Magufuli said on Wednesday this week after receiving a report on the exports of gold and copper concentrates by Acacia Mining Plc, Tanzania's biggest mining company, that the country was subject to economic warfare.
"We are in an economic war ... billions in revenue have been lost. It's something that is very painful and shameful for Tanzania," the president said.
Magufuli made the remarks after the chairman of a comittee he appointed to analyse the contents of 277 export-bound shipping containers of mineral sand from Acacia's Bulyanhulu and Buzwagi gold mines uncovered allegations that Acacia under-declared the value of its mineral shipments by up to 10 times.
Acacia denied the accusations in a statement issued on Friday and called for an independent review of the report findings.
“If the committee’s published findings were based on accurate data, Bulyanhulu and Buzwagi would be the world’s two largest gold producers,” the company said in the statement.
At a meeting with members of the private sector in Dar es Salaam on May 6 under the Tanzania National Business Council (TNBC), Magufuli once again made clear his belief that the country was being ripped off by multinational companies.
"There is rampant looting in the mining sector," Magufuli said at the meeting earlier this month with senior business leaders in Tanzania, which included top representatives from Acacia.
The president noted that some foreign investor companies in the country's mining sector were shifting profits from their operations in Tanzania and dodging their tax liabilities by consistently declaring losses.
"That's how multinational companies steal from Africa," said Magufuli.
Government thinking is that some mining companies cheat the country out of 30 per cent corporate tax earnings by consistently declaring losses in the country while paying dividends to their shareholders from their Tanzanian operations, which would imply they are actually making profits.
As a result of the simmering ongoing tug-of-war between the government and Acacia over the mineral sand exports, several analysts here at home and abroad have weighed in on the potential cost of the dispute to Tanzania as a country and Acacia as a foreign investor.
Samuel Wangwe, an economics professor, advised the government to come up with a policy that would favour joint ventures between foreign and domestic investors in strategic projects to curb capital flight.
"The government should find a mechanism which will ensure foreign investors enter into strategic partnerships with the local private sector in key sectors such as mining through joint ventures," said Prof Wangwe.
Opposition lawmaker Tundu Lissu advised Tanzania to pull out of the Multilateral Investment Guarantee Agency (MIGA) if it wants to take on multinational companies to avoid negative outcomes in case foreign investors seek international arbitration.
MIGA is an international financial institution which offers political risk insurance and credit enhancement guarantees. Such guarantees help investors protect foreign direct investments against political and non-commercial risks in developing countries such as Tanzania.
'Threat of litigation'
Tanzania also in 2013 signed the Canada-Tanzania Foreign Investment Promotion and Protection Agreement (FIPA), which protects the interests of Canadian companies in Tanzania. Toronto-based Barrick Gold Corp is the majority shareholder of Acacia.
"Tanzania's image as an investment destination has now been severely tarnished due to the ongoing situation," Lissu said, adding:
"Foreign investments could shift away from Tanzania if investor uncertainty persists and this will affect the whole economy."
However, Magufuli has received broad applause from economists and politicians from both the ruling Chama Cha Mapinduzi (CCM) and opposition parties, with many commentators praising the president for his bold move, which also included sacking Energy and Minerals Minister Prof Sospeter Muhongo and chief executive of the Tanzania Minerals Audit Agency (TMAA) Dominic Rwekaza.
The announcement by Acacia that it was "considering all of our options" has raised concern among some foreign analysts that the gold miner could resort to international arbitration.
Acacia also has other ongoing tax disputes with the government.
"It provides a further indication of how problematic the relationship between the company (Acacia) and the government has become," said Jonathan Guy at broker Numis.
Guy expressed confidence that the United Kingdom-based company and the Tanzanian government will resolve the dispute before too long.
RBC Capital Markets analyst Tyler Broda downgraded Acacia's shares to 'underperform' from 'sector perform' as he felt the developments may even put the miner's local operating licence under pressure.
Broda said the Tanzanian accusations were "highly unusual" and therefore further investigations "may - in theory - provide some relief for Acacia, although it is unclear what next steps can be taken to clarify this matter."
But with the lack of near-term resolution to the concentrates export ban and uncertainty around the future implications, Acacia's shares are likely to continue to sag as investors further discount the potential cash flows in the near and medium terms.
Acacia has already said it could put production from its Bulyanhulu and Buzwagi mines on pause if the current export ban on gold and copper concentrates was extended, and analysts at RBC and Numis said this was likely to happen in order to avoid a further build-up of working capital from the concentrates which it is unable to sell.
There is a chance Acacia could be cleared by an independent investigation, Broda wrote, although he warned that international litigation looks increasingly likely.
"The economic consequences to Tanzania of shutting down what would be otherwise viable mining operations, especially with the negative mark that this could place on foreign direct investment, could see an eventual resolution arise," he concluded, such as a government stake or higher taxes.
"Ultimately what the government wants is for Acacia to resume exports but with adjustments to the amount of cash tax and royalties being paid," Guy noted.