Tanzania Daily News (Dar es Salaam)

22 July 2014

Tanzania: Red Tape Dogs Tanzania's Leading Gold Mining Firm

African Barrick Gold (ABG) is negotiating with the government to recover a whopping US$ 65 million (about 107.9bn/) as Value Added Tax (VAT) refunds accumulated over years due to overly bureaucratic procedures for refunding.

The firm enjoys special VAT relief as part of various tax incentives and exemptions extended to investors in the mining sector. ABG is Tanzania's largest gold producer and one of the five largest gold producers in Africa.

It currently operates three producing mines in the country -- Bulyanhulu, Buzwagi and North Mara, as well as several exploration projects at various stages of development in Tanzania and Kenya.

The company listed on the London Stock Exchange and Dar es Salaam Stock Exchange (DSE) and is a constituent of the FTSE 250 Index. ABG is a unit of Barrick Gold Corporation, the largest gold mining company in the world, with its headquarters in Toronto, Ontario, Canada.

Tanzania is currently the fourth largest gold producer after South Africa, Ghana and Mali. The ABG Chief Executive Officer, Brad Gordon said they were in negotiations with the government to address the problem that is making procurement of local supplies expensive.

"The amount accumulated is very high and it seems its recovery would take long time. As it stands it makes it expensive to procure our supplies locally," he told reporters in Dar es Salaam last week at a presentation of ABG's economic and tax contribution to Tanzania in 2013.

ABG which contributed about 1.4tr/- (US$ 855 million) to the economy last year, equivalent to about three per cent of the total economy, enjoys special VAT relief as part of various tax incentives and exemptions extended to investors in the mining sector.

The special VAT relief, includes exemption from VAT on imports and local supplies of goods and services to mining companies and their subcontractors The ABG Chief Financial Officer, Andrew Wray said the mining finds it expensive to procure locally due to overly bureaucratic procedures to recover value added tax refunds.

The mining company with three mines, Bulyanhulu, North Mara and Buzwagi, spent a total of US$ 769 million to procure goods and services where US$ 448 of goods and services were purchased from suppliers in Tanzania, according to a study by Ernest &Young, a global accounting firm.

The study whose results were presented in Dar es Salaam last week show ABG contributed 1.4tr/- (US$ 855 million) to the economy last year representing about three per cent of the total economy.

However, the 2013 contribution was down from about 1.62tr/- (U$ $980 million) contributed in 2012 which comprised of slightly over three per cent of the economy. Total tax contribution for of the mining company was estimated to reach 316bn/- (US$ 197 million) in 2013 down from 450bn/- (US $275) million in 2012.

The study revealed that indirect and induced contribution of the African Barrick Gold for 2013 reached 853bn/- (US$ 531million) down from 1.17tr/- (US$706 million) recorded in 2012. Tanzania is currently Africa's fourth largest gold producer after South Africa, Ghana and Mali.

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