Tuesday, October 8, 2019

On Criticism of HakiRasilimali and ACT-Wazalendo

Why criticism of HakiRasilimali and ACT-Wazalendo doesn’t hold up

Thabit Jacob

Dastan Kweka published an interesting piece yesterday on the recent deal reached between the Government of Tanzania and Barrick Gold over the Acacia saga. Just to remind readers that the agreement was reached after Acacia shareholders accepted a second bumper offer presented by Barrick in July 2019. The offer valued Acacia at $1.2 billion, a huge improvement on the original offer of May 2019, which valued Acacia at $787 million but was turned down. The $1.2 billion offer was great for Acacia, and as I mentioned at the time, its minority shareholders are the biggest winners. 

Now back to Dastan’s piece. I know Dastan, who not only writes as a keen observer of the extractive sector, but brings in his personal experience of policy engagements with civil society and other actors in the sector. In his insightful piece, which offers great background to the saga for those who have not been following it closely, among other things, he takes issue with the civil-society network HakiRasilimali and the opposition political party, ACT-Wazalendo, which have concluded that the recent deal is bad for Tanzania. Dastan concludes by asserting that "To be able to say, with certainty, whether this was a bad deal or not, one will have to model the results, or wait for clues in EITI reports."
Dastan’s conclusion is built around the notion that it is difficult to reach a conclusion over whether the current deal is good or bad for the country based on the presently available information. This is a valid concern: I’m currently involved in a separate research project on the politics of oil governance in Africa, where, among other things, we are investigating how national oil companies make deals with international oil companies, and we have been grappling with questions like when is a deal good or bad for a country, and whether in this case the good deal is the one on paper (i.e. has been negotiated) or the one operating on the ground. As Dastan suggests, financial modelling is one of many ways of establishing this. However, the big question, based on the available information related to the recent Tanzania–Barrick settlement, is whether we really need modelling to know whether the deal is good or bad. The answer is that we don’t. Dastan’s criticism of Hakirasilimali and ACT-Wazalendo is, therefore, misplaced: the deal is indeed not good, and we don’t need fiscal models to tell us that. Here’s why. 

First, as many recall, in a highly anticipated meeting between President John Magufuli and Barrick chairman John Thornton Thorton at State House in October 2017, a much-celebrated resolution was reached in which the government’s chief negotiator, Professor Palamagamba Kabudi, emphasized that Tanzania’s total share of mineral wealth will be over 60 percent as a result of 50/50 profit-sharing, plus an additional 16% government shareholding. In a joint televised interview with Thornton, President Magufuli hailed the deal as historic and said Barrick were no longer thieves and that the two sides can now sit together to resolve outstanding issues as genuine partners. Among key issues agreed on that day, October 19, 2017, were (1) 50/50 profit-sharing, (2) a sixteen percent government stake in a new company to be headquartered in the mineral-rich Mwanza region, (3) Barrick to build a smelter in Tanzania to boost value addition, (4) Barrick to make a one-off payment of $300 million, (5) Settling disputes within Tanzania, (6) all Acacia’s banking transactions to use Tanzanian banks, (7) Improving the conditions of local communities adjacent to gold-mining areas and (8) the work and safety conditions of mine workers to be improved, among other provisions. 
In the most recent deal, the government has made a dramatic U-turn, which, among other things, includes: (1) providing Barrick with access to international arbitration in Singapore, (2) no longer forcing Barrick to build a smelter, (3) the ban on copper concentrates to be lifted once the deal is finalized, (4) requirement for public listing potentially to be waived, (5) transactions with foreign banks to be allowed, and (6) the promised $300 million one-off payment to be paid in seven instalments. One wonders what happened to the famous 2017 deal, which was celebrated across the country and in other parts of Africa! In short, recent concessions in the latest deal clearly show that it is not as good as Tanzania’s citizens expected on the basis of the 2017 euphoria. 

As HakiRasilimali’s analysis indicates, the Tanzania–Barrick settlement also shows the current deal making a sharp divergence from the strict intentions stated by the government through legislation passed in 2017, which were hailed across Africa as a radical transformation of the sector, although some of us have argued that these reforms were also motivated by the increasing electoral threat and Magufuli’s quest for legitimacy. Again, HakiRasimali’s analysis confirms what many observers in the sector already knew, namely that the outcome of the current deal represents a legislative dilemma by rendering some sections of various pieces of legislation useless. ACT-Wazalendo were also right to say the deal was bad, and the government wanted the details to be kept secret, but thanks to stock market regulations, Barrick had no option but to make the agreement public.
While I agree with Dastan that the next EITI report may offer more insights into the nature of the deal, we already know that it is not good for the country based on its divergence from the existing legal framework and the complete U-turn from the initial ’good’ deal agreed in 2017. Finally, while a lot of attention has focused on the deal’s fiscal aspects, stakeholders should take time to discuss its implications beyond taxes and revenues and focus more on other critical areas, such as human rights and environmental issues, which have received less attention recently. This is important bearing in mind the abuses that local communities have suffered in the past, an issue that Acacia has acknowledged before, and given also that most recent research shows communities still being troubled by abuses and concerns over pollution.

1 comment:

  1. Hi Thabit,
    While great to have many sides of analyses. I think Kweka's was not really a criticism on the previous analyses by HakiRasilimali and ACT-Wazalendo, per-se, instead a thought encouraging that he question of whether the deal is good or not should not be seen from what the government was led to believe could achieve in the first place versus what is really achievable. On that basis, i think his conclusion is that may be it is not bad, all things including how the future pans out considered.So perhaps every observer is on the same page except on what is being judged - government's initial terms of agreement versus how things stand within an overall picture of realistic mining deal.
    For me the most important aspect of all this is what this implies to other resource-rich developing countries after almost instantly praising and being tempted to do the Tanzania way.