A dispute over mineral royalties in Tanzania is being closely watched by resource investors as its outcome could set a precedent as to how mining, oil and gas disputes are handled by African countries.
Most resource projects on the continent are financed by companies based in the United States, United Kingdom, Canada and Australia. The UAE, too, is home to firms involved in developing gas and oil plays in African countries, including Tanzania.
In March, Tanzania's president John Magufuli banned the export of gold and copper ore produced by the country's largest gold miner, the London listed Acacia Mining. In a televised speech Mr Magafuli said Acacia had not declared the full value of the ore concentrate it was exporting for refining abroad. In doing so Acacia paid less tax, he alleged.
Mr Magufuli also accused Acacia of not declaring other minerals in the exported ore. A special committee set up to verify Acacia's export documentation found a substantial financial shortfall in the value of declarations.
“The committee [investigating the exports] found that there were many other minerals in those shipping containers that were not declared, such as sulphur, iron, iridium, titanium and zinc,” Mr Magufuli said in his broadcast on CNBC Africa. “They were also under-invoicing the actual gold, copper and silver content in those shipping containers.”
The move has been wildly popular both at home and in other countries in the region.
More recently Tanzanian authorities seized a US$15 million consignment of diamonds belonging to another London-based mining firm, Petra. The gems were sourced at its Williamson mine and en route to Antwerp for processing.
"While Williamson Diamonds declared in its documentation that the value of the diamonds was $14.8m, a fresh valuation done by the government established that the actual value of the diamonds is $29.5m," an official government statement released in early September read.
Both companies have denied hiding the true value of their exports. Acacia did not respond to requests for comment, but in regulatory filings has said it now has an unshipped stockpile of $265m in concentrate inventory and had burned through $210m of its cash reserves by early September.
Acacia was also hit with a $190 billion dollar fine by the government, approximately equal to 200 years of its revenue.
A Petra spokesman referred to the company's official statement on the matter, which said its Tanzania mine's products are valued by government officials, not its staff; "Petra is not responsible for the provisional valuation of diamond parcels from Williamson before they are exported to Antwerp; this is carried out by the government’s diamonds and gemstones valuation agency."
Meanwhile Tanzania itself stands to lose $553m in taxes and labour incomes annually if Acacia shuts down its operations in the country, an audit report by Ernst & Young shows. Already Reuters reports that numerous mining projects in the works are being quietly put on hold. So far though, Mr Magafuli is not backing down.
The issue of under-declaring the value of exports has been bubbling beneath the surface for some time, not just in Tanzania but in other resource producers across Africa. Activists, and increasingly voters are demanding a bigger share of mineral wealth.
Thomas Scurfield, the Tanzania analyst at the Natural Resource Governance Institute in the UK, says citizens suspect companies of dodging tax because they do not see many benefits trickling down to their communities.
"While countries undoubtedly do lose from such practices, some combination of generous contracts, ineffective use of collected revenues and mismanaged expectations are often also to blame," Mr Scurfield said. "Tanzania is arguably a pertinent example of how these different factors can come together with far-reaching implications."
Placating a sceptical populace is not helped by the way imperious government officials sign deals with little to no consultation with the communities affected.
"When a mining company signs a deal with government, it is the high political office that is also involved," says Ignatius Kamwanje, a geoscience consultant based in Malawi, where similar tensions exist over mining deals and the value they deliver. "The majority and stakeholders have to be consulted through various platforms before the deals are signed."
Similar disputes are playing out in Asia and South America as well. In countries such as Indonesia, the Philippines, Mongolia and Brazil, there are ongoing disputes over mineral rights. The issue is not just royalties but whether or not mines should be allowed to be owned by foreigners at all.
“We’re seeing the rise of more nationalistic governments everywhere,” says Paul Mitchell, a partner at Ernst & Young’s mining and metals practice. “That desire to hold the assets of a nation and work on them themselves, I think is only going to rise as we realise they’re becoming scarce, and are only going to become more scarce.”
Tanzania's open challenge to the established order is therefore going to be scrutinised by resource countries everywhere. Nationalisation of resources fell out of favour after the millennium, especially across Africa. The post-colonial years of supporting loss-making, poorly run mines drained treasuries and, desperate for capital, governments invited private money to take over.
Now, this could be changing.
"There is nothing unorthodox about governments holding shares in mining companies; it's commonplace in the region," says Dan Paget, a scholar at Oxford University's department of politics and international relations.
"While it has become unfashionable for states to run mines themselves, they have before, and they could again."
The specs
Engine: 2.0-litre 4-cylturbo
Transmission: seven-speed DSG automatic
Power: 242bhp
Torque: 370Nm
Price: Dh136,814
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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How to watch Ireland v Pakistan in UAE
When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
COMPANY%20PROFILE
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COMPANY%20PROFILE
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NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
THE SIXTH SENSE
Starring: Bruce Willis, Toni Collette, Hayley Joel Osment
Director: M. Night Shyamalan
Rating: 5/5
Scorecard:
England 458 & 119/1 (51.0 ov)
South Africa 361
England lead by 216 runs with 9 wickets remaining
Company name: Farmin
Date started: March 2019
Founder: Dr Ali Al Hammadi
Based: Abu Dhabi
Sector: AgriTech
Initial investment: None to date
Partners/Incubators: UAE Space Agency/Krypto Labs
Killing of Qassem Suleimani
The National in Davos
We are bringing you the inside story from the World Economic Forum's Annual Meeting in Davos, a gathering of hundreds of world leaders, top executives and billionaires.
Match info
Manchester United 1 (Van de Beek 80') Crystal Palace 3 (Townsend 7', Zaha pen 74' & 85')
Man of the match Wilfried Zaha (Crystal Palace)
Quick pearls of wisdom
Focus on gratitude: And do so deeply, he says. “Think of one to three things a day that you’re grateful for. It needs to be specific, too, don’t just say ‘air.’ Really think about it. If you’re grateful for, say, what your parents have done for you, that will motivate you to do more for the world.”
Know how to fight: Shetty married his wife, Radhi, three years ago (he met her in a meditation class before he went off and became a monk). He says they’ve had to learn to respect each other’s “fighting styles” – he’s a talk it-out-immediately person, while she needs space to think. “When you’re having an argument, remember, it’s not you against each other. It’s both of you against the problem. When you win, they lose. If you’re on a team you have to win together.”
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
UAE currency: the story behind the money in your pockets
Difference between fractional ownership and timeshare
Although similar in its appearance, the concept of a fractional title deed is unlike that of a timeshare, which usually involves multiple investors buying “time” in a property whereby the owner has the right to occupation for a specified period of time in any year, as opposed to the actual real estate, said John Peacock, Head of Indirect Tax and Conveyancing, BSA Ahmad Bin Hezeem & Associates, a law firm.
Our legal consultants
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
The biog
Name: Maitha Qambar
Age: 24
Emirate: Abu Dhabi
Education: Master’s Degree
Favourite hobby: Reading
She says: “Everyone has a purpose in life and everyone learns from their experiences”
JAPAN SQUAD
Goalkeepers: Masaaki Higashiguchi, Shuichi Gonda, Daniel Schmidt
Defenders: Yuto Nagatomo, Tomoaki Makino, Maya Yoshida, Sho Sasaki, Hiroki Sakai, Sei Muroya, Genta Miura, Takehiro Tomiyasu
Midfielders: Toshihiro Aoyama, Genki Haraguchi, Gaku Shibasaki, Wataru Endo, Junya Ito, Shoya Nakajima, Takumi Minamino, Hidemasa Morita, Ritsu Doan
Forwards: Yuya Osako, Takuma Asano, Koya Kitagawa
FROM%20THE%20ASHES
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Three ways to boost your credit score
Marwan Lutfi says the core fundamentals that drive better payment behaviour and can improve your credit score are:
1. Make sure you make your payments on time;
2. Limit the number of products you borrow on: the more loans and credit cards you have, the more it will affect your credit score;
3. Don't max out all your debts: how much you maximise those credit facilities will have an impact. If you have five credit cards and utilise 90 per cent of that credit, it will negatively affect your score.
Moon Music
Artist: Coldplay
Label: Parlophone/Atlantic
Number of tracks: 10
Rating: 3/5
