Tanzania and Ethiopia have signed loan agreements with South Korea, securing billions of dollars in funding as part of broader deals that will grant the Southeast Asian nation access to Africa’s vital mineral resources and expansive export markets.
This development emerged during a high-profile South Korea-Africa summit, which hosted several heads of state, including those from Tanzania and Ethiopia.
Tanzania announced plans to borrow $2.5 billion over the next five years through concessional loans from South Korea. As part of this agreement, the East African country also signed a deal for a $163 million concessional loan to build a state-of-the-art referral hospital.
Additionally, Tanzania inked two pivotal agreements enabling South Korea to utilize its ocean resources and minerals essential for clean energy technologies, such as nickel, lithium, and graphite. Presidential spokesperson Zuhura Yunus emphasized the strategic importance of these resources for the future of green technologies.
Meanwhile, Ethiopia secured a $1 billion financing agreement over four years. The funds will be directed towards enhancing infrastructure, science and technology, health, and urban development, as reported by the state-affiliated Fana media outlet. This investment is crucial for Ethiopia’s ongoing development and urbanization efforts, supporting its ambition to transform into a middle-income country.
Tanzanian President Samia Suluhu Hassan is also seeking expanded cooperation in sustainable ocean resource management, natural gas development, creative industries, and labour export to South Korea, according to spokesperson Yunus.
These agreements signal a significant shift in the economic and diplomatic landscapes of Tanzania and Ethiopia. That said, President Suluhu’s new agreements with South Korea raise questions about whether Tanzania is reversing the gains made under John Magufuli’s mineral sector reforms.
John Magufuli mining reforms
Former President John Magufuli’s legacy includes sweeping reforms in Tanzania’s mining sector. Despite being Africa’s second-largest mining giant after South Africa, Tanzania’s economic benefits from the mining sector were deemed insufficient.
Consequently, Magufuli introduced reforms aimed at changing the legal, regulatory, and fiscal frameworks governing the mining sector dominated by foreign conglomerates. By 2017, Magufuli had revised mining laws and regulations, increasing gold royalties from 4% to 6%.
He also introduced 16% government ownership of mining companies’ stock without compensation, with the opportunity to purchase a further 34% ownership. The late president also banned the exportation of concentrates and unprocessed minerals, directing that value-addition processing be done within Tanzania.
These reforms were not well received by global mining corporations, leading to significant confrontations. However, Magufuli achieved substantial concessions from major players like the UK’s Acacia Mining which was eventually outlawed from Tanzania, and Canada-based Barrick Gold which agreed to a more equitable share deal over gold from its mines in the country.
Is President Suluhu reversing the reforms?
Magufuli’s reforms were characterized by a strong nationalistic approach aimed at ensuring Tanzania retained a significant portion of its mineral wealth. In contrast, Suluhu’s strategy, while appearing more open to international partnerships, still aligns with the broader goals of Magufuli’s reforms.
For instance, the head of state recently granted Tembo Nickel, a subsidiary of Lifezone Metals and the operator of the Kabanga Nickel project, a license for a multi-metal processing facility. This facility will be established to refine nickel, copper, and cobalt.
The Kabanga Nickel project, recognized as the world’s largest and highest-grade nickel sulfide deposit, contains approximately 44 million tons, with an average in-situ nickel grade of 2.61%, along with 0.35% copper and 0.19% cobalt.
“Our goal is to maximize the value of nickel, copper, and cobalt right here with Tanzanians’ hands shaping Tanzania’s future,” Lifezone Metal CEO Chris Showalter stated, emphasizing the project’s dedication to local economic growth.
This means that the country’s minerals will be processed in Tanzania, addressing the challenge of exporting raw metal concentrates at low prices and thereby boosting the economy.
Moreover, the influx of funds and development of strategic sectors like natural gas and ocean resources could spur economic growth and further industrialization in Tanzania, maintaining the balance between attracting foreign investment and preserving national interests.
In conclusion, while President Suluhu’s agreements with South Korea mark a departure in terms of engagement style compared to Magufuli’s more confrontational approach, they continue to emphasize the importance of local value addition and economic development.
