Tanzania orders wall built around tanzanite mines to end illegal trade

DAR ES SALAAM (Reuters) - Tanzania’s president ordered the military on Wednesday to build walls around its tanzanite mines and directed the central bank to buy the precious stone to boost reserves - the latest twist in a spat with mining firms over alleged tax evasion.

FILE PHOTO: Tanzania's President John Magufuli addresses a news conference during his official visit to Nairobi, Kenya October 31, 2016. REUTERS/Thomas Mukoya

President John Magufuli’s government accuses mining firms of cheating Tanzania out of its fair share of mineral wealth through tax dodging and smuggling, allegations they deny.

“All tanzanite gemstones will be controlled and will pass through one gate and he (Magufuli) ordered the (central) Bank of Tanzania to take part in the tanzanite buying trade,” a statement from the presidency said.

A parliamentary inquiry team said on Sept. 7 that it had uncovered massive smuggling of the blue-violet tanzanite gemstone, found only in the East African nation.

Magufuli ordered the military to build walls with security cameras and checkpoints around all tanzanite mining concessions in northern Tanzania “to control illegal mining and trading activities,” the presidency statement said.

“Even if someone swallows some tanzanite gemstones, they will be detected at the proposed checkpoint,” Magufuli said.

“Tanzania gets just 5 percent of revenues from the global tanzanite trade - all the rest of this precious gemstone benefits other people abroad. This is unacceptable.”

Sammy Mollel, the chairman of the Tanzania Mineral Dealers Association (TAMIDA), welcomed the new directives, including the construction of a wall.

“We recommended that a perimeter wall should be built and the tanzanite mines should be declared as a controlled area, since 2002, to curb smuggling and government revenue loss,” Mollel, who is a tanzanite miner and trader, told Reuters.

“The proposed government control in this trade will help assure buyers in the U.S that the gemstones are legitimate and all the relevant taxes, including royalties, were paid.”

Tanzania overhauled the legal, regulatory and fiscal framework governing the mining sector with three new laws in July, sending stock in foreign-owned mining companies plunging.

The new laws established a National Gold and Gemstone Reserve under the control of the central bank.

On Sept. 7, the government confiscated a consignment of diamonds from a mine majority-owned by Petra Diamonds after accusing the London-listed firm of under-declaring the value of the stones by around half. Petra denies the charge.

Reporting by Fumbuka Ng’wanakilala; Writing by Katharine Houreld and Duncan Miriri; Editing by Mark Heinrich and Edmund Blair