ACT-Wazalendo 2020 Manifesto: What Are Their Policies On Mining, Oil And Gas, Energy, State-owned Enterprises?

The manifesto shows that the party is opting for a more pragmatic approach, realizing that Tanzania’s state-owned companies are financially constrained and technologically weak to undertake such huge projects.
Thabit Jacob21 September 202011 min

The Alliance for Change and Transparency, ACT-Wazalendo, launched its 2020 election manifesto on Monday this week with the slogan #KaziNaBata, based on the party’s philosophy of combining hard work, having fun and maintaining happiness. The sixty-page manifesto sets out a range of policies and socio-economic proposals that ACT-Wazalendo aims to introduce should it be able to form a government. In this short piece, I look at the key promises the party is making and highlight a couple of things that have caught my eye in four areas: (1) mining, (2) oil and gas, (3) energy, and (4) state-owned enterprises.

Mining

The ACT manifesto proposes a total overhaul of the way mining contracts between the state and mining companies are governed. While the current mining regime is based on Mining Development Agreements (MDAs), ACT is promising to change the ownership regime to bring mining investments in line with Production Sharing Agreements (PSAs) between the state as the owner and the companies as operators or contractors. This is a radical proposal and suggests that the party wants to reverse the state’s recent humiliating U-turn regarding the deal with Barrick. PSAs are rare in mining but common in the oil and gas sector. Possibly their relative success in the latter is influencing ACT in proposing them for the mining sector.

The most striking item in the manifesto is its recognition of communities’ rights in the context of mining projects. Having analyzed party manifestos over the years, to my knowledge this is the first time a political party has openly recognized and explicitly referred to the right to Free Prior Informed Consent in its manifesto. The manifesto states that “It will legally establish a mechanism for citizens living in mining areas to approve mining projects before implementation (Free Prior Informed Consent)”. This is a welcome move, especially given recent studies (see, 1, 2, 3, 4 and 5) showing increasing tensions between local communities and the state in areas where mining and oil and gas extraction are already taking place.

ACT also promises to focus on mining projects that have significant linkages of benefit to the national economy. The party identifies two main ‘priority projects’, namely to mine coal and iron ore in Mchuchuma and Liganga, and nickel in the Kabanga nickel project. The manifesto promises to oversee the completion of investments in the Mchuchuma and Liganga project to produce steel products, vanadium and other minerals, as well as power from coal, and to increase foreign exchange earnings from such projects. It is good to see the party prioritizing this project. As someone who keeps a close eye on these projects, I regard what happened to Mchuchuma-Liganga as a very sad story and a huge missed opportunity for Tanzania to integrate the mining sector with the current industrialization drive. 

This is especially the case at a time when the state is implementing large-scale infrastructure projects such as the standard-gauge railway and the controversial Nyerere hydrodam, both of which will rely on imported steel. Mchuchuma and Liganga could have been finished years ago, but dilly-dallying, politicized decision-making, misguided resource nationalism and the sidelining of experts in the Ministry of Energy have stalled development for the past nine years. The joint venture company (which includes a 20 per cent stake held by the state-owned NDC) in charge of the project, Tanzania China International Mineral Resource Ltd, is now counting on blossoming ties between Tanzania and China to resolve the deadlock. However, I am informed by insiders that the state is demanding a review of previous contracts and insisting that they need to be aligned with the amended natural wealth and resource laws that were passed at the peak of resource nationalism in 2017.

ACT’s focus on the nickel project in Kabanga is also interesting in many ways. First of all, for the benefit of readers, nickel is a critical metal in the manufacture of stainless steel and a key component in the lithium-ion batteries that are used to power electric vehicles. As the world moves towards cleaner forms of energy and a rise in the demand for electric vehicles, nickel is projected to become a very important metal in the years to come. The International Energy Agency is projecting that there will be 250 million electric vehicles on the road globally by 2030. Last year nickel prices reached a record high of $18,785 a tonne. Developing the Kabanga project will strategically position Tanzania to make the most out of the incoming Electric Vehicle boom and strengthen mining’s fiscal contribution to the state’s coffers. This is something I have mentioned several times in my conversations with NDC and STAMICO officials, but as usual it has fallen on deaf ears.

Oil and Gas

In the oil and gas sector, ACT promises to “Restore the Natural Gas Project (LNG Plant) by accelerating negotiations with investors and removing all obstacles to enable our country to become a major gas producer in Africa, increase and boost industrial development in the country and increase foreign exchange earnings from exports of natural gas.”

Just as was the case with Mchuchuma-Liganga, the delay in the LNG project has as much to do with politicized decision-making as with the sidelining of the technocrats in the Ministry. Valued at $30 billion, the project will be the country’s largest ever investment since independence. In 2014, Yona Killagane, the former managing director of TPDC, the national oil company, was quoted as saying that “There is a need to fast track that investment, which is coming mostly from international oil companies active in the area, so a concrete gas-producing industry can be developed.” The final investment decision for the project was supposed to be finalized in 2017, but there have been a lot of delays, and the Host Government Agreement (HGA) has still not been signed. It is the HGA that should define the fiscal, legal and commercial terms for the project before the final investment decision is made. In this case, moreover, the LNG project will require its own special law, known as ‘project law’, though sources suggest that discussions are still far off. It is also worth pointing out that, even after an HGA is signed, it will take at least ten years before gas production can start. According to an insider in one of the oil companies involved, the state and investors are deadlocked on a number of issues, including the contentious issue of international arbitration. There has been very little progress between the government’s negotiating team and the investors, so it was surprising (though maybe it shouldn’t be) to see government spokesman suggesting in a tweet recently that talks are on track. The recent humiliating U-turn in the Barrick deal indicates that the President and his small inner circle are shifting towards pragmatism and retreating from resource nationalism, while the consortium of international oil companies will be hoping for similar compromise and pragmatism from the government. The dillydallying by Tanzania has seen neighboring Mozambique make steady progress, France’s oil giant Total having recently finalized a $16 billion financing plan for the country’s LNG project. The road ahead is very bumpy, as Tanzania looks to join the league of the world’s LNG exporters. The rapidly changing nature of the global LNG market and the number of LNG terminals under construction elsewhere around the world could complicate matters further.

Furthermore, ACT pledges to ensure that natural gas wealth is used to build the ‘gas economy’ and increase economic activity in the country. Another crucial pledge in the manifesto is the promise to increase the use of Mtwara gas to generate electricity from the current rate of below 20 per cent to 60 per cent by 2025 by building gas-fired power stations in the Mtwara and Lindi regions and connecting the electricity thus produced to the national grid.

The party is also promising to supply gas to households for domestic use (mainly cooking), a move they hope will contribute to reducing the cost of energy to poor households and reduce deforestation by saving the millions of forests that are lost every year for firewood and charcoal. This could be a game changer in meeting households’ energy demands, while at the same time limiting Tanzania’s greenhouse gas emissions and avoiding climate change.

Energy

In the energy sector, the party promises to add an extra 3,900 megawatts (MW) of power to the national grid from the current 1,500 MW, taking the total to 5,400 MW by 2025. These additions to the energy mix will include 1,238 MW (32 per cent) generated from hydroelectric power, 1,800 MW (46 per cent) from natural gas and 862 MW (22 per cent) from other sources, such as coal, and renewables like solar, wind and geothermal. In comparison, according to the updated Tanzania Power System Master Plan published by the then Ministry of Energy and Minerals in 2017, by 2040 Tanzania’s energy mix will be made up largely of gas-fired generation (40 per cent), closely followed by coal-fired power (35 per cent) and hydropower (20 per cent), while the remainder (5 per cent) will come from renewables (solar, wind, and geothermal) and imports.

The party has also pledged to speed up rural electrification by continuing to “supply electricity faster, especially in rural areas”, along with reducing electricity costs and connecting all regions and districts to the national grid. The electrification rate is low, especially in rural areas, although the government recently announced the start of the heavily donor-funded phase three of rural electrification under the Rural Energy Agency within the Ministry of Energy. In terms of renewable energy, ACT says it will ensure that rural water cooperative societies are enabled to run their water projects using solar or wind power.

State-owned enterprises

Tanzania’s state-owned enterprises (SOEs) have been in the news for all the wrong reasons. ACT’s manifesto proposes a radical approach that will seek to transfer SOE ownership from the state to the citizens. ACT promises that up to 51 per cent of the shares of major state-owned companies and other companies which the state own shares will be sold to Tanzanians to enable citizens to participate directly in owning their own economy. The party also hopes that this move will boost efficiency and transparency, especially when SOEs are listed on stock markets. ACT’s belief in this respect is backed by the literature on state-owned enterprises, which shows that listed SOEs tend to perform better, thus reducing their dependence on the state’s coffers and increasing their capital expenditure, unlike non-listed SOEs, which tend to struggle financially. This is a massive promise that will make every single Tanzanian an owner of SOEs.

ACT also promises to restore and redistribute land to citizens who have lost their land in privatization deals involving state-owned companies and holding companies. It is a little surprising that state-owned enterprises do not feature that much in the manifesto apart from these few mentions. Maybe I am expecting too much, given that ACT’s party leader, Zitto Kabwe, is a former chairman of the very influential and now-defunct Bunge’s Public Organizations Accounts Committee (POAC), and he also served as chairman of its successor, the Public Accounts Committee (PAC). These committees are responsible for monitoring the activities of state-owned companies.

Final thoughts

It is fair to say that the manifesto is impressive for a party that was only formed five years ago. It might be too early to judge, but it appears that the arrival of the CUF faction led by veteran politician Maalim Seif Sharif Hamad is somehow moving ACT-Wazalendo too far to the right. The manifesto prioritizes private sector-driven development and minimal state interference in the economy. This also suggests that the party has ditched some key tenets of its own brand of socialism under the party’s Azimio la Tabora, unveiled back in 2015. ACT also sees a greater role for the private sector in major projects such as Mchuchuma and Liganga, Kabanga Nickel and the Lindi Gas-Processing plant. This is contrary to the CCM-led government and President Magufuli’s renewed commitment to a statist-nationalist ideology that sees state intervention through state-owned enterprises as the key driver of national development, especially in the extractive and energy sectors. The ACT manifesto shows that the party is opting for a more pragmatic approach, realizing that Tanzania’s state-owned companies are financially too constrained and technologically too weak to undertake such huge projects. There is a clear tension between nationalistic ambitions and the state’s actual capacity, as I have pointed out elsewhere.

This article was firstly published on Medium and it is republished here with its author’s permission. Thabit Jacob is a research fellow at Roskilde University. His research is broadly on the political economy of development, with a focus on politics of energy and resource extraction in the era of resurgence resource nationalism. He can be reached through his Twitter account @ThabitSenior. This is the writer’s opinion and it doesn’t necessarily reflect the views of The Chanzo Initiative and its editorial board. 

Thabit Jacob

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