A British mining company has become the latest casualty of Tanzanian president John Magufuli’s nationalist drive to take on what he believes is corruption and international exploitation of its mining industry.
Late last month (Aug. 31), Tanzanian authorities seized $15 million worth of diamonds at Dar es Salaam airport, which were set for export to Antwerp, Belgium. The diamonds were being exported by Williamson Diamonds, a local mine majority owned by British mining firm, Petra.
While the London-listed Petra Diamonds claims it has not been given a reason for the seizure, Tanzania’s government has alleged the miner had under-declared the value of the exports.
Tanzania has valued the seized diamonds at $29.5 million—double of the Williamson’s $14.7 million valuation. In a statement, the government says it will nationalize the diamonds having determined that “there was cheating involved in declaring the actual value of the mineral.” Tanzania has also ordered a criminal investigation against officials involved in declaring valuing the diamonds and issuing its export permits. Tanzania’s finance minister has claimed the country likely loses “more than $46 million” annually to under-cleared diamond exports.
Petra owns a 75% stake in Williamson Diamonds while Tanzania’s government own 25%. But even that ownership stake has come under question as the government has claimed there were “irregularities” in the process that saw the government’s stake reduced to 25% from 50%. Petra has denied any wrongdoing and says valuation of exports are typically carried out by a government agency.
But regardless, news of the seizure has resulted in a sharp slide in Petra’s share price. At a point yesterday (Sept. 11), Petra’s shares fell 28%—the biggest single-day slump in 16 years, Bloomberg reports. Petra has also temporarily shuttered operations at its Williamson mine citing “health and safety and security reasons.”
The seizure of the diamonds is the latest episode in Tanzania’s continued focus on alleged wrongdoing in its mining industry under president John Magufuli.
Back in July, Tanzania hit Acacia, a London-based gold mining firm, with a fine of $190 billion—worth two centuries of the firm’s revenue or four times the size of Tanzania’s GDP. Tanzania alleged Acacia was operating in the country illegally and did not fully disclose its export earnings over a 17-year span between 2000 and 2017.
While Magufuli’s “brazen” approach in dealing with international miners will no doubt win local populist support and admiration from other Africans and governments, analysts have commented that it risks discouraging investors. These analysts suspect Magufuli’s government actually wants to drive out existing miners and reset the country’s mining industry led by new, preferably local, operators. However there is some concern whether there is enough local knowledge to be able to handle major mining operations right away.