sharing in governance of extractive industries

A Tale of the ‘Bulldozer’, Thorn-ton & the Subterfuge

Tanzanians have heard it all. The world has not heard the last of it. Uncle Magufuli and his team were all teeth out yesterday when a certain Thornton jetted-in and broke the news that there is bucks for take at the tune of US $300 million. This comes when the US $190 Billion tax bill stalemate is not yet solved.

The country is divided as to whether this is a good thing or not. Whether the pending payment which Thornton termed as a show of “good faith” should have been accepted or not. Understandably, such divided and diverse opinion landscape as has been evidenced in Tanzania between yesterday and today, should be expected.

The current social, economic and political economy scenarios in Tanzania, leave the majority of the Tanzanian citizenry no choice but to agree to receive a little payment here and there. This is done, if they even have a say, in a belief that perhaps this will help in the provision of most needed public services.

So the people of Tanzania went out on social media to start making jokes of what they would do if they were given even a little cut from the $300 million. One of the locals in North Mara said, “…I am in the financial sector, if I was to be even given 000.024% of the money, you will see how many acres of vegetable farming I will do”.

While the Tanzanian folks were daydreaming of how much they would do with a little cut from Thornton’s millions, in London Acacia Mining shares were reported to skyrocket. The shares appreciation ranged between 20.49 and 219.9p after Thornton and Tanzania’s State House agreement’s announcement. More bucks to shareholders, or did they say 50% to State House?

Wonders will never cease! In the new agreement, Tanzania will have a 16% stake in Barrick Gold Corporation as well as the most celebrated news of 50% profit share after all other mandatory tax and ‘corporate social responsibility’ payments to local government authorities. This is where things start to get a little interesting, if not a little confusing.

It is our belief that most Tanzanians would benefit a lot from some clearer explanation on how business works. In the most basic understanding, lay persons would ask the following questions after the pomposity shown  by the State House and Palamagamba Kabudi and interested information ‘disseminators’ after the press address:

  1. What will be the base for the proposed 16% share as well the 50%?
  2. What is Barrick Gold Corporation’s dividend policy?
  3. If after mandatory tax deductions as well as other CSR contributions payments, it is proposed that the government and Barrick Gold will have a distribution 50% of gross profit. Does it mean that Barrick Gold retains nothing to advance its business interests in Tanzania or elsewhere?
  4. If this is the arrangement, how does Barrick Gold take care of the interests of its shareholders who also want a cut from the profit but also to ensure that their future economic interests are protected

Apart from those questions, it is also surprising how at a lightening speed Acacia Mining turned their back on what their boss agreed on. Today, online social media were abuzz with the news of Acacia Mining stating that they have no pockets deep enough to cough US $300 million as Thornton promised, as a “sign of good faith”.

It is not clear how many Tanzanians would come as close as to like Barrick Gold Corporation or it’s subsidiary Acacia Mining’s operational ethics. But believe me, Barrick Gold Corporation’s subsidiary, just as Barrick itself, care less whether its is liked in host countries or not. All they care about is making the most profit in the most dubious and violent manner possible. 

But from what may seem as being the devil’s advocate, we would love to hear what those with expertise on business  to clarify the matter further. Perhaps better than Professor  Kabudi tried to explain.

Put in a more critical perspective, it is hoped that the discussions between President Magufuli aka. the “Bulldozer” did not reach a point where documents were signed to the effect that the held consignments should be released. The recent claim by Acacia mining that they have no money to pay the agreed initial pay, may just be a way for the company to ask the government to release the consignment to sell and pay the government. More of a pig being cooked in its own fat.

Thank goodness, or we should hope, that our government is not like a pig going to the slaughter house in broad day light to economic doom. All this depends on what kind of advisors the government have. Unfortunately, the kind of statements already flooding social media from the likes of Prof. Kabudi do not give any hope.

Retracing where we started and most particularly the questions asked above, let us know what you, professionals in the Finance and administration fields, think. This way we can find out if the Tanzanian government has been duped or not. Or if our local experts aren’t just all they claim to be!

This article appeared on AfrikaYetu's website: https://afrikayetu.net/2017/10/20/is-tanzanias-bulldozer-duped-by-b...

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Comment by Antipas Massawe on November 7, 2017 at 9:58

I can only guess that the 50% gross profit share for Tanzania includes the new royalty of 6% and other mandatory tax and corporate social responsibility; and that, the 16% stake in Bаrrіck only covers 16% of its local Board plus 16% of its salaries.

Otherwise, Bаrrіck’s acceptance of the 50% distribution of gross profit on top of the royalty of 6% and other mandatory tax and corporate social responsibility also paid to the Government could only mean that gross profit is estimated to be insignificant; and that, Bаrrіck is going to earn most of its deserved share of gross profit through other undetected and therefore untaxed sources.

Basing on figure 2 of the division of mine revenues of а 20 year typical medium sized copper mine presented here:


could also guess that the undetected and therefore untaxed ways Bаrrick could earn most of its deserved share of mining profits untaxed could be through the unditected over costing of capital and operating services and supplies to minimize the gross profits declared for sharing with the Government through corporate taxes.

Had to guess because neither Bаrrick nor the Government bothered to clearly clarify to us on the base for the proposed 16% share in Bаrrick as well the 50% distribution of gross profits asked for here by Africa Yetu.


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