ASSERTIVE POPULISM

Tanzania’s president John Magufuli has been a blend of populist and “action man” since he took office in October 2015. His administration has dealt noisily with corruption and getting rid of the inefficiencies of government, especially as represented by firing seemingly incompetent managers.

Magufuli’s can-do image has been welcomed and he’s probably been as popular around Africa as at home. Of course, it hasn’t all been smooth sailing. He’s also accused of having authoritarian tendencies particularly with regards to press freedom and policing social media use.

But his latest move to aggressively reform the country’s mining industry may turn out to be his most significant. After months of negotiating with the country’s largest gold miner Acacia, Tanzanian regulators got fed up with what they saw as the company’s intransigence and hit it with a $190 billion fine for undeclared revenues and unpaid taxes. That number sounds outlandish because it’s four times Tanzania’s GDP or equivalent to two centuries of Acacia’s revenues. By some estimates the value all the gold in Acacia’s Tanzanian mines is around $10 billion.

Magufuli’s response to delays in negotiations with Acacia is, “I will close all mines and give them to Tanzanians.” This sounds great in principle but shutting down the country’s largest miner and risking 40,000 jobs is not as easy a decision as the populist rhetoric.

As seen with Nigeria’s battle with MTN over a $5.1 billon fine or Chad’s $74 billion fine against Exxon Mobil, these moves against “arrogant” multinationals are usually quite popular at home. Extractive industries in Africa are particularly vulnerable to exploitation by partners but more so from those in power. Take DR Congo where a recent investigation found only 6% of mining export revenue made its way to the country’s budget.

Yet, if well handled—with a focus on the corporate’s wrongdoing under existing reasonable laws—this kind of assertiveness with investors is a good thing for any country. But if the fines and punishment don’t fit the crime, so to speak, or if new emergency laws are applied retroactively, that kind of thing sets a dangerous precedent. It will lead to future investors holding back capital from all areas of the economy or demanding onerous terms if they do invest.

Modern African leaders often say their countries are no longer focused on receiving aid but looking for foreign investment and partners to accelerate development. They must protect their citizens from being exploited but investors won’t come if they believe they’re the ones who are going to be exploited.

Yinka Adegoke, Quartz Africa editor