By Veneranda Sumila The Citizen Reporter
(email the author)
Posted Monday, July 22 2013 at 08:01
In Summary
The world’s top 40 mining companies by market
capitalisation last year spent $140 billion on capital projects, but the
figure has dropped to $110 billion
Dar es Salaam. Reduced investment in mining could hit Tanzania’s goal of having the sector contribute at least 10 per cent of GDP by 2025.
The industry’s contribution to the national economy currently stands at 3.7 per cent.
PricewaterhouseCoopers (PwC) says in a new report
that big mining companies worldwide have this year decreased their
capital expenditure by 21 per cent. This had led to projects being
deferred or scaled back.
The top 40 mining companies by market
capitalisation last year spent $140 billion on capital projects, but the
figure has dropped to $110 billion this year.
Mr David Tarimo, PwC Partner, Tax Services, told The Citizen
in an exclusive interview that Tanzania was likely to see few or no new
projects in 2013, and existing ones could be scaled back or scrapped
altogether, adding that this could have a great impact on the economy.
He said resource nationalism continues to pose a big threat to mining as governments seek greater shares of profits.
“Governments are now looking at different
strategies to extract a greater share from mining operations. These
strategies range from increasing taxes and royalties to restricting
foreign ownership,” Mr Tarimo said.
This could increase the cost of minerals which could, in turn, reduce economic growth in the jurisdictions that are driving demand for minerals.
The impact of reduced spending had in recent
months been seen through the industry’s value chain after many suppliers
announced lower than expected profits, Mr Tarimo said.
The future is also not very rosy for smaller
miners, who are struggling to raise capital. Even those who are
prepared to pay high interest rates on loans cannot get credit.
“If funding does not improve soon, this will have a dramatic impact on new reserves,” Mr Tarimo said.
The PWC report titled Mine: A Confidence Crisis says being tough with mining companies might look good to stakeholders at home in the short run, but governments should consider a broader view of returns from natural resource development.
