Advancing Together With Barrick Gold

Mining Golden possibilities: Mining and economic development in Tanzania

For many years, Evodius Fulgence struggled with the irony of his business model: selling small electrical appliances in an area where residents had little to no access to aff ordable electricity.

“Business was not good,” the young entrepreneur said. “The demand for electrical appliances such as televisions, fans and music systems was very low.”

The Tanzanian town of Kakola, population 17,000, is where Fulgence operates his business. The town’s only source of power used to come from expensive and dirty diesel generators. Operating these generators is pricey and power was considered a luxury. “I spent a lot of money running a diesel generator for my business,” Fulgence said. “I could not use some appliances because the power produced from generators was inadequate.” Fulgence would keep his business open only during daylight hours, fearing for his own security once the town went dark. But today, Fulgence has no such worry. “I have extended my working time up to 10 p.m.,” he said.

The turnaround came in 2008 when Barrick partnered with TANESCO, the national power utility, to bring electricity to Kakola and surrounding areas for the first time. As the large wooden electricity poles went up in the community, so too did Fulgence’s sales.

“The electrification project has improved my life, doubled my customers and doubled my income,” he said. Fulgence is taking advantage of the town’s newest commodity by introducing new products, such as DVD players, to his shop. He even plans to open a second store selling refrigerators, deep freezers and microwaves.

His success story is a familiar one in towns where electrical supply is reliably available. “Businesses tend to gravitate to places that can provide essentials such as electricity,” says Greg Hawkins, CEO of African Barrick Gold (ABG). “We want these communities to develop and we know that by extending the power supply here, businesses will fl ourish and quality of life will improve.”

In the last decade, Barrick has invested more than $100 million to extend the national electricity grid to its four mine sites and the communities that surround them. “This is a big benefit that we as a company can offer to our neighbouring communities,” Hawkins said. Electrification of rural communities is only part of Barrick’s contribution to the growth of Tanzania’s economy.

Since the late 1990s, when the first large-scale gold mines began production in Tanzania, the country has benefitted from the extraction of its most valuable resource.

The commodity has already placed the African nation among the continent’s top destinations for foreign direct investment. Over the last decade, mining companies alone have invested $2.5 billion in the country.

Gold has quickly overtaken agricultural products as Tanzania’s largest export. In 1999, exports of the country’s traditional products, such as tea, coffee, tobacco, cotton and cashews, was relatively equal to that of gold. Less than a decade later, gold exports are at nearly 700 per cent more than the other products combined.

Even at this early stage, more than 50 per cent of Tanzania’s total export income comes from six gold mines. Four of these are ABG properties: North Mara, Bulyanhulu, Tulawaka and Buzwagi. Exports from gold mining currently bring in a substantial $770 million annually and are expected to double in the next six years.

While industry critics have focused on corporate income tax rates, a macroeconomic study by the World Gold Council confirmed that Barrick is among the largest single taxpayers in the country. In 2009 alone, the Tanzanian government received approximately $73 million in payments from the company in the form of payroll taxes, royalties and other levies.

ABG has invested over $1.6 billion in capital in Tanzania to date. In fact, the vast majority of revenue generated from Barrick’s operations in Tanzania is retained in the country. In 2009, 60 per cent was paid out to local employees as well as in payments for local goods and services. Another 10 per cent was paid in taxes and royalties and was invested to benefit communities. ABG spent only about 30 per cent on imported goods and services from outside Tanzania. Thus, out of the total revenue ABG generated in 2009, roughly 70 per cent was retained in the country.

Overall, more than 46 per cent of the value of mined minerals generated by the mining industry, is kept in Tanzania, paid out through taxation, government contributions, employment salaries, training, infrastructure, procurement within Tanzania, and corporate social investments. Th e total contributed is nearly $3 billion thus far. With mineral extraction set to ramp up in the next few years, that number will increase.

Large scale mining employs nearly 15,000 Tanzanians, more than the total of those employed in all the utility sectors combined. Barrick alone has 4,200 employees in its mines and hires an additional 5,000 contractors.

Indirect employment is even greater. It is generally believed that for every job in the mining sector, three indirect jobs are created. Approximately 50,000 Tanzanians are currently employed in jobs related to mining. Barrick’s local procurement policy ensures that whenever possible all supplies are sourced at a local or regional level. Although large-scale supplies are not always available for purchase in developing countries such as Tanzania, Barrick has created a local supplier development program to increase the capacity of local businesses.

Since July 2010, Nyemo Chiwaligo has been working with Barrick to supply a steady stream of recruits for work at the Bulyanhulu mine in Tanzania’s Lake Zone region. Chiwaligo’s cooperative IBUKA is creating an inventory of skills available in the local labour market and matching it to Barrick’s labour needs. Through its partnership with Barrick, the cooperative is creating employment opportunities for local residents. IBUKA itself is poised to earn upwards of $50,000 annually for its work. This is a significant amount in a country where the average income hovers at around $1 per day and finding reliable, long-term employment

can be a challenge. Chiwaligo says his cooperative is now planning for the future.

“We have a plan to introduce sustainable development projects, particularly income earning projects, that will help members of the society change their economic welfare,” he said. “We will also train board members to acquire leadership and management skills in areas of people management and recruitment.”

Perhaps one of the most significant outcomes of a strong mining sector is the ability for Tanzanians to carve out solid careers in a constantly evolving industry. The mining industry has spent more than $35 million to train local employees to work in the sector. In 2009 alone, African Barrick Gold invested $1 million in skills development.

Take, for example, Godliver Manumbu. She began her career at Barrick as a personal assistant to the general manager at the local mining offi ce in Buzwagi. After a year, she was appointed as the mine team-building coordinator, focused on employee business understanding and conflict management. During this time, Manumbu continued her education, receiving a Bachelor of Arts in sociology with a major in human psychology.

“I was promoted to take up the role of Community Relations Manager,” Manumbu said. For two years, she worked in the role until she was promoted to Community Relations systems coordinator, a job she currently occupies.

For Shufaa Lukoo the story is much the same. She was working in sales at a local hotel when she heard about a job opening with Barrick. She started as a document controller and received two promotions in just two years. Since becoming a quality systems manager, Lukoo has not only increased her take-home pay, but has also received training opportunities.

“While with Barrick, I had an opportunity to gain my Masters in Business Administration,” she said.

Goldliver and Shufaa represent just two of the many success stories made possible by the presence of mining companies, such as Barrick.