Dynamics and Trends of Mining in Tanzania: A Cointegration Approach, 1966-2023.

Abstract

This paper examines trends and dynamics of the Mining sector of Tanzania over a time span of 100 years. To do so, econometrics analysis is used to estimate cointegration model for trends within the span of time from 1966 till 2023. Qualitative analysis is also undertaken and empirical findings confirm five distinct regimes of mining sector performance since 1898 namely; the gold boom from 1898 till 1950, diamond boom from 1950 up to 1966, drastic fall from 1966 till 1997, recovery from 1997 up to 2010 and gold boom from 2010 to date. Tracing from 2000 when Vision 2025 was adopted, paper estimates show that the mining sector performance has been extraordinary from 1 percent in 1997 to 10 percent share of GDP by 2023 and export contribution has increased from US dollar 26 million in 1997 to 2.9 billion by 2023. Legal, regulatory and institutional frameworks at sectoral and macro level substantially influence the observed performance. The paper shows that the error correction term is correctly signed and statistically significant and, the coefficient of minerals export is statistically significant such that a 1 percent increase in mineral export will lead to a 0. 43 percentage increase of total export in the long run, with 77 percent speed of convergence to equilibrium. In terms of contribution to GDP, the results show that 1 percent increase in minerals production lead to 0.16 percent increase of GDP. Further analysis of the paper demonstrates high intensity of the correlation, integration and linkages effects between mining sector with other sectors particularly manufacturing. Thus, mining sector generally has potential to maximize gains from economic and social development whereas discovery of huge deposits of rare earth elements in Tanzania and availability of wide range of industrial mineral in nearly all regions of Tanzania have a potential of becoming a new backbone of Tanzania and enable manufacturing contribution over 30 percent of GDP.