Tanzania in Battle to Tackle Corruption that Hinders Energy Plans

3 December 2014 FDI Team

The Public Accounts Committee (PAC), formed to plug the haemorrhaging of public monies, has presented a report accusing key energy companies of malpractice. In response, the international community is threatening aid withdrawals if action is not taken, vindicating the warnings of PAC Chairman and opposition spokesman, Zitto Kabwe.

Background

Since independence, Tanzania has been dogged by widespread, institutional and cultural corruption, damaging the country’s international reputation and socio-economic outlook. With large hydrocarbon deposits found and ready to be extracted, the government in Dar es Salaam is aware of the need to address the energy supply and infrastructure woes that are limiting output and foreign direct investment.

Comment

The Tanzanian Government is eager to become East Africa’s leading mining investment destination. To capitalise on the exploitation of its growing oil and gas reserves, Dar es Salaam recognises that its legislation is not yet sufficient. In line with East African sentiment that the “trickle down” effect of extractive industries must be widespread and provide impetus for social improvement, the government faces strong regional demands for the transparency of business deals.

On 3 November, two high-ranking officials from the state-owned Tanzania Petroleum Development Corporation (TPDC) were arrested for failing to disclose 26 oil and gas contracts. The two men were released the following day, suggesting the move was a token display of the power of the PAC. The TPDC claims that they were not given enough time to comply with the PAC’s requests, being unable to gain swift approval for disclosure of sensitive information from private companies that were involved.

The excuse may even be valid and, if nothing else, the episode confirms the severe deficit of solid industrial legislation: the 2010 Mining Act is in dire need of an upgrade to better guide the opening up of Tanzania’s markets. Commenting on the arrests, Mr Kabwe professed that ‘transparency of contracts is fundamental for ensuring proper management of natural resources: without transparency, no accountability’.

Other notable developments are the accusations of the siphoning, by government figures, of public monies from the central bank to private entities. In a comprehensive report by Mr Kabwe, the PAC Chairman discovered that US$124 million has been ‘looted’ from the Bank of Tanzania via the route of Public-Private-Partnerships (PPPs). The companies in the firing line are Pan Africa Power Tanzania Ltd (PAP) and Independent Power Tanzania Ltd (ITPL). Their leaders received huge profits from power plants and obscure percentage-deals attributed to their names. Mr Kabwe noted that the leaders’ stakes came after not having ‘invested a single shilling’ in the respective projects.

Tanzanian economic growth sits at an average 7.1 per cent, while growth in power generation has managed only 4.2 per cent over the past decade. Coupled with a 13 per cent annual growth in energy demand, the problems are easy to see. Given that only 36 per cent of Tanzanians have access to electricity, albeit up from a mere ten per cent for registered bill-payers in 2010, unless the sector improves, the country will not be able to manage the influx of mining operations. According to Mr Kabwe, ‘There is no story of power in Tanzania, of the energy sector in Tanzania, without corruption’.

The government is yet to respond to the to the full PAC report, tabled in Parliament by Mr Kabwe on 26 November after an unsuccessful last-minute request to the High Court for an injunction to stop parliamentary debate on the report. With the Chama Cha Mapinduzi party having been in power for the past 37 years, excuses may be thin on the ground, especially now that US$500 million worth of foreign aid grants is set to be withheld if sufficient action is not taken. Even in the recent past, up to 40 per cent of the national and 80 per cent of the development budget was attributed to foreign aid. Following the withdrawal from Tanzania of some of the Nordic countries, a spokesman for the UK Department of International Development said that Britain ‘will not disburse any further budget support to Tanzania until we have considered the findings of the inquiries’. The response bears out Mr Kabwe’s fears that unaddressed public sector corruption will damage the international ‘credibility of the country’.

Earlier, the entire Ministry of Agriculture, Food Security and Co-operatives was placed under suspension for its poor handling of the surplus maize harvest. Given two weeks to justify the performance, Agriculture Minister Kadume was told to redraft “feasible strategies” or be sacked. Holding government officials to account over incompetence is important in the attempts to restructure of Tanzania’s political and business culture. With PAC Chairman Kabwe forecast to contest the 2015 presidential elections, the young statesman may prove the catalyst for his opposition Chadema party (Party of Democracy and Progress), to mobilise electors frustrated with the lack of government transparency and accountability.

Ben Pattison
Research Assistant
Indian Ocean Research Programme

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