Golden handcuffsTanzania’s firebrand leader takes on its largest gold miner

comte

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Dec 11, 2011
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Golden handcuffsTanzania’s firebrand leader takes on its largest gold miner

The row raises concerns for mining firms across Africa


Jun 15th 2017 | NAIROBI



“IF THEY accept that they stole from us and seek forgiveness in front of God and the angels and all Tanzanians and enter into negotiations, we are ready to do business.” As conciliatory gestures go, that one by John Magufuli, Tanzania’s president, to Acacia Mining, the country’s largest foreign investor, could hardly have been more fork-tongued.

Nonetheless, two days later John Thornton, head of Barrick Gold, Acacia’s largest shareholder, met Mr Magufuli to start talks on ending a dispute that has halved Acacia’s market value since the government in March imposed a ban on the export of gold- and copper-concentrates. It is a mark of the seriousness of the stand-off that he is ready to negotiate on all points of contention between the two sides.

The context of the row is increasingly typical of Africa’s mining industry. The Tanzanian government is seeking more tax revenue from a foreign mining firm that was initially wooed into the country by generous tax concessions. The state also wants to generate more value and jobs by smelting Acacia’s concentrates domestically, rather than abroad.

That may seem reasonable, but Mr Magufuli’s firebrand populism, as well as his unpredictability, have made it a particularly worrying test case for mining firms across the region. In April Tanzania announced a new presidential committee to look into its gold exports. In late May the committee accused Acacia of underreporting its gold exports by a factor of ten, an accusation Mr Magufuli repeated.

Acacia says the charges of tax evasion are absurd. They note that if production were as understated as the committee alleged, Bulyanhulu and Buzwagi, the two mines where it produces concentrate, would be the biggest gold producers in the world. The firm says that it “wishes this were true, but sadly it is not the case.” Its gold production is audited in its accounts.

How far Mr Magufuli wishes to go is unclear. The big fear is that he may favour full nationalisation. But he may accept a more pragmatic settlement. Analysts at UBS, a bank, reckon the Tanzanian government wants to bully Acacia into giving up a share of its “tax assets”, which it values at $532m. For example, the company is owed some $150m in VAT refunds.

Barrick, which owns almost 64% of Acacia, will discuss all of this. “A negotiated solution is better than escalation, such as going to international arbitration,” a spokesman says. That means it is prepared to talk about the tax problem as well as the possible construction of Tanzania’s first smelter of gold- and copper-concentrates, even though the latter has long been considered uneconomic because the country’s output of concentrates is too low.

Since the ban was imposed, Acacia has continued to mine, stockpiling its output instead of exporting it. But it cannot continue without generating cash for ever. If it stops production, the damage will extend to the country at large. Last year Tanzania’s economy was among Africa’s best performers, growing by about 6%. It needs more foreign investment to maintain that pace. Mr Magufuli’s tactics—whether he has God and the angels on his side or not—will make that harder to achieve.

This article appeared in the Business section of the print edition under the headline "Golden handcuffs"
 

figganigga

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Oct 17, 2010
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Golden handcuffsTanzania’s firebrand leader takes on its largest gold miner
The row raises concerns for mining firms across Africa


“IF THEY accept that they stole from us and seek forgiveness in front of God and the angels and all Tanzanians and enter into negotiations, we are ready to do business.” As conciliatory gestures go, that one by John Magufuli, Tanzania’s president, to Acacia Mining, the country’s largest foreign investor, could hardly have been more fork-tongued.

Nonetheless, two days later John Thornton, head of Barrick Gold, Acacia’s largest shareholder, met Mr Magufuli to start talks on ending a dispute that has halved Acacia’s market value since the government in March imposed a ban on the export of gold- and copper-concentrates. It is a mark of the seriousness of the stand-off that he is ready to negotiate on all points of contention between the two sides.

The context of the row is increasingly typical of Africa’s mining industry. The Tanzanian government is seeking more tax revenue from a foreign mining firm that was initially wooed into the country by generous tax concessions. The state also wants to generate more value and jobs by smelting Acacia’s concentrates domestically, rather than abroad.

That may seem reasonable, but Mr Magufuli’s firebrand populism, as well as his unpredictability, have made it a particularly worrying test case for mining firms across the region. In April Tanzania announced a new presidential committee to look into its gold exports. In late May the committee accused Acacia of underreporting its gold exports by a factor of ten, an accusation Mr Magufuli repeated.

Acacia says the charges of tax evasion are absurd. They note that if production were as understated as the committee alleged, Bulyanhulu and Buzwagi, the two mines where it produces concentrate, would be the biggest gold producers in the world. The firm says that it “wishes this were true, but sadly it is not the case.” Its gold production is audited in its accounts.

How far Mr Magufuli wishes to go is unclear. The big fear is that he may favour full nationalisation. But he may accept a more pragmatic settlement. Analysts at UBS, a bank, reckon the Tanzanian government wants to bully Acacia into giving up a share of its “tax assets”, which it values at $532m. For example, the company is owed some $150m in VAT refunds.

Barrick, which owns almost 64% of Acacia, will discuss all of this. “A negotiated solution is better than escalation, such as going to international arbitration,” a spokesman says. That means it is prepared to talk about the tax problem as well as the possible construction of Tanzania’s first smelter of gold- and copper-concentrates, even though the latter has long been considered uneconomic because the country’s output of concentrates is too low.

Since the ban was imposed, Acacia has continued to mine, stockpiling its output instead of exporting it. But it cannot continue without generating cash for ever. If it stops production, the damage will extend to the country at large. Last year Tanzania’s economy was among Africa’s best performers, growing by about 6%. It needs more foreign investment to maintain that pace. Mr Magufuli’s tactics—whether he has God and the angels on his side or not—will make that harder to achieve.

http://www.economist.com/news/busin...s-africa-tanzanias-firebrand-leader-takes-its
 

Mgibeon

JF-Expert Member
Aug 7, 2011
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Mr Magufuli's tactics- whether he has God and the angels on his side or not-will make harder to achieve.
 

Mtumishi Wetu

JF-Expert Member
Oct 12, 2010
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Nimependa hapo mwisho Mr Magufuli's tactics- whether he has God and the angels on his side or not-will make harder to achieve.
It is achivable.
Since these guys agree to negotiate
something better will be achived.
Thats better than nothing.
 

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