Tanzania threatens to close down all gold mines

Tanzania threatens to close down all gold mines

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Tanzanian President John Magafuli

TANZANIA’s President John Magufuli has threatened to close down all gold mines in the country if mining companies delay talks with his government aimed at resolving allegations of tax evasion.

The announcement by Magufuli, nicknamed ‘the Bulldozer’ for his forceful leadership style, marks a further escalation of a dispute with foreign companies like Acacia Mining over export revenues.

It follows news of the interrogation of Acacia executives, and expulsion of the company’s foreign workers.

‘We have asked them to come for talks … they have agreed to come. But if they delay those talks, I will close down all the mines,’ Magufuli told a cheering crowd at a public rally in the northwestern town of Kigoma.

Magufuli has sent shock-waves through the mining community in Africa’s fourth-largest gold producer since his election late in 2015 with a series of actions he says are aimed at ensuring that mining companies pay a fair share of taxes.

The government has accused Acacia Mining, the country’s biggest gold miner, of evading taxes worth billions of dollars by under-declaring export volume and value of its minerals.

Acacia denies the allegations. The company said on July 4 it was seeking international arbitration to resolve the dispute.

The company’s decision to seek arbitration came a day after Tanzania passed new laws to increase mining taxes, force companies to re-negotiate their contracts and allow the state to own up to 50 percent of shares in mining companies.

AngloGold Ashanti, which owns Tanzania’s biggest open-pit mine, Geita, also said last week that it was filing for international arbitration after the overhaul of the mining laws.

Barrick Gold, which owns a 63.9 percent stake in Acacia, agreed last month to hold talks with the government to resolve the tax evasion claims against Acacia.

The talks are yet to begin but officials said they could start ‘soon’. The president said he had taken on multinational companies for the sake of the country.

‘I have launched an economic war,’ he told the crowd at the rally.

Tanzania has asked foreign employees of London-listed Acacia Mining to leave the country in an escalation of a dispute that began in 2016 over allegations of tax evasion, a source with knowledge of the matter said last week.

Two senior local staff of the mining firm, Tanzania’s largest foreign investor, were detained and interrogated at an airport last week, two sources with knowledge of the matter said.

One of the sources said the arrests were related to the dispute.

President John Magufuli has accused the company of failing to pay billions of dollars of taxes.

In March, the state banned exports of unprocessed gold and copper, a move Acacia later said has been costing it $1 million a day in lost revenue.

Acacia said in a statement that ‘employees in Tanzania have been and continue to be interviewed by government agencies.’

The company declined to comment further.

Earlier this month, Tanzania’s government approved laws that would enable the state to renegotiate contracts with mining and energy companies.

One of the interrogated executives, Deo Mwanyika, listed on Acacia’s website as the company’s vice-president of corporate affairs, was at least initially monitored at his house by secret service agents and has been interrogated since his initial detention.

Mwanyika joined the company in 2010, having previously worked as a manager at Barrick Gold for more than a decade, including as executive general manager for Tanzania.

Barrick owns 64 percent of London-based Acacia, which produces gold in Tanzania. Andy Lloyd, a spokesman for Barrick, declined to comment.

Magufuli is overhauling the country’s natural-resources industry to try and ensure the government gets a greater share of revenue from its raw materials and help finance his plan to industrialise sub-Saharan Africa’s sixth-biggest economy.

The country plans transport and utilities projects worth at least $19bn, according to PwC.

In May, Barrick said the issues in Tanzania could cut its company-wide 2017 production by as much as 6 percent, equivalent to about 336,000 ounces.

The company’s executive chairman, John Thornton, has met with the president in Tanzania and Barrick will be involved in upcoming talks with the government.

Acacia said the dispute had cut its cash balance to $176 million from $318 million, mostly because it cannot realise revenue.

Acacia’s stock has lost almost half its value since March.

 

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