Dangote’s cement factory in Tanzania had allegedly been shut down a few days ago after the business mogul had a sustained disagreement with Tanzania’s government. The Dangote-Tanzania row is one that had carried on for a long period of time, evidently, since President Magufuli came into power.
The Dangote-Tanzania row centered around policies instituted by the new President which went against the grain of the agreements the Dangote had made with the previous administration.
Those agreements under the administration of Jakaya Kikwete assured the billionaire access to cheap natural gas to power the factory and following that, the factory was established near Mtwara, where there are natural gas deposits.
When President Magufuli came into power, however, there emerged a bitter $600 million dispute with Dangote Cement over these investment incentives. The Dangote-Tanzania row saw the company accusing the government of going back on the promises that president Jakaya Kikwete’s administration had made.
The changing policies of the new administration affected the company so much so that it suspended production last month. On the threat of closure and backlash from the public, President Magufuli got directly involved and struck a last minute deal with Dangote on Saturday. With the relations saved, the factory will stay open and thousands of jobs which were threatened are now saved.
Basically, Aliko Dangote won the Dangote-Tanzania row and Tanzania did not really lose much, right? Well, Dangote is undoubtedly a winner in the situation but beyond the allowances that the President would have made to keep Africa’s richest man in the country, the Dangote-Tanzania row may have had other hidden costs.
Analysts say that it has already hurt the country’s reputation as an investment destination. Investors are supposing that Tanzania has become, under President Magufuli, a difficult environment to do business in the private sector.
Currently, Tanzania ranks 132 out of 190 on the ease of doing business index. Now, analysts are saying that the country’s seeming outlook to raise revenue at the expense of business environment will not improve this position.
With the former President, the already difficult business environment of the country was helped by government incentives but under President Magufuli those incentives are disappearing.
The President who has been nicknamed ‘bull-dozer’ for his tough stance on corruption and insistence on holding the private sector to account may have to soften on this note.
The country still needs investors willing to pour into it or its burgeoning economy may stall and all those who have hailed Magufuli as a hero will quickly turn against him.