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Tanzania Tells China Merchants Holdings: “Take It or Leave It!”

Tanzanian President John Pombe Magufuli speaks during a joint press conference with Kenyan President on October 31, 2016 at the State House in Nairobi. SIMON MAINA / AFP

Tanzanian President John Magufuli seems to be taking a page from Malaysian Prime Minister Mahathir Mohamad’s playbook on how to negotiate with the Chinese. Mahathir last year, if you recall, abruptly canceled a multi-billion dollar rail and oil pipeline deal with the Chinese, calling them “unfair.” Unsurprisingly, China’s critics in the US/EU jumped with excitement that finally an emerging market leader stood up and said “enough.”

Well… it turns out that Mahathir was just negotiating and with his tough tactics he brought the Chinese back to the table where he got the Beijing to significantly lower their price.

Something similar may be going on in Tanzania where the government is giving state-owned China Merchant Holdings an ultimatum: accept our terms or go away, according to a report in The East African newspaper.

And, just as it was with Malaysia, the US/EU-led Twitterverse is now starting to buzz with excitement that an African leader is going stand up to China. But, be careful here, Magufuli is a strong supporter of China and has a lot of friends in Beijing, so this all may just be a Mahathir-style negotiating tactic.

Tanzania’s 5-Point Offer to China Merchants Holdings for the Bagamoyo Port Deal

  1. China Merchants will get just a 33-year lease instead of the 99-year lease they demanded previously.
  2. There will be no tax holidays and China Merchants will be subjected to all taxes as determined by the Tanzania Revenue Authority.
  3. China Merchants will not be granted any special status and will be required to pay market rates for water and electricity just like any other investor.
  4. China Merchants Holdings will not be allowed to run any other businesses within the port with the government’s permission. The government will conduct regular inspections to ensure compliance just as they would with any other investor.
  5. The government will retain the right to develop other ports even if those new facilities are in direct competition with the Bagamoyo Port.

It will be very interesting to see how China Merchants Holdings responds to this much more assertive negotiating style that is being done in full view of the public. This is something new that we haven’t seen before and, if Tanzania is successful, it could set a precedent that will encourage other African stakeholders to start negotiating much aggressively with their Chinese counterparts.

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