Pula and Tanzania team up to lead globe’s energy transition

Edited by Sharyn Macnamara

The world has begun to place the pandemic peak in its rear-view mirror and governments have made a decided turn to clean energy to drive COVID recovery plans. If the necessity for clean energy and e-vehicles was not clear before Russia’s invasion of Ukraine, it is now, writes Dr Nicolaas C. Steenkamp.

As the West looks to develop alternative energy supply chains that do not leave them dependent on conflict riddled regions of the world, they are looking for other options. Democratic, mineral rich, African countries offer new options and new opportunities for Africa and the West to work together on a global issue – the world’s clean energy transition.

The Pula Group, a US-owned company with high-quality graphite assets in Tanzania, is working together with Tanzanians to lead this North-South charge from East Africa. Tanzania is a stable democracy with among the world’s largest graphite reserves. The Pula Group has developed a profitable and ethical approach toward exploration and mining graphite in the country. While the Tanzanian government is moving full bore to make it easier for companies like the Pula Group to succeed, the group’s approach is environmentally sound and socially responsible. Furthermore, Pula prioritises local representation as fundamental, which is evident in a strong Tanzanian team and board that has helped develop the project.

Pula holds four graphite licenses in the Ruangwa region, home to Tanzania’s richest graphite belt. The British Geological Survey recently commissioned a study on graphite deposits in Africa and Pula’s graphite project was ranked the fifth largest in terms of total tonnage. Pula has prioritised one license – PL10332, which has significant finds of 34Mt of Indicated Resource and 62Mt of Inferred Resource. Forty per-cent of the flakes range from large to super jumbo, while 30 per-cent range from medium to large, which command a premium price. The characteristics in terms of quantum and quality are exceptional. Pula recently commissioned a new round of metallurgical studies that achieved a graphite concentrate of 96 per-cent purity. Pula is in late-stage discussions with potential offtakers that reflect the global shift to clean energy.

The United States, along with several European countries, have designated graphite as a ‘critical mineral.’  The Pula team recently held meetings in Washington DC with the US deputy secretary of Commerce, Don Graves, and EXIM Bank CEO and chair, Reta Jo Lewis, to update them on Pula’s projects in Tanzania and discuss how Pula might help US energy related companies access ‘critical minerals’ like graphite. Pula president, Dr Mary Stith, recently presented at the 2022 Mining Forum in Germany, which aims to lead battery manufacturing in Europe. Her presentation entitled, “With world-class graphite, Pula proves African Juniors as innovative and ethical influences,” furthered Tanzania’s place on the German and global radar screen. Germany minister of state, Katja Keul, who is a member of The Green Party, visited Tanzania in April 2022 and met with high-ranking members of the Tanzanian government.

The Tanzanian government is being particularly proactive in working to provide a regulatory climate to enable the success of foreign companies with strong local shareholders like Pula. Tanzania’s President, Her Excellency Samia Suhulu Hassan, has taken a number of high-profile trips to pitch Tanzania’s mineral assets and the new government’s commitment to providing an investor-friendly environment. Beyond the general regulatory changes, the government has made specific infrastructure upgrades to the roads, deep water port, and power supply in the Ruangwa region, which is where the Pula projects are located. These upgrades improve the project logistics tremendously.

With its cross-continent connections, Pula is working to become one of the leading mining groups in the global energy transition. The company expects to break ground on Phase 1 in the second quarter in 2023. Phase 1 will produce 12 000t of graphite concentrate per annum, while proving out the assumptions to ramp up to full production at 80 000t of concentrate per year. This revenue-generating exploration approach is a positive for the company and the country.

International public-private sector cooperation exemplified in Pula’s continued progress toward establishing Tanzania as a hub for the clean energy transition is key. Democratic mineral-rich, stable African countries offer new options and Pula, with its commitment to “doing well, while doing good,” offers a model for unlocking value for shareholders and stakeholders alike. With the right approach, the world’s development goals can be achieved alongside those of Africa.

Country overview

Tanzania is located on the border of the Indian Ocean between Kenya and Mozambique. The Tanzania mainland is bound by Uganda, Lake Victoria, and Kenya to the north, by the Indian Ocean to the east, by Mozambique, Lake Nyasa, Malawi, and Zambia to the south and southwest, and by Lake Tanganyika, Burundi, and Rwanda to the west.

Recent historical political movement

Magufuli won the October 2020 presidential elections, a contest dismissed by the opposition as a “travesty” because of widespread irregularities. Magufuli won 12.5 million votes in the election – or 85% – while his main challenger, Tundu Lissu of the Chadema party, got 1.9 million votes, or 13%. Magufuli died in March 2021, reportedly of a heart attack although there were rumours that he had had Covid-19. Vice President Samia Suluhu Hassan became the country’s sixth president and the country’s first woman president.

President Hassan’s government has prioritised efforts to clamp down corruption, improve public infrastructure systems, public administration and accountability, and to effectively manage public resources for improved social outcomes. Infrastructure and the health and education sectors have seen an improvement.

While some progress has been made with socioeconomic inclusion, media freedom and freedom of expression are still lacking for Tanzanian citizens.

The IIAG (The Ibrahim Index of African Governance) gives Tanzania a governance score of 53/100, ranking 19^th out of 54 African countries.

Economic factors

GDP grew at 4.90% in 2021, up from 4.8% in 2020, supported by the global economic recovery. Growth was driven by agriculture and services on the supply side and final consumption and investment on the demand side. Monetary policy remained tight, which stabilised inflation at 3.3% in 2020 and 3.7% in 2021. The Tanzanian shilling remained stable in 2020–21, depreciating by only 0.2% against the US dollar. The ratio of NPLs to gross loans fell to 9.4% in March 2021 from 11% in March 2020 but was still above the statutory requirement of 5%. The fiscal deficit increased to 3.4% of GDP in 2021 from 0.8% in 2020 due to weak revenue performance and growing financing needs to address the impacts of COVID-19 – financed by external and domestic borrowing. Tanzania had previously reduced poverty, but about 1 million people are estimated to have fallen back into poverty in 2020 due to the pandemic.

GDP growth is projected at 5% and 5.6% in 2022 and 2023, due to improved performance in tourism, the reopening of trade corridors, and accelerated rollout of vaccines. Inflation was projected to increase to 4.4% in 2022 and to 3.8% in 2023 due to higher energy prices because of the Russia–Ukraine conflict ¹.

Opportunities

The country’s extractive sector accounted for a 5.2% contribution to national GDP in 2019. Its diverse mining sector includes exploitation of gold, diamonds and tanzanite. Tanzania also produces natural gas and plans to commercialise offshore gas discoveries through the development of a liquefied natural gas (LNG) plant. However, a decrease in natural gas prices and delays in the financing of commercial natural gas agreements put future revenues at risk. The extractive industry is primarily regulated by the Mining Commission, the Petroleum Upstream Regulatory Authority, the national oil company Tanzania Petroleum Development Corporation (TPDC), and the Tanzania Revenue Authority.²

The Ibrahim Index of African Governance (IIAG) gives Tanzania a governance score of 53/100, ranking 19th out of 54 African countries. The health and education sectors and infrastructure have been improved. While some progress has been made with socioeconomic inclusion, media freedom and freedom of expression are still lacking for Tanzanian citizens.³ The latest Fraser Institute annual survey gives Tanzania an Economic Freedom rating of 6.55/10 with a Regulation score of 7.03.⁴

Reference:

1. African Development Bank Economic Outlook 2022.
2. eiti.org
3. 2020 Ibrahim Index of African Governance – Index Report (IIAG).
4. Fraser Institute Annual Survey of Mining Companies, 2021

About the author:

Dr Nicolaas C Steenkamp is an independent consultant, specialising in geological, geotechnical and geometallurgical projects and mining project management. He has over two decades of industry experience with global exposure. ncs.contract@gmail.com

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