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Monday, March 24, 2014 

Shattered by Tanzania diamond dream

Peter Alan Lloyd, a British former investor in Tanzania’s diamond mining industry, is writing a book about his experiences in the country’s diamond rich region of Shinyanga.

To be called ‘Rough Diamonds: An Account of Our African Mining Disaster’, the book intends to show how an ambitious diamond mining project to put the formerly Williamson Diamonds Limited-owned Nyang’hwale mine back into production turned into a nightmare for them. 

His two brothers were also involved with Peter. Terence was the joint funder/partner, while John did all the hard work in the bush and on the mine. He actually lived in a small guest house in Kahama, Shinyanga.

Peter’s background is law while his brother Terence’s is a financier. At the outset, neither of them understood the day-to-day details of the diamond mining business.

But they didn’t think they would have too. They went into it believing they’d only be funding it, but as things turned out they ended up having to manage it too.

 This gave rise to problems and increased costs. Peter recently talked to East African Business Week about those hectic days. Below are  excerpts:

Question: What was your capital?

Answer: Terence and I at the outset thought one million dollars, in the absolute worse case would cover putting Nyang’hwale into production, based on reports of experts who visited the mine. But it became multiples of that, as costs rose, problems arose, delays dragged on and other investors were needed. 

Why have you decided to write a book about diamond mining in Tanzania?

I needed to understand how and why we’d failed so spectacularly and so expensively out there, and also what we and others could have done differently. It isn’t intended to be a witchhunt, more like an autopsy, unfortunately.

I am still ploughing through over 15,000 emails, notes of calls and meetings from 2005 to 2013 as part of my research in order to write what I hope will be an entertaining and instructive account of our roller coaster time in Tanzania.

What were your experiences in taxation, investment, security, working culture and relations in Tanzania. Was there any politics involved?

As a general comment, we were lucky to use an outstanding lawyer in Dar es Salaam called Mustafa Tharoo, who is now based in London, I believe. 

He gave us the best commercial, practical and tactical advice on the legal/regulatory side that we could have asked for. In the end he was so good he was headhunted.

We had preliminary taxations discussions with our lawyer, someone at Grant Thornton in Dar es Salaam, and for local day-to-day matters, our local partners had an accountant on the ground in Shinyanga who we used.

We had no experience in investing in Tanzania until we began putting the joint venture deal together. Terence and I once went to hear President Jakaya Kikwete speak at the Mining Indaba in Cape Town, and we were pleasantly surprised to discover he had been right and that it was relatively easy and painless for foreigners to invest in Tanzania.

We knew security would always be a problem, but it rapidly became a financial headache as well. We had to employ sufficient guards to ensure no further mine invasions took place (just before we completed, 300 artisanals invaded Nyangwale, and it was a major problem for our local partners to remove them). 

Then there were security costs of just securing the mining equipment when that arrived from South Africa, and of course, once we actually went into limited production, that was a different (and more expensive) story altogether. In addition, my brother John had to have 24-hour security in Kahama.

We ended up with some outstanding employees in Tanzania, but that was as a result of expensive trial and error. 

Labour laws were a joke, with many time-consuming, frivolous lawsuits from lazy, thieving or incompetent staff we had to fire. Unfortunately we soon realized the legal system seemed designed to encourage, or at least support these claims to a point where many management man-hours were lost in dealing with irresponsible claims and court cases, or we’d just settle for as low amount as possible to have the problem go away.

Could you comment on Tanzania legal system as an investor?

As a lawyer, and someone who’s lived in Asia for over a decade, I’m not naïve about how the courts systems really operate in emerging economies, and I told my brother at the outset that the last thing we’d want to do in Tanzania is litigate. 

So we set up everything from the point of view of never wanting to be in a commercial court, and having lucked out on our laywer in Dar es Salaam, and in having such honest local partners in the Souds, we never had to. Our local partners, the Souds, are a highly respected Shinyanga-based Tanzanian family, who also have a joint venture with Petra inside Mwadui.

Where is your brother now?

John is back in the UK, wondering if his intense and challenging five years living in the bush in Tanzania was just a bad dream. 

What is your opinion about the future of mining and the environment issues?

We were dismayed at the price rises in annual fees and renewal fees for mining licences in Tanzania. 

I cannot understand the financial logic behind it, but it sounded the death knell for another mining license area we controlled, called Diamond Africa, which was an 18 square kilometres piece of land outside Mwadui. 

After our losses since 2008, investors couldn’t stomach these enormous hikes in mining licence fees and we had to finally walk away from all of our Tanzanian mining assets.

We didn’t have any environmental issues in running Nyang’hwale, I’m pleased to say, and we always respected the opinion of the Mines Department in Shinyanga whenever they visited the site to make recommendations on our operations.

What did you do with your equipment/machinery at Nyang’hwale?

We sold it to our local partner. What we had expensively had constructed in Kimberley, South Africa and expensively transported to Nyang’hwale and expensively erected at the mine, was in the end sold for peanuts.

Do you intend to come back to Tanzania?

I’d love to! It’s a great country. But next time preferably as a tourist and not as an investor, although I still follow Tanzanian and African mining ventures with great interest.

You can visit Peter’s website www.peteralanlloyd.com for more articles and information about his Tanzanian experiences.

By Andrew Zablon, Monday, March 24th, 2014