BHARTI Airtel of India, which recently completed a US$10.7 billion purchase of Zain African operations from Kuwait’s Zain Group, could be heading into troubled waters in Tanzania, as the government there has reportedly blocked its shares.

The Tanzanian government announced last month that it would receive $11.2 million and also retain its 40 per cent stake in Zain Tanzania, following the sale of the company to Bharti Airtel.
Tanzania was the only operation where government has retained a stake.

Local Press reported on Friday showed that Bharti Airtel has offered a $11 million bid to buy off the 40 per cent stake owned by the government in Zain Tanzania, but the government now maintains it will not sell its holding, and will instead look to buy back the majority of the company that it does not currently own.

The latest news is the Tanzanian government was working on an acquisition strategy of its own and accused management of the company of not fully communicating the sale agreement.

According to Telegeography News, the Tanzanian government claims the acquisition of the Zain Tanzania operation by Bharti Airtel contradicted the partnership agreement between Zain Tanzania and national fixed line operator Tanzania Telecommunication Company Limited (TTCL).

Alongside its stake in Zain Tanzania the Kuwait group owned 35 per cent of TTCL.

However, an agreement signed in April 2010 saw Zain agree to sell its TTCL stake back to the government in order for TTCL to be wholly owned by the state.

[pullquote] In Zambia, 20 per cent of shares in Zain Zambia are held by minority shareholders through the Lusaka Stock Exchange (LuSE), and Bharti Airtel has indicated that it would be asking the minority shareholders to sell their stake to the Indian investor,[/pullquote]

Now, in addition to wanting to reacquire Zain’s stake in Zain Tanzania, the Tanzanians want to make TTCL a 100 per cent government-owned firm, hoping the company would be able to compete with private operators in the local market.

The Ministry of Finance and Economic Affairs permanent secretary permanent secretary, Ramadhan Khijjah, was quoted as saying Zain Tanzania’s management did not fully communicate information about the Bharti Airtel deal to the relevant government authorities.

Earlier this month, the country’s Minister for Higher Education, Science and Technology, Peter Msolla, told the National Assembly that the government was still in talks with Bharti Airtel concerning the sale.

In a debate on the country’s budget for the 2010 -11 financial year, Professor Msolla said: ‘We met with the company’s officials on June 21 to discuss the sale.

“We have told them to finalise the evaluation of the assets so that we can determine whether the payment made to us is satisfactory,” he said.

The minister said: “Since the government has shares in the company, it is imperative that it be involved in transactions regarding the sale. The shares we hold in the company are assets that ensure our role is not underestimated.”

He said a big mistake had been made and being a shareholder, the Tanzanian government’s involvement in the company’s transactions was a must.

“As far as I am concerned, we are not done yet. They cannot say they have sealed a deal when we are still carrying on with talks,” Prof Msolla said.

He was answering questions on whether government was involved in the negotiations for the Zain take over, and whether the country would benefit from the takeover of the company.

[pullquote] Bharti Airtel international chief executive officer Manoj Kohli, who was in Zambia on June 24, said the investor would welcome minority investors who would want to remain in the company when it makes a mandatory offer to LuSE next month and September[/pullquote]

The members of parliament also wanted to know why the government had not offloaded the shares on the Dar es Salaam Stock Exchange (DSE), since they passed a law requiring all mobile phone operators to list on the exchange.

In Zambia, 20 per cent of shares in Zain Zambia are held by minority shareholders through the Lusaka Stock Exchange (LuSE), and Bharti Airtel has indicated that it would be asking the minority shareholders to sell their stake to the Indian investor,

Bharti Airtel international chief executive officer Manoj Kohli, who was in Zambia on June 24, said the investor would welcome minority investors who would want to remain in the company when it makes a mandatory offer to LuSE next month and September

Except for Sudan and Morocco, Bharti Airtel has acquired Zain Africa operations in all other African countries where it operates, which include among others Burkina Faso, Chad, Congo, Democratic Republic of Congo (DRC), Gabon, Ghana, Kenya, Tanzania, Uganda and Zambia .

[Times of Zambia]

SOLWEZI residents differed with the Chamber of Mines at a heated public discussion on mining taxes, with some saying Lumwana and Kansanshi mining companies were giving Solwezi a raw deal.

Chamber of Mines general manager, Frederick Bantubonse articulated benefits of mining investments which he said accrued even before metal production commenced, but stakeholders to the meeting at the weekend were not convinced.

Mr Bantubonse said major benefits included economic and social infrastructure, taxes, employment, which he explained had risen from 19,000 at the time of privatisation to 24,000 people working in the mines, with another 24,000 created by contractors.

And with the Chamber of Mines representative accused of being defensive, the stakeholders wished Lumwana and Kansanshi were there to discuss for themselves the subject of “Mining Tax: An Endless Tug of War?”

The stakeholders were also disappointed that Solwezi Municipal Council shunned the meeting organised by Caritas, Centre for Policy and Development, Economics Association of Zambia, and Evangelical Fellowship of Zambia.

A local economist, Al Gwanu said the Chamber of Mines should have discussed challenges of the mines instead of just the positives, while another resident said with little benefits for Solwezi, it would be better to leave the minerals untouched for the future generation.

Allan Soneka accused the Chamber of Mines of being defensive, and wondered why mining companies were giving jobs which the Zambians were capable of doing to expatriates.

Former politician, Alina Nyikosa wondered whether mining companies knew that there was need for a ring road in Solwezi due to the damage caused to the Chingola-Solwezi (Lumwana) Road by heavy trucks.

And Kennedy Muluka wondered why Lumwana was distributing environmental booklets on radiation awareness written in English to villagers who could not read the foreign language.

Another resident wonderered why there was only talk of copper and not other minerals at Kansanshi and Lumwana, when Kansanshi was mining gold and had even built a gold plant.

An economist representing the provincial administration, Rodney Machila said he had taken note of the concerns raised and said that, among other measures, a ring road for Solwezi had been proposed in the Sixth National Development Plan and in the integrated development plan for Solwezi.

[Times of Zambia]

Zambia is conducting an audit of mining companies to determine their earnings and will punish companies found cheating over declaration of revenues, Finance Minister Situmbeko Musokotwane said on Saturday.

Musokotwane said the southern African country, the continent’s largest copper producer, was also on course to produce 700,000 tonnes of copper this year following a rebound in metals output at the mines and a rally in global prices.

Copper output at 675,000 tonnes last year was far above expectations of a forecast 500,000 tonnes.

Musokotwane said the audit had been ordered following claims by some Zambians, including the opposition parties and mining analysts, that the country was not reaping enough benefit from its key mining industry because of mis-reporting of revenues by some foreign owned mining companies.

Major opposition parties and civic groups have even asked for re-introduction of a 25 percent windfall tax the government scrapped this year, after an outcry from the mining companies.

[pullquote]Musokotwane said the audit had been ordered following claims by some Zambians, including the opposition parties and mining analysts, that the country was not reaping enough benefit from its key mining industry because of mis-reporting of revenues by some foreign owned mining companies.[/pullquote]

“We have asked for a special audit to be done on the mining sector and if we find someone cheating, we will deal with that,” Musokotwane told Reuters in a telephone interview from Lusaka.

“Cheating is dealt with by punishing offenders, but you cannot deal with cheating by increasing tax rates, you can’t,” he said.

Musokotwane said Zambia would in the long term begin to accrue more revenue from its mines after foreign investors put in up to $5 billion in reviving the mining industry in the last eight years.

“You have to be patient that you allow investments to come, make it stablise and then the tax revenue will come and I am absolutely sure the tax revenues will come up,” he said.

Analysts say pressure has been mounting on the government from the opposition to raise taxes in view of a presidential election in 2011 with mining discussions increasingly becoming emotive in this country of 13 million people, where the mines are a major employer.

Musokotwane said the government would continue with policies that support growth of the mining sector to ensure the mines help with the diversification of the economy.

“We need a strong mining sector to help us diversify the economy,” Musokotwane said.

Some of the foreign mining companies operating in Zambia include Canada’s First Quantum Minerals, London-listed Vedanta Resources Plc, Equinox Minerals,Glencore International AG of Switzerland and Metorex of South Africa.

[Reuters]