Sunday, August 13, 2017

The govt-Acacia dispute: It’s the strategy that matters


By Raphael Mgaya

As the negotiations between the government and Barrick Gold Corporation, Acacia’s parent company, have just commenced all eyes are on Prof Kabudi and his team.

But, frankly there is little, if at all to celebrate for, at least for now. It is worth reminding the reader that, this is not the first time the government has undertaken renegotiations of contracts with a foreign investor in the extractive sector.

In July 2012, the Government Negotiating Team (2012 GNT) which concluded a re-negotiation of contract with Pan African Energy Limited (Pan African, an operator of the Songo Songo gas field). The negotiations followed the report of the Parliamentary Committee of November 18, 2011, whereupon, Parliament recommended that the government should renegotiate the Songo Songo Production Sharing Agreement (PSA).

The 2012 GNT made some important “conditional” gains by the end of the negotiations in early July 2012. These were conditional gains because, in order to realise those gains, the government was obliged to ensure that the Tanzania Electric Supply Company (Tanesco) settles its outstanding gas bills with Pan African. Some of the gains that were made include that the working interest of TPDC and that annual training fees would be increased substantially. In addition, the Songo Songo PSA was to be amended in favour of the government/TPDC.

The government, quite strangely, has never implemented the recommendations of the 2012 GNT. Apparently, the government has incurred colossal losses as a result of failure to implement those recommendations.

While the recommendations of the 2012 GNT have been ignored and perhaps forgotten in government circles, another GNT led by Prof Kabudi (the Kabudi GNT) to participate in negotiations with Barrick. This begs a lot of questions: Does the government has a strategy in place? Is there a roadmap? Is it again going to be conditional gains again never to be implemented? While, I acknowledge Prof Kabudi’s academic achievements, but he has spent his lifetime as an academician. He has absolutely no experience in the mining industry not least the requisite commercial negotiations skills. On the contrary, the lead negotiator of Barrick, Richard Williams is a COO, with a long experience as an executive in the mining industry. Absence of a big shot with equal or surpassing credentials to that of the lead negotiator of the other side, is a stark evidence on a strategic failure of planning on the part of the government.

In negotiations, knowing the strength of your counterpart and mobilising your resources to match with that of your counterpart is as important as the banker knowing the expectations of his customers. The negotiations of this nature ought not to be led by a politician in the first place; it ought to be left to seasoned professionals with industry experience and skills. This is not a political dispute between states, even if it was one; a professional diplomat would be preferred to a politician. The problem of politicians, tend to bring into the negotiating rooms their political garbage which more often than not ends up dampening the objectivity of the negotiations. It is the negotiations skills; it is the industry prowess that matters most and not the political ineptitude and academic romanticism.

The chairman is a kingpin of the negotiation team and therefore he must be on top of his game. There are times during negotiations when, each member is stranded, lost and or confused, and at such times the chairman must rise to the occasion and bolster the team. I do not see this box as having been ticked in this case and this is where a great risk lies.

It is important for the government to re-think its strategy. Like in the 2012 GNT, it would be worthwhile looking for an external expert to support the lead negotiator.

Though negotiations have started, but it is not too late. It is never too late to do something better. There must be a roadmap. There must be clear and achievable targets, no go zones must be clearly identified. The Terms of Reference for the negotiations must be set exclusively by the government.

The laws on which the present mineral development agreements (MDAs) were based and the terms of those MDAs should never be used as a framework for negotiations because they are hugely skewed in favour of the investor, and this was orchestrated by World Bank as it did in Ecuador and other places.

I believe that the renegotiation of MDAs will be an excellent move only if it is done well. Whatever the case, the outcome must be substantial and in the end it must be implemented for the tangible benefit of the country, otherwise the whole exercise will be judged once again as another useless soap opera.

It must not be about the political credit of those in power but the positive contribution that will be made to lives of ordinary folks that are wallowing in abject poverty throughout the nation. At this juncture, we must all be focused on what is best for the nation. It is not about which side is right or wrong, it’s the strategy!

Mr Mgaya is an advocate. Areas of his expertise range from international law and human rights, oil and gas to finance and investment