41678 v4. Study on Growth and Environment Links for Preparation of Country Economic Memorandum (CEM) The World Bank

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized The World Bank Study on Growth and Environment Links for Preparation of Country Economic Memorandum (CEM) Part 3: Success Stories of Growth? Mining, Freshwater Fisheries and Tourism Final report May v4

2 The World Bank Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part 3: Success Stories of Growth? Mining, Freshwater Fisheries and Tourism Final report May 2005 Report no. 3 Issue no. 2 Date of issue 18 May 2005 Prepared Checked KEP TNH Approved

3 Table of Contents 1. Introduction 1 2. Mining Questions Arising in the Context of the CEM Data and Definitions Is the Growth Sustainable? Employment and Income Social Impacts Environmental Impacts Conclusion Freshwater Fisheries Questions Arising in the Context of the CEM Trends in Catches and Revenue Contribution to Export Earnings Employment and Income Sustainability Conclusion Tourism Tourist Arrivals and Earnings Contribution to Exports and GDP Tourism Attractions Employment and Income Environmental Impacts Tourism and poverty reduction Recommendations 41 Annexes 42

4 List of Boxes Box 1 Tanzanite production 4 Box 2 Key Figures on Earnings from Tourism 26 Box 3 Figures on tourist visiting Tanzania s National Parks 32 List of Charts Chart 1 Employed persons by employment status 6 Chart 2 Employment in large-scale mining sector and gold production 7 Chart 3 Average monthly income of paid employees by age and selected industries 8 Chart 4 Mean monthly income of self-employed (without employees) by selected industries 2000/01 10 Chart 5 Statutory taxes and other contributions paid to the Government - Commercial mines in Tanzania 12 Chart 6 Income of self-employed women by selected industry, absolute and as ratio to self-employed men, 2000/01 14 Chart 7 Freshwater and marine revenues as share of total fisheries revenues 20 Chart 8 Proportion of freshwater fish export earnings on total exports, Chart 9 Fishermen and boats in freshwater Fisheries, 21 Chart 10 Fishnet production and import Chart 11 Freshwater Fisheries, CPUE and total catch, Chart 12 Number of tourists, Chart 13 Revenue trend from tourism services for Chart 14 Tourism arrivals, tourism revenue and revenue per tourist ratio growth rate for Chart 15 Proportion of tourism earnings to total exports for the year Chart 16 Proportion of tourist earnings to the GDP for the year Chart 17 Proportion of revenue from National Parks to the total tourism revenue for the year Chart 18 Number of foreign visitor to each park from 1991 to Chart 19 TANAPA 2001/2002 Primary Revenue 35 Chart 20 Number of employees in the tourism sector 37 Chart 21 Employment rate in the tourism sector 38 Chart 22 Income from payments by one of four tour operators, Olosokwan Village and Ngorongoro District Council, 1999/ /03 41

5 List of Tables Table 1. Freshwater catches and revenue collected for the year Table 2. Number of fishermen, catches and revenues, Table 3. Tourists arrivals and revenue collected for the year Table 4. Projected Revenue and expenditure by park for 1999/ Table 5. Visits to selected historical sites for the year

6 List of Abbreviations and Acronyms BBC CEM CPUE DFID EIA EIU EMP ENR EU FOB GDP GoT HIV/AIDS IMF ISO LFVRP MSY NBS NCAA NEMC NP NSGRP TANAPA TSH UNIDO URT US$ British Broadcasting Corporation Country Economic Memorandum Catches Per Unit Effort Department for International Development Environmental Impact Assessment Economist Intelligence Unit Environmental Management Plan Environment and Natural Resources European Union Free On Board Gross Domestic Product Government of Tanzania Human Immunodeficiency Virus/Acquired Immunodeficiency Syndrome International Monetary Fund International Standards Organisation Lake Victoria Fisheries Research Project Maximum Sustainable Yield National Bureau of Statistics Ngorongoro Conservation Area Authority National Environment Management Council Nile Perch National Strategy for Growth and Poverty Reduction Tanzania s National Parks Tanzania Shilling United Nations Industrial Development Organisation United Republic of Tanzania United States Dollar

7 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part Introduction This paper presents Part 3 of a report on growth and environmental links commissioned by the World Bank to serve as an input to the Country Economic Memorandum (CEM), which is currently being prepared. The Terms of Reference for the assignment are provided in Annex 1 to Part 1 of the report. Environment and Natural Resources (ENR) are discussed in the CEM in the context of the analysis of Mining (mainly gold), Fisheries and Tourism as the main drivers of economic growth. The focus of this report is to look beyond the direct economic implications of recent growth in these sectors, and draw attention to the wider implications and externalities. For example, whereas Mining no doubt features as one of the growth poles for the Tanzanian economy and the export sector, the recent growth has not been a strong driver of local employment. Moreover, as this report will argue, the consolidation of large-scale Mining activities may have serious consequences for the environment as well as the wider social infrastructure of the communities affected by Mining activities. Likewise, the report points to trade-offs associated with recent growth in the other focus sectors. There are indications for example that significant growth in freshwater Fisheries is unsustainable. The rapid growth in the Tourism sector may also have negative implications for wildlife and protected areas. This report is based on a secondary data analysis. The sources of information are statistics from the relevant line ministries, the National Bureau of Statistics, the Bank of Tanzania and various books and scholarly literature. The examined literature is contained in Annex 3. The report is structured as follows: Chapter 1 introduces the subject and the methodology. Chapters 2 to 4 describe recent growth performance in the respective sectors and analyse the wider implications of these growth stories. Chapter 2 focuses on Mining, 3 on Fisheries, and 4 on Tourism. Chapter 5 summarises and concludes the analysis.

8 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part Mining Tanzania is rich in mineral resources. In recent years, the mineral industry has produced copper, gold, silver, and rolled steep products, and such industrial minerals as calcite, diamond and other gemstones, gypsum, phosphate rock, salt, silica sand, and soda ash. Deposits of cobalt, copper, iron ore, natural gas, nickel, and titanium are also known to occur in Tanzania. In strictly economic terms, mineral resources are probably the most important natural resource in Tanzania. The Mining sector in Tanzania mainland grew by 27.4% in 1998 as a reflection of massive foreign investment in the large-scale Mining sector. In subsequent years, growth has been lower, but still remains double digit. Chart A in Annex 1 demonstrates that growth in the Mining sector has been far higher than what has been observed in the main sector of the economy, Agriculture. The growth in the sector reflects a significant increase in the annual production of gold in the large-scale Mining sector (see Chart B in Annex 1) that has, following the liberalisation of the sector in the late 1990s, increased to a level of more than 45,000 kg in 2003 (EIU, 2004: 30). The growth in gold production has led to a significant increase in gold exports, which, as Chart C in Annex 1 describes, has triggered a corresponding increase in total export earnings for Tanzania. However, Mining as a sector is still small, it accounts for only 1.9 percent of GDP (2003), up from a level of 1.4 percent in 1995 (IMF, 2004). Hence, despite its rapid growth, general GDP growth has not been significantly affected by the growth in the Mining sector (see Chart A in Annex 1). This chapter will first explain a few questions arising in the context of the discussion of the gold boom in the CEM. Then it will provide a brief explanation of the methodology. Then the question of sustainability is investigated, followed by the employment effect of the gold boom. This is followed by a paragraph each on the environment and social impacts. The last section summarizes conclusions Questions Arising in the Context of the CEM As the draft CEM points out under the heading Gold and Foreign Aid Boom or Curse?, the impact of these two developments [gold production and exports and foreign aid inflows, red.] on economic growth and on income-poverty (...),

9 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part 3 3 is ambiguous (p.14). Whereas the CEM explains this ambiguity with the Dutch disease effect mainly in relation to the balance of payment, a number of other important questions are left out in the current draft. These are: Given that gold is a non-renewable natural resource and the existing reserves are exhaustible, how long will the country s reserves last? Or put differently, can the current growth rates be sustained? Has the growth in the Mining sector translated into increased employment opportunities in the Mining sector per se and in the local communities? If so, what kind of employment has been triggered? What are the environmental implications of the growth in the Mining sector? What are the wider social implications of the growth in the Mining sector for HIV/AIDS and gender in the local communities? 2.2. Data and Definitions Data availability is a constraint to the detailed analysis of the four questions above due to the following reasons: The growth and employment data, generally, does not distinguish between small- and large-scale Mining operators and so makes it impossible to attribute growth effects to either sub-sector. To compensate for this lack of data a number of proxies will be used; Growth and employment data is not available at a sufficiently low geographical aggregation level. Accordingly, it is difficult to observe and compare growth patterns in Mining areas with performance in nonmining areas; For some indicators, only limited time-series data is available, which makes it difficult to determine the effects of the introduction of largescale Mining in Tanzania; and Very limited reliable data is available on the wider environmental and social aspects of Mining. Therefore, this chapter cannot conclude authoritatively on the raised questions. The purpose is mainly to assess the existing data and literature with a view to make provisional findings and conclusions. Further data collection and analysis will be required to corroborate the findings. The Mining sector will for the purposes of this paper include all activities directly related to mineral Mining but will focus primarily on gold, which accounts for the bulk of the sector s export earnings. Where detailed data is not available for mineral Mining sector, aggregate data for the Mining and quarrying sector will be used as a proxy. A key distinction will be made between large- and small-scale operators with the latter category encompassing artisanal miners. The working definitions, based on Mwaipopo et al. (2004), are as follows:

10 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part 3 4 Large-scale operators are typically foreign owned capital-intensive operations applying sophisticated imported equipment; and Small-scale operators, by contrast, are labour-intensive operations, domestically owned and applying less sophisticated equipment. Small-scale miners include a wide spectrum of users which differ by degree of capitalintensity, but they can be grouped into two main areas: - Licensed operators applying some measure of sophisticated equipment and a limited workforce; and - Artisanal miners, labour-intensive operations applying very basic equipment, and typically operating without license and employees. Hence, artisanal miners typically operate in the informal sector Is the Growth Sustainable? Mineral resources are non-renewable natural resources. Since their stocks are exhaustible, the question is, whether the Mining sector will remain a growth pole for the economy in the future. There is no data or authoritative estimates on the size of mineral reserves in the country. Hence the above question cannot be clearly answered. Even if new stock are discovered, the question is, whether these can be extracted on a profitable basis. The review of literature provides the following estimates or believes on mineral stocks and the related question of sustainability of growth in the sector. There are some indications that for example existing tanzanite reserves are approaching a stage where the remaining resources are less accessible as they require increasingly difficult Mining operations (see text box below). Tanzania s production of tsavorite nearly ceased in late 2003 (Yager 2003:31.4). Box 1 Tanzanite production In Merelani (Arusha Region), the world s only source of tanzanite, officially reported production of tanzanite fell to 4,490 kg in 2003 from 6,461 kg in The value of tanzanite produced in 2003 amounted to US$13.14 million. From 2001 to 2003, tanzanite accounted for 80 percent of the value of domestic gemstone production. According to the Ministry of Energy and Minerals, the decrease in output in 2003 may have been due to falling tanzanite prices in 2002 or increasingly difficult Mining conditions. Mineshafts are getting deeper and more difficult to reach. (Source: Yager, 2003) Gold reserves are abundant along the western side of the Rift Valley in the regions of Mwanza, Mara, Shinyanga and Tabora. Van Campenhout (2002:5) suggests that as much as roughly 130m tons of gold reserves are still available in Tanzania. The same author argues that the growth observed so far reflects development of mineral projects in the known geology, and he considers it questionable whether investments will be made in more remote locations. The NSGRP is rather optimistic that improved growth in the Mining sector can be realised over the next five years, provided that productivity improvements in

11 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part 3 5 the sector will be undertaken (p.33). Similarly, Mwalyosi (2004) believes that the sector will continue to see high growth rates and with time will grow to account for 10 percent of GDP (compared to the current level of 1.9%). It is however not clear what this estimate is based on. According to the estimates of the Economist Intelligence Unit, growth is expected to slow down in the next years. They base their estimate on the expectation that new investments are not expected to increase significantly and so growth in the Mining sector will primarily be driven by operations in existing mines Employment and Income This paragraph aims at investigating the contribution of the Mining sector to poverty reduction via the creation of employment. The question is whether and to what extent the growth in the Mining sector has translated into an increased level of employment in Tanzania. Secondly, the aim is to assess what type of employment has been created. The analysis includes both, employment effects within the Mining sector itself, and in the local communities surrounding the Mining sites. Overview Most of the mineral resources of Tanzania, in particular gold and gemstones, are exported in unprocessed form, hence associated in-country employment effects are low. As the US Geological mineral Survey quotes more than 98% of the gemstones exported from Tanzania were shipped in rough form to foreign cutting and polishing centres (31.4). Overall, employment in the Tanzanian Mining sector accounts for only 0.2 percent of total employment, corresponding to roughly 15,500 men and 13,800 female (National Bureau of Statistics, 2000/01). Thus the sector s impact on the absolute level of employment is limited. As Chart 1 below demonstrates, the structure of employment in the Mining (and quarry) sector differs significantly from the general picture. Hence, fourfifths of those employed in the sector are self-employed without employees, a proportion far higher than the national average. The national composition of employment is however highly skewed towards persons owning own farms or shamba, but even when compared to other non-agricultural sectors such as construction, it becomes evident that the composition of the Mining sector is unique (see Chart 1 below). The high proportion of self-employed in the Mining sectors is arguably indicative of the high proportion of artisanal miners working in the sector. The remaining fifth of the employed persons in the Mining sector are paid employees, typically working for large-scale Mining companies and the more advanced small-scale companies.

12 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part 3 6 Chart 1 Employed persons by employment status Percentage Paid employee Self-employed with employee Self-employed without employee Unpaid family helper (nonagric) On own farm or shamba Mining Construction All sectors (Source: National Bureau of Statistics) Employment in the Large-Scale Mining Sector The increase in gold production originates primarily from six foreign owned large-scale Mining companies, which are listed in Table A in Annex 2. Smallscale operators, which have traditionally dominated the Mining sector, account by contrast for only a small part of total output. Although the large-scale sector is the main growth engine, the majority of scholars attribute limited local employment creation potential to it. One reason provided is the capital-intensive nature of production of the large-scale mines (Kulindwa et al., 2003: 111; Van Campenhout, 2002: 10). Capital investment corresponding to US$1bn has been exported by foreign Mining firms for use in Tanzanian large-scale mines (Mwalyosi, 2004). Another possible reason is that the recruitment of labour for large-scale mines takes place outside the locality (see for example Mwalyosi, 2004). In addition, Mwalyosi emphasizes that Mining employment fluctuates with production levels and hence is not a source of stable, long-term employment. The statistical analysis suggests a positive relationship between large-scale Mining and employment (see Chart 2 below). The correlation coefficient between output from gold mines and employment in large-scale mines is However, whereas this positive relationship applies to the period , it breaks down in the last few years, notably from 2002 to 2003 where gold production has continued to rise, while employment has dropped quite significantly. It still needs to be established whether this recent fall in employment is a single outlier or indicative of a new trend.

13 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part 3 7 Chart 2 Employment in large-scale mining sector and gold production Employment Kg gold Employment of Tanzanians by large-scale mines Gold production (Note: Pearson correlation coefficient Source: Data from Ministry of Energy and Minerals) The question of the type of employment created is difficult to answer. Whereas the number of people employed in the large-scale Mining sector has clearly increased since 1997, the level of remuneration and type of employment has not been specified in the available statistics. Mwalyosi notes that over 50% of Mining employees are originally farmers or civil servants, which, he suggests, indicates that those employed in the large-scale Mining sector are not recruited locally. This may be true for the civil servants who typically are strongly represented in urban areas away from the Mining activities, but it cannot be excluded that farmers are recruited locally. As Chart 3 below demonstrates, the pay-scale for paid employees in the Mining sector (here used as a proxy for employees in the large-scale Mining sector) differs significantly from other sectors of the economy: Whereas Mining and quarrying is one the best-paid sectors for paid employees below the age of 35, the picture is completely the opposite for employees above 34, who earn significantly less than their younger colleagues and their contemporaries in other sectors. This inverse relationship between pay and age is only valid in the Mining sector. It may be explained by the facts that a) the Mining industry primarily demands strong and fit workers, and b) the Mining industry is a young industry so the majority of the (presumably) young workers recruited at the outset are still below 35 years of age.

14 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part 3 8 Chart 3 Average monthly income of paid employees by age and selected industries Agriculture Mining and Quarry Construction Total Transport Manufacture Tsh (Source: National Bureau of Statistics, 2001) Age Age Age Safety and security at the mines is an issue of on-going debate in Tanzania. In early 2003, the Government instituted new measured to regulate increased security of tanzanite Mining, which is undertaken to a large extent by small-scale miners under increasingly difficult Mining conditions. The increased emphasis on mine safety followed a fatal accident in June 2002 that temporarily halted tanzanite production (Yager 2003: 31.4). In summary, the employment or income related contribution to poverty reduction of the Mining sector is rated as limited by the authors of this paper. Although the large-scale Mining sector created a significant number of employment opportunities in the first years of operation, there is now some indication that the rate of employment has started to decrease, as the sector grows increasingly capital-intensive. In addition, employment is usually not long-term as the physical demands of the jobs impose age-limits. Employment in the small-scale Mining sector The state monopoly of the Mining industry of the 70s ended in the late 1980s opening the way for any citizen to register claims and sell minerals. In consequence, the number of small-scale miners grew rapidly. The growth was further boosted in the early 1990s with the Government permitting exporters to use their proceeds for financing imported goods, equipment and spare parts. Consequently, the number of people employed in small-scale Mining operations surpassed 500,000 by 1995 (Philips et al., 2001).

15 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part 3 9 Many observers argue that the subsequent introduction and consolidation of large-scale Mining operations in Tanzania has had negative implications for employment in the small-scale sector, both in terms of number of jobs and the level of pay. The two following hypotheses have been formulated: The growth in large-scale Mining has crowded out small-scale miners, particularly artisanal miners; Following increased competition from capital-intensive large-scale operators, the return (pay) to small-scale miners has decreased significantly. With regard to the first hypothesis, Kulindwa et al. (2003: 86) argue that there is a trade off between the livelihoods requirements of artisanal miners on the one hand and the economic objectives of large-scale operators on the other. Likewise, Phillips et al. (2001) argue that the level of employment in the artisanal Mining sector has dropped since the peak in the 1990s as a result of the influx of foreign large-scale Mining operations. To substantiate this hypothesis Kulindwa et al. describe how large-scale operators, operating within the limits of the Government s Mining policy, mobilise support from local government authorities with a view to buy out small-scale operators. This is confirmed by similar anecdotal evidence from Bulyanhulu, where the Canadian operator Barrick allegedly forced small-scale artisanal miners to leave after buying the rights to the area (BBC, 2001). However, there is also evidence to the contrary, i.e. that large-scale miners may contribute to keeping small-scale operators in business. One example is the large-scale operator Meremeta, which has entered into agreements with a number of small-scale operators providing them with cheap equipment (Kulindwa et al. 2003: 88) in return for agreements that the small-scale miners sell their production exclusively to Meremata. Very little reliable data exists to document employment levels in the smallscale sector: A large proportion of small-scale miners, notably artisanal miners, are employed in the informal sector and therefore not necessarily accounted for in official statistics. The World Bank (2001: 1) cites estimates of around 500,000 people employed in the artisanal Mining sector as of 2001 and the employment level is therefore roughly the same as in the mid 1990s. Likewise, Mwaipopo et al. (2004: 113) estimate the number of artisanal miners in Tanzania to be around 600,000 in By contrast official Government statistics from NBS (2001) estimate the number of people employed in the informal sector with Mining and quarrying as a dominant activity (an alternative proxy for the number of people employed in the small-scale sector) to approximately 20,000 people. Still, this proxy grossly underestimates the number of people employed in the small-scale sector since it a) explicitly excludes those working in the formal small-scale sector, and b) arguably only captures a small fraction of those employed in the informal sector, since informal operations by definition are difficult to comprehensively

16 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part 3 10 trace and estimate. Hence, the evidence is inconclusive and it cannot be ruled out that the largescale Mining sector has in fact both positive and negative effects on the level of employment in the small-scale sector by a) crowding out some small-scale operators while b) keeping others in business through contribution agreements or similar instruments and finally c) leaving some unaffected. With regard to the type of employment created, some authors argue that the small-scale sector has provided very significant income opportunities to the rural population in Tanzania. Phillips et al. (2001) for example point to evidence that small-scale miners at one point had an income six times higher than agricultural workers. In consequence, they see the growth in the small-scale Mining sector as a very significant contribution to poverty reduction in the concerned areas. Recent data from NBS (2000/01) indicate however that the mean monthly income of self-employed in the Mining industry (here used as a proxy for smallscale workers) is now among the lowest in the country, even lower than the income for the self-employed in the agricultural sector. This is clearly demonstrated in Chart 4 below, where mean income for self-employed (with no employees) are compared across industries. Chart 4 Mean monthly income of self-employed (without employees) by selected industries 2000/ Tsh Mining and Quarry Trade Manufacture Total Agriculture, Forestry and Fishing Transport Construction (Source: National Bureau of Statistics, 2001) The data does not take into account that Mining typically is a seasonal activity and the mean income for months actually worked may therefore be somewhat higher. Also, the data covers a wide income disparity between men working as miners (higher paid), and women, who typically work in (lower paid) auxiliary. Self-employed women in the Mining industry earn only about a third of their

17 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part 3 11 male counterparts (see paragraph 2.5 below). In consequence, there is some evidence that the returns to small-scale miners have dropped concurrently to the introduction and consolidation of large-scale operators. Although this does not prove causality it may be indicative thereof. In summary, the net effect of the introduction of large scale Mining on the number of sustainable jobs in the small-scale sector is believed to be negative: The level of people employed as small-scale miners has at best remained constant, but the sector now features the lowest returns for self-employed in Tanzania. Employment effects on local communities Apart from the direct employment benefits, large-scale Mining firm can create employment more indirectly through infrastructure investments, in particular in the water and roads sector. There may be infrastructure investments of large Mining firms (roads, water, power) in the surrounding area, which in turn benefit the wider community. For example, EIU (2004: 31) observes that rural communities have benefited to a degree from the development of gold mines as companies have improved rural roads and linked electricity facilities to the national grid. However, no comprehensive analyses have been made on the sector s overall impact on the level of infrastructure in the Mining communities and the employment effects triggered through this investment. In fact, most of the capital equipment is imported from abroad and the minerals, once extracted, are generally exported without any significant in-country processing. Likewise, most of the processes linked to exploration of potential reserves rely on foreign laboratories. Consequently, wider employment effects are limited to mainly services industries, such as transport, food and, on a less positive note, prostitution. These observations notwithstanding, the Mining sector s contribution to the Tanzanian economy has increased significantly over the last years. Chart 5 below traces the level of statutory taxes and contributions paid by commercial miners to the Government in the period

18 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part 3 12 Chart 5 Statutory taxes and other contributions paid to the Government - Commercial mines in Tanzania US$ ' (Source: Chamber of Miners, Hence, there is a clear positive association between the rise in gold production and the increase in revenues received by the Government from the commercial miners. It remains to be established whether part of these funds has been reinvested in communities adjacent to mining operations to offset any disadvantages. Still, it is clear that there is a significant and increasing pool of funds, which the Government may legitimately consider using to the benefit of the Mining communities. Moreover, some politicians, including President Mkapa, have argued that tax incentives have been too generous towards foreign investors and so, they argues, a tax raise could be justified Social Impacts The social impacts of large Mining operations on the surrounding communities can be both positive and negative. Some authors (see for example Kulindwa et al., 2003: 81) describe Mining operations as a successful vehicle for social integration, arguing that Mining operations attract labour from all over the country. Mining communities are therefore typically much more diverse than a typical Tanzanian village. Moreover, some Mining firms have launched specific social investment programmes (typically in health or education) to increase the goodwill of the neighbouring communities. Barrick Gold Corporation, which runs the Bulyanhulu mine through its subsidiary Kahama Mining Corporation, has for example established a fund to support various charitable endeavours, which claims to be responsive to local needs and priorities (Barrick Gold Corporation, 2005).

19 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part 3 13 Some of the negative social impacts on local communities associated with the operations of large Mining operations are related to gender and health, in particular HIV/AIDS, which will be explored further below. In addition, child labour has been voiced as a particular concern in the Mining sector (see for example GoT, 2005: 10). Kulindwa et al. (2003: 95) argue that this essentially reflects the high level of poverty in the Mining areas, which in turn forces parents to send their children to work the mines. According to data collected by George (2003) in small- and large-scale Mining operations in the Geita District, 12.5 percent of the workforce were children. Moreover, according to the data from George, child labour is primarily a concern in small-scale Mining operations, and, by contrast, very infrequent in large-scale mines (George, 2003: 76). HIV/AIDS As noted in Drasch and Boese-O Reilly (2004) small-scale miners constitute a high-risk group for spreading HIV/AIDS since they are mobile men with money. Kulindwa et al. (2003: 94) further add that the risk of spread of HIV/AIDS in Mining communities is high due to lack of awareness, a carefree attitude, widespread prostitution, and lack of access to quality health services. The question is then whether the risk of getting HIV/AIDS is significantly higher in Mining communities than elsewhere in Tanzania. Arguably, HIV/AIDS infection rates are equally high or higher in many other sectors. Road construction projects for example are also associated with high infection rates. Unfortunately, very little reliable data is available on the number of HIV/AIDS affected living in Mining communities and the hypothesis is therefore difficult to test. According, to George s analysis of local communities in Geita District, HIV/AIDS is at least perceived to be much more common in Mining communities than elsewhere: Hence, 37.8% of those living in the sampled Mining communities mentioned HIV/AIDS as a common disease, compared to 18.9% in the sampled non-mining communities (George, 2003: 75). In the context of a wider research project on artisanal Mining in Tanzania, Mwaipopo et al. (2004: 94) have conducted a study to identify and rank threats to households in Mining communities. HIV/AIDS does not come out as a significant threat, at least not when compared to other threats such as food shortage, legal threats, Mining prices etc. Still, this does not imply that HIV/AIDS should be neglected in Mining communities; only that Mining households have more pressing and immediate concerns to deal with in their daily lives. Gender As noted by UNIDO (2001) a high number of women are involved in smallscale Mining activities worldwide. This is also the case in Tanzania, especially

20 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part 3 14 so in the informal Mining sector. According to figures from the National Bureau of Statistics, the majority (60%) of self-employed workers without employees in the Mining sector (here used as proxy for employment in small-scale Mining sector) are in fact women. Additional NBS data on persons employed in the informal sector confirms this picture: Approximately 13,600 women are employed in the informal sector with Mining and quarrying as a main activity compared to only 8,380 men (NBS, 2001: 62). Still, only a small proportion of these women are actually employed in Mining activities per se. According to information revealed during interviews with officials from the Ministry of Energy and Minerals, women mostly work in related service sectors. Chart 6 Income of self-employed women by selected industry, absolute and as ratio to self-employed men, 2000/01 Tsh Mining and Quarry Trade Manufacture Total Agriculture, Forestry and Fishing Transport Construction 1 0 Ratio to mean income of self-employed men Female income Ratio to male income (Source: National Bureau of Statistics, 2001) As Chart 6 above demonstrates, the salary of self-employed women in the Mining sector is very low compared to men. It is in fact only a third of that of their male colleagues, a lower proportion than in any other industry listed in the chart. This supports the assumption that women work mainly in lower-paid jobs, providing services to the small-scale Mining industry. The question is then why so few women work as miners per se. Mutagwaba et al. (1997) suggest for example that women face difficulties entering the Mining sector due to cultural norms and the nature of the equipment applied in small-scale Mining, which requires hard physical labour. According to the World Bank (2001: 2) women miners are also facing obstacles due to lack of formal education, lack of access to collaterals for securing loans, and time constraints Environmental Impacts The NSGRP (GoT, 2005: 7) emphasises that serious concerns have been raised regarding the Mining sector s impact on the environment. Negative environ-

21 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part 3 15 mental impacts associated with Mining activities has been documented in several studies (see for example Kulindwa et al., 2003: 76-77; Mwaipopo et al, 2004: 50; Van Straaten, 2000; Appleton et al., 2004; Drasch and Boese- O Reilly, 2004). The concerns generally relate to both large-scale as well as small-scale Mining. A 2001 Government Commission on The Legal Framework for the Development of the Mining Industry stated for example that while it is true that smallscale Mining endangers the environment, it is also true that large scale Mining is even more damaging (Law Reform Commission, 2001: 20). This paper does not further discuss environmental impacts of small-scale Mining. This is due to the focus on the environmental trade-offs related to the growth in the sector, which is based on the gold production through large-scale operations. There are a number of studies summarizing the environmental impacts of artisanal Mining, which are mainly, mercury pollution through inhalation of vapour pollution of surrounding water bodies as well as abandonment of open pit mines and associated effects on the surrounding landscape (Kulindwa et al., 2003: 76-77; Mwaipopo et al, 2004: 50; Van Straaten (2000); Appleton et al. (2004); Drasch and Boese-O Reilly (2004)). There are a number of environmental issues associated with large-scale Mining activities. Many of the environmental concerns are linked to the breaking and exploding of rocks, which has been reported as a major nuisance to the local environment. The particular environmental issues concern inter alia land erosion and degradation, air pollution, water pollution, and noise pollution. George (2003) has traced and documented all of these effects in his Geita District survey. Dust pollution in the area around the Geita Gold Mine has for example caused pollution of drinking water sources of a nearby village. It has therefore been necessary for the Mining operator to supply tap water to the local community (George, 2003: 71). Moreover, both George (2003: 72) and Kulindwa et al. (2003:77) have pointed to deforestation as a major issue. Allegedly, large-scale Mining operations have in many cases made significant land clearance necessary. George reports from Geita District that the Geita Gold Mine large-scale operation has acquired 110 square kilometres in the Geita Forest Reserve, of which a significant proportion has been cleared for plant, housing and infrastructure (2003: 73). Still, the conclusions are mainly based on case-studies and anecdotal evidence and should therefore be verified by more comprehensive studies. The scientific evidence notwithstanding, there is no doubt that Mining activities are at least perceived as having serious negative impacts on the environment. The Government has integrated several environmental safeguards in its policies, notably the 1998 Mining Act, which calls for Environmental Management Plans (EMP) and Impact Assessments (EIA) as a condition for Special Mining Licenses.The EMP has to include inter alia proposals for prevention of pollu-

22 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part 3 16 tion, waste treatment, protection and reclamation of land and water resources and for eliminating or reducing adverse environmental effects. According to preliminary information from Ministry of Energy and Mineral officials, 5 EIAs and EMPs (acceptable to the Ministry) have to date been prepared by large-scale operators and approximately 10 by medium scale operators. As the 2001 Law Reform Commission remarks, implementation of these safeguards need to be more consistent and should involve NEMC to have an objective third party assisting the line Ministry. Large-scale companies are also reacting to the general perception that Mining activities are environmentally dangerous. Geita Gold Mine, for example, was recently awarded ISO14001 standard for environmental management, a firstever for a Tanzania-based Mining operation. Still, it is worth noting that award of ISO14001 merely implies compliance with the host country s environmental legislation and standards, which in the case of Tanzania has suffered form limited coverage and enforcement. In conclusion, award of ISO14001 does not necessarily imply environmental improvement in a Tanzanian context Conclusion It is beyond the scope of this analysis to fully quantify the direct and indirect benefits and costs of the introduction of large-scale Mining operations in Tanzania. Based on the evidence surveyed in this report, the Mining sector seems to have had limited influence on poverty reduction in the local economy. Employment in the large-scale Mining sector is limited although especially younger employees may receive significant salaries. The majority of those employed in the Mining sector operate, mostly as self-employed, in the small-scale sector, typically as artisanal miners. This category receives very low returns, especially when one considers the hardship associated with this kind of employment. It seems furthermore that an increasing income disparity is emerging between those employed in the small-scale and large-scale Mining sector. To the extent that those recruited by the large-scale Mining-sector are recruited outside the local community, the local community is thus restricted to opt for poorly paid employment opportunities in the small-scale sector. Large-scale Mining may have positive effects for local communities through the improvement of basic infrastructure. There is however no indication that the expansion in the Mining sector triggers significant growth in the local economy, since Mining operations generally are detached from local supply chains and therefore primarily create employment in the services sector.

23 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part 3 17 The NSGRP emphasizes that policies should be designed so that benefits from high-growth sectors are transmitted to the poor in form of better livelihoods opportunities, e.g. supporting supply linkages with local producers. The question is however how to create such supply linkages. Tanzania would need to improve its human capacity and capital stock so that value-added processing can increasingly take place within the country. Mining poses a number of threats and possibilities to the local communities as well as to the miners themselves. The nature and extent of these threats and opportunities cannot be assessed in detail due to lack of reliable data. There are, however indications of a number of negative social effects, notably child labour, HIV/AIDS, and gender imbalances. Most of these problems have been observed through case studies, which does not allow making conclusions about the Mining sector in general. Finally, the evidence provided about the environmental effects of large-scale Mining suggest that Mining communities may suffer a number of severe effects, spanning from direct and observable noise and erosion, to longer term pollution of air, water and soil, which in turn may have serious health consequences. Still, the evidence does not allow for extrapolation and more rigid, comprehensive analysis is required to have a better idea of the environmental implications of large-scale Mining in Tanzania.

24 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part Freshwater Fisheries 3.1. Questions Arising in the Context of the CEM Fisheries from freshwater resources have, like Mining and Tourism, developed considerably over the past decade to become a main driver of economic growth and a significant source of export revenue for Tanzania. This sets the freshwater Fisheries sector apart from the marine Fisheries sector, which, as discussed in Part 2 of this report, still has to develop into a major driver of growth in Tanzania. Fisheries are based on a renewable resource, which makes the question of sustainability pertinent, especially for Lake fisheries. As this Chapter will show, there are already indications that fisk stocks in Lake Victoria are decreasing. Although total catch is presently stagnant, the number of fishing boats has increased and the Catch per unit Efforts (CPUE) has been decreasing in recent years. Moreover, while Fisheries are a success story in pure economic terms, this is not necessarily so in terms of poverty reduction. The impact on income poverty through increased local employment in the Fisheries industry around the lakes may well have been set-off through a negative impact on livelihoods of artisanal fisherfolk and on nutrition of communities whose livelihoods are based on the lake. Tanzania features water bodies corresponding to approximately 945,000 square kilometres. Freshwater resources, notably Lake Victoria, Lake Tanganyika and Lake Nyasa, make up only five percent of this area, but yield about 85 percent of all fish production. For that reason, this chapter will focus primarily on freshwater fishery Trends in Catches and Revenue The freshwater bodies of Tanzania harbour a variety of fish, including Nile perch, Sardine, Tilapia and Catfish. The bulk of catch comes from lakes Victoria and Tanganyika, together yielding 85 percent of inland production. Other potentially important water bodies are lake Rukwa, Lake Nyasa, Mtera dam and Nyumba ya Mungu.

25 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part 3 19 The annual catch of Tanzania freshwater fishery over the last ten years has increased from 294,782 tons in 1993 to more than 300,000 tons in 2003 with most of the increase coming from the Lake Victoria Nile Perch yield. The corresponding revenues have increased from Tsh.31 million in 1993 to Tsh.141 million in 2003 as indicated in Table 1 below. Table 1. Freshwater catches and revenue collected for the year Year Freshwater catch (tons) Freshwater catch value (Tsh) , ,238, , ,949, , ,805, , ,200, , ,265, , ,486, , ,018, , ,500, , ,108, , ,771, , ,073, (Source: URT, 2004c) Chart 7 shows recent trends in revenue for freshwater and marine Fisheries as a proportion of total Fisheries revenue. Currently revenue from freshwater Fisheries accounts to approximately 80 percent of total revenue from the sector. The proportion was roughly the same at the beginning of the 1990s, but was somewhat lower, around 60 percent during the mid-late 1990s. All of the above statistics exclude fish for own consumption (subsistence), which may account for about 10 percent of total catch (Kulindwa 2001).

26 Study on Growth and Environment Links for Preparation of Country Economic Memorandum Part 3 20 Chart 7 Freshwater and marine revenues as share of total fisheries revenues (Source GoT 2004) Proportion of freshwater catch value on total revenue Proportion of marine catch value on total revenue 3.3. Contribution to Export Earnings The proportion of fishery exports to total exports has been increasing from 4.8 percent in 1996 to about 7.1 percent in Of this proportion, freshwater fish exports to total exports has been between 4 percent and 5.6 percent between 1996 and 2003 as indicated in Chart 8 below. Of the total revenue generated by fish exports between 1996 and 2003, an average of approximately 80 percent has been accounted for by NP exports. The NP export trade figures may furthermore be underestimated. According to Kulindwa (2001) exporters have quoted similar FOB prices for both frozen and chilled fish fillet, while the actual price for the chilled was higher. Hence, the Government may loose additional revenue due to underreporting of export prices. Chart 8 Proportion of freshwater fish export earnings on total exports, Proportion in % Years Proportion of Freshwater Fish exports on Total exports (Source GoT 2004)