Is Magufuli in crusade against Trump-like negotiating game?

Thursday April 13 2017
Magufuli pic

President John Magufuli and World Bank president Jim Yong Kim at the launch of a flyover project in Dar es Salaam last month. In the midst of a public outcry over the exploitation of the country’s natural resources by shrewd multinationals, the Head of State’s task is to strike a balance between achieving his goal of getting the right piece of cake for Tanzanians and maintaining investors confidence. PHOTO I FILE

By Bakari S. Machumu

In May 2009, Geoffrey James, writing for CBS News’ Money Watch, traced Donald Trump’s negotiating skills in an article titled Donald Trump’s negotiation mind games. This was way back, well before the real estate tycoon became the 45th president of the United States on January 20th, 2017.

James shares his friend’s story on how he fell into one of Trump’s ‘negotiations mind games’.

The writer explains what has always been in Trump’s mind when negotiating a deal, “selling high”, a characteristic shared with not only the most successful businesspersons, but also businesses like multinational companies.

So, this is what happened to the author’s unnamed friend when he sold his medium-sized health and beauty business to the American billionaire.

Having gone through ‘a period of due diligence and preliminary negotiation’ with aides, it was time to meet the big boss himself.

The CBS news author wrote: “The meeting was held at famous Trump Towers in New York City. My friend, though savvy at business, found it impossible not to be awed by the fact that he was riding the elevator featured in television show ‘The Apprentice’.

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“Rather than meeting immediately with Trump (the original plan), my friend was taken to a conference room to discuss the final terms with some staffers.

“A message was then brought to the meeting that Trump would be arriving at the meeting in a few minutes. A staffer took my friend aside and said: “You need to understand that Mr Trump never shakes hands with anybody. So don’t be offended if he doesn’t offer his hand, and don’t offer your hand when he comes in the room.

“While my friend digested this tidbit, the staffer continued. “Mr Trump is a very busy man and prefers to make decision quickly. So if the meeting lasts less than five minutes, please don’t take it amiss, because that’s normal for him.”

Fast forward, Trump came in. Guess what? He did shake the entrepreneur’s hand - “warmly”, and the meeting ran for a good 40 minutes! A deal was done - ‘less advantageous’ to the entrepreneur off course.

James explains how the entrepreneur could not hide his joy saying how impressed he had been for not only being at the Trump Tower, but also having the prominent host of The Apprentice show shake his hand!

But to James, that was Trump’s mind game at work.

You will probably be wondering how this is related to President John Magufuli. But before I draw a parallel (of Trump and the entrepreneur story) to the Tanzanian situation, in not only negotiating mining contracts, but also in its other multinational engagements, let’s look at another application of Trump’s tactics.

Fast forward 2016, Trump runs for the US presidency and wins. He applies his skills as explained in 11 rules of negotiation principles from his book, The Art of the Deal, both during the campaigns, and later on as the president.

His proposal to block Mexican immigrants is the case in point. His campaign promise - build a wall… and make the Mexican government pay for it.

As Ana Campoy analyses in a Quartz article, “Trump’s border wall is a negotiating tactic straight out of his book The Art of the Deal. He likes to think big, maximising the options and using leverage, among others. This is why.

On January 25, writes Campoy, “representatives of Mexico’s government arrived in Washington to meet with White House officials. The purpose: preliminary discussions ahead of talks between Mexican president Enrique Peña Nieto and new US president Donald Trump, who are (were) scheduled to meet on January 31 to discuss North American Free Trade Agreement (Nafta), immigration, and border security.

“And even before the Mexican delegation landed, Trump undermined their negotiating position by a tweet.

‘Big day planned on NATIONAL SECURITY tomorrow. Among many other things, we will build the wall!


— Donald J. Trump (@realDonaldTrump) January 25, 2017’.

The Mexican currency (peso) fell almost immediately after the tweet. Mexicans called for their president to cancel the trip… and cancel he did.

Campoy sees how Trump is using his leverage. For instance, the writer notes Mexican exports amounted to 37 per cent of gross domestic product (GDP) in 2015. So, by pushing Mexicans to the wall, Trump is actually reminding them of what they are likely to lose from Nafta or border taxes, or from taxing remittances from immigrants.

Whether Trump will build a wall or a fence, it doesn’t matter that much. He would have accomplished his mission - to grow his country’s piece of cake in Nafta, as and when it comes to re-negotiating the trade agreement.

It is an undeniable fact that when Tanzania was liberalising her economy – which led to privatisation and opening up to foreign direct investments - we had not amassed enough negotiation skills or expertise.

And in some instances, we appeared desperate, eager to pull in investments at any cost, ignoring national benefits either by design or default.

In doing so, while ignoring the long time stand of father of the Nation Julius Nyerere – who preferred to leave mineral resources untouched until that time Tanzania was ready to engage in such businesses profitably - we were exposed.

We ventured into unknown territories – which is not necessarily a bad thing. Depends on whether you appreciate the game and its guiding rules to the letter or not.

In so doing, Tanzania found itself in a similar situation as James’ friend and Mexico was/ is against the deal maker, Trump. We lacked skills/ knowledge and capability to negotiate better deals.


How did it start?

In the late 1990s, Tanzania was rapidly opening up to international businesses. Foreign Direct Investment (FDI) was in top gear, including mining projects and privatisation.

And while the drive had good intentions, some shrewd investors – locals and foreigners – looking for a piece of cake in parastatals through privatisation or other forms of FDIs – grossly benefited or took advantage of either our ‘ignorance’ or ‘desperation’.

Some acquired properties/ factories only to turn them into go-downs after failing to either revive or continue with production.

For example, according to an article published by Tomlic Agency (AllAfrica.com) in February 2000, about 95 enterprises went to Tanzanians, and 69 of them to indigenous.

Many of the buyers of these 69 enterprises were reportedly unable to meet even the minimum conditions necessary to sign a memorandum of understanding on the sales.

The story is the same for foreign players. The privatisation of water services in Dar es Salaam is a case in point.

In an article taken from the World Bank white paper: A case study of Public-Private Partnerships in Water Supply and Sewerage Services in Dar es Salaam, Thelma Triche, highlighted how privatisation of the water utility in Tanzania failed.

Triche narrates how the Dar es Salaam Water and Sewerage Authority (Dawasa), established in 1997, failed to improve its dilapidated infrastructure and consequently issuance of service because of resource constraints.

Government attempt to privatise it in 2002 hoping for better services proved futile even after Biwater Gauff Tanzania Limited (an Anglo- German consortium) and Super Doll Trailer Manufacture Company Limited (STM) formed a joint venture to create City Water Services Limited (CWS).

It is important to note that the contract was entered into against the World Bank’s advice that the bidder was incapable of pulling it off. As per WB suspicion, CWS ended up accumulating about $12.3 million in losses within three years.

This forced the then Water minister Edward Lowassa to terminate CWS contract in 2005. Later that year, the government established the Dar es Salaam Water and Sewerage Company (Dawasco) to take over water service provision, leaving Dawasa to man the infrastructure. Meanwhile, water woes continue to date in several parts of the city.


magu 2

President John Magufuli and Jim Yong Kim cut a ribbon launch a costruction of the ubungo interchange at Morogoro road. Photo|File

Come to mining sector

Tanzania was doing well in terms of investment - especially in gold mining projects.

Eager to be more attractive to foreign/ strategic investors, conducive policies and laws were put in place.

According to the Tanzania Chamber of Minerals and Energy (TCME), in the early 1990s, Tanzania’s mining industry was expanding rapidly, thanks to the creation of an ‘Investment Promotion Centre under the Investment Promotion Policy’ and legislation in 1997 and 1998.

As a result of this, notes the Unctad’s World Investment Report in 2008, “Tanzania ranked as one of the top non-oil African countries in terms of FDI receipts.

Major gold mining projects included Bulyanhulu, Geita Gold, Buzwagi, Tulawaka and North Mara.

By the time President Benjamin Mkapa was officially commissioning Bulyanhulu in 2001, Tanzania had become the third largest gold producer in Africa, after South Africa and Ghana, with the Tanzania Chamber of Mines reporting gold exports value to have frog-jumped from $3.3 million in 1998 to $186.9 million in 2000.


Transparency concerns

But the public remained of the opinion that, this was not translated into the right share of forex earnings – hence the continued public and political anxiety over existing mining contracts.

For years, the secretive nature of mining contracts has been a hot potato in Parliament. Frustration grew amongst parliamentarians as their quest for transparency into what the country was getting and whether that was the right share remained unfulfilled.

Jacques Morisset, then the World Bank’s lead economist for Tanzania, Burundi and Uganda, is on record telling Al Jazeera in 2014 that the “resource extraction industry hasn’t been transparent,” adding that communities are not finding how much is invested in their communities.

These concerns began way back when President Mkapa was in power.

Come 2005, President Jakaya Kikwete ascended to power. One of his major campaign promise, to review mining contracts. He did.

He formed the Masha Commission that led to the creation of the new mining policy of 2009, and eventually the Mining Act 2010.

The Mineral Policy of Tanzania, 2009 aimed at “emphasising the integration of the mineral sector with the rest of the economy, establishing a fiscal regime which ensures benefits to the country and remain internationally competitive, promoting public participation in mining activities, among others.

In his foreword to the policy, then minister for Energy and Minerals William Ngeleja, hoped the “policy provides a clear guidance to investors towards sustainable exploitation of mineral resources of Tanzania in a win–win manner.”

Thereafter, the Mining Act 2010 came into being, “with substantial amendments (on) the provisions that regulate the law relating to prospecting for minerals, mining, processing and dealing in minerals, to granting, renewal and termination of mineral rights, payment of royalties, fees and other charges and any other relevant matters.”

From these reviews, royalty was raised from three per cent to four, among others. But it seems this didn’t reassure the doubting Thomases, making it unfinished (concern) business.

It is this perceived lack of transparency, which has led to mistrust between the government and mining investors. Actually, in the public eye, it has been left to go on far too long.

It is thus not surprising that this concern is resurfacing in an unexpected way - the government’s ban on export of copper concentrates. This has affected Acacia, owners of Bulyanhulu and Buzwagi gold mines significantly, not to mention small-scale miners in the same line of business.

Reacting to the ban, mid-March this year, Acacia CEO Brad Gordon said it had cost the company $17 million (Sh37 billion) in two weeks.

While we have debated so much on the approach taken by the government, it remains a fact that the perceived lack of transparency or monitoring leaves the concern alive.

And this is not to brush off the likely effects of the approach used in banning copper concentrates exports, and how it affects the Tanzania perception in the investment world. Of course, there is a price to pay when dealing with international agreements.

We know of the $148.4 million dispute between Tanesco and IPTL as well as the $561 million dispute with Symbion Power. In the later situation, Tanesco is sued at a Paris-based international arbitration court for ending a 15-year contract only weeks after renewing the Power Purchase Agreement deal with Symbion. The latter is now demanding $561 million in compensation.

If Tanesco loses, then it will have to pay billions of shillings, which would have otherwise be channeled to its infrastructure development projects.

Acacia too may end up seeking international re-dress. But for now, the management believe dialogue should be given priority.

How the copper concentrates crackdown itself has been conducted sends a chill down a spine. But how did we reach here?

We did not do our homework better from the word go! Now, we have no option but to play catch up. Either way, the task of the President is to balance how to achieve his goal of getting the right piece of cake for Tanzania, while maintaining investment confidence in Tanzania intact.

Selling high to CEOs (multinationals)

With three committees in place, two by President Magufuli and the third one being a parliamentary committee, I can only hope that this time round we will renegotiate the deal, close it once and for all.

And it would be wise to compare notes with what the earlier two committees, in 2008 and 2011, did.

Back to James’ friend’s story. James says “I suspect my friend would have gotten a better deal if he’d kept his cool and realised that he was being gamed. But instead, he let himself get caught up in all the folderol of power.’

“When you’re selling to CEOs, don’t get caught up in their exalted self-image. CEOs, even Trump, are just plain folk. If you’re selling to them, you’re their equal by definition. You have something the CEO needs; the CEO has something you want. So the two of you are equally important.’

Just like James’ friend, Tanzania had something to sell too. It had minerals! ... and investors wanted them. We should have gone into negotiations with an “equal” mentality. Unfortunately, we kind of showed how desperate we were. And the capitalism in them struck.

Once beaten twice shy. We still have a lot to sell. As the CBS News writer put it “even if your prospect is an uber-bigwig, you must treat the prospect as an equal. Otherwise, you run the risk of being fleeced.”

Since the Acacia boss has said there is no need to go to court yet, we can only hope that at the end of the day when the reports are ready, the government would have gained the ability to go back to the re-negotiation table(s) with a strong proposition.

Once that happens, President Magufuli’s stance to challenge the Trump doctrine applied by multinationals will shape our future approach in “cutting deals”. Yes, facing the CEOs as equals.

As the Kiswahili saying goes: Kosa si kufanya kosa, bali kurudia kosa ndio kosa!