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The East African : Nov 24th 2014
The EastAfrican NEWS NOVEMBER 22-28,2014 HIGH-PROFILE FIGURES MENTIONED IN PROBE $120m scandal hangs over heads of officials MPs want senio≥ govt o∞ce≥s who took the money f≥om cent≥al bank sacked and sued By ERICK KABENDERA The EastAfrican A scandal in which $120 million was illegally withdrawn from the Tanzanian central bank, the Bank of Tanzania (BoT), in a deal involving the Independent Power Tanzania Ltd (IPTL) could claim the careers of top government officials. The EastAfrican has learned that a parliamentary oversight committee plans to move a censure motion against a senior government official and recommend that President Jakaya Kikwete immediately sack several others. It will further instruct the Prevention and Combating of Corruption Bureau (PCCB) to take legal action against the officials, whom it accuses of negligence and abuse of office. “One of the officials has vehe- mently defended the withdrawal of the funds from the escrow account on the basis that it was not taxpayers’ money,” a member of the Public Accounts Committee told The EastAfrican on condition of anonymity. “The Controller and Auditor-General’s report has confirmed that the money was wrongly granted to Pan-African Power Solutions (PAP) and that is was, indeed, taxpayers’ money. “We therefore think the con- cerned government officials should be held to account.” The matter is yet to be taken to the floor of the House. The money was reportedly moved from an escrow account created in 2006 after the Tanzania Electricity Supply Company (Tanesco) and IPTL were involved in a capacity charge dispute that was taken to the International Centre for Settlement of Investment Disputes (ICSID). IPTL is a joint venture be- tween a Malaysian company, Mechmar, and Tanzanian firm VIP Engineering and Marketing Ltd. However, the money was controversially transferred to PAP between November and December last year after it claimed that it had taken over IPTL. When ICSID ruled in Feb- ruary that IPTL overcharged Tanesco and should therefore reimburse the excess payment upon recalculation, the escrow account was found to be depleted. It was then that both the PAC and the Ministry of Energy and Minerals ordered the CAG to investigate the transaction. Although the audit did not ex- pressly implicate the senior government official, the committee 11 The Independent Power Tanzania Ltd (IPTL) plant at Tegeta, Dar es Salaam. Picture: File wants him to take political responsibility for his actions. The scandal has caused a public outcry with development partners announcing last month that they would withhold Tsh937 billion ($558 million) in budget support for the 2014/15 financial year until they were satisfied with the outcome of the CAG investigation. Foreign Affairs Minister Be- nard Membe has called for the culprits to be held to account, saying the scandal has crippled the economy. David Kafulila, shadow minister for industry and trade, said allowing PAP to access the escrow account in the middle of the ICSID dispute gave foreign investors the impression that Tanzania does not respect international business arbitration. “The ICISD judgment has to be enforced, otherwise this will have an impact on the interest rate at which the government and investors intending to invest in Tanzania borrow, because the risk of default is high,” said Mr Kafulila. It will also have far-reaching political ramifications if parliament backs the PAC proposal. PAP company secretary There are plans to stop parliament from debating the report.” James Mbatia, shadow finance minister Joseph Makonde last week denied claims in social media that Simba Trust, which owns a 50 per cent stake in PAP, is owned by the First Family. Habinder Singh Sethi, a Kenyan citizen resident in South Africa, and his son own the other half. Simba Trust is incorporated in Australia. The move is also likely to put to test the supremacy of parliament after it emerged that the judiciary had attempted to prevent debate on the CAG’s report. On Tuesday, shadow finance minister James Mbatia claimed that the opposition had informa- tion that judiciary had written a letter to the Office of the Speaker seeking to stop parliament from debating the report. “There are plans to stop par- liament from debating the report,” Mr Mbatia said. “However, we think that the judiciary can’t interfere with the work of parliament.” The scandal is one of the big- gest to hit the country’s energy sector in the past 20 years. Besides the officials adversely mentioned in the report, some senior ministers have been sucked into the scandal. Minister for Housing and Hu- man Settlement Developments Prof Anna Tibaijuka admitted two months ago that she had received a $1 million donation from PAP for building a girls school. The former Unep director-general however said she was not aware then that the company was involved in the escrow scandal. The circumstances in which the donation was made nonetheless remain unclear. Implicated Attorney-General Fredrick Werema was also implicated in the investigation for having granted a Tsh20 billion ($3.5 million) tax waiver to PAP during the acquisition despite the Tanzania Revenue Authority instructing that value added tax be paid, as well as giving PAP access to the escrow account. According to sources, Energy and Minerals Permanent Secretary Eliakim Maswi approved the transfer of the money without proof that PAP had acquired Mechmar’s 70 per cent stake in IPTL. Mr Werema and Mr Maswi however said they acted procedurally in authorising the payments. Prior to the release of the au- ABOUT THE SCANDAL Taxpayers’ $120 million was illegally withdrawn from the central bank in a deal involving the Independent Power Tanzania Ltd (IPTL). Parliament’s Public Accounts Committee will censure a senior government official, seek the sacking of others and instruct the Prevention and Combating of Corruption Bureau (PCCB) to take legal action against them. The Controller and AuditorGeneral’s report says the money was wrongly granted to Pan- dit report, PAC chairman Zitto Kabwe had told The EastAfrican that the money could have been transferred from the escrow account to PAP before the company acquired the shares in IPTL. Sources privy to the investiga- tion told The EastAfrican that Mechmar sold its 70 per cent stake in IPTL Piperlink Investments Ltd for a paltry $3,750, only for the remainder, which was owned by VIP Engineering, to be offloaded to the same firm for $75 million a few weeks later. Piperlink, which is incorporat- ed in the British Virgin Islands, later transferred to Mr Sethi the African Power Solutions (PAP). The money was moved from an Escrow account created in 2006 after Tanzania Electric Company (Tanesco) and IPTL were involved in a dispute. Those adversely mentioned in the investigations include Minister for Housing and Human Settlement Developments and former UNEP director-general Prof Anna Tibaijuka, AttorneyGeneral Fredrick Werema and Energy and Minerals Permanent Secretary Eliakim Maswi. 70 per cent stake for $300,000 — exactly 80 times more than the consideration paid to Mechmar. Mr Sethi later set up PAP and the shares were transferred to the new entity. Mr Sethi’s company, Hydro Tanz, which was registered in Australia at the same address as Simba Trust and has major interests in real estate, was granted an exploration licence for Mnazi Bay North block many years ago. Interestingly, although there is no suggestion of any wrongdoing in the acquisition of the block, Hydro Tanz is yet to move on the site.
Nov 17th 2014
Dec 1st 2014