Chronicle of Suspected Plunder and Corruption in Energy and Minerals Ministry: An Inside Story

Madini House in Mbeya City

From Jaston Binala in Mbeya City.


According to one English idiom looks can be deceiving; and this appears to be the case in Mbeya City in the Southern Highlands of Tanzania, where an innocent looking Government building apparently hides a serious controversy.

Investigations indicate Madini House, a Government structure constructed and completed just before the change of Government leadership in 2015, and which is owned by the Tanzania Ministry of Energy and Minerals,  may be over-valued and may be the subject of a probe concerning misuse of public funds during the Jakaya Kikwete Administration.

The narrow four-storey building sits on a plot approximately the size of 16 x 18 meters near an area famously known in Mbeya City as Baby Shangazi intersection. The declared construction cost of Madini House in Mbeya is around Tsh. 349,762,620/-. Insiders dispute this construction cost on the ground the bill of quantities for materials used to raise this structure may not justify this value.

Madini House is built of a few bricks on its sides to give it the look of a four-storey building, but it is definitely not worth Tsh. 349,762,620/-, insiders told TZ Business News in a discrete setting.

The findings present a new instance in which the Ministry of Energy and Minerals may be at the center of another public finances controversy. The findings have come in the wake of  another report  concerning Government revenue losses identified in a flawed minerals exports saga. A Presidential probe team  found the ministry and its minerals investigative wing, the Tanzania Minerals Audit Agency (TMAA) to have occasioned massive losses of public funds by permitting conditions which facilitated payment avoidance of minerals royalty and profit tax.

The declared construction cost of Madini House appears to have been ‘padded’ to create room for embezzlement, according to insiders who also argued the  declared amount could have been used for a better purpose by purchasing a land plot in Dar es Salaam to build a modern minerals laboratory.  TMAA and the Ministry of Energy and Minerals need a modern minerals lab for identification and evaluation of minerals, insiders told this website.  The lab is currently housed in a rented building in Dar es Salaam where the government pays exorbitant amounts of rent.

President John Pombe Magufuli recently disbanded the Tanzania Minerals Audit Agency ( TMAA) and  removed from office the country’s Minister for Energy and Minerals Prof. Sospeter Muhongo in the wake of discovery Tanzania was losing billions of Tanzania shillings  in unpaid  mining royalties and profit  tax due do governance issues in the Ministry and the Agency.

President Magufuli gets clarification from the chairperson of a committee formed to probe the contents in mineral sand containers, Prof Abdulkarim Mruma, soon after receiving the report at the State House in Dar es Salaam. Looking on are Vice-President, Ms Samia Suluhu Hassan and Prime Minister, Mr Kassim Majaliwa (Photo Credit, Tanzania Daily News).

TMAA was established in 2009 to be a semi-autonomous Government  minerals intelligence agency. It was established under the Executive Agencies Act, Cap. 245 to monitor and audit mining operations in the country in order to facilitate maximization of Government revenue from the mining industry through effective monitoring and auditing of  mining operations and ensuring sound environment in the mining areas.

The Agency was also given the mandate to counteract minerals smuggling and minerals royalty evasion in collaboration with the Minerals Department in the parent Ministry, the Tanzania Revenue Authority, Tanzania Airports Authority, Tanzania Police Force and Immigration Department. In order to implement effectively this task, TMAA established Minerals Auditing Desks at all international airports in the country.

But TMAA has proved a major failure on its mandate over the years, with its operations shrouded in mists of incompetence and possible corruption, investigations show.

Between the years 2010-2013 the Tanzanite One mine at Mererani in Simanjiro experienced and reported a wave of mine invasions and thefts of the Tanzanite gemstone at the mine. The total value of Tanzanite gems reportedly stolen during this period was placed at around Tsh. 10,000,000,000/-.

Investigations suggest these thefts may have been a planned operation to facilitate non-payment of  royalties and profit tax by attributing the none payment to theft and loss.

In the year 2010 TMAA was one year old. Mine audits established during this year that the Tanzanite mine in Simanjiro had an outstanding debt in unpaid royalties and profit taxes amounting to some  $1,735,050(about Tsh.3,470,100,000/-). Investigations indicate TMAA and the Ministry in general have been lenient to the Tanzanite mine;  only $400,000 of this debt had been paid by 2015. The lenience has not been explained.

Recent press reports said Tanzania lost a staggering Tsh. 7.2trn/- ( about $2.13billion) in 2016 as a result of some extraordinary tax holiday and loopholes in the mining sector. Tanzania is Africa’s fourth largest gold producer.

The committee for economic justice and integrity of creation in Tanzania blamed corruption and tax evasion, explaining that  tax evasion and tax incentives had jumped from $ 1.3 billion in 2012 to $1.83 billion in 2016. The loss identified in the mining sector in 2016 was pegged at $ 57 million, according to the interfaith report. The report calls for more action to improve tax collection and containing tax evasion loopholes.

The Tsh. 7.2trn/-  loss report for 2016 was presented to the public by the interfaith organization fighting for economic justice in Tanzania. It was jointly prepared by  the Tanzania Episcopal Conference (TEC), the National Muslim Council of Tanzania (BAKWATA) and the Christian Council of Tanzania (CCT). It was a follow-up to a similar report published in 2012.

International airports in Tanzania contain duty free shops.  These include Julius Nyerere International Airport in Dar es Salaam, Kilimanjaro International Airport in Kilimanjaro and the Zanzibar Airport. The duty free shops contains gemstone counters which in reality are mineral export outlets which do not follow mineral export procedure. TMAA and the ministry kept a blind eye on these duty free shops for all these years.

TMAA  had kept a laissez-faire atmosphere in the mining industry for years allowing for mineral export procedures to be flouted where inspections of containers carrying mineral sand for export were not being conducted. TMAA kept production and export records as presented to them by the miners instead keeping records as found during pro-active inspections.  The Tanzania Revenue Authority then used these self-declared TMAA records to compute royalties and profit taxes.

Reports have in the meantime indicated existence of a suspicious link between the Ministry of Energy and Minerals and the privately owned Giraffe Ocean View Hotel on Monduli Road at Mbezi Beach in Dar es Salaam, where every conceivable function of the Ministry of Energy and Minerals had been conducted before President Magufuli ordered all Government functions be conducted in Government premises.

From above: Former Minister for Energy and Minerals, Prof. Sospeter Muhongo, and former Tanzania Minerals Audit Agency (TMAA) Chief Executive Officer Eng Dominic Rwekaza.

Insiders have told this website the Prevention and Combating of Corruption Bureau (PCCB) is in possession of valuable information major tenders in the TMAA and the Ministry of Energy and Minerals  were always won and awarded to one individual in the name of Jonathan Thabit Mweta.

Acting on an advance tip-off in March, 2017, the President paid an impromptu visit at the Dar es Salaam port where he found shipping containers filled with undervalued unprocessed bits of rock called ‘mineral sand’.  The President  formed an eight-man probe team of experts, led by Prof Abdulkarim Mruma, to investigate and establish the amount of minerals and their correct values in the shipping containers which were just about to be exported abroad.

Some 277  containers with capacity for 20-tonnes of mineral concentrates each were detained at the Dar es Salaam Port and later at other Inland Customs Depots to await verification of content. The mining companies exporting the bits of rocks, which include the gold mining giant ACACIA, claimed each of the containers carried only 3Kg of gold and only 3 tonnes of copper in individual containers.

The presidential probe team found individual containers to hold between 28 and 47.5kgs of gold each. The probe team also established there was between 6 and 7kgs of silver in the individual containers and between 5.2 and 6.75 tonnes of copper. The mining companies started exporting mineral sands since 1998. President Magufuli said over 3,000 containers with mineral sand were being exported every year.

The probe team established that the total value of the seized 277 containers was between Tsh. 829.4bn/- and 1.439 trl/- where the exporting companies put the total value of the containers at 85.87bn/-.

Payable royalties on minerals such as gold is 4 per cent of gross value. A 30% net profit tax is also also payable. The probe team  established that the mineral concentrates in the seized containers was worth between 829.4bn/- and 1.438 trl/-, which may translate into avoided payment of royalties of between 33.17bn/- and 57.55bn/- on just this particular shipment. A seperate committee is looking into how many containers of mineral sand have been exported between 1998 and 2017.

The containers export saga has typified serious failure of the Tanzania Minerals Audit Agency (TMAA) and indeed the Ministry of Energy and Minerals, but TZ Business News can confirm that this saga is not the only serious shortfall in the ministry.

On receiving the mineral sand probe team report  in May, 2017, the President  was alarmed by the revelations the 227 containers did not just contain gold in them, but also other strategic minerals which had not been identified in the list of exported minerals by both TMAA and the mining companies.

The probe team recommended that smelters used in extracting minerals from sand be constructed in the country as soon as possible to process the mineral sand which will allow identification of all minerals present in the mineral concentrate.

The president  removed from office the Minister for Energy and Minerals Prof Sospeter Muhongo, suspended  from work  Chief Executive Officer of the Tanzania Minerals Audit Eng Dominic Rwekaza, dissolved  the TMAA and  the Ministerial Advisory Board (MAB).

The President then directed other security organs including the Prevention and Combating of Corruption Bureau (PCCB) to immediately investigate all employees who worked under the dissolved TMAA and Ministry of Energy and Minerals–including former Mineral Commissioners for any legal actions.

The President has also directed that security organs,  the Tanzania Intelligence and Security Service (TISS) and even the military to get involved in the clean-up of the ministry.