Tanzania as a country is unique to its surrounding Sub-Saharan neighbors. It managed to evade civil and ethnic strife through the socialist policies of “Ujamaa” in its post-colonial era.
The harmony and peace Ujamaa provided for Tanzanians were halted in the early 1990s. The end of the 20th century was nearing, and the world was rapidly advancing; however, Tanzania faced economic stagnation and social problems.
The government’s solution was the precursor for Africa Barrick Gold’s (Barrick) activities around Lake Victoria. The state-controlled financial strategy that underpinned former socialist policies was replaced with a liberal, free enterprise strategy.
The leaders of Tanzania wanted to attract foreign investment and privatize to propel and strengthen its crumbling economic and social situation. Tanzania offered Transnational corporations (TNCs), particularly in the mining sector, an environment richly endowed with minerals with the benefit of low labor costs.
As one of the largest Canadian mining companies, Barrick was aware of these advantages and sought to exploit the area around Lake Victoria. However, the social and environmental impact of Barrick’s mining activities has left local communities angry, yearning for their previously harmonious and peaceful life.
New regulations and policies were devised to make Tanzania as FDI attractive as possible, which adversely affected the needs of its citizens. As a leading player in global mining operated in multiple continents, Barrick knew that being ‘responsive’ should be integral to the company’s strategy.
As a result, a hybrid institutional infrastructure enabled Barrick to have a dual focus: earning profit and sponsoring social development. A summary of the political, economic, social, and technological conditions that affected Lake Victoria’s market is summarized in Exhibit 1, which provides a cultural context to this piece.
The topics this essay will discuss are the challenges facing TNCs operating out of the global south secondly, why violence has continued despite the genuine contributions of Barrick to development. Thirdly, Barrick’s Corporate social responsibility (CSR) activities and how FDI benefits developing countries can be correctly utilized to break the ubiquitous ‘resource curse’ to help those affected by Barrick’s operations.
Challenges Facing Companies Conducting Operations out of the Global South
The demand for gold increased after the First and Second World Wars, and Tanzania’s richness in natural resources, such as gold, presented a significant opportunity in the mining sector. Due to its limited resources, the country could not take advantage of this to meet the rising lucrative demand.
However, The Collapse of the “Ujamaa” regime in Tanzania enabled and inflowed foreign direct investment into the country through the extractive industry of mining.
The inflow of TNCs into developing economies brings positives like technological know-how and billions of dollars (Exhibit 3), which helps stimulate the economies of developing countries and carry them forward toward industrialization.
These positives that TNCs bring assist Tanzania in overcoming the challenges which prevented its previous nationalization attempt in the mining industry.
The challenges for social licences and local legitimacy are not unique to Barrick or Tanzania. Obstacles arise for any extractive mining corporation that seeks to establish subsidiary operations in a developing nation.
These barriers can be attributed to the fundamental tensions between the corporate pursuit of profitability and the human rights of populations in the host states where such corporations seek to invest. For example, there is a stark comparison between the lives of those living around Lake Victoria and those seeking to exploit indigenous lands for profit.
There are often many trade-offs local communities must suffer to enable foreign investment to stimulate their economies. This issue is compounded by the governments’ inability to articulate and educate their people on the advantages TNCs bring to their citizens.
This lack of communication leaves the affected population at a loss regarding the corporation’s benefits to them specifically. The result leaves locals to dwell and focus on what is tangible to them, i.e., problems such as noise disturbances and ecological damage, which have degraded their indigenous agricultural industries.
The labor environment in developing countries and the abundance of natural resources come with the price of intrinsic legal and institutional weakness. Like many African countries, there is a high level of corruption, and poor regulatory enforcement is present in Tanzania. (Exhibit 2).
Corporations must deal with the pressures of engaging in locally-based community partnerships to tackle social problems of environmental issues, unemployment, healthcare, and poverty.
Additionally, weak legal and institutional capabilities contribute to the corruption and unaccountability of officials, which in turn triggers violence from local communities. Particularly in Tanzania, Barrick is facing a challenge to balance its global strategy and the interests of local subsidiary operations.
Tanzania’s economy was centred around agricultural activity; thus, it fell to the foreign corporations to implement initiatives to commence industrialization and then encourage the population to engage in mining activities. Along with the obligations a company has to its stakeholders, Mining companies face further challenges from secondary stakeholders.
These include people who are consequently affected by the actions of mining TNCs, such as farmers and artisanal miners but have no direct claim to compensation and all have a flurry of individual grievances.
Violence persists despite efforts.
The Lake Victoria zone is one of Africa’s most densely populated regions. Due to this dense population area around the Lake, a heavy dependency grew over the Lake’s Resources. After the collapse of the Ujamaa political system, Companies such as Barrick wanted to and were able to invest in Tanzania. This Foreign investment was facilitated and aided through National services such as the Tanzanian Investment Centre (TIC), which promised to help foreign firms overcome procedural hurdles during acquisition.
Tanzania is rich in minerals such as gold, copper, and nickel, making it an attractive place for TNCs such as Barrick to invest and mine in. As previously noted, foreign investment was needed to boost the country’s economy and provide employment, skills, and training to the locals. Most of whom were previously engaged in agricultural practices. This creation of employment opportunities has proved to be a fatal double-edged sword. As more people immigrated to the already densely populated Lake Victoria to seek the employment that foreign firms offered, the faster the Lake’s ecological health plummeted.
The Agricultural lifestyle, which was central to many Tanzanian lives, was destroyed by this growing population and the rise of the mining industry.
Tanzania was already overly dependent on its agricultural sector, and as a direct cause of TNC’s activity around Lake Victoria, locals could no longer make a livelihood from agricultural practices.
The effect has a devastating indirect impact on local communities. The resulting unemployment from the environmental degradation of the Lake is somewhat caught by the employment opportunities which flow from Barrick.
Although these opportunities are there, there remains a reliance on foreign-trained ex-pats. However, solely focusing on employment will not clarify why the violence and tensions had not abated.
Profits Vs. Human rights
To fully understand why protests, persist, we must realize that the actions of both Barrick and the Tanzanian government ignore the human rights of the local communities. For example, as noted in the case study, Barrick’s use of the Field force unit (FFU) to stop protests at its mining sites has led to deaths, imprisonment of campaigners, intimidation, and harassment.
This brutality against local communities, commissioned by Barrick, contradicts its reputation as a “responsive” global corporation in the mining industry. How can the use of brutal violence against the people you’re purportedly trying to help be justified?
The Local communities were left furious and felt neglected by their government, but as mentioned in the case they, “cannot confront them like they are now confronting the mining company.” Although Barrick has strived to be cognizant of corporate socially responsible, this comment illustrates why it remains an easier target than the government.
It is also an agent who has a voice that the local communities do not. “$2 billion in the past decade has been injected into the Tanzanian economy by mining TNCs”. The Tanzanian government is much more likely to be persuaded into accountability by corporations who financially contribute to their economy.
The locals then lash out at the company because they see it as a vehicle for their concerns to be heard. Suppose the TNC wishes to relocate its operations due to this backlash. In that case, the company’s financial contributions go with it, which the Tanzanian government will take active steps to avoid.
Despite Tanzania’s Membership of African Unions Development blueprint, Local communities see little or no remuneration in exchange for selling mining rights to TNCs. The purpose of the country’s partnership with this union was to protect ecological and community welfare while maximizing remittances from mining TNCs in a transparent and accountable way. Notwithstanding this, Barrick has been granted mining permission through ‘secret contracts’ with corrupt officials to mine and drain resources from the land, which the local communities inhibit. This practice directly contradicts the spirit of the African Unions Development blueprint and demonstrates the corruption and unaccountability that prevails over well intentions. It is stated that “there is so much poverty, and the communities around the mining sites are angry and desperate.” The high rates of corruption in the government and weak institutional and legal systems can be traced as the root of this anger and social unrest. The poor institutional capacity fails to demonstrate to locals how companies like Barrick can benefit the impoverished community around the Lake Victoria Zone. Community leaders expressed that local communities had lost interest in Barrick’s CSR projects because of this poor communication channel.
Barrick holds the right intentions, as illustrated through its mission statement “Barrick’s core vision and values were to continue finding, acquiring, developing and producing quality reserves in a safe, profitable and socially responsible manner.” Although its operations are profitable, the socially responsible arm of its strategy is incurring failures. In the case study, one of the community leaders’ comments that if Barrick can “respond positively to our concerns, we will strive to protect its business interest here and operate in harmony with our communities.” Barrick should take up this advice. The company has a bad reputation with the locals; they are discontent despite a new locally-based interaction model that promotes mutual partnership with the communities. The locals still feel not enough had been done by Barrick to promote sustainable and inclusive development in the communities.
This reaction from the locals seems somewhat counterintuitive, considering a large part of the case study centers around the efforts of Barrick’s CSR initiatives and the donations, infrastructure, and investment they’ve made in the Lake Victoria area.
Therefore, it appears there is a significant disparity between the donations and investments given and what is received by the local communities affected by Barrick’s operations.
Barrick’s social development department should track whether its money is well spent and is falling into the right hands to remedy this. Due to the lack of governmental transparency and accountability, compensation does not reach local communities.
To fix this, Barrick could redivert some of its CSR funds to compensate local individuals while guaranteeing corporate oversight to bypass potential corruption and misallocation (this will be discussed further in the final section).
A possible program could be for Barrick to support the technology needed for improved irrigation systems to strengthen its support of the agricultural industry while also mitigating the environmental damage it has caused. Barrick should also limit the amount of violent force their security FFU use, as their brutality has harmed Barrick’s relationships with the local communities. The resulting strained relationship contributes to the continued unrest and perpetuates protests against Barrick’s operations.
Barrick's Global approach to CSR
The forces of globalization, emerging technologies, the liberation of national and business regulations, and the improvement of the investment climate in developing nations have provided many incentives for TNCs, such as mining corporations, to increase their commercial mining activities in emerging nations.
TNCs have been quick to capitalize on improved infrastructure, free-market conditions, democratic governance systems, and the large availability of low-cost labor across developing societies.
As noted in the case study, Barrick holds operations across five continents, many of the nations in the global south.
As mining TNCs have become increasingly globalized, their opposition has likewise become increasingly globalized.
“Both local and international not-for-profit had continued to create a significant impact with respect to promoting responsive behavior.”
Collaboration of local, indigenous communities with social movements and lobbyists from developed countries have demonstrated a considerable inclination to interact not just with one other but also with those most directly and negatively impacted by mining activity.
As illustrated in the case study, Indigenous communities have frequently challenged mining TNCs on the issues their activities create. Furthermore, these challenges can be taken further afield due to globalization and technologies.
Social injustices exponentially spread outrage, particularly when western TNCs exploit market conditions to the detriment of local people. Areas that become contentious involve TNC’s tax obligations, royalties from profits, rights to extract minerals and compensation measures, long-term impact on lands, as well as social issues, including jobs, the environment, and agricultural livelihood.
In its mission statement, Barrick has a noted commitment to CSR, publicly proclaiming its values. However, when measuring the actual impact of how TNCs engage with local stakeholders on social and ecological issues, their actions should be scrutinized rather than their words in mission statements.
Many embrace the language of “sustainable development.”, but this is purely lip service without tangible being received by the affected communities.
Barrick has realized that there are economic and social benefits in genuinely engaging local stakeholders rather than relying on national institutions or outside individuals to address these social and ecological issues.
Breaking the resource curse
Many resource-rich nations such as Tanzania are confronted with the paradoxical predicament in which their abundance of natural resources is contradicted with poor economic and human progression rates.
This situation is referred to as the ‘resource curse. (Corrigan, 2014). This ‘resource curse’ results when the wealth of natural resources has a damaging effect on its national economic, political, and social welfare.
In Tanzania (as well as in other African mineral-rich countries), TNCs like Barrick import most of their mining equipment and the technical, financial, and managerial services needed to run the mines.
Only a few African companies, based mainly in South Africa, can provide heavy equipment and services. The raw ore is shipped after extraction for additional refining or processing elsewhere.
Few forward or backward linkages between mining TNCs and the local or national economy exist, encouraging more private sector development and job creation. Furthermore, mining TNCs primarily create manual labor jobs with few professional positions due to the industry’s capital-intensive nature. Administrative jobs are frequently generated due to the shortage of skilled workers.
As a result, it isn’t easy to understand how mining TNCs can transfer primary skills, technology, and capital to help Tanzanian society evolve into a knowledge-based society, for example.
To develop an economy that would bring about social progress, it is necessary to collect public income through a transparent tax and budget system. In general, income from tax enables a government to collect revenue to spend on national and local development plans and redistribute its revenue through a budget to attain more equitable development.
It also allows for setting the price of goods and services to achieve social and environmental goals or influence the behavior of companies and individuals. Additionally, it is associated with stronger political and democratic representation channels since it encourages tax-paying citizens to demand more accountability from their government.
Following this, revenue collected from the tax could become a key mechanism in facilitating the government in using the mining industry as a tool for national economic development. Tax revenues, rents, and subsidies can materialize Barrick’s CSR intentions in the Lake Victoria Zone to support economic development. However, the successful utilization of these revenue streams is dictated by a high level of transparency and accountability.
Corruption has been a driving factor perpetuating the resource curse (Cappelen et al., 2021). Therefore, it is submitted that it is only through more transparent tax structures that Tanzania’s government can build trust and practice accountability. The “state-citizen” accountability this creates allows for infrastructural and economic development to flourish. For example, The Extractive Industries Transparency Initiative (EITI) is an initiative that aims to solve the resource curse by improving institutional quality. Academia regarding this initiative has illustrated that those countries undertaking the EITI demonstrate positive economic development, government effectiveness, and regulation quality (Corrigan, 2014).
As noted earlier in the essay, evidence from the case study reveals that the primary beneficiaries of the taxes paid by TNCs are a handful of corrupt politicians, some corrupt community leaders, and the mining company’s shareholders. However, with the proper oversight and initiatives, such as EITI, mining subsidies, rents, and tax revenues can create demand for small, local enterprises that serve the mining communities.
For example, Local fishers who have lost their consistent source of employment can be supported through alternative projects such as fishponds or upskilling through carpentry. These projects should be complemented by Barrick adequately addressing how to mitigate the issues caused by the toxins they release into rivers and the Lake. Furthermore, revenue could partially support the harvesting of the Lake Victoria hyacinth to bolster efforts to produce it into compost and biogas. This would redress some of the environmental degradations of the Lake caused by TNCs and signal that Corporations such as Barrick are attuned to the social problems they contribute to, which face the people in the areas they operate in. Tax revenues could also directly improve employment by contributing to micro-business ventures through micro-financing channels, e.g., The Tanzania Investment Centre, to reduce poverty and crimes in the region.
Communities have been affected by the introduction of mining in various ways: loss of local farmland, soil and water contamination, air and sound pollution, deforestation, forced removals, physical damage to dwellings, and an unsafe living environment around the Lake Victoria Zone. Mining tax regimes should be used to enhance socioeconomic circumstances and encourage and assist local governments in raising awareness about the need to maintain natural vegetation and prevent land erosion and desertification. The effect of successfully addressing these issues would also contribute to creating a legitimate social license for Barrick to operate.
Tanzania’s political leadership is ready to engage with affected stakeholders, “Tanzania wanted its institutions to be more transparent and accountable.” Under the strength of institutional laws and enforcement, taxes could transform the industry to bring about social and ecological benefits to the area effectively. Africa Barrick gold operates its mining activities in the remote and economically depressed areas around Lake Victoria, which the government has neglected for many years. As a country eager to be democratic and politically representative of its citizens, Tanzania should create an open system for local citizens and other affected stakeholders to monitor Barrick’s revenues’ collection and have a say in their allocation and expenditure. Instead of forcing local communities to rely on Barrick as a newly arrived “patron” who could provide them with basic services, the government should build a pro-active cross-sector social partnership strategy between the company and the communities. Such partnerships may generate much-needed, locally based social and ecological development opportunities.
For example, the government can encourage cross-sector social partnership strategies to create cooperative organizations in farming, cattle-raising, and fishing, opening new employment opportunities for local communities, equipping educational and health services via indigenous talent and resources to produce much-needed support and access to such services and also, developing networks of dedicated entrepreneurs with indigenous capabilities who are prepared to use indigenous resources to generate jobs in various areas to satisfy and preserve domestic markets.
Finally, through dialogue, mutual respect, and involvement, establishing and expanding “bottom-up” local partnership methods can be implemented.
This could be accomplished via workshops in which people of the local community are asked to debate and discuss problems affecting them and collaborate on solutions.
Tanzania should avoid unwarranted tax advantages and mining contracts with corrupt government officials, notwithstanding Barrick’s considerable gold production operations in the Lake Victoria Zone.
Tanzania’s constitution states that the government owns the mineral deposits and that royalties must be charged to the state treasury.
However, given the impact on residents’ livelihoods, the government should ensure that royalties, licenses, and corporation tax are paid to benefit those populations that have been displaced from their land and whose environment has been impacted by mining activities.
It is still the job and responsibility of the government to guarantee its population sufficient education, healthcare, clean water, and other fundamental requirements. Barrick cannot be expected to deliver all of these critical services efficiently and equally, and there is no system in place to hold the business accountable to the communities.
Thus, Barrick’s tax contributions should be its main contribution to development. Improvement through CSR community activities should be secondary. They are wholly voluntary, fluctuate year to year, are not allocated relatively, and account for a relatively tiny portion of its overall revenues.
This essay has put forward a reasoned explanation as to why, despite sizeable efforts, Barrick’s activities have continued to spark outrage with various stakeholders.
Tanzanian leaders have displayed progressive intentions, yet they make trade-offs with human rights in exchange for profits from FDI.
Critically, government corruption and lack of accountability further impede citizens’ human rights and hinder a community’s ability to voice their basic needs.
In such a situation, where the financial benefits of FDI are being barred from realizing and preventing meaningful development, TNCs must put pressure on the governments and hinge investment on transparent tax, subsidies.
Although complete transparency may be wishful thinking, undertaking agreements such as the EITI will alter attitudes at the highest level.
A zero-tolerance approach to corruption and Barrick demanding to see which hands its money falls in will allow Tanzanians, particularly around Lake Victoria, to live a peaceful and harmonious life once again.