COUNTRY IN FOCUS
The Magufuli purge
Not long after his election in November 2015, Magufuli
(nicknamed the ‘Bulldozer’) had foreign investors eating out
of his hand. But the love affair between the private sector
and Magufuli didn’t last long. The president delivered on his
promises and really started clamping down on corruption,
which caught most by surprise. It wasn’t just the usual populist
rhetoric by a desperate politician like so many companies
doing business in Africa have become accustomed to.
Magufuli meant business. His purge not only included crooked
government officials, but he took straight aim at those that
sung his praises so loudly at the beginning of his tenure, yet
kept previous corrupt regimes in power for so long. Doing
business in Tanzania was never going to be the same, and it
hurt those that had become part of the patrimonial system
(including business). Suddenly, Magufuli was enemy number
one and analysts warned about investing in Tanzania. Those
negative perceptions have persisted, and foreign investors
remain cautious, despite the obvious opportunities.
Regulatory risk
Tanzania’s regulatory risk, expounded so well in the
Acacia case, might just scare future mining investors and
exploration companies. A little more than two years ago,
Acacia was heavily fined with a tax bill of USD190-billion,
several executives were arrested and some of the company’s
operations came to a standstill. The matter was resolved
soon after global mining giant Barrick Gold took full control
of Acacia’s operations in September last year when Barrick
and the Government of Tanzania signed an agreement
according to which Barrick would settle an outstanding tax
bill of USD300-million. Other terms of the agreement included
the lifting of government’s ban on export concentrate; the
sharing of future economic benefits from the mines on a
50/50 basis; and the establishment of a unique, Africa-focused
international dispute resolution framework. According to
Mark Bristow, president and CEO of Barrick, a new operating
company called Twiga Minerals Corporation was formed to
manage the Bulyanhulu, North Mara and Buzwagi mines.
“The Government of Tanzania will acquire a free carried
shareholding of 16% in each of these mines and will receive
its half of the economic benefits from taxes, royalties, clearing
According to Vincent Phiri, economist at NKC African
Economics, Magufuli’s administration has sent mixed messages
regarding the state’s relationship with the private sector,
particularly the mining sector. “This has resulted in an element
of unpredictability, which makes planning in the long term
extremely difficult,” says Phiri. Lara Smith, managing director
at Core Consultants, says that a lot of money is being invested
in infrastructure development, which helps with job creation,
and will bode well for Magufuli in the 2020 election. “The issue
is, however, that economic growth is regarded as something
that the state itself needs to deliver on. There is a lot of money
being spent, though, on vanity projects like the national
airline (Air Tanzania), or building new sport stadiums. The fact
that the government is investing in infrastructure-related
projects is fantastic, but they seem to be ill-conceived, badly
implemented and don’t make financial sense – and definitely
won’t benefit the citizens beyond the construction (job-
creation) phase,” Smith says.
Amani’s Reverse Circulation Drilling at its gold project in Tanzania.
www. africanmining.co.za
African Mining Publication
African Mining
African Mining January 2020
21