Navigating the Economic Contribution of the ASM Sector in Tanzania

IT IS ALL ABOUT WORK: Miners at the Mwazimba ASM area doing their best towards improving their lifestyles as well as contributing to Government Coffers. PHOTO by Evans Rubara

This article highlights the current trends and mainly the contribution of Artisanal and small scale miners in the economy and the critical role they have in fostering domestic investments, especially in developing sustainability from finite resources such as minerals. Overall the ASM sector has a higher multiplier effect in its activities through its linkage to other sectors. It further discusses the great potential the sector has and suggesting some key policy challenges both technically and in the policy arena and the critical role media has in making it happen.

Contributed by Lulu Silas

Overview of Economic Principles

To understand the economic contribution of artisanal and small scale miners, we first have to start at the fundamental economic principles. We first have to acknowledge that economics is concerned with the efficient allocation of scarce resources in its totality. In essence, how to tackle the fundamental problem for every society-Scarcity. In solving this problem, economists, policy makers, and producers have to decide what to produce, produce it, and produce it. What to produce involves decisions about the kinds and quantities of goods and services to produce. How to produce requires decisions about what techniques to use and how economic resources (or factors of production) are to be combined in producing output.

This brings us to discuss the economic resource of interest: land, which includes the economy’s natural resources—such as land, trees, and minerals, how minerals as an economic resource is used in combination with Labor. Individuals’ mental and physical skills in society and Capital, such as tools, machines, and factories, are used in production or to facilitate production.  It then determines the performance of the economy as commonly measured in the aggregate gross domestic product (GDP)[i]. On the other hand, the government has managed to derive substantial revenues in tax and non-tax from mining as an economic activity.

Mining Sector Overview

In assessing the performance of the subsector of Tanzania, available national accounts indicate the overall Mining and quarrying activity contributed 5.1% to GDP in 2019 (NA,2020), grew by 11.8 per cent in 2019 compared with 9.7 per cent in 2018. In 2019, value-added in mining and quarrying sub-activity expanded by 17.7 percent in real terms compared with 1.5 per cent in 2018. This growth is attributed to measures taken to improve mining activities management and curb smuggling, including establishing mineral trading centres and promoting the use of locally produced coal.[ii]

One would be interested to know why the mining sector is given this attention; however, to understand this, we must first know the key characteristics of the mining sector. First is the nature of the resources being finite. The non-renewable nature of the sector accords its attention to ensure that a scarce resource is allocated well in the economy. Second is the operationalization of the mining activities and the investments. The practice has shown the high investment costs that go into the exploration and development of minerals with high risks and high returns. However, the challenges that come with the effective allocation and distribution of use of these resources in an economy make the focus of this article. It is clear and believed that the main challenge with the mining sector is its enclave nature, the tendency to have minimal links to other economic activities and directly impact the society around the mining projects. Furthermore, this challenge has even been exacerbated in developing countries highly dependent on foreign investment to develop the sector in the midst of the underdeveloped domestic investments.

The mining sector in Tanzania is rightly composed of three main categories of miners, according to the Mineral policy 2009;

Miners Categories

  1. SMALL SCALE –UPTO US$ 100,000,000 (200MLN)
  3. LARGE SCALE ABOVE US$ 100,000,000 (200BN)

Most domestic investors in the mining sector are concentrated in the small scale category, with a few in medium scale. From an economic perspective, the sources of funds or investment have an implication in developing an economy mainly because sources of funds from outside borrowing or foreign investment return have to go out, and less is left behind, compared to domestic resource mobilization and domestic investment. From this premise, we analyze the linkage that domestic investors, in this case, small scale miners, contribute to the economy in the light of highlighting areas that need attention to improve their performance, graduation, and ease co-existence with foreign investors.

ASM Contribution and Economic Linkage in Tanzania

Tanzania has been making strides towards developing the ASMs, recognizes the critical importance of establishing the critical mineral linkages while the resources are still existent.

The ASMs have played strategic importance linked to the vision in Tanzania, believed to be pioneers in the sector. Most of the mineral sites were first discovered and used to benefit the mining communities before the onset of large mines dated back decades before the nation’s independence. On the other hand, we have witnessed the exploitation of deposits that are not economically viable to large-scale mining being developed by ASMs.

Small scale miners contribute a significant proportion to the production of minerals. Data shows that GOLD PRODUCTION in 2019 from small scale miners was equivalent to 29% of the total production( see figure) from July 2020 to March 2021, a total of 42,084.76 kilograms of gold valued at shillings 5,337,395,790,264.35 was produced by large mines, medium mines and small mines. 12,650.24 kilograms equivalent to 30.05 percent of gold worth shillings 1,587,698,305,067.90 produced by small-scale miners in the country[iii]

However, the sub-sector is beset with formidable challenges, Limited capacity, low productivity, and a difficult working environment with inadequate infrastructure. Most of the Artisanal miners are considered nomadic. Implementing extension services and policy support programs is then challenging.

In recent years (2010s-2020), the government of Tanzania has made commendable efforts to recognize and support ASM, starting with the minerals policy and Acts of Tanzania identifying artisanal and small scale mining. Nevertheless, also highlighting the first-ever meeting in 2019 where the late Hon. President John Magufuli went through the challenges of miners and suggested the best avenues for enhancing the sector’s participation. Ongoing plans at the ministry create improved access to finance and availability of tools, equipment and consumables, supportive extension services. Also the Simplified licensing process and reduced time of processing from four months to one month.

The biggest challenge of ASM has been accessing markets, and recent, we have seen enhanced marketing opportunities. In the budgetary plans for 2021/22, the ministry has planned to dedicate its efforts to continue supporting the sector through its agencies, and a good example is GST conducting geological and geophysical surveys in six ASM identified areas, this is to increase the availability of geological information for ASM and reduce the costs for the operation of their mines.

So far, we are witnessing that the initiatives have led to significant impact and outcomes. Some of the impacts is seen in the increasing number of registered small scale miners with primary mining licences. In 2020 a total of 3540 licences were issued, an increase from 2941 in 2019[iv].

ASM Linkage to the Economy

The data below and information will show ASM sector fosters local economic development through its strong multiplier and forward and backward linkage effects. Analyzing each linkage individually can create a picture of the continued economic impact and potential areas of development. The linkages here include fiscal linkages, production linkages, lateral linkages, horizontal linkages, and sidestream linkages.

Fiscal Linkages: Refer to the payments such as royalties and fees that ASM make to

governments in order to extract and sell the resources. In the case of gemstone and diamond, of six per centum;  in the case of metallic minerals such as copper, gold, silver, and platinum group minerals, of six per centum; in the case of gem, of one per centum; and in the case of other minerals, including building materials, salt, all minerals within the industrial minerals group, of three per centum.

For 2020/2021, the cut and polished gems sold through mineral markets provided the government with 109.22 billion shillings. The contribution from royalties and fees by ASM in 2020  shows that 26.56% of the revenues came from small-scale gold producers.

Production Linkages: refer to the goods and services that can be developed as a result of ASM operations. These can be further divided into:

Backward Linkages: That relates to the procurement of goods and services that the ASM sector requires to operate. For example, this includes welding services needed for indigenous mining equipment technology that miners use.

Downstream (or Forward) Linkages: That relates to the beneficiation of extracted commodities through refining, smelting, and further downstream processing of the commodity before reaching the final consumer. For example, women miners who process/crush at mines but also potentially linked to processors. We have recently witnessed the construction of the Lwamgasa , Katente and Itumbi model processing stations. As reported, 864 small-scale miners were able to process a total of 421.6 tonnes of gold plates. They produced approximately 11.6 kilograms of gold, where the government collected revenue A total of shs . 104,038,097.73

Lateral Linkages: These relate to the development of new industries using the capabilities of the related supply chain. Apart from originating from the mining project, horizontal linkages can occur from the upstream and downstream levels. For example, depending on the mining community and geographical positions, ASM diversifies their resources and time to other activities, agriculture. In the other communities of Nyarugusu and Mabuki, mining is a significant component of people’s lives. However, it is integrated with other activities, as people remain to manipulate a combination of tasks to sustain their lives. Nyarugusu’s reality expresses this combination very well, and people keep on digging for gold but still maintain their agriculture[v]

Consumption Linkages: Relate to the demand for goods and services resulting from the spending of earnings by the miners. For example, when a miner earns their share from minerals extracted in a pit spends his salary on buying construction materials to build a family house or purchasing other assets, however this is mainly true of miners with permanent settlement rather than the “nomadic” miners.

Knowledge and Technological Linkages: Relate to the transfer of knowledge and technological know-how. Knowledge transfer within the mining sector and especially among  ASM is high among each other as most acquire skills through apprenticeship.

Infrastructure Linkages: Relate to the benefits associated with the infrastructure developed as a result of coming mining projects. Such include banks and financial centers, gem houses. Other people in the community benefit from these, not only ASM. The economy in mining towns stimulates diverse demands for recreation, accommodation, and transportation. Individual voluntary contributions by miners have been instrumental in constructing village government offices, schools, and other establishments.

Employment: The literature refers to three channels through which mining projects create employment in resource-rich countries: direct employment: refers to the people directly employed in mining-95% of sectors employment (supports directly more than 1.5million people) in Tanzania. Indirect employment: refers to the people employed upstream and downstream from the mining sector—for example, employees of a catering company that services a mine site. Induced employment: refers to the economic activity resulting from the spending of direct and indirect employees of a mining project generally, the mining sector has the potential to generates three jobs for each individual directly involved in the mining. Induced employment is around 2-4 times larger than indirect employment World Bank (2009)

Overall, the ASM sector provides (relatively) economically viable direct livelihoods for vast numbers of impoverished people in rural areas; Offers indirect livelihoods to even more people in such areas. In a recent report[vi] on the context of SDGs, ASM is significant to consider the sector’s relative capacity to absorb unemployed youth. Mainly young men participate as ASM or employees to SSM. A source of employment for low literate youth with high risks. Young women; provide services to mining towns such as catering but also offers an opportunity for young men and women to participate in value addition. Efforts have been identified in training provided at TGC and AMGC, however, the challenge for capital access by graduates to purchase tools for cutting and polishing-high tax of importation is still existing. So far, the ASM is making sizeable financial contributions; however the lack of coherent data makes policy targeting for development and recommendation challenge.

Key Policy Challenges Going Forward

As discussed, a large part of this production benefits local economies. Nevertheless, the more significant challenge is to ascertain the contribution of ASM to economic growth at the national level, given its predominantly informal state and exclusion from national statistics. This data will encourage policymakers to act and have improved policies to improve the contribution of ASM to the economy. There has been increased focus to enhance ASMs in other minerals such as gemstones and Tin. Focus has predominantly been on gold and gemstones. However, data continues to be mainly focused on gold production, even less on industrial and development minerals[vii] that have more significant potential for integration with other sectors.

The role of media as a critical stakeholder in the development of the sector is to highlight the ongoing participation of miners and the success stories of ASM to help shape the narrative of miners as domestic investors critical for developing the sector in the country.


[i] Measures total output in the domestic economy

[ii] BOT,2019 Annual report

[iii] ( MOM, 2021) budget speech

[iv] Tanzania mineral commission (2021)

[v] (Mwaipopo et. al 2004) Increasing the contribution of artisanal and small-scale mining to poverty reduction in Tanzania: Based on an analysis of mining livelihoods in Misungwi and Geita Districts, Mwanza

[vi] de Haan, Jorden, Dales, Kirsten, and McQuilken, James. 2020. Mapping Artisanal and Small-Scale Mining to the Sustainable Development Goals. Newark DE: University of Delaware (Minerals, Materials and Society program in partnership with PACT).

Leave your comment