Tanzania’s Mining Model Is Starting to Pay Off

In 1967, a Maasai herder named Jumanne Mhero Ngoma discovered a unique violet crystal in Tanzania's Mereli Hills. Ngoma received a modest payment of 50,000 shillings, equivalent to around $22 at present-day rates, but the rights to sell the mineral were granted to Henry B. Platt, a relative of Tiffany & Co. Platt named the stone Tanzanite and marketed it as a rare gem only found in Tanzania and Tiffany's.

Between 1967 and 1971, approximately 2 million carats of Tanzanite were mined in Tanzania, almost entirely for sale to Tiffany's. Today, these stones could be worth up to $1.2 billion. Tanzania's mineral wealth has historically been exploited by external entities, but the country is now taking steps to rebalance the benefits towards its own citizens.

Over the past two decades, Tanzania's mining industry has experienced rapid growth and diversification, with minerals overtaking tourism as the country's primary source of foreign currency since the mid-2000s. Mining-related tax and royalty revenue has more than doubled since 2021, and mining's contribution to GDP surpassed 10% for the first time in 2023.

In recent years, Tanzania has implemented reforms to the Mining Act, granting the government a 16% non-dilutive, free-carried interest in large-scale mining licenses and implementing local content rules to ensure that Tanzanian firms hold minimum equity stakes in mining ventures and their supply chains. President Samia Suluhu Hassan has promoted this approach as "sovereign pragmatism," shifting the nation's focus from aid dependence to trade and investment.

The state is now more directly involved in mineral wealth, rather than merely collecting royalties. Investors cite improvements in land titling and judicial efficiency as factors contributing to Tanzania's increased attractiveness to foreign investors. Despite initial concerns that changes to the Mining Act might deter investors, Tanzania's cautious approach to engaging with the private sector and the global push for critical minerals has encouraged more companies to collaborate with the government.

The Kabanga nickel project, one of the world's largest undeveloped nickel deposits, is nearing a final decision to develop a local refinery for battery-grade nickel, with a US government-backed consortium, Orion CMC, in negotiations for a $500-600 million minority stake. This development could demonstrate Tanzania's capacity to attract international private-sector investment while ensuring more value is captured for the country's people through jobs and additional tax revenue.

While two Western-linked graphite projects have faced recent challenges, Tanzania's mining sector remains on an overall strong trajectory, attracting approximately $3.3 billion in private investment over the last four years. Under President Samia's leadership, the country has successfully adapted its regulatory framework to accommodate various foreign financing structures, diversifying its partnerships to minimize dependency on any single market or power.

This progress raises the question of how quickly Western financing structures can adapt to match Tanzania's model, as the success of the Kabanga project could serve as proof that the country has established a durable regulatory template for other resource-rich nations to follow.