A Ring with a Tanzanite Gem

It does not make economic sense for Tanzania, which is the only producer of tanzanite (a name derived from the mineral's country of origin ) in the world, to continue wallowing in poverty. Oil has made the Middle-East Rich. Gold has made South Africa rich- Why is Tanzania poor?

Tanzanite (discovered in 1967 at Merelani Hills, located near the East African towns of Arusha and Moshi in northern Tanzania) is a popular and well-known gemstone and a staple of the jewelry trade. Thanks to the power of promotion in creating demand for what was once a relatively an unknown gemstone, the wholesale price of tanzanite rose by approximately 2,500% between 1970 and 1980. This track record is unmatched by any other gemstone.

Today the demand for Tanzanite, especially in sizes between 6 and 15 carats, continues to be strong. New mining techniques and the liberalization of the Tanzanian economy has helped to boost production in the past few years to make tanzanite more available than ever before in the history of the gemstone.

But why is the price of this precious commodity tumbling to the detriment of Tanzania’s economy? Today the local price of uncut Tanzanite has tumbled by 50 per cent, threatening the industry and the future of native miners. Gemstone dealers say that the blue/purple gemstone now fetches USD180 per uncut gramme, down from USD350 in June this year. This is the lowest price recorded in the history of Tanzanite business. The only other time it hit an all time low was during the 9/11 attacks on the World Trade Centre. Traders in Thailand and India dropped the price in panic to as low as USD120 a carat for high quality pieces from November 2001 until the Tucson Tanzanite Conference in the spring of 2002.

 

Sammy Mollel, Chairman of the Tanzania Mineral Dealers Association (Tamida), attributes the falling demand for the gemstone to the deterioration of the US economy, a major market for Tanzanite. According to The Guardian, the US is the most important market for Tanzanite, accounting for about 70 per cent of total sales. It is followed by Asia with 15 per cent and Europe with 5 per cent.

 

“As many people will be aware, the US economy has grown awfully unstable. Because the US is the largest market for the gemstone, obviously this will have a devastating effect on the price,” Sammy Mollel says.

 

Dar-es-Salaam based Dr Peter Kafumu, Commissioner for Minerals in the Energy and Minerals ministry in Tanzania, says that he is unaware of the drop in price of tanzanite  but explains that recent records available at the ministry show that gemstone production in the country has fallen considerably.

 

“I have talked to the officials responsible about the said 50 per cent price drop but all have denied knowing about it,” notes Dr Kafumu. The commissioner links the development to the recent flooding accident at the Mirerani Tanzanite mines in Simanjiro District, Manyara Region, in which some 80 miners died.

 

Official records from the Energy and Minerals ministry show that in 2000, Tanzania exported 5.5 million gm of Tanzanite valued at USD 16.2 million. This dropped slightly the following year to 5.4 million gm valued at USD 15.9 million. A total of 6.4 million gm valued at USD 17.3 million were exported in 2002, this dropped again to 4.5 million gm that earned the country USD 13.1 million the following year. The figures for subsequent years are 3.9 million gm valued at USD 24.2 million in 2004, a total of 1.3 million gm that earned the country USD 34.0 million in 2005, and 3.4m gm valued at USD 43.6 million in 2006.

 

Despite the genuine reasons given by the ministry concerned and the current financial shake-up in the US, the drop in Tanzanite price to 50% is a bad indicator to the country. Pertinent questions need to be answered.

Why does Kenya which has no tanzanite, export more tanzanite than Tanzania? Why are the US, India, South Africa, Germany and Israel controlling Tanzanite? Why is the government too lenient on mining industry agreements at the expense of the country? Why does it condone illicit plundering of the resources? With corruption rampant in government procurement, privatization, taxation, ports, customs clearance, police forces and agencies handling FDI, especially in the mining sector, will our country ever benefit from its minerals?

Is it true as reported by Minweb, one of the online information providers, that Tanzania does not even know the amount of minerals produced in a particular mining area, a situation that provides loopholes for companies to cheat not only in terms of amounts of minerals still underground, but also the completion period of reserved minerals? Who is setting the price fro this mineral?

It is time we figured out what we need and what our partners in business want in order for the two of us to have a win win situation. It is time Tanzanians benefited from their resources now and left a legacy for their children.

By Elizabeth Riziki

Elizabeth Riziki is Chairperson of Tanzania Youth With a Vision