Trouble In Tanzania

AFGEM, the South African gem-mining corporation that two years ago leased prime property in the Merelani tanzanite mines from the Tanzanian Department of Energy and Minerals, is at odds with its neighbors. AFGEM’s Block C lease is the largest mining area in the region, yielding the highest percentage of fine-quality rough tanzanite. Local miners of Blocks D and B believe they have been wrongly kept away from the hillside of Block C, and they say AFGEM hasn’t lived up to its end of the bargain to acquire it.

According to Tanzanian news reports, the agreement between AFGEM and the Tanzanian minister of mines included a promise that AFGEM would create jobs for miners, improve local infrastructure such as roads and water supplies, furnish jobs in local cutting factories, and provide “significant contributions to community development.” AFGEM has done little to keep its promise, the news reports say. Local miners also are unhappy with AFGEM’s proposed branding of tanzanite, which they fear will reduce the value of their unbranded gems.

Joanne Herbstein, corporate communications officer for AFGEM, responded to these allegations, saying that AFGEM’s property is “one of the most sought-after gemstone properties in the world, so it stands to reason that certain members in the tanzanite industry would exhaust every avenue in trying to lay claim to it. Unfortunately, in our situation, these attempts have been centered around a host of unfounded allegations, in an effort to defame our company and gain access to our mining license area.”

Herbstein says AFGEM’s aim is “to grow, develop, and formalize the tanzanite industry, adding value to all stakeholders, including the small miners, the community, and the Tanzanian economy. This represents a shift in the status quo, and we are now dealing with significant resistance to that objective. Fortunately, the resistance is fueled by a small group of vested interests, and we are 100% supported by the Tanzanian government.”

But reports by local media include accounts of AFGEM security forces shooting at hundreds of trespassers and releasing guard dogs to protect property rights. Other reports say trespassing miners have been buried alive in intentionally collapsed mine tunnels. This apparently has led the miners’ organization—the Arusha Regional Mining Association (AREMA)—to file a lawsuit against AFGEM and prompted the minister of mines to protest the lease agreement.

Herbstein takes a different view of the situation: “About two weeks ago, 1,500 people invaded our property,” she says. “The situation was managed by the Merelani Police commander. AFGEM’s security officers were under police control. The situation was very tense. Shots were fired. At one stage, the police ran out of ammunition and asked AFGEM’s security officers for assistance. The police were armed with automatic weapons. Four of AFGEM’s security officers were armed with shotguns loaded with birdshot only.” According to Herbstein, six trespassers were injured, treated by AFGEM’s on-site medical officer, and then transported to the local hospital by AFGEM personnel. “There were no serious injuries and no deaths,” she adds.

Herbstein confirms that AFGEM does have guard dogs, but she says they’re trained only to guard fenced restricted areas at night. “Dogs have absolutely never been used for any other purpose,” she insists. “We have a strict policy in place that is quite specific in terms of the guard dogs and their handling.”

More allegations. AFGEM also has been accused of smuggling tanzanite, but Herbstein notes that it’s a public company, and she says its export figures are 100% up to date. “We are also completely up to date in terms of the royalties we have paid the Tanzanian government,” she adds. “Our tanzanite exits Tanzania through the appropriate channels—always has and always will.

“The irony is that the miners’ associations that have made these baseless allegations represent a community of mining operations that are certainly not as legitimate as we are,” says Herbstein. According to AFGEM, the tanzanite market is worth $150 million per year, yet export figures show only $8 million. “It is glaringly apparent that smuggling is occurring and that Tanzania is losing significant amounts of money because of it,” says Herbstein. AFGEM sees its role as helping the government acquire its “full value out of its natural mineral wealth.”

As for aiding Tanzania’s infrastructure, AFGEM reports that the rebuilding of a 14-km service road between Kilimanjaro Airport and Nasinyai Village—at a cost to date of $15,000—is 75% complete. In addition, “AFGEM has built two cattle dams, laid water provision piping, and contributed toward the repairs of water borehole facilities in the local village,” claims Herbstein. “AFGEM also has provided electricity to the local clinic as well as internal wiring for lights and plugs. Significant resources have been spent on rebuilding a new staff village. Also, we have identified the Nasinyai School as a community development project [that] will be initiated and actioned this year. We are also investing much money in a branding and marketing campaign that will grow the global market for tanzanite, benefiting all players in the industry.

“We are doing so much good and are very committed to our investment in Tanzania, but it is becoming more and more frustrating to manage the small band of influential people that are set on sabotaging our project,” adds Herbstein. “We have submitted solid counter-affidavits and supporting evidence to the courts. Our case is airtight. We can only trust that the system is, too.”

Growing unrest. But continuing resentment over AFGEM’s control of the best and biggest portion of the mine has spawned violence—reports that protesting miners have been shot and killed are now confirmed.

According to Herbstein, a group of approximately 300 local miners staged what she terms a “harassment episode”—described as a stone-throwing incident—at block C. Herbstein says AFGEM’s security policy is to let local police handle any episodes. In this particular instance, the police were called in and—according to Herbstein—they “managed” the disturbance.

According to local news reports, however, the incident began when AFGEM guards shot and killed miner Emmanuel Obed, age 17. The reports also state that Obed was the second such victim in less than a month.

“Our security team had absolutely nothing to do with the incident, aside from being available to support the police had they been instructed to do so,” says Herbstein. “I know that Mr. Obed died during the incident, and it is an absolute tragedy.”

At press time, AFGEM stock was selling on the South African stock exchange for about 13 cents (U.S.) per share, down from its initial price of $1.75 per share a year ago.