After a clash with Dangote, investors won’t be so sure Magufuli’s Tanzania is a place to do business
Omar Mohammed
Quartz Africa
My way...or Aliko's way. (Reuters/Sadi Said)
For almost a year, Tanzanian officials had been in a
bitter $600 million dispute with Dangote Cement over investment incentives related to a new cement plant in Mtwara, southern Tanzania. The Nigerian company had claimed the government was reneging on promises made by the previous administration of president Jakaya Kikwete, who left office thirteen months ago.
The cement plant launched last year and was
flourishing until John Magufuli became president. In the last 12 months, new regulatory challenges undermined operations to such a degree, that the
company suspended production last month. It caused an uproar in Tanzania. And Magufuli had to get directly involved and eventually struck a last-minute
deal with Dangote on Saturday (Dec. 10) to keep the factory in the country and save
thousands of jobs that were at risk if it closed.
Put another way, Dangote called the government’s bluff—and won.
Dangote called Magufuli’s bluff—and won. But this isn’t about Dangote, Africa’s richest man and a powerful figure on the continent who can probably get any president on a cellphone if he needs to. The dispute, instead, had troubling implications for watching investors who might have been thinking of coming to Tanzania or deepening existing investments there. Analysts say it has already noticeably hurt the country’s reputation as an investment destination. They think it looks like east Africa’s second largest economy is not only a difficult environment for the private sector, but that the new administration is hostile to business.