McGill –ISID Resources Extraction Conference

Public-Private Partnerships for Sustainable Development: Toward a Framework for Resource Extraction Industries.

Hotel Omni Mont-Royal

March 29th

Keynote Address by Lawrence KegoMasha

Partner - Ishengoma, Karume, Masha and Magai (Advocates)

Ladies and Gentlemen, Distinguished Guests Good Afternoon.

As you have been told my name is Lawrence Masha and I am from Tanzania.

The subject at hand today is one of great personal interest to me because I had the arduous task of dealing with the relationship between large mining companies and the communities that surround them at a very close and personal level for five years straight. Right now I am pleased to say that I have the pleasure of reminiscing and not dealing with this topic on a day to day basis, as it gave me many sleepless nights and it has no easy fix. I am sure that this is not the first such conference dealing with this topic , nor will it be the last, especially during this day and age of heightened resource nationalism.

Today, I shall speak to you from my personal experience. It is a bit daunting to speak to this esteemed audience of experts in the extractive industries, even moreso because I am not an expert, I simply had the misfortune of being in the wrong place at the wrong time. For five years I lived the life of trying to balance the interests of large scale mining companies and the communities that surrounded them.

There are two things I would like to stress from the outset:

  1. Firstly, we should all remember that we are discussing a unique industry, the extractive industry. It is unique in that whereas it is highly capital intensive, it is romanticized by the very nature of the resource….. Gold, Diamonds, Tanzanite etc…

Whereas the Companies …. (Management and shareholders alike) are looking at the bottom line, the communities that surround the mines only see the extracted resource and its value on the international markets, without a clear understanding of the costs involved in the extractive process, especially when it was a resource mined artisinally in the area for centuries prior to the presence of the large scale mine.

  1. Secondly, and I believe most importantly it should be noted , or at least let me say that I believe that it is possible for large scale mines and the communities that surround them to live in a harmonious and sustainable environment . Harmony at a mine site is not impossible!

In the year 2006, I was plucked from the comfort of private legal practice and thrown into the world of policy making totally unexpectedly to become Deputy Minister for Energy and Minerals for the United Republic of Tanzania. Although I had willingly campaigned for my President and had run for Parliament in Mwanza , Tanzania’s second largest city, little did I expect that at the young age of 35 I would be appointed a Deputy Minister and not just any deputy minister , Deputy Minister of Energy and Minerals.

My President had campaigned on a platform whereby if elected, the government would review the Country’s mining legislation as well as mining contracts to facilitate a “win – win” situation. It was the perception at the time by the public at large within Tanzania that mining companies were unfairly profiting from mining in Tanzania and that the Country at large and the surrounding communities in particular were being irreversibly plundered and raped by the presence of the large scale mines in these areas.

I was assigned by His Excellency Dr. JakayaMrishoKikwete, President of the United Republic of Tanzania to spearhead a review of the mining sector in Tanzania including the terms of the various mining development agreements which were in issue. Somehow with my colleagues we were able to do this and I am pleased to say we did it without me getting any grey hair.

The environment was hostile, especially to me personally. The public did not trust me because they felt that I was too close to the sector. I was one of three local shareholders of Tanzania’s largest Tanzanite mine prior to my becoming deputy minister, I had also been a legal advisor to numerous mining companies prior to my appointment.

The Mining Companies on the other hand, initially felt that I would push them too hard, taking advantage of the years of personal relationships I had forged while working within the sector.

I on the other hand, was determined to do the best that I could to gain the respect of all parties involved.

The matters I had to deal with almost immediately were mine incursions at the North Mara Gold Mine owned by African Barrick Gold (ABG), disputes and undermining at the Tanzanite One Mine in Merelani, General hostility from the surrounding communities and their parliamentarians, hostility from the press and civil society with regard to the mining sector in general.

What I found to be most interesting was the role of the umpire that I almost immediately found myself thrust into. More difficulty so , I was an umpire with a clear interest in the game (I wanted the sector to flourish)! My key players all wanted to be protected by me , the umpire. Mining Companies wanted the comfort from Government that their investments would be protected and assurances that the Government would stand by their side and not change the goal posts.

The Electorate wanted the umpire to protect Tanzania’s natural resource wealth for the people of Tanzania and to ensure that the “poor Tanzanian populous” was protected against the exploitative tendencies of the big mining companies.

Most interesting however was that the fans who had packed the stadium, the NGO’s, Parliamentarians, the press and civil society all wanted the mining companies to lose the gameand their cheers were ever so loudly heard.

As umpire, I was placed between the rock and the proverbial hard place, as a representative of a Government wanting to promote foreign direct investment and to encourage growth withinthe Country’s second largest economic sector, I had to take full cognizance of the views of the electorate or risk my party losing the next election, yet at the same time one did not want to be responsible for killing the goose that was laying the “golden egg”.

Thus as was directed by my President, I had to look for a “win - win” situation; a scenario where the fans at the game would be rooting for both teams equally; a situation where the key players would play with mutual respect; a situation where the umpire could be truly impartial.

After becoming Minister for Home Affairs, my belief in this cause was cemented even further.

How many times could I reasonably be expected to send in a police force to deal with mine incursions or civil unrest surrounding mine sites, before I looked as if I was in charge of a foreign occupying force? Was it sustainable to always use the police as a solution to problems, or was it better to try to determine what the underlying problem was, so as to avoid the tensions between the mines and the surrounding communities? Was it sustainable for the mines and foreign direct investment in general to have a situation where the communities surrounding mines were more like a war zone rather than the stable community environment where one could enjoy working and raising a family.

I often recalled stories from my father about the great MwaduiDaimond Mine in Shinyanga Tanzania. Now, I am not so sure that his stories were fully accurate, but the adoration with which he spoke about the mine evoked a sense of what a mining community should be.

Everyone wanted to work for the mine, everyone wanted to do business with the mine, and most importantly everyone wanted to protect the mine. Its value and the need for its presence were well understood by all members of the community.

During my tenure in Government, I visited numerous mine sites….some at the exploration stage and others at the level of full blown mining. But one visit in particular has stuck to my mind over the years and that was a visit I made in September of 2006 to the Tampakan Copper project in South Catabato in the Philippines.

What impressed me most about this particular project was the approach which was taken by the project promoters , Sagittarius Mines Inc. in relation to the engagement of the community and their desire to have community ownership of the project from its inception. The Company with great foresight invested in community relations from the beginning of their exploration programme. They did this not by building the traditional one off classroom (although they did build a school), but by actually investing in sustainable programmes that would outlive the life of the mine in terms of benefits for the people. Clear thought was put into how best to engage different target groups within the community ----- women, youth etc…

During the exploration programme, the Company invested in an agricultural extension programme so as to teach the local farmers how to farm produce which would be required by the mine were the mine to become operational. The farmers were taught how to produce fresh produce at an export quality standard and were assisted through their local cooperatives to find ready markets for their goods with local supermarket chains thus generating sustainable wealth creation for the people of Tampakan. It was intended that once the mine was fully operational the local farmers would have a ready and captive market , and the mine would not need to source fresh produce from outside the community. The villagers had been given a skill which would forever change their lives.

A local vocational training institute was assisted to develop courses that would train certified technicians who would be issued with recognized diplomas in fields that would be required by the mine were it to become operational.

Although I spent only a few days in Tampakan, the feeling I got from the local community was highly encouraging. The community wanted the mine to succeed, they felt that the mine was an integral part of their future and communityas there was a direct benefit that they saw from the presence of Sagittarius Mines inc. My observation was that this was the direct result of a trusting relationship which was nurtured from the time the mine was beign conceived.

One of the biggest mistakes that I have seen within the mining sector has been that many CSR Programmes are funded and developed not at the time of exploration but to the contrary at the time when the mine is operational, often in my opinion when it is way too late to salvage a relationship which hs often turned sour.

During my five years of dealing with communities which surround mines one thing which was always consistent was the cry by communities surrounding mines to see an immediate economic benefit on the part of the communities as whole as well as the members individually. The questions which were often asked were:

  • Why are all the service providers all foreign?
  • Why were simple labourer positions being filled from outside the community
  • Why are they not buying fresh produce locally?

The procurement experts within the Mines always had very good replies.

  • Quality
  • Bulk Procurement from Head office
  • And my personal favourite “we will look into it”

In many societies, including Tanzania , procurement at mine sites smacked of expatriate cronyism (in all fairness, most probably unknown to the Corporate headquarters of most mining companies).

Supplies which were procured locally more often than not were supplied by westernized Tanzanians like myself who had become friends with mine officials due to a common liking for the same British Premier League Team, while having no direct link to the mining community in question.

The presence of one or two such locals on a suppliers list has often satisfied the queries of head office and Government, but not often the cries of locals on the ground. In my considered opinion it does not suffice to state that local villages do not have the capacity to supply goods and services to the mining companies that come to their areas. Mining Companies must invest directly as part of their exploration budget in the communities that surround the mines so as to enable the communities surrounding mining concessions to participate in varying levels in the secondary wealth creation opportunities resultant from the presence of a mine. Feel good projects such as schools, building of dispensaries etc… are all good, yet they do not always touch the immediate needs of those who are the most destructive to the harmonious and sustainable relations of the communities surrounding mine sites.

To put it simply and in plain English, people want jobs and people want money in their pockets ; To quote James Carville, Bill Clinton’s famed campaign strategist, “It’s the economy stupid”, it’s all about the economy!

Having said what I have said, I do not wish to be understood as having absolved Government of its obligations and role in the development of skills, infrastructure etc… It is clearly the duty of Governments’ at a National Level to ensure that they produce mining engineers, mineral economists etc… or in the case of Tanzania to ensure that the geology department at the University of Dare s Salaam or Zanzibar is well equipped to train the best geologists in the World. At a national level this must be done.

However it can not be ignored that many mines are situate in highly remote areas which are simply not on the immediate developmental radar of poor Countries such as Tanzania, and accordingly mining companies should take it upon themselves to engage communities and government alike to facilitate the presence of the necessary skill subset required for the operation of a mine within a local community .

Now , I know that there are some CFO’s who would cringe at the thought of making a substantial investment in community relations at the exploration stage. CSR budgets are often calculated after knowing what the cost of developing will be, the grade of the ore, cost of production and the life of the mine. This is all well and good , what I would like those CFO’s to calculate is this example of events that took place in relation to one of ABG’s sites as follows :

  • In 2008 due to incursions at a single mine site, losses of USD 7,000,000 are incurred in a single day.
  • May 16th, 2011 , 5 villagers are shot resulting in ABG’s share price falling by 5% in day.
  • Today a 14Km wall is under construction to surround the mine

Wouldn’t the losses incurred coupled with the money spent have been better utilized if 1/3 or a ½ of the amount above had been spent as an investment in the Community surrounding the mine.

My interaction with mining communities has led me to believe that the residents of these communities are not interested in handouts what they want is to participate in the wealth generation of the mine so that they can determine their own future and developmental path. Whereas it is true that many of the communities in question do require schools, hospitals, running water and roads just to name a few, the reaction that I have noted over the years in situations where there is no wealth generation and these services have been provided to communities has been as follows:

  • They built the roads not for us , but to get their product to market.
  • They gave us water because they had to get water to the mine site.
  • Amongst the unemployed youth, ---- I am too old for school and I am not sick --- what do I need a hospital or a school for?

Mining Companies have to realize that when mining communities do not feel a financial benefit from the presence of a mine, the indigenous members of the community become resentful and opportunists come in to take advantage. Cheap populist politics and community based activism take over, more often that not sponsored by NGO’s from the West who just hate the extractive industry .

I can not say that I have a solution to the issues at hand, that is why you are all here… all I have tried to do is give you my perspective…an I wish to thank you for listening to me.

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