William Mhando

Tanzania Electric Supply Company (Tanesco) has been struggling for nine months now to secure a Sh408 billion loan from a consortium of three local banks to no avail thanks to bureaucratic red tape and lack of seriousness at the Ministry of Finance, The Guardian on Sunday has learnt.

But as the State owned power utility faces financial crisis, yesterday the Permanent Secretary of the Ministry of energy and minerals, Eliakim Maswi, announced that the Tanesco’s Managing director and other four deputy directors have been suspended with immediate effects.

The move was taken after the PS accused Tanesco’s Managing Director, William Muhando of failure to manage the power utility as well as intentionally introducing power rationing without an approval from the Ministry.

Early, this week, there was a power blackout in some regions in the country, which lasted for two days that was caused by technical faults and acute shortage of industrial diesel.(Read separate story)

The news about the suspension of the Tanesco’s MD and his deputies came at the time when the company has been waiting for nine months to secure the loan that was aimed at ending the power crisis.

The money is part of the Sh523 billion ambitious power rescue package endorsed by the national Assembly on August 13, 2011, whose aim was producing a total of 572 megawatts to curb power rationing which had been rocking the country for the past eighteen months.

It was dubbed an ‘emergency power rescue package’ with a cost tag of Sh523 billion endorsed by Parliament in August, last year, but nearly one year since the plan was approved there are no clues as to when the loan will be available, hence effectively putting Tanesco at a crossroads as another, and probably more severe, power crisis looms.

Under the power rescue package the state-owned power utility would have raised Sh115 billion in revenue in six months of operations, while the deficit amounting to Sh408 billion would have been secured as a loan from a consortium of local commercial banks.

Three banks led by Citibank had agreed to loan Tanesco the amount before the end of last year, but to date the cash-strapped power firm is yet to secure the loan because of bureaucracy and dilly-dallying at the Finance ministry, putting the availability of electricity in the next few months in the balance.

In order for Tanesco to borrow money from any bank, it needs an approval and guarantee from the Finance ministry, according to laid down government regulations and procedure.

According to details gathered by The Guardian on Sunday, while Tanzanians have been hopping to close the last page to a sad and agonizing chapter characterized by a biting and economically debilitating power rationing regime which the country had to put up with last year, Tanesco has literally been abandoned by the Finance ministry to fend for itself.

Dozens of meetings are said to have taken place so far between Finance ministry officials, Tanesco representatives and those from the lending institutions, but no breakthrough is anywhere in sight.

“This was an emergency loan aimed at ending power rationing, but it has taken us nine long months of endless meetings at the Finance ministry with nothing to show for the effort. It is apparent that some bureaucrats there don’t really care at all,” a senior official from one of the lending banks told the Guardian on Friday.

Speaking on condition of anonymity because he was not the authorized spokesperson for the three banks, the official added, “We are being treated like beggars by the Finance ministry…we have exchanged hundreds of pages of documents and still bureaucratic red tape has stalled everything.”

“If there’s any worry I think the banks should have been more worried than the government because they are the lenders. But in this case it’s just the opposite, with our colleagues from the Finance ministry opting for endless meetings,” the disappointed bank official further said.

Three banks - NBC, NMB and Citibank - agreed to loan Tanesco a total of Sh408 billion since last December, but the deal is yet to materialize.

Contacted yesterday before his suspension, Tanesco’s MD said, “It’s true we haven’t secured the loan, but I can’t give more details about the matter.”

“What you should know is that Tanesco is in serious financial problems, but hopefully very soon there might be a breakthrough.” Muhando told the Guardian on Sunday over the phone.

The Guardian on Sunday further contacted Energy and Minerals Permanent Secretary EliakimMaswi who, however, declined to give further details, insisting that Tanesco was in a better position to explain what was delaying the loan.

“I can’t comment anything on this issue, just contact Tanesco,” the PS told the Guardian on Sunday over the phone on Friday.

Efforts to contact Finance Minister Dr William Mgimwa proved futile after his mobile phones were switched off throughout the day.

Background

On August 13, 2011, former Energy and Minerals Minister William Ngeleja tabled in the National Assembly what the government termed as a ‘grand power rescue package’, which was finally endorsed by the august House after fierce debate.

Elaborating the financing mechanism of the package, Ngeleja told Parliament that while the total cost was Sh523 billion, Tanesco’s revenues during that period would be only Sh115 billion, creating a deficit of Sh408 billion.

To cover the deficit, Ngeleja said the government would act as guarantor to enable Tanesco borrow the Sh408 billion from local banks, a move which was strongly challenged by the opposition camp.

The grand power rescue package would have given the nation a total of 572 megawatts at a cost of Sh523 billion($330 million), thus ending power rationing that had been ravaging the economy for 18 months.

Apart from adversely affecting the economy, power rationing also denied Tanesco revenue amounting to Sh420 billion.

When some legislators questioned why the rescue package was so costly, the minister responded by saying that the cost of power rationing to the economy was bigger than what the nation would incur to finance the multibillion-shilling proposal.

“We need electricity, but at what cost? Having electricity under this package is still cheaper than not having it at all because for every single unit that is not produced, it costs the economy $1.10,” Ngeleja told Parliament.

Ngeleja, whose ministry was given three weeks by Parliament to come up with the rescue package to save the country from the worsening power crisis, said the target was to produce 500 megawatts, but under this package there would be a total of 572 megawatts.

The 572-megawatt structure

According to Ngeleja, Symbion, Aggreko, IPTL and the National Social Security Fund (NSSF) were the companies which were contracted by the government, through Tanesco, to resolve the power crisis through the emergency rescue plan.

The four companies were expected to produce a total of 572 megawatts within six months, beginning from last September.

The extra 572 megawatts was to have been added to the national grid by December, 2011, giving Tanesco over 1110 megawatts of electricity - with a surplus of about 272 megawatts.

The government came up with the plan on August 13, 2011 after MPs on July 18, last year, had vehemently rejected the budget estimates of the Ministry of Energy and Minerals owing to what they said was inadequate fund allocation to curb power rationing. The budget having been rejected, Prime Minister Mizengo Pinda was compelled to withdraw it.

But to date, due mainly to bureaucracy and lack of seriousness by the Treasury, approval of the Sh408 billion loan is yet to be made.

Ironically, the much-touted 100 megawatts from NSSF failed to materialise as scheduled after the pension fund faced serious technical problems in procuring power generators from the United States.