The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™

Ratings update: Acacia Mining, Tanzania

President Magufuli’s moves against Acacia have wiped over £1 billion off Acacia’s market value and seriously undermined investor confidence in Tanzania – but the situation does offer important lessons for investors in countries facing the risk of resource nationalism.

Key Developments

  • Acacia is locked in a dispute with the Tanzanian government over an export ban and alleged tax evasion. In addition to Acacia, the government has also targeted a number of other companies. Earlier this year, the government of President John Magufuli banned exports of unprocessed mineral ores, leaving Acacia – the country’s biggest copper and gold exporter – unable to export gold concentrate and forcing it to reduce operations at its flagship Bulyanhulu mine. The government has also accused Acacia of understating by a factor of over ten the gold and copper concentrate levels in its mineral exports and cheating the country out of billions of dollars in tax revenue, serving it with a $190 billion bill for unpaid taxes. This has raised eyebrows in the industry given that Acacia’s total 2016 revenues were just over $1 billion and the bill amounts to about four times Tanzania’s GDP. Acacia strenuously denies the allegations.
  • Barrick, Acacia’s majority shareholder, is in negotiations with the Tanzanian government to resolve the dispute. These talks are reportedly being held in secret and at the time of writing a resolution had not been reached. Acacia served notice of arbitration to the government in July, and may take the case to court if negotiations prove unsuccessful. As of July 2017, over £1 billion has been wiped off Acacia’s market value as a result of the dispute.



  • Magufuli’s moves against Acacia are part of his government’s broader efforts to assert greater control over the country’s natural resources industries and force them to make more significant contributions to the Tanzanian economy. Tanzania’s trend towards resource nationalism is motivated by deep-seated popular disquiet around the perceived failure of the industry to contribute sufficiently to local and national economic development. The government has overhauled mining policy to extract higher rents from the sector, increasing mining royalties and allowing the state to take a 16% free carried interest in mining companies. Legislative changes also allow the government to renegotiate or dissolve contracts relating to natural resources generally – which has raised concerns that the country’s oil and gas sector may also be targeted. The government has also launched an investigation into alleged tax evasion and corruption in the country’s diamond sector, recently seizing a parcel of diamonds from Petra Diamonds and ordering a review of its contract.
  • Magufuli’s unexpected and tough crackdown on the natural resource sector – and specifically on mining companies – has seriously eroded investor confidence in Tanzania. The allegations Magufuli’s government has levied against Acacia are likely unfounded. They would imply that the company’s Bulyanhulu and Buzwagi mines produce over 1.5 million ounces of gold per year, making them the world’s largest gold mines – which quite patently they are not. While Magufuli’s strategy is seemingly to extract higher rents from the sector to stimulate economic growth, it may be a misguided one. The fact that his claims against Acacia appear unreasonable is likely to have the opposite effect by creating a perception of the country as an unstable and risky investment jurisdiction, potentially deterring FDI for years to come and eroding economic progress.
  • Whatever Acacia might have done differently, the situation does offer lessons for investors considering making investments in countries at risk of resource nationalism. The mining industry was originally attracted to Tanzania in the 1990s by tax concessions offered by the government to encourage private investment in the country’s mining sector, which was previously under government control. For example, Acacia’s original Mineral Development Agreement with the Tanzanian government allowed the company to recover all its costs plus an additional 15% before paying any tax on profits. Such generous fiscal terms may have been important in attracting large-scale mining investment in the country, but deals with host governments that require companies to make economic contributions to state coffers earlier in the development cycle can be more effective in building trust and confidence with key stakeholders.
  • Acacia attempted to take some steps to mitigate popular distrust of the mining sector and ward off attack. In 2016, for example, it agreed to bring forward corporate tax payments by three years to increase its economic contributions to the Tanzanian economy. However, by this point, public and political suspicion against the sector had already mounted. For companies in similar situations, it is crucial that they go out of their way to demonstrate a commitment to economic development through local employment, supply chain development and tax contributions at a very early stage, and to clearly communicate these contributions to relevant local and national stakeholders. Once resource nationalist sentiment gains momentum it can be difficult to reverse.
  • While the government’s claims against Acacia are seemingly implausible, they have nevertheless won Magufuli popular support. His narrative that mining companies are cheating the government has gained traction in part due to lack of popular understanding of the mining sector. It is therefore important for companies in jurisdictions at risk of resource nationalism to effectively and tirelessly convey to stakeholders how tax revenues are generated across industry lifecycles and what accountability mechanisms are in place to certify valuation. This would also ensure they are less susceptible to unfounded government allegations.


This article uses Critical Resource’s LicenseSecure™ model to assess the likely level of political and stakeholder risk. Our updates provide a rapid overview of new or updated ratings in our database, with a focus on projects in the news. Please note that these ratings updates are provisional, based in part on open source analysis and are not from client projects. Full LicenseSecure analyses are in-depth, involve extensive intelligence gathering and are confidential.

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