By Matina Stevis in Johannesburg and Nicholas Bariyo in Kampala, Uganda
Sitting before a parliamentary oversight committee last month,
two top executives from Tanzania Petroleum Development Corp.
declined to reveal details of billions of dollars in gas contracts
that the state company had signed with foreign investors.
Parliamentarians had a sharp riposte: They called the police.
The two company board members had argued they needed permission
from their investors before they disclosed details of the deal. But
soon after a police officer showed up, the executives were fumbling
with their paperwork, according to lawmakers who attended the
hearing. In the end, they didn't release any documents.
The executives were escorted out of the parliamentary building
and into a police truck. They were briefly taken into custody,
detained for a few hours and released without charges.
"Companies must accept the era of secrecy is over," says Zitto
Kabwe, the head of the Tanzanian parliament's public-accounts
committee, who witnessed the scene.
TPDC declined to comment on the police detention of its
executives, and Tanzania's ministry of energy and minerals didn't
respond to requests for comment.
Battles over contract transparency are brewing across Africa,
touching on sensitive tax issues among energy and mineral giants
trying to tap into a new frontier of the global economy. The
clashes show how once-malleable African governments are fighting
for a bigger share of earnings in sometimes-secretive deals, often
following the advice of Western groups such as the Soros Foundation
and the African Governance Initiative, which is headed by former
British Prime Minister Tony Blair.
The upshot: A raft of legal disputes that have stalled
production of some key projects and frayed relationships between
African governments and foreign investors.
Uganda remains embroiled in a litany of tax disputes with Tullow
Oil PLC and Heritage Oil Corp., nearly a decade after oil reserves
were discovered. The country had amended its income-tax law to
introduce a capital-gains tax on the sale of oil rights shortly
after the discoveries, prompting Heritage and Tullow to contest the
new tax assessments.
Zambia's mining industry is faltering after the government in
October decided to more than triple mine royalties to 20%,
following the advice of Western groups. This compelled miners such
as First Quantum Minerals Ltd. and Glencore PLC to suspend $2
billion in expansion projects.
And in Guinea, disputes stemming from government changes to a
lease for the Simandou iron-ore mine are dogging the project.
Some experts argue the disputes reveal a blurring between
demands for more disclosure from investors and more tax revenue
from governments. "It's about negotiating to get a better deal in
terms of money ... income, but not necessarily transparency," says
Carlos Lopes, the chief of the United Nations Economic Commission
for Africa.
African governments have found ready partners for both
endeavors. Western organizations such as the Soros Foundation,
founded by hedge-fund billionaire George Soros, and international
institutions like the United Nations and the World Bank are
providing advisory services to resource-rich nations on how to
adjust ownership structures and rejigger tax laws for a bigger
slice of revenues.
Some analysts say this is a necessary tilting of the scales
toward African governments.
"The deals often favor the companies which have access to vast
experience and capital, while the governments do not have the
experience, institutions or laws in place to manage their natural
resources," says George Boden, an analyst with U.K.-based
anticorruption group Global Witness.
The African Governance Initiative--headed by Mr. Blair--has
helped Rwanda become the region's first country to issue mining
certificates at the point of export, in an effort to keep conflict
minerals out of the supply chain.
In Guinea, Mr. Soros, through his foundations, played a key role
in advising the government on its review of mining deals struck by
the previous government. This led to the ouster of BSG Resources,
the mining arm of Israeli tycoon Beny Steinmetz's family-owned
conglomerate, from the country earlier this year and the ushering
in of Rio Tinto PLC.
Mr. Steinmetz has since sued Global Witness--partly funded by
the Soros Foundation--which accused his company of obtaining mining
rights in the country through corruption. BSG also is in
international arbitration with Guinea in a bid to win compensation
for being stripped of the Simandou mine. BSG Resources has denied
wrongdoing and accused President Alpha Condé's government of
seeking to expropriate its rights by stealth--a claim the
government rejects.
Simandou's current operator Rio Tinto has also sued rival Vale
SA and Mr. Steinmetz, alleging that they colluded to rob the
Anglo-Australian company of the highly prized iron-ore concession,
further complicating the legal battles around the mine. Both
parties denied Rio Tinto's allegations, which a BSG Resources
spokesman called "baseless and bizarre."
In Tanzania, the recent police detention of the oil-company
executives capped months of a simmering row at the local parliament
over whether the East African nation is getting a fair deal for its
newfound vast natural-gas resources.
Mr. Kabwe's fight to make all contracts public kicked off in
August, when part of the contract with Norway's Statoil ASA and
ExxonMobil Corp. was leaked to the local press, showing that the
state-run Tanzania Petroleum Development Corporation, or TPDC, had
agreed to terms yielding 30%-50% of the revenue for state
coffers--well below the 50%-80% yields recommended by the World
Bank and the International Monetary Fund.
Tanzania in 2009 signed the Extractive Industries Transparency
Initiative, an effort led by non-governmental organizations to
bring contracts to light. Though most of Africa's other
mineral-rich nations also are signatories, implementation has been
uneven.
Mr. Kabwe ordered TPDC to bring all contracts to parliament for
scrutiny, but the state-run company cited investor reluctance to
publicize the terms. It didn't comply with a Nov. 3 deadline--at
which point the two senior TPDC board members were briefly taken
into custody.
An official with TPDC said that confidentiality clauses in the
deals prevent the state company from revealing them to third
parties.
ExxonMobil, the minority partner in the venture, referred
questions to Statoil. Knut Rostad, a spokesman for Statoil, said
the deal was "balanced and comparable to commercial terms in other
places with similar risks." He added that his company was making a
long-term commitment to the country and has already spent over $1.5
billion on exploration.
But Mr. Rostad said he wouldn't comment on parliamentary debates
or police detention of TPDC executives. He confirmed his company
didn't release the contracts but declined to answer why, given the
demands of the Tanzanian parliament.
Write to Matina Stevis at matina.stevis@wsj.com and Nicholas
Bariyo at nicholas.bariyo@wsj.com
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