it disappeared amongst a swirl of
ripples. On lifting her hand from the water, a small drop fell into her lap. The
drop magically transformed into a beautiful, faceted gem the deep violet-blue of
the lake. And the heavens broke out with a cool, sweet rain, bringing life to her
land.
Centuries later, the Maasai people were again struck with poverty. Remembering
the legend of Queen Ayanda, the village elders decided to make the journey to
Ayanda’s fabled lake. What they found was not the blue-violet waters that legend
spoke of, but a deposit of precious blue-violet gem. The gem was named
Tanzanite in honor of the Tanzanian people.”
Despite the hope that people engrained in the stone, it seems like Tanzanite has
failed to save them from the vicious circles of poverty.
On a hot airy night in November, Dr. Peter Kafumu, the Minister of Energy and
Minerals, was looking out over the endless panoramas of green fields that his country
was so rich in, as he remembered the myth that his grandfather told him when he was
a little boy - with hopes that he too, some day, could save his people from poverty.
Dr. Kafumu was sipping a popular local liquor konyagi, wondering if he should have
agreed with President Kikwete three years ago on the question of the mining
contracts. President Kikwete proposed to increase tax royalties from the mining
companies in order to boost tax revenue. However, Dr. Kafumu believed in trade
liberalization and the attraction of foreign dirext investment (FDI), which would be
stymieed if the royalties to mining companies were to be increased.

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Now his ideas were questioned in High Court by a constitutional petition that was
filed in November 2009 seeking to have all the mining contracts entered into by the
government without Parliament's approval declared null and void. The petitioners
believe that the government is giving away their natural resources to mining
companies without getting a fair compensation for the people from taxes and
royalties. Dr. Kafumu is believed to have sole power in signing these mining contracts
which include huge tax concessions. (Ayanda tanzanite)

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Contents

INTRODUCTION ......................................................................................... 4

1. TANZANITE .......................................................................................... 6

2. PORTER’S DIAMOND ............................................................................. 7
2.1. Factor conditions ................................................................................ 9
Human Labor .......................................................................................... 10
Material Resources ................................................................................. 11
2.2 Demand Conditions ............................................................................ 12
2.3. Related industries ............................................................................. 13
2.4. Firm Strategy, Structure and Rivalry .................................................. 16

3. A 3-PARTY RELATIONSHIP BETWEEN THE GOVERNMENT, FOREIGN INVESTORS AND
SMALL-SCALE MINERS .............................................................................. 26
3.1. Mining companies and community development ............................... 30
3.2. Tax initiatives .................................................................................... 31

CONCLUSION ........................................................................................... 34
Update as of April 24, 2010 from Reuters ................................................ 34

APPENDICES ............................................................................................. 37
Table 1. World Tanzanite Production ........................................................ 37
Table 2. Production of Tanzanite by Tanzanite One .................................. 37
Table 3. Ease of doing business in Tanzania ............................................ 38
Summary of Indicators .............................................................................. 39
Table 4. Economic contributions by mining companies – general economic indicators
................................................................................................................. 41

REFERENCES ............................................................................................. 42

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THE AIM OF THIS CASE IS TO DETERMINE WHO IS BENEFITING
FROM THIS CONTROVERSIAL INDUSTRY AND WHAT IMPACT THE
MINING OF A RARE TANZANITE HAS ON THE ECONOMY OF
TANZANIA.

INTRODUCTION

The theme of this paper is determine if a country can transform a monopoly on
a natural resource into a competitive industry and can effectively implement FDI
policies to benefit the growth of the economy as well as the development of the
community and infrastructure. The aim of the research was to show that despite the
efforts to make a country competitive for foreign investors and attract FDI, it is vital
to make a distinction in the impact of the FDI on the economic, social and political
factors. It is important to have a stable and reliable political framework that allows
the country to distribute the accumulated wealth from foreign sources fairly;
otherwise, the benefit of FDI, without a direct impact on the economy and lives of the
local people, is reduced to profits shared among the elites of the government and the
CEO‟s of major companies.

The paper is organized in three chapters that discuss the history of Tanzanite
against the backdrop of the Porter‟s diamond and cluster models, showing what
factors in the industry fail to support the whole system. In the last chapter the
intertwined relationship between the government, the local miners and the foreign
investors is shown. Looking at the economical factors, it is possible to say at a first
glance that Tanzania has all the resources to transform its unique resource into a
“goldmine”. However, looking into the political situation reveals that the situation
leaves much improvement to be desired.

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Before going into the discussion of Tanzania, an insight into a neighboring
country is essential to understanding what could have been done differently to
achieve a national competitive advantage.

It is useful to present the example of Botswana which as a poor country with
rich natural resources has achieved great economic growth and stability. It currently
ranks as #3 on the African Competitiveness Report in 2009 only after Tunisia and
South Africa. At a first glance Botswana could fall into the category of a “resource
curse” country. Nevertheless, it has reached a success rate thanks to its management
of these precious resources, rather than their exploitation. From 2004 to 2005 the
economy of Botswana grew by 8.3% benefiting largely from the mining industry
which represents 35% of GDP and 80% of exports. Health facilities, education, clean
water and electricity are available to over 90 percent of the population; and literacy
rates, which stood at 50 percent in the early 1970s, are over 80 percent today.
(SANGA, 2006/2007)

The new administration that came in 1995 performed a political miracle – they
actually implemented the policies that they promised: low and stable taxes to mining
companies, liberalized trade, increased personal freedom, and low marginal income
tax rates (to deter tax evasion and corruption). The growth was further encouraged by
the properly ran institutions and good governance – two common sense attributes of
a successful government. Unfortunately, these melancholic dreams of a better future
did not seem to reach the hearts of the Tanzania officials who failed to follow the
Botswana experience in a more lucrative situation. After all, Botswana has achieved a
De-Beers like success with diamonds, which are found in other parts of the world.
Tanzania on the other hand is the only source of tanzanite, revealing how far the
“resource curse” can go. Despite all the accusation, they tried to make it happen.

After becoming the United Republic of Tanzania in 1964, the government started
promoting the inflows of foreign direct investment (FDI) through an attractive tax
structure and tariffs, protecting companies from nationalization and expropriation,
offering investment opportunities in the public sector. In 1986 the Economic

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Recovery program focused on macroeconomic stabilization and trade liberalization.
By 1999, virtually all export restrictions had been eliminated. The rationalization of
import tariff rates in 1998 reduced it from 35% to 23% (A case study of Tanzania:
impact of FDI on developing economies, 2003). These measures have undoubtedly
attracted foreign investors; however, the price that was paid for their benevolence
seems to be too high. Today Tanzania is still one of the poorest countries in the world
with per capita income estimated at $US440 in 2008 (World Bank, 2008).

1. TANZANITE
Tanzanite is a deep blue-violet gemstone discovered in 1967 in the Merelani Hills
near Mount Kilimanjaro and 70km south-east of Arusha. Merelani is the only source
of tanzanite in the world with a supply projected to be 15-20 years depending on the
methods and pace of extraction. Geologists
predict that the chances of finding another
deposit are 1: 100,000 (Tanzanite One).

The stone saw the light of day when a
geologist‟s father Hyman Saul showed the
stones in New York to Henry B. Platt, Vice
President of Tiffany‟s, who decided to
market the stone to the rest of the world.
The mineralogical name of the stone,
zoisite, sounded much like “suicide,” hence
Mr. Platt christened the stone after the
country of origin. The largest crystal of gem
HTTPS://WWW.CIA.GOV/LIBRARY/PUBLICATIONS/THE-
WORLD-FACTBOOK/GEOS/TZ.HTML tanzanite known to survive measures 7 by 8
by 22 cm and weighs more the 3 kg (16,839 carats). It was found in July 2005 in
Block C. The Tanzanite One Company has decided to retain the crystal in its uncut
state, as an exhibit specimen, though it is currently kept in vault because of its high
value (Vincent Pardieu and Richard W. Hughes, 2008).

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After a growing interest for the rare stone, the government of Tanzania decided
to divide the 2 by 8 sq km of deposit into four areas, named blocks – A, B, C, and D.
The government attempted to profit from the booming sector by nationalizing the
mines in 1972 in a State Mining Corporation until 1983. The nationalized mine was
poorly management, had haphazard open-pit mining and led the State to abandon
the mines in 1986. In 1990 the government decided to clear the area and license it to
foreign investors and local miners. The most suitable area – Block C – was awarded
to JABE, a British –Australian company (later Afgem and Tanzanite One). The other
Blocks were licensed to local businessmen as well as small-scale miners who are
represented by the Arusha Regional Miners Association (AREMA).

Signs of enrichment started to emerge: the wealth of the lucky Merelani brokers
is invested in local hotels, bars and clubs. Brand new Toyota Land Cruisers and off-
road motorcycles maneuver on the treacherous dirt roads that cut through town.
Satellite dishes adorn hastily built homes. Cell phone towers can be seen in town and
it is even possible to gain internet access through the phone. But most people live
desperate lives. This is a town of lawlessness. There is no running water. Those who
can‟t afford bottled water take it from shallow wells, contracting diseases like typhoid
and cholera. 60% of the people may be HIV infected. A deeper look at the country‟s
industry and economy will reveal the reason for such disparity in the distribution of
the tanzanite profits.

In the following chapter, Michael Porter‟s Diamond and Cluster Frameworks are
used, as well as the value chain, to see if discovery of tanzanite could create a
competitive advantage given all the factors and conditions.

2. PORTER’S DIAMOND

Michael Porter (Porter, 1998) argues that there are inherent factors in each
nation that create the foundation for creating a competitive advantage. In this case,
the limitation of the framework is that essentially there is no competition since one of

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the foreign companies dominates the process. It will be explained further how the
government could assist in changing this situation. This sector explores
competitiveness dynamics that could be adjusted with the help of the government.

The national playing field is an important determinant in the competitiveness of
the country, as determined by Porter. His diamond framework will be used to show if
the government of Tanzania has achieved a competitive advantage in an industry
where it inherited a monopoly over the rare gemstone.

Each of the factors in the quadrants determines the dynamics of
competitiveness. As can be seen from the diagram, the role of the government in this
framework should be that of a facilitator and motivator for companies to increase
their advantages through fair competition, by enforcing anti-trust laws and
promoting small and medium-size. The following sub-chapters will look at the state of
these conditions in Tanzania and their impact on the advancement of possible
competition.

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2.1. Factor conditions

Porter argues that inherited factors, such as natural resources and unskilled
labor do not contribute to a competitive advantage because any other firm can obtain
them. A competitive advantage is obtained when the firm creates a product, service or
relationships with suppliers and/or buyers as well as the government and other
agencies that is difficult to imitate. In the same manner, the country must possess an
attractive infrastructure, skilled human capital, political and economic stability to be
attractive to foreign investors. There are factors that are not inherited and can be
changed, such as the macroeconomic stability, political situation and socio-cultural
factors.

Tanzania is free of ideological confrontations, ethnic problems and labor
disputes; it is considered a center of economic and political stability in Sub Saharan
Africa. As a result of prudent fiscal and monetary policy, the inflation rate has been
lowered to sustainable level of 12.5% as of November, 2009 (National Bureau of
Statistics, 2009). The government has increased revenue streams and reduced
spending, which enables it to grow the current account and increase the level of
domestic investment spending and the growth of economy. Institutional support is
readily available from the Tanzania Investment Center. Mining and tourism are the
main recipients of FDI and are tipped to become growth sectors.

Since this industry is labor intensive at the outset, Tanzania has great potential
with its low cost of labor and natural resources. However, companies need a
developed infrastructure and a reliable economic and political background to perform
operations. Besides, after around 200 meters, it is almost impossible to dig by hand,
and technology is needed to continue exploration. At this point only the foreign
companies have the power to obtain the financing for this type of technology and
deliver knowledge and skills for its use.

The rarity of tanzanite makes it an attractive investment opportunity, as well as
a source of government revenue. If the proper education on the rarity of this stone is

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performed, the government may stand in a position of power as it possesses a limited
desirable resource. However, from the point of view of the multinational companies
(MNC‟s), tanzanite may be just a mineral that may be compared to all the other
investments in the mining industry. It is in the best interest of the government of
Tanzania to present it as a rare opportunity and provide ample resources for foreign
investors.

Human Labor

The labor supply in the mining industry remains a challenge, yet Tanzania is
one of the poorest countries in the world, and people travel from other regions to
work in the mines. The Merelani area alone provides around 75,000 people with an
estimated 15,000 mine workers (MAGNE BRÅTVEIT, 2002). The Maasai people who
are the indigenous tribe in the area look down on the work of the miners and prefer
not to engage in such business. However, workers from other cities (where there are
few other job opportunities) flow into the area in hopes of finding a fortune. 60% of
the population lives on less than $2 a day and an average person lives on $280 a year
(USAID, 2005). Mining is a tedious process involving manual labor, which often
attracts uneducated and unskilled labor. The people also move around a lot in search
of better opportunities. Those workers who switch to mining are usually involved in
agriculture and cattle farming. If they find no success in the gemstone business, they
are likely to go back to their previous livelihoods. Therefore, the level of commitment
is low on the side of the workers. Following successful negotiations between the
company and the union representatives and government, non-core employees are
paid sector rates as opposed to mining sector rates. The average pay for mineworkers
in Tanzania is US$128 to US$240 a month. This is a high salary compared to other
jobs, in areas where few other jobs are available. However, by contrast, Barrick‟s
chief executive, Greg Wilkins, received US$9.4 million in 2006, including basic
salary, bonus and stock options. It would take an average Tanzanian miner over 500
years to make this amount of money (Lissu, 2008).

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The knowledge capital related to this industry is low since it attracts a certain
type of people, usually poor and without formal education. However, the labor force is
trainable and the government has made a long-term commitment to develop a pool of
well-trained and educated specialists. The government recognizes that if they don‟t
invest in education now, they will have a gap of knowledge in this generation, putting
them further in line for attracting FDI. This issue if not dealt with will affect the
future human resource of a nation because they are getting a generation of children
who are missing out on education. The outcome will be that they will have a gap or a
generation of people who are not educated, who don‟t have any skills to contribute to
the human development.

Women sell food at the mines, but their income from the business is not enough
to support the family. This dire situation forces women to subsidize their income
through prostitution. Children are also compelled into sex work in order to survive.
Sub-Saharan Africa has the highest proportion of child laborers of any region in the
world. Unfortunately, Tanzania is not an exception. Parents encourage their children
to work at the mines because there are no schools near the diggings. Children are
called “snakes” for their ability to move lithely with dynamite through the narrow
mine pits. Every day, 4000 child miners between the ages of 8 and 14 risk their lives
in poorly constructed mine shafts for barely a meal a day (TANZANIA Gem Slave,
2006). The government doesn‟t want kids to work in mines. It is the government‟s
wish that they go to school, but there are not enough schools for the kids.

Material Resources

The capital resources are also scarce; it is difficult for an individual to obtain
financing if he were to start a business in mining a pit. Most of the men get the
proceeds from the sale of their cattle for the initial investment in the mines. Claim
titles are cheap ($18 per year), while the investment to start production is extremely
high. One needs $91,743 to buy a compressor, water pump, explosives and other
equipment. A common share system in small scale mining is that the sponsor gets

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40%, the claim holder 30%, the person owning the compressor 20%, and the workers
as a group 10%. According to the Zonal Mines office there are 600 claim holders in
the northern zone, of which 200 are active at any time. AREMA1 operates with a
number of 700 mines in Merelani alone. Each of the active claim holders has 25-60
workers, which means there are 12,500 small scale miners in Merelani (Lange, CMI
Report R 2006: 11 54 p. ).

Nevertheless, the development of the industry is bringing urbanization features
to the locals. The National Micro-Finance Bank (NMB) plans to install an ATM at
Merelani Township in Simanjiro district in a bid to bring financial services closer to
people. The present NMB decision follows a special request from Merelani residents
through a Tanzanite dealer Laizer Kurian. The township has no bank services and
instead people are forced to travel long distances to t Arusha or to Boma Ng‟ombe in
Hai.

2.2 Demand Conditions

According to the World Bank, the population of Tanzania in 2008 is around 42.5
million people with a growth rate of 2.9% per year. A population that can barely
afford food and water will hardly bother to get jewelry. The local demand is supposed
to drive the innovation and product development; the more educated and demanding
the consumers are, the more the local companies will try to please the customer by
offering better quality product or service. In the case of tanzanite, the local demand is
obviously low. The only buyer‟s market that exists is that of the local dealers and
brokers that buy directly from the mine in the village or in town and later resell
abroad. The miners are uneducated about the prices that transfer abroad and sell the
stone at a fraction of what it is worth to the end consumer.

Raw tanzanite represents one twentieth of the final value of the stone after
cutting and polishing. In 2008 the prices of raw tanzanite were $9-14 per carat

1 Arusha Regional Miners Association

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compared to the price of a cut and polished stone selling at $250-500 (Kilimba,
2008).

The external market is represented by Jaipur, India, where 80-90% of the stone
goes for processing; therefore most of the value accrues overseas. The U.S., South
Africa and Thailand are the main trading markets for tanzanite, accounting for about
70% and Europe 5% (Selasini, 2009).

2.3. Related industries

Related industries are represented in the cluster model where support one
another in an area which has reached a certain level of integration in cluster
development. Mining is yet an indigenous industry which is self-sustainable. Before
the foreign companies, artisanal miners used only their hands and a few simple tools
to dig for the stones. Therefore, it is difficult in this industry to form clusters were the
other companies would support the mining. Of course transportation, food,
telephone, and hotel industries have grown since the coming of the big multinational
companies.

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The value chain helps to determine if the industry is positioned to become a cluster.
The value chain follows the process of creation of a product or service to its final
consumption or use. If the value chain participants are closely intertwined, yet
independent, they can drive competition. If the buyers and suppliers of the company
are separate entities, a process of development is sustained. However, if the company
is vertically integrated, it creates a lot of value for the company, but leaves no room
for rivals to develop a competitive environment.

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The value chain of mining consists of exploration, mining, ore crushing and
processing, transportation, dealers and brokers, jewelry design, wholesale and retail.
Unfortunately most of these value adding activities are outsourced and are unable to
form a cluster. Tanzania is left to do the extractive work. However, in June 2003, the
government banned the export of unprocessed tanzanite over 1 carat to India. It was
to spur the local lapidary work and processing facilities, recouping the value for the
local people. Jaipur in India has one third of its exports from tanzanite (Kilimba,
2008). Tanzanite One, the largest mining company of tanzanite, has set up 6 cutting
stations in Merelani and has hired both men and women to do this work. The
company has trained the cutters themselves, both locally and in South Africa,
planning to expand the tanzanite facility to 25 cutting stations and to invest even
more in training. There is only one other company which exports stones. The owner,
Sailesh Pandit, says employment would be secured for 3000 people if all stones were

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processed in Tanzania (Lange, CMI Report R 2006: 11 54 p. ). Besides, local
processing doesn‟t mean that the quality goes down.

The mining sector falls under the jurisdiction of the Ministry of Energy and
Mining. There is also a Chamber of Mining that oversees the development of the
sector and serves the interests of large, small and artisanal miners in collaboration
with Tanzania Miners Development Association (TAMIDA). Mining, research and
exploration center located in Dodoma serves as a referral center for all technological
studies and related research. Foreign investors partnered with local investors are the
most favored for licensing purposes. This should increase the demand for local
processing of the gemstone.

Because of the fragmented nature of operations every business tries to do all
things for themselves: bulk supplies procurement from long distances (mining
equipment and food), health services, transportation, technological and social
infrastructure development, small scale lapidary work, entrepreneurial development
and employee capacity building. The result is uncoordinated growth and development
of the mining area. Coordination of existing fragmented service providers and the
associations into a solid network that is facilitative to the various suppliers would
strengthen the cluster. More investment in lapidary and jewelry manufacture and
capacity building is needed for relevant local skills.

The whole industry would become more competitive if the following issues would
be addressed: artisanal miners don‟t have access to technology, socio-economic
development efforts are uncoordinated, the lapidary development is low, small scale
miners suffer from dominant buyers of raw and polished tanzanite and have little
bargaining capacity, low multiplier/spillover effects of mining to related economic
activities.

2.4. Firm Strategy, Structure and Rivalry

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The main players of the industry can be divided into local miners and foreign
companies. The main foreign player is Tanzanite One, which is South-African,
previously under the name of Afgem. Tanzanite One occupies Block C, the other
blocks are destined to be for the local miners, who are represented by two
associations AREMA and MAREMA.

Main Players

1. Tanzanite One Company Ltd
The following three players are subsidiaries of the main company and represent a full
forward integration.
2. Tanzanite Trading Ltd
3. Tanzanite Marketing
4. Tanzanite Foundation
5. Arusha Region Miners Association (B and D)
6. Manyara Region Miners Association (B and D)
7. Tanzanite Africa Ltd (D)

The tanzanite resource strikes along a length of seven kilometers and is divided
into four blocks. Tanzanite One in Block C undertakes large scale mining; medium
scale mining is undertaken by Kilimanjaro Mining in Block A and Tanzanite Africa in
Block D. The company‟s neighboring Blocks B and D are mined largely by artisanal
and small scale miners. This poses a challenge for Tanzanite One - the artisanal
miners continue mining into Tanzanite One‟s designated license area. This continues
to be a major challenge to the operation with ongoing illegal mining activities
continuing to take place from both Blocks B and D. Constant communication with
officials from the Zonal Mines Office and the Ministry of Energy and Minerals yields
results from time to time, but the problem continues.

The foreign investors are more welcome by the government since they bring new
technology, skills, spillover effects (such as employee training, introduction of new
techniques, management know-how, which are generally more beneficial in the
manufacturing sector) as well as safe working conditions and community

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development projects. On the other side, the local miners face many challenges, as
their production is dispersed and they are disorganized. Due to unsafe mining
practices, they have suffered several accidents in the mines. Although they are
supposed to dig straight down on the 150 by 150 feet plot that they are assigned,
nobody follows the rules (Lovgren, 2001). The mines are in the form of “Swiss
cheese”.

The government officials seem to close their eyes on the tense relationships
between multinational companies and artisanal miners. The controversy around the
linkage of tanzanite to Al-Qaeda funding has been groundless. Nevertheless, it seems
like the whole aim of the story that was published in the Wall Street Journal by
Daniel Pearl and Robert Block on November 16, 2001 was to show that the artisanal
miners were involved in the smuggling of the stone and that anything bought from
them could be of dubious origin. The story created quite a stir and several articles
that appeared shortly after never failed to mention that despite the link of tanzanite
to terrorism funding, there is only one company that tracks the stone from the
mining pit to the hands of the consumer – Tanzanite One. It has been mentioned that
the journalist of the article visited the Tanzanite One shortly before the issue,
perhaps going over the story. Even though Tanzanite One would have suffered as the
sale price of tanzanite dropped 50%, it is possible to consider that they implemented
a long-term strategy, where they would draw the attention to the dark link of
tanzanite to terrorism, and then carefully isolate themselves from this picture. Thus,
in the eyes of the consumers, Tanzanite One would be the only viable supplier of the
rare gemstone. Isn‟t it a perfect recipe for a monopoly? Of course, the artisanal
miners were furious with the attempt of Tanzanite One to push them out of the
market.

The story attracted attention across the world and was a threat to the reputation
of the stone, as many jewelers dropped the sale of tanzanite after the article was
published. Shortly after the investigation, on February 9, 2002 in Tucson, Arizona,
the Government of Tanzania and all trade associations representing the full

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international scope of tanzanite miners, gemstone dealers, manufacturers, suppliers
and the retail jewelry industry in the United States, which accounts for 80% of the
world market for tanzanite, met and agreed to eliminate concerns about the tanzanite
trade, its alleged connection to funding terrorism, and to restore confidence in
tanzanite. The Protocols were to designate the mining area as Merelani Controlled
Area and develop plans to tighten security around the mine enclave and strengthen
rules governing the exports.

A high-level US delegation that same year verified that the government was
taking substantive steps to comply with the agreement. The tangible effects are the
following:

By 2007 a 10 foot fence was built encircling the entire 12km² mining enclave.
Police and guard posts were built. Systems of written warranties and secure
packaging were in place and observed by legitimate exporters. Smuggling dried up to
10% of its former volume. The use of child labor has decreased dramatically.
Thousands of miners and laborers acquired official ID passes (Schroeder, 2010). On
balance, many of the leaks, facilitating illegal trading, were plugged.

Tanzanite One met the requirements before they were set in place. They
possessed a self-contained mining compound with elaborate security measures to
guard against theft by their own employees and outsiders, they moved their gems
through a vertically integrated system that funneled rough stones directly to
processors, wholesalers and jewelers. In 2009 Tanzanite task force was formed to
carry out the Tanzanite Protocols. A chain of warranties would accompany each
tanzanite shipment from the mine all the way to the retail store, stating that
“tanzanite herein invoiced was mined in Tanzania and has been traded through
legitimate sources.”

COMPANY’S STRATEGY

Tanzanite One represents the only large foreign company in the Merelani mines
and has developed a strategy that helps it stay that way. Tanzanite One is the largest

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and most scientifically advanced miner and supplier of rough tanzanite, a unique
position that affords it the opportunity to support and influence the entire channel,
from mine to market, ensuring that maximum stakeholder value is achieved at each
stage of the process. The mine is considered a modern, low-cost operation and boasts
an exemplary safety record. It applies international best practice in the design of its
employment, social and environmental policies. Processing and sorting take place on
site within purpose-built infrastructure and facilities. A conservative estimate of
Tanzanite One's resource, and as published at the time of listing on AIM in 2004,
would place the figure at 63-83 million carats. At an average price of $ 12 per carat in
the rough, this represents an estimated $756 million to $996 million in the ground
(Tanzanite One, 2008).

It has vertically integrated itself into trading, marketing and building awareness
of tanzanite through Tanzanite Trading, Tanzanite Marketing and Tanzanite
Foundation. Their strategy is similar to the De-Beers cartel in the diamond industry
which controlled the prices and positioned diamonds as the stone for a life-time
which should never be sold, thus limiting the supply. They were the ones who came
up with the marketing slogan “A diamond is forever” and made it the obligatory
engagement ring, pouring in millions of dollars in marketing to strengthen the spell.
In the same manner, the Tanzanite Foundation, a subsidiary of Tanzanite One, came
up with a similar strategy. The next section tells the story:

“Tanzanite, the birthstone, is the gift given on the birth of a child. Fittingly this
theme draws on the inspiration that we are all born to something special. The
promise of a person begins with the earliest moments of life and every tradition
cherishes and celebrates a child being born, the miracle of birth, and the gift of life.
From the heart of Africa comes a powerful tradition. Maasai women who have had the

Page 20


honor of giving birth to a baby wear vibrant blue beads and adornments to bestow
upon the child a healthy and positive life, whilst setting themselves apart as creators
of new life.

This custom, protected and preserved by the proud Maasai through the
generations, is now celebrated in a modern tradition: the giving of tanzanite on the
birth of a baby.

Every culture all over the world cherishes and celebrates the miracle of new life.
Tanzanite, a precious heirloom to treasure through the generations, is the perfect gift
to give on the occasion of birth. It uniquely symbolizes new beginnings, and pays
tribute to those who have shown the greatest of loves by becoming a parent.”
(Tanzanite One)

With the help of this “spell” Tanzanite One controls 35% of tanzanite
(Larenaudie, 2007). Naturally, due to the fact that they have the rights to Block C
which is considered the most productive part of the mine, as well thanks to the
company‟s efforts to be everything from the supplier to the distributor and the
certifier. Production for the year 2008 totaled 2.2 million carats, a significant 29%
increase over 2007, recovered from 42.3 thousand tonnes. This was also a result of a
combination of improved mining methods and increased security presence through
the upgrading of security systems. The company‟s ability to increase production to 3
million carats per annum remains unchanged and it will be fully exploited once the
markets return to normality. In August 2008, Tanzanite One opened The Tanzanite
Experience (TTE), a museum in Arusha that showcases the history of tanzanite
through a series of visual and interactive exhibitions whilst affording visitors the
unique opportunity to purchase cut and polished tanzanite directly from the world‟s
only known source. TTE targets approximately 600,000 tourists who pass through
the town annually. Marketing is geared towards safari companies and tour operators
in an effort to include a visit to this facility on their itineraries (Tanzanite One, 2008).
In a nutshell Tanzanite One is carrying out a massive strategy of dominating the
market and letting the whole world know about tanzanite.

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The following structure of the Tanzanite One Company shows how the company
controls the supply, marketing, grading, certification and community projects to
further spread the monopolistic influence.

Tanzanite One Trading

Tanzanite One Trading is a Group subsidiary based in Arusha that purchases
rough tanzanite from smaller miners, brokers and dealers; cementing its position as
one of if not the strongest tanzanite buying operation in Tanzania. Tanzanite One
Trading operates under the guidelines of the Tucson Tanzanite Protocols. Tanzanite
One Trading (T1T) Relationships have been developed with all the prominent.
Processing and selling is controlled by Tanzanite Trading; it buys from small scale
miners, which accounts for 15% of output (Tanzanite One ).

In support of more stability in terms of rough prices, Tanzanite One Trading
pays a small premium. This strategy has been well received in the local market and
as a result, Tanzanite One Trading has become a market leader in procuring high
quality material.

Tanzanite One Marketing

Tanzanite One Marketing is the Group‟s marketing and sales arm for rough
tanzanite. The subsidiary consolidates the available mined and traded rough
tanzanite and is able to add further value by applying a proprietary rough tanzanite
grading system and preparing parcels of material specifically suited to the individual
business needs of each of its eight “sightholders”.

This is achieved through the Preferred Supply Strategy, which is a world first in
the colored gemstone industry, aimed to grow the global market for tanzanite through
strategic collaborative relationships with exclusive customers, „Sightholders', selected
from the world's leading gemstone houses and jewelry manufacturers.

Page 22


Sightholders have been chosen for their focus on tanzanite, ability to make a long-
term commitment, distribution capabilities, understanding of the need for vertical
integration and most importantly their operational standards of integrity. Their belief
in and commitment to supporting an ethical route of the tanzanite market has also
been a prerequisite for their appointment.

Tanzanite One has initially appointed eight Sightholders, with plans to increase
this number in the medium term. These initial eights are listed below (Tanzanite One
):
• AG Color Inc
• Colorjewels
• Intercolor
• Paul Wild
• KL Tambi
• Rare Multicolor Gems
• STS Jewels Inc.
• Tanzanite International

The Tanzanite Foundation

The Tanzanite Foundation is a non-profit, industry-supported organization that
strives to develop the tanzanite industry by growing demand and creating value for
all stakeholders in the tanzanite value chain. By striving to standardize stakeholder
conduct and communication, the Tanzanite Foundation aims to uphold an ethical
route to market in accordance with the Tanzanite Tucson Protocols and invests in
meaningful and sustainable projects developed in configuration with the local
communities situated at tanzanite‟s source.

Tanzanite One is a founding member
and primary fund provider of the Tanzanite
Foundation. In order to contribute positively

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to the community and area surrounding the tanzanite mines, the Tanzanite
Foundation™ is committed to making a meaningful and sustainable difference to the
social, economic and environmental uplift in the area.
Projects undertaken to date include:

• the construction of a 400m² Community Centre for the residents of Nasinyai,
the village bordering the tanzanite mining area
• the renovation and installation of electricity to the Nasinyai Medical-Clinic

• the upgrading and maintenance to the road leading to the tanzanite mining
area
• active participation in the establishment of the Merelani Controlled Area. In
compliance with the Tucson Tanzanite Protocols the Tanzanite Foundation™
provided funding and support for the establishment of a satellite police station in the
mining area and donated a police vehicle to local authorities
• the provision of water to over 2,000 villagers and 4,500 head of cattle on a daily
basis in the severely drought stricken region surrounding the tanzanite mining area
• the refurbishment and extensive expansion of the Nasinyai Primary School,
which has seen school attendance quadruple to a current figure of 432 enrolled
students
• in partnership with the Nasinyai community and World Vision (an international
aid Christian humanitarian organization), the construction of Nasinyai Secondary
School
• the development and initiation of SMAP (Small Mines Assistance Program).
SMAP provides geological, mining, survey, safety, logistical, operational and other
guidance and support to small mines with the aim of building and developing the
entire tanzanite mining industry and sound stakeholder relations
• mitigation of acid mine drainage by appropriate design of waste rock and
tailings disposal systems and monitoring of water quality. Regular water analysis
indicates that Tanzanite One is well within the recommended pH levels
• the donation of tailings to local communities, which also operates as a

Page 24


community support project. Tailings have a recognized and measured tanzanite
content which is uneconomical for Tanzanite One to extract. Local communities
extract this tanzanite, which is generally sold back to Tanzanite One Trading. The
remaining tailings are used as building material. This system reduces waste and
encourages economic activity
• rendering old mine workings safe, and continuously monitoring the same;
closing numerous old mine workings on Tanzanite One's property and in common
areas around the mining license that were deemed safety hazards. (Tanzanite One)
Tanzanite One secured a position where it holds the keys to all the steps in the
process. By integrating forward and backward, the company is able to control the
process in a De-Beers style, managing the supply and directing the price, which has
already gone upward in the past decades.

Grading and Certification

The Tanzanite Foundation‟s Tanzanite Quality Scale™ is the first internationally
recognized tanzanite-specific grading system. Developed in collaboration with leading
gemological laboratories, the Tanzanite Quality Scale™ is based on 4Cs criteria,
grading tanzanite quality based on Color, Clarity, Cut and Carat weight. A fifth “C”
stands for Confidence, and is the assurance that tanzanite accompanied with a
Tanzanite Quality Scale™ certificate is genuine, rare and precious (Tanzanite One,
2008). Tanzanite One has benefited from the controversy around the Al-Qaeda link,
since it promoted the certification that accompanies every stone from their mine as a
guarantee against the “illegitimate” stones.

As can be seen from this previous analysis and the strategy of the company, the
industry does not promote competition, since one giant corporation is trying to push
out all the small-scale miners. Besides, the latter don‟t have the technique or
resources to drive innovation and be competitive. Tanzanite One had the resources to

Page 25


drive the marketing campaign that created the demand for tanzanite which will have
a stronger effect closer to the “extinction” of the stone.

The role of the government is an important factor in the facilitation of a
country‟s competitiveness, and in the following part, it will become clear why the
industry turned out that way.

3. A 3-PARTY RELATIONSHIP BETWEEN THE GOVERNMENT,
FOREIGN INVESTORS AND SMALL-SCALE MINERS
The government of Tanzania has carried out successful economic policies and
structural reforms to attract foreign investors. It seems like the industry is not
developing in a way that would benefit the local communities. Taking into
consideration that the tanzanite reserves will be depleted within a decade or two, if
the local community doesn‟t get the development funds from tax revenues, the
country will be left without proper infrastructure, human development or a valuable
natural resource.

Reform of the mining law in 1997 offered attractive fiscal incentives for
investors: substantial tax breaks, and lead to a significant and rapid boom according
to EIU. Favorable fiscal and legal measures flowing from the Mining Act have acted as
a catalyst for FDI. :
 Tax incentives such as repatriation of profits
 Special VAT relief
 Zero import duties for equipment and machinery used during exploration
 Depreciation allowance of 100%
 15% withholding tax for foreign contractors on technical services and
management fees.

The mineral‟s sector contribution to GDP has risen from 2.0% in 1998 to 3.7%
in 2007, and could reach 10% by 2025 (A brief on the mineral sector of Tanzania,
2009).

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The question at hand is – why invite FDI if the benefits to the people are
miniscule? It goes without saying that large mining companies earn huge revenues;
hence they should pay enough taxes for the government to raise the standard of
living of the people whose resources are being depleted. The following chapter will
look at the impediments that stand in the way of this promising industry.

Tanzania exports 80% of tanzanite to US. It is a $500 million a year industry
although Tanzania gets barely $20 million annually, with the lion‟s share going to
Indian and American dealers (Lyimo, 2009). The discrepancy is not only caused by
smuggling through Kenya, but the government failing to collect revenue from
royalties and taxes.

Royalties are paid by commercial companies to the owners of a mineral in return
for the right to extract a non renewable source; they are the main income that
governments earn from new mining projects in the first few years of operation.
International companies can manipulate their tax base to reduce declared profits. In
2003 an independent auditor contracted by the government to examine the accounts
of four major gold companies alleged that the country‟s two largest mining companies
both over-declared their losses, which reduced their tax liabilities. Companies can
manipulate their accounts where the company made profits, but no tax is due. This
tax deferral can continue for years, starving the government of their main source of
revenue. A 2008 report by the Business & Human Rights Resource Centre estimated
that the combined loss to the country over the previous seven years as a result of low
royalty rates, unpaid corporation taxes and tax evasion by major gold mines
amounted to US$400million (Research and Markets: Tanzania Mining Report Q1 ,
2010).

Another way a company can avoid paying taxes is by trade mis-invoicing.
Companies either under-declare the value of their exports or overstate the prices of
their imports. This enables the company to reduce profits. Most mining authorities
don‟t have the requisite skills to audit the complex accounts of large MNC‟s. The

Page 27


auditors allege that they were hindered in their work by persistent reluctance of the
mining companies to cooperate.

When the investment environment was not conducive in Tanzania, the World
Bank prompted the government to give the foreign companies major tax concessions.
The government agreed to use all means to attract FDI even of dubious quality,
knowing that it would hurt the country‟s long-term industrial development (with no
revenues to fund its expenditures). It seems that now is the right time for a world
organization to provide auditors who would make it clear who‟s making the money in
this industry.

In October 2006 President Kikwete directed the Minerals and Energy ministry to
review mining policies and laws. President Kikwete and Commissioner for Minerals
and Energy Dr. Peter Kafumu didn‟t agree with each other on the mining royalties.
President Kikwete argument of raising royalties was based on the experience of South
Africa, which charged a 12% royalty; and the desire to raise government revenue. Dr.
Kafumu chose the side of foreign companies fearing that the increased royalty will
shy away new investors into the country. Besides, South Africa is incomparable with
Tanzania in terms of infrastructure, human and capital resources. According to Dr.
Kafumu, miners in Tanzania have to cover operational costs that are around 60
percent of the total profit they generate. Out of this 60 percent, 20 percent is spent
on taxes and other levies. This means miners are left with 40 percent and they still
have to pay a further three percent as royalty. This leaves the miners with 37 percent
and out of this, according to Dr. Kafumu investors have to service bank loans at 12
percent and are left with 25 percent after-tax profit from where 30 percent in
corporate tax is derived. (Jomo, 2007)

However, Tanzania is becoming a more competitive destination due to good
government policies (Bekefi, 2006). It would be wise if the royalty was changed for
already established companies, since their extensive investment would prevent them
from leaving. These exemptions should only apply to new companies; however the
ones that are in place and reluctant to leave should be taxed at a higher rate.

Page 28


Companies argue that they need these tax concessions because mining is a high
risk industry that requires huge initial outlays of capital in the early years. But high
return is accompanied by high risk, and after all – isn‟t this included in the cost of
doing business in less developed countries? For some reason companies don‟t take
the government as a serious partner, especially in this case when the resource is
located only in Tanzania. It would be quite bizarre if a company asked the supplier to
give them equipment for free just because exploration sometimes doesn‟t yield any
results. Nevertheless, they approach the government of the resource in this manner.
Of course it is important to hear both sides and come to a compromise royalty fee.
However, in this case it appears that the fee is not the problem, the major leak is in
tax revenue collection.

African governments are foregoing millions of dollars in revenue, because they
failed to collect significant budget revenue from mining, despite higher production
and prices, for two main reasons: excessive tax concessions to mining companies,
and aggressive tax avoidance by mining companies, primarily by insisting on tax
breaks in secret mining contracts. The main beneficiaries of the mining boom are a
handful of African political elites, the shareholders of mining companies, the
engineering, construction and management consultant firms servicing the global
mining industry, and the financial institutions backing these ventures.

The question is not whether to increase taxes or royalties but how to collect
them and make sure that the money is reaching the people. In March 2009 Reuters
reported that a group of five grassroots organizations criticized the way the
government dealt with mining corporations. “Breaking the curse” said that
governments should publish and review all tax subsidies and concessions given to
MNC‟s. Revenues lost by secret deals and backroom transactions could be used for
fighting poverty. Only one miner in the country - AngloGold Ashanti - had paid
corporate income tax by the end of 2008, 10 years after industrial mining began
there.

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Major reforms to the legislation covering the mining sector are expected in the
amended Mining Act that was held in parliament in April 2009 include royalties on
gemstones to change from 5 to 7%, for cut and polished stones - rising to 3% from
zero. The Parliamentary committee advised the government to stop selling shares in
mining companies, stating that no mine should be wholly foreign-owned and
recommending that the government own a 10% share in all the mining companies
(Tanzania Mining Report Q2, 2009).

3.1. Mining companies and community development
Mining companies create little forward or backward linkages into the local or
national economy that would stimulate more private sector development and job
creation. World Bank believes that if multinational companies can commit to
sustainable development as part of its bottom line, then the transfer of skills,
technology and capital from mining can revolutionize the impact of mining on
economic and social development.

As can be seen from the example of the Tanzanite Foundation, a company can
do a lot for a community that it is based in. But what are the motives that drive a
corporation to do good? And is it good from the perspective of the Maasai tribe people
who are often evicted from their villages or are deprived of a water source because the
company needed the land? Or is it unfair, from the perspective of Milton Friedman
(Friedman, 1970), to expect the companies to provide the people with their
livelihoods, replacing the duties of the failing government?

Instead of improving electricity and transport network, fundamental to the
operation of the mining companies in remote areas, governments give them tax
breaks instead, hoping that this would compensate for the additional costs of
operations. Therefore, Tanzania is falling down a slippery slope. If they don‟t collect
taxes and invest in infrastructure and human development, they will not only deprive
their people of the basic needs but also loose their competitiveness.

Page 30


Why not attract FDI by advanced infrastructure that is financed from the tax
revenue instead of lowering taxes? This in the long term will provide an enhanced
benefit to the local communities and increase the flow of FDI. Government needs to
improve infrastructure rather than give tax breaks.

MNC‟s are more interested in government support rather than that of the
community. Their only incentive for involvement in socially-responsible behavior is
the pressure of the outside world. Services to communities may be direct, but they
are not constant or something that people should rely on. Unfortunately, the tax
money doesn‟t reach the communities, and they are happy with what the foreign
companies have to offer. The money that does reach the communities is often
sporadic and does not usually present the most economically optimal solution.

3.2. Tax initiatives
Most African mineral rich countries, whose economies depend heavily on
extractive industries, have lower economic growth and human development than
those that are not so dependent on these industries. Many believe that revenues from
extractive industries serve to heighten corruption. The “resource curse” can be
broken once mining tax laws are transparent and equitable, skilled tax authorities
are able to collect taxes, and these are distributed through a participatory and
transparent budget process. To ensure that the correct amount is collected from
mining activity, and that this is spent equitably according to the country‟s agreed
national development strategy, civil society organizations and parliaments need to be
able to monitor and oversee the collection, allocation and actual spending of budget
revenue. Unless there is a legal framework in place that allows civil society
organizations, parliamentarians and citizens access to budget and revenue
information, and unless there are laws that allow them to hold the government
accountable for its fiscal management and expenditure, there is no guarantee that
income earned from mining would contribute to development and poverty reduction.

There are some positive changes - in 2008 the Tanzanian government
announced their intention to join the Extractive Industries Transparency Initiative

Page 31


(EITI) initiative (Extractive Industries Transparency Initiative). EITI requires
companies to report publicly the following:
1. Revenue and profit for each concession or license
2. Taxes and fees paid to the state

Once communities have information on the revenue transmitted to the
government and other structures meant to service them, they will be able to monitor
these funds directly, instead of expecting companies to spend more on community
services directly. Of course this initiative will have an effect if the people will have the
power to question the actions of the mining companies and their relations with the
government.

The following problems need immediate attention as they are vital for the
attraction of FDI. According to the 2009 African Competitiveness Report, the most
problematic factors for doing business in Tanzania are:
1. inadequate infrastructure (more than 70% of the firms listed “electricity” as the
most serious constraint).
2. inadequately educated work force
3. corruption
4. access to financing. (World Economic Forum, 2009)

It is possible to link the third problem as the reason for the first two. Botswana
offers a guideline to follow in fighting with the causes of corruption. As a poor
country with vast natural resources, it has succeeded due to the following efforts:
• Voice and accountability, measured via political process, and also civil liberties
and political rights – which indicate an ability to criticize those in authority when it
comes to resource extraction issues.
• Government effectiveness measured by the quality of public services and the
competence of civil servants. Its use of mineral revenue has kept an eye on an
implicit self-disciplining rule – the sustainable budget index – any mineral revenue is
supposed to finance investment expenditure and ensure spending on education and
health – this is in contrast with Tanzania, where all mineral revenues go into general

Page 32


budget.
• Natural resource development must involve a long-term relationship with all
private parties, while market-friendly policies like price controlled and excessive
regulatory burdens are undesirable. Mining lease are 25 vs. 10 years in Tanzania
(SANGA, 2006/2007). The government holds 50% of shares in the largest diamond
company; and the Ministry of Minerals and Water Resources has direct responsibility
for natural resource regulation and management.
• Anti-corruption policies are essential to a fair and transparent distribution of
resource benefits.
If Tanzania wants to replicate this, it should start with good governance policies.

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CONCLUSION
When we look back and think about why Tanzania has not become as
competitive as Botswana, it seems that the problem is not in the amount of royalties,
macroeconomic factors or fiscal policies. They all trace back to the way the
government operates. The success of the tax reforms and revenue distribution is
supported by the guarantees of the natural development law. Any successful
development is guaranteed through a dialogue of the opposing parties. Truth is born
in an argument. Botswana has secured this through civil liberties and rights of the
people to question and challenge the actions of the government. Unfortunately, this is
absent in Tanzania, and no reforms will help the economy unless the laws are
implemented in tax revenue collection and distribution. The problems mentioned in
the Competitiveness Report can be eliminated once strict rules are in place directing
the use of the government budget.

Basically, Tanzania has a monopoly on the rare gemstone, and it could charge
the companies any reasonable amount of royalties. However, new companies may
consider that mining tanzanite is the same as mining gold and diamonds. Then, the
government does not have the monopolistic power. In the case of Tanzanite One,
which already established operations and invested millions of dollars into the mines,
it would be reasonable to impose applicable taxes, which were pardoned in the last
decade. If the government increased royalties and taxes in the new mining contracts,
coupled with a stricter tax revenue distribution, the impact of this FDI could truly
bring out of poverty those who still believe in the legend of Ayanda.

Update as of April 24, 2010 from Reuters

“Tanzania's parliament has passed a new mining law that increases the rate of
royalty paid on minerals like gold from 3 percent to 4 percent and requires the
government to own a stake in future mining projects. The Mining Act 2010 also
requires mining companies to list on the Dar es Salaam Stock Exchange.

Page 34


As part of the new legislation, Tanzania will not issue new gemstone mining licenses
to foreign companies. Current agreements with foreign mining companies remain
unchanged.

"This bill makes comprehensive provision for prospecting for minerals, mining,
processing and dealing in minerals, for the granting, renewal and termination of
mineral rights, for payment of royalties, fees and other charges and for any other
relevant matters," said part of the legislation.

"The bill is a response to challenges faced and experience gained during 12 years of
the implementation of the Mining Act ... that was enacted in the year 1998."

Gemstones identified by the new law include diamonds, tanzanite, emerald, ruby,
sapphire, turquoise, topaz, and others. Gemstone producer Tanzanite One (TNZ.L),
will not be affected by the new ownership rules.

Mining stakeholders said they will issue a joint statement on the new mining law on
Monday.

"The government will increase revenues a lot thanks to the new mining legislation ...
But, it might send a negative signal to investors and might impact foreign direct
investment. I'm worried on that," Zitto Kabwe, a member of parliament from the
opposition Chadema party told Reuters.

"We were supposed to pass a new law that balances benefits of the people and the
interests of mining companies. The mood of the day in Tanzania is that foreign
investors are stealing from the country and this might not necessarily be the case all
the time."

Government's stake in future mining projects would be determined by the level of
investment in each individual joint venture, Kabwe said.

Tanzania earned $57 million from mining royalties in 2009, but is expected to double
this amount after the new mining law comes into force, he said.

Page 35


"The main highlight of this new legislation is that it makes gemstone mining the
preserve of Tanzanians. It also changes the method of calculating royalties by using
the gross value of minerals instead of the net value," said Kabwe.” (Hardy, 2010)

Only time will show if this new legislation will make it easier for the local people to
extract value from their unique stone or make the issue more controversial. Now that
Tanzania will not issue new gemstone mining licenses to foreign companies, Dr.
Kafumu will have to find new ways to attract FDI in the Minerals and Energy sector.

Page 36


APPENDICES

Table 1. World Tanzanite Production
WORLD TANZANITE PRODUCTION
(in kilograms)

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
e
Tanzania 467 1 094 2 250 1 946 5 228 5 516 5 473 6 461 4 490 3 400 3 400

e
Estimated; estimated data are rounded to no more than two significant digits.

(Thomas R. Yager, Weight of Production of Emeralds, Rubies, Sapphires, and
Tanzanite from 1995 Through 2005, 2008)

Table 2. Production of Tanzanite by Tanzanite One

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(Tanzanite One, 2009)

Table 3. Ease of doing business in Tanzania
Tanzania is ranked 131 out of 183 economies. Singapore is the top ranked economy
in the Ease of Doing Business. Whole Africa receives less FDI that Singapore.

Page 38


Summary of Indicators

Page 39


(Doing Business in Tanzania, 2010)

Page 40


Table 4. Economic contributions by mining companies – general
economic indicators

(A brief on the mineral sector of Tanzania, 2009)

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