A long-running battle between the government of Tanzania and the country’s largest gold mining company, Acacia Mining Plc, came to ahead this past week – with dire consequences for the many interests involved.
At the centre of the standoff is a tax dispute that has hit the headlines in both local and international media.
Millions of dollars’ worth of gold belonging to Acacia has been impounded and held as the dispute rages on with huge financial implications for both the company and government revenue.
Though it all began with the laudable aim of fighting against fraud in Tanzania’s fertile mining industry and sealing the loopholes through which the East African nation loses revenue, there can be no denying that its outcomes have been less than positive.
The Tanzanian government had initially accused Acacia Mining of a series of wrongdoings, including tax evasion, breach of environmental regulations, money laundering and corruption, sending the company’s stock at the London Stock Exchange into a tailspin.
This was soon followed in 2017 by a $190 billion tax demand on the company for under-declaring exports.
Dar es Salaam also banned exports of unprocessed metal in a move that hurt the company heavily.
For nearly two years, Acacia had been waiting for its Canadian parent Barrick Gold to negotiate a settlement with President John Magufuli, after he put a stop to exports of concentrate in early 2017.
This series of events did great damage to Dar’s relations with Acacia Mining and left the investment fraternity in shock, not knowing how to deal with the Tanzanian government.
To settle the dispute with Dar es Salam, Barrick Gold Corp, which owns 63.9 per cent of Acacia Mining, has offered to take full ownership of its local subsidiary in what appears to be an attempt to calm the Tanzanian authorities.
Barrick in February said it had submitted a proposal to the Tanzanian authorities on how to resolve outstanding disputes with Acacia Mining plc.
The proposal included the creation of a local operating company to manage Acacia’s operations in the country, a formula for sharing the economic benefits arising from Acacia’s operations in Tanzania on a 50/50 basis and a payment of $300 million to the government to resolve outstanding tax claims.
This past week, Barrick and the government appeared to have reached a settlement on the dispute. But it is a settlement that has left a bitter taste in Acacia’s mouth.
Acacia directors claim that they were totally excluded from key decisions affecting the future of their company, including the valuation of the assets.Besides, it has turned out that Acacia’s minority shareholders are on the list of big-time losers in the wake of the settlement.
Dar must stay alive to the fact that the EAC Treaty requires the region to become a single conducive investment destination that is marketed as such.
This requires moderation in whatever actions authorities take in sensitive areas such as foreign investment.