1 August 2017

Tanzania to Lose U.S.$553 Million Annually If Acacia Exits Its Market

Tanzania stands to lose $553 million in taxes and labour incomes annually if Acacia Mining shuts down its operations in the country, an audit report by Ernst & Young shows.

In the report on Acacia's economic and tax contribution to Tanzania, the mining company's total direct, indirect and induced economic contribution in Tanzania last year included more than 36,000 jobs, about $339 million of labour income, and nearly $214 million in tax payments.

"In total, including direct, indirect and induced taxes paid by Acacia, its employees, suppliers, and other affected businesses, Acacia's total tax contribution last year was an estimated $214 million," the analysis shows.

The total workforce was 3,000, whose wages and benefits totalled over $101 million, with an average of $34,000 per employee.

"About 2,800 were Tanzanian nationals who received an average annual wage of $20,000, up from $17,000 in 2015.

"The average annual wage for its Tanzanian workers in 2016 was over 10 times higher than the average earnings of $1,878 for other Tanzanian workers throughout the economy in 2016," the report states.

In terms of the supply chain and direct contribution to the economy, Acacia's Tanzanian entities purchased $413 million's worth of goods and services from other Tanzanian businesses.

"These purchases accounted for 66 per cent of the total supplier purchases made by Acacia's Tanzanian entities. Of this amount, about $112 million was purchased from businesses local to Acacia's mines.

"Our spending supported jobs across all sectors of the economy, with the most jobs concentrated in the transportation, communication and other services sectors," the report says.

Contribution to GDP

Recurring operating purchases and capital investments comprised 91 per cent of Acacia's total procurement spending in 2016.

In terms of tax obligations, the firm says that it contributed to nearly 1.6 per cent ($724 million) of GDP last year.

"Acacia and its employees together incurred about $167 million in taxes and royalties in Tanzania in 2016. Acacia incurred nearly $128 million in taxes and royalties, about 80 per cent of which was related to corporate income taxes and royalties.

"The remaining 20 per cent was related to unrecovered VAT, Customs and excise taxes, payroll taxes, and other levies. Of this, $14 million of corporate income tax will be paid on assessment in 2017. Its employees paid an estimated $39.3 million in taxes," the audit report said.

It also said Acacia has spent $11 million on social investments in communities around its mines, with $6 million going towards education, health, infrastructure, water and sanitation through its Maendeleo Fund.

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