By Sunday Citizen Team

Economists and other experts are warning against premature celebrations following the reported plan by gold mining giant Barrick Gold Corporation to sell shares through the Dar es Salaam Stock Exchange (DSE).

They called for a careful assessment of the shares offer, even as other stakeholders lauded the move as a crucial development in an effort to get Tanzanians to play a greater role in the exploitation of the country’s mineral wealth.

In interviews with the Sunday Citizen since the announcement in Dar es Salaam on Thursday of Barrick’s plan to establish a new company, African Barrick Gold (ABG), and trade on the London Stock Exchange (LSE) and the Dar es Salaam bourse, the experts gave indications of what the public should expect.

One of the major concerns was whether the intended listing on the Dar es Salaam Stock Exchange (DSE) would be affordable or even accessible to more Tanzanians.     

The Civic United Front (CUF) national chairman, Prof Ibrahim Lipumba, who is a renowned economist, said the share sale plan at the DSE, after the Initial Public Offering (IPO) in London would not benefit the Tanzanian economy.

He said that due to the immaturity of the DSE, the foreign IPO would dictate the prices of the shares, pegging them out of reach for many Tanzanians.During a briefing to journalists, local Barrick executives announced that the proposed ABG would list on the LSE next month, and in Dar es Salaam, possibly before the end of the year.

Barrick Tanzania CEO Deo Mwanyika said the ABG, which would be based in London, would take over all of Barrick Gold Corporation (BGC)’s African assets and seek to expand its operations throughout the continent.Currently, Barrick has operations in Tanzania and explorations and contractual rights in other parts of Africa. In Tanzania, Barrick owns Bulyanhulu, Buzwagi, North Mara, and Tulawaka gold mines. BGC will retain 75 per cent ownership of the African outfit, and sell 25 per cent through the LSE.

Mr Mwanyika, who will serve the new company as the vice-president for corporate affairs, said the listing on the DSE would facilitate local ownership of the company.
“Listing on the DSE will allow for local investors to participate in the gold business and increase our profile in Tanzania and Africa,” he said.
 But Prof Lipumba posed: “Will Barrick set different prices for the shares in London and Dar es Salaam? The firm is out to raise capital and I doubt any such considerations are a priority.”

He said the trading would only add to the class of those who can buy shares.  However, he said the public could benefit only if the local security funds came out to claim a stake.

The economist also warned about the risky nature of gold investments due to price instability.
 A lecturer at the University of Dar es Salaam, Dr Haji Semboja, said that by listing in London, Barrick was eyeing a higher market for capitalisation that might not resonate with the public expectations in Tanzania. 

“We need to study and understand how Tanzania can participate in direct mining investments. Capital markets entail long term decisions, which take into account the development of the country and is not merely about trading on the stock exchange.”

The head of corporate affairs and research at Orbit Securities Company Limited, Mr Fortius Rutabingwa, told Sunday Citizen that Barrick could have made sure that a portion of capital to be raised was reserved for the local market instead of just cross-listing.

“A portion of the capital should be raised through DSE…this will create local ownership of the company, a vital step in the country’s economic development,” he said.

Another economist, who asked not to be named, said taxation would also be complicated if the new company would not be based locally.  “The best for Tanzania will be a simultaneous IPO in the LSE and DSE,” he said.

An economics lecturer at Mzumbe University, Dr Ngowi Honest, said: “Gold has a special place in the global economy. I do not expect it to be sold at prices at which other listed companies trade their shares.”
 He said collective investment schemes such as TCCIA and Nicol would be crucial in enabling “poor” individual savers to buy shares in Barrick.

A Dar es Salaam advocate and human rights and environmental conservation campaigner, Mr Tundu Lissu, said that by listing in London, Barrick would not be making any difference, as it was already listed in New York and Toronto.

 “If they list in Dar that will make a difference since Tanzanians will be able to invest in the mining sector,” he said, adding, that share prices were about profitability and ability to attract people to buy.

Reported by Tom Mosoba, Samuel Kamndaya, Ray Naluyaga and Frank Kimboy

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