Foreign Investors stress worry over the recently signed government policy requesting a free 16% ownership in all foreign owned businesses
President of Dangote Industries, Mr. Aliko Dangote expressed his frustration over the enacted law, stressing that Mr. John Magufuli (President of Tanzania) is “coming through the back door to seize assets”. He made this statement while attending a summit organised by the Financial Times, in London this week.
The State Stake Law, makes it mandatory for the nation to own at least 16 percent of all mining projects, while also raising export royalties. This law applies to existing contracts, making it possible for the nation to renegotiate all natural resource contracts without the possibility for international arbitration.
Since becoming president of the republic, Mr Magufuli’s mandate has focused on fighting corruption which has eaten deep into the system. This earned him the nick name “Bull dozer”, because of his hostility towards corrupt practices. His battle ground has centered around large companies evading taxes, which affects economic and infrastructural development.
Acacia Mining, a London based gold mining company operating in Tanzania was hit with an export ban and a $190 billion fine for evading tax. The company is also a subsidiary of Barrick Gold, the world’s largest gold mining company, with the news affecting it’s stock price.
Mr. Magufuli’s move is forcing all foreign investors to re-strategies, aligning their business activities to conform with the new law. Vodacom, the countries largest mobile phone company has since made strategic moves to comply, while Acacia Mining is taking great efforts to scale down their activities. As for the US$650 million Dangote Cement plant, it is obvious that the news does not sit well with the board of directors. We will continue to keep a close watch on the feud between the government of Tanzania and Dangote.