Earlier this week, a small-scale miner in Tanzania made headlines around the world when he became a multimillionaire overnight after selling to the government two of the largest tanzanite rocks ever unearthed.
The government agreed to buy the brilliant violet-blue-tinged precious stones, which weighed in at 20.4 and 11.2 pounds respectively, for $3.3 million—which is well below their actual market value—and put them in the country’s museum. Tanzanite has become something of a must-have jewel for celebrities looking to spice up their outfit with a striking blue gem.
Saniniu Kuryan Laizer, the 52-year-old miner and father of 30—yes, 30!—who discovered the tanzanite samples, said he planned to invest the money in a shopping mall in the northeastern city of Arusha and to build a local school in the neighboring district of Manyara.
But Laizer’s millionaire moment represents more than just an amazing stroke of luck for one man. It represents a rare victory for an African government in being able to regulate artisanal mining—a practice that employs more than 40 million people around the globe and is implicated in exploitative labor practices, human rights abuses, and environmental degradation. With tanzanite, Tanzania has managed to use market mechanisms to channel the insatiable forces of demand and supply to create a more sustainable and possibly less damaging industry.
Tanzanite is one of the world’s rarest minerals. It is found in only one tiny patch of the globe, just five square miles in size, in the Mererani Hills of northern Tanzania, the legacy of a violent clash of tectonic plates 585 million years ago that would also spawn the volcano that is today Mount Kilimanjaro. Only first discovered by a gold prospector in 1967, diamond company De Beers brought the gem to market for use in jewelry the following year. But in the past decade its popularity has soared, setting off a mining boom in the Merarani Hills.
One large-scale commercial mine, operated by a Bermuda-registered company called TanzaniteOne Ltd., has an official concession to operate in the area in partnership with the State Mining Company of Tanzania. It was once publicly listed in London but is now in private hands.
But hundreds of small-scale, unlicensed pit mines have sprung up all over the area—bringing with them many of the same problems that have plagued artisanal mining of other minerals elsewhere: unsafe working conditions and exploitative labor practices.
Because none of the miners were licensed, miners had to sell the uncut gemstones they excavated illicitly, giving rise to an underground economy of smuggling networks, loan sharks, and organized crime. It also spurred government corruption as officials were paid to look the other way. Meanwhile, Tanzania itself lost out on revenues it could have derived from royalty fees and mineral rights. The government estimated in 2017 that 40% of tanzanite was being smuggled out of the country.
These sorts of problems are common to artisanal mining, according to a 2017 report of the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF). “Environmental and health and safety practices tend to be very poor. For example, dust and fine particles resulting from blasting and drilling cause respiratory illnesses,” the IGF wrote.
Small-scale gold mining, which uses mercury to separate gold from other metals, is especially problematic. In fact, artisanal mining is the largest global source of mercury pollution—estimated at 1,400 tonnes of mercury released into the environment each year, the IGF says. “Exposure to mercury can have serious health impacts, including irreversible brain damage,” the report continues. “Mercury is also difficult to contain and can be toxic at even very small doses. It can be transported long distances by air or water, poisoning the soil and waterways, and eventually making its way into the food chain. In sub-Saharan Africa, most of these risks are borne by women.”
And yet small-scale mining is key to the production of many valuable minerals: 20% of the world’s gold supply, 80% of sapphires, and 20% of diamonds are mined this way, according to the IGF. Key metals for electronic components are also extracted by small-scale mines: 25% of the world’s tin and 26% of the supply of tantalum, which is used in computer chips and smartphones.
In the case of tanzanite, the Tanzanian government first tried to wall off the problem—literally. Because the area where tanzanite is found is concentrated so densely, in 2017, Tanzania’s President John Magufuli decided to build a fence around the entire mining region. But fences are never very good at separating supply from demand. The fence did reduce the amount of tanzanite being mined illicitly, but it also drove prices higher and made smuggling more lucrative.
So, in 2019, the government also instituted a new policy. It decided to expand the legitimate market for tanzanite—as well as gold and other minerals. It began licensing small-scale miners and set up official government mineral trading centers where they could sell their production at a fair prices. The 28 official trading hubs established so far are all close to mining sites, so that small miners could sell their production directly, without having to rely on sometimes unscrupulous middlemen to take the minerals to markets in bigger cities, which had been a source of corruption in the trade.
The markets also allow the governments to efficiently tax mining production. Plus, the government changed the tax rate miners have to pay, reducing it to a 7% royalty rate on sales. Previously miners paid a litany of taxes and fees: 5% withholding tax, plus 18% value-added tax on mineral sales, plus 7.3% inspection fees, and a 0.3% government service levy on top. The new, flatter tax structure is “well designed to curb smuggling,” Matthew Salomon, the senior economist for the Institute of Taxation and Economic Policy, told trade publication Mining Technology. “The lower tax rate should provide incentives for small-scale miners to transact through the hub.”
That newly minted tanzanite millionaire, Laizer, shows that Tanzania’s efforts to formalize the informal mining economy is starting to work. He’s one of the small-scale miners recently licensed by the government. The government was able to purchase his huge tanzanite specimens because Laizer brought it to a government trading hub. In the past, it might never have even known the giant gemstones existed—they would likely have been spirited out of the country.
“We are now moving from a situation where the small miners were smuggling tanzanite, and now they are following the procedures and paying government taxes and royalties,” Tanzanian mining minister Dotto Biteko said at an event this week celebrating Laizier’s find.
Having shown initial success with tanzanite and gold, Tanzania is hoping to expand the system to other minerals too, and it could prove to be a model for other mining-dependent economies throughout Africa