By Global Risk Insights - Jul 01, 2016, 6:44 PM CDT
The discovery of a massive helium deposit in Tanzania this week has excited both scientists and mining experts, yet for all its potential this new cache holds risks for Dodoma. Specifically, this new deposit threatens to only further increase tensions between indigenous groups and the government; as development projects continue to infringe on ancestral lands. Tanzania’s extractive, agribusiness, and tourism sectors all face increased uncertainty going forward.
This latest find, estimated at 54 billion cubic feet of helium, is a major shot in the arm to global helium reserves which have been running dangerously low, with prices rising by 500 percent in the last 15 years. Despite being the second most common element in the universe, helium is very rare on Earth, as it is only produced from the slow decay of uranium and other elements. Helium has many uses, including in welding, leak detection, nuclear research, cooling systems in medical equipment and the Large Hadron Collider.
The problem for the government is that the discovery has been made in Tanzania’s Rift Valley; an area already beset with land claim issues between indigenous communities and businesses. Tanzania was already admonished by the UN in 2010 regarding the removal of pastoralists without informed consent. Indigenous groups, notably the Maasai, have been repeatedly (and often violently) evicted from ancestral lands to make way for development projects.
Consequently, long-standing grievances exist among local groups, who do not feel represented by the government.
Helium is no laughing matter in Tanzania
While unresolved land claim disputes are not a new phenomenon, in recent years Tanzania has been adopting an increasingly aggressive approach, in order to entice FDI and ensure growth. This trend, combined with last year’s election of the heavy-handed, firmly pro-development John Pombe Magufuli, means a greater risk for violence in the event of large-scale helium extraction.
Magufuli, has earned the monicker ‘The Bulldozer’ for his strong-willed and forceful push for development. With Tanzania’s GDP increasing by 7.2 percent in 2016, and growth forecast at 7.4 percent for 2017, Magufuli is charging ahead to awaken the ‘sleeping giant’ that is Tanzania, with a focus on the country’s under-exploited natural resources. Moreover, in his budget released in June, Magufuli is increasing government spending by 31 percent to finance infrastructure and industrial projects, with infrastructure spending jumping from 25 percent to 40 percent of total spending.
While investors may laud Magufuli’s drive, anyone called ‘Bulldozer’ is unlikely to be tactful or patient, two key traits needed when negotiating complicated land claims. As a result, the uncertainty faced by investors in Tanzania emerges from several issues related to land. Firstly, the Tanzanian government owns all land in the country, with the president acting as trustee, leasing it to businesses. Secondly, the government’s unclear regulations regarding land use and tenancy mean it does not recognize ancestral claims by indigenous groups. Lastly, these tensions are further compounded by a heavy-handed and ad-hoc approach to dispute settlement.
Land claim disputes mar key sectors in Tanzania
Large scale helium mining in Tanzania would trigger a slew of additional land disputes, bad news for a sector already plagued by conflict with natives. For instance, Barrick Gold’s North Mara mine has been embroiled in scandal, following revelations of rape and assault by employees and guards against indigenous communities. Moreover, there is a three-way fight broiling between mining firms, small-scale artisanal miners, and indigenous groups over land usage.
Despite these tensions, the government is unlikely to do much, given the fact that in March, Dodoma finally ended a long-standing fight with seven gold mining companies around non-payment of corporate taxes, dating back to 2009. After this victory, the government will want to bury the hatchet with mining companies, who in turn will push for more mining (including helium) concessions in the short-to-medium term. This will pressure Magufuli to green-light further developments, drawing the ire of opponents directly, especially given the president’s role as trustee.
Alongside mining, there is trouble brewing for tourism and agribusiness companies. With regards to tourism, local Maasai groups are currently seeking to appeal a decision regarding a 30-year land dispute. The Maasai sought the return of over 12,600 acres managed by a U.S safari company, which they claim was transferred to the firm illegally. While the court granted the Maasai 2,000 acres in restitution, they are appealing the decision.
Furthermore, in May the government banned drought-afflicted indigenous herders to leave Tanzania’s national parks, under the pretense of protecting valuable tourist destinations from damage.
Magufuli has also been keen develop the country’s agribusiness sector, as some 80 percent of Tanzanians are subsistence farmers. While seeking to improve the lives of citizens, the government is disenfranchising indigenous groups who occupy fertile land.
Under Magufuli, Tanzania made headlines earlier this month after receiving an opt-out by the World Bank concerning the organization’s rules protecting indigenous communities. This was to aid a $70 million World Bank loan to the Southern Agricultural Growth Corridor of Tanzania (SAGCOT) initiative. SAGCOT is a government initiative to promote FDI in Tanzania’s agribusiness sector, with the aim to convert 350,000 hectares for commercial production by 2030.
Alongside indigenous resistance to SAGCOT, a $500 million project by Agro EcoEnergy is stuck at the proposal stage, due to land claim disputes with native tribes. The project, which seeks to establish a sugarcane plantation and processing facility for sugar and ethanol, is tied down over issues of relocation and compensation.
While the government’s ad-hoc resolution process treats these disputes as individual cases, indigenous groups view these conflicts as inter-connected manifestations of Dodoma’s disdain for their plight. The remote nature of many of these projects – where the government’s presence is thin on the ground – put them at greater vulnerability to local instability and violence.
It is imperative that Tanzania implement a clear and just dispute resolution mechanism, or foreign companies will pay the price. Magufuli’s antics have made him a meme (#whatwouldMagufulido) in East Africa – the real question is what must Magufuli do to avoid instability.
By Jeremy Luedi via Global Risk Insight