US & GEM

Tanzania 2014 | INDUSTRY & MINING | INTERVIEW

TBY talks to Ami Mpungwe, Chairman of TanzaniteOne, on the necessary business environment for partnerships to develop the tanzanite industry.

Ami Mpungwe
BIOGRAPHY
Ami Mpungwe is the Chairman of TanzaniteOne

What are the implications of the recently signed letter of intent for a 50-50 joint license ownership between Richmond and TanzaniteOne going forward?

Philosophically, I have no problem with this, as the new world that is evolving is a different one from the past. There must be local involvement, which is in the business' own best interests. Some of these huge international companies are actually bigger than countries, and absolutely need to be part of the local DNA. If they aren't, and some fail to be, they risk becoming antibodies, whereby the political, economic, and social system rejects them. The problem I perceive, however, is how to achieve this in the national interest and also in the interest of investors. As with any other mineral activity, there is a need for capital investment, technology, and expertise. For locals, foreign investments enable the meeting of these requirements, thereby modernizing the gemstone industry. That being said, the necessary legislation has been passed curbing foreign participation to 50%. We had no option but to comply with it after failing with alternative options in the past in trying to involve Tanzanians, including the IPO route via the stock market. We have met the requirements of this law, however, and now the government, through STAMICO, has become our 50% partner. We also believe that the government will provide greater support for us as we face significant challenges, particularly in the security arena.

Is the support you mention related to illegal mining activities?

Yes, there is considerable illegal mining continuing unabated. We are the only sector in Tanzania that is transparent; we account for every stone and we're fully compliant with all our fiscal and environmental obligations. We fully expect this partnership to strengthen our hand and help modernize the sector.

Why was 2012 was a difficult year for you?

The losses in 2012 largely stemmed from illegal activities among our neighbors. We are totally compliant, but there is sadly a cost to compliance. We pay taxes and respect environmental, labor, and fiscal rules and regulations, while at the same time playing in a market against illegal competitors that acknowledge no such costs or compliance issues. They can sell a stone for $0.50, whereas the cost of a stone I produce comes to a dollar, and yet we sell on the same market. The result is that Tanzania is a source of tanzanite with no formal tanzanite industry. In fact, the only formalized tanzanite company is my company.

What are the biggest markets for tanzanite today and where is the biggest growth in demand?

For many years, it's been North America, especially the US. We have sold in Europe, but over the past few years we've been looking eastward, opening an outlet in Dubai. We are now focused on the Far East, particularly China, which is where we observe the largest demand, underpinned by a fast growing middle and upper class .

Can you tell us about TanzaniaOne's “preferred supply strategy," which is a world first in the colored gemstone market?

While in the past we solely focused on producing and mining the stone, today, with our preferred supply strategy, we are involved in the entire process, from mining the stone to delivering it to the market. We have gone about this in a number of ways. Firstly, we pioneered adapting diamond industry technology to the gemstone business. This makes us perhaps the most modern company in gemstone mining. Secondly, we operate with eight distribution partners, and this underlines our commitment to a solid global network enabling us to efficiently reach consumers. Our consumers and clients know that when they buy our product, they're buying a legal product from a company in full legal compliance from regulatory to labor quality, environmental standards, and best practices. People know that if their stone comes from TanzaniteOne, their conscience is clear. Our products benefit our country and its communities. Thirdly, we focus on price stability. We are less focused on the level of prices than on their stability, and on stable supply. Jewelers should confidently promote a stone that they know will be available, be it here or in Dubai, or in China or the US. Fourthly, we've created an online boutique, TanzaniteOne Online, to showcase our efforts.

What do you think is needed for the tanzanite industry to grow in the future?

I think we basically need three things: compliance, compliance, and compliance. Companies have to comply with rules and regulations, and with the necessary legislation, and have to enforce those standards. We at TanzaniteOne have done this, as a result of which we've recently won six industry awards in different categories.