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Aliko Dangote has shut down his $500 million factory in Tanzania owing to high business costs and a fall out with the government over tax exemptions. The company had last week given indication that discussion with the country’s gas company failed to yield good result before the announcement of closure.
Dangote was invited to Tanzania to do business by former President Jakaya Kikwete in 2014 and was promised access to cheap natural gas to power the factory.
The Dangote factory was sited at Mtwara where natural gas is extracted. The end of Kikwete’s administration has spelled trouble for the factory as the government of John Magufuli has reneged on many of the original agreements, refusing to provide cheap natural gas for the factory. Dangote then retaliated by importing coal from South Africa despite Tanzania having substantial coal deposits.
Magufuli’s administration eventually banned the importation of coal, a policy which seemed specifically targeted at Dangote. The government has said Tanzanian coal is of higher quality than South Africa’s and therefore saw no need to allow companies import it. The factory now spends as much as $4 million per month on diesel
Despite Dangote’s protests, government officials say they have upheld all the incentives such as tax holidays granted to Dangote by the former administration.