Minister for Energy and Minerals, Prof. Sospeter Muhongo

The axe has now fallen on group of businesspeople some Members of Parliament included for the financial crisis under the Tanzania Electric Supply Company (Tanesco) finds itself, with the full backing of some workers at the power utility firm, the government has confirmed.

Winding up debate on his 2012/13 budget estimates yesterday, the Minister for Energy and Minerals, Prof. Sospeter Muhongo, revealed that for the two months he had held the ministerial brief, he had learnt that the cash-strapped power utility firm was its own worst enemy.

Still worse, the minister described past episodes of power shedding as a façade to mask well-designed ‘projects’ of some dishonest Tanesco management staff working in collusion with some businesspeople.

According to the minister, some businesspeople—yet unnamed—were doing business with Tanesco, most of which termed ‘dirty deals’ to siphon large amounts of money out of Tanesco.

Citing an example, Prof Muhongo said there were MPs who entered agreements with Tanesco to supply car tyres to the power utility—a direct conflict of interest when it came to making hard decisions about the company. However, the unnamed MPs had, at times, supplied sub-standard tyres but at inflated prices.

The minister told the august House that the performance of top Tanesco management was so pathetic that some of the decisions on power rationing were not genuinely made, considering the truth that the power company had been collecting substantial revenue. In May, this year alone, its collections hit an all-time high of Sh80 billion.

However, the company’s financial analysis for July-December, this year (made available to The Guardian On Sunday) shows that Tanesco will be spending Sh42 billion a month— half its revenue—on exorbitant capacity charges to independent power producers.

These costs do not include the price tag for buying power from the same independent power producers—while the so-called capacity charges still have to be paid whether Tanesco consumes electricity or not.

Capacity charge is money paid to the owner of the power generating plant regardless of the operation of that plant, which means the money accumulates every month and has to be paid even if the plants were to switch off.

As things now stand, Tanesco’s monthly collections between July and December, this year, stand at an average Sh94 billion per month, but the firm will have to cough up half of that money on capacity charges, with the biggest chunk of it goes to Symbion Power—the company that inherited the controversial operations of Dowans Tanzania.

Narrating how Tanesco workers were sabotaging the company, Prof Muhongo cited the case of electricity poles from Mufindi, Iringa region, saying these were once transported to Mombasa in Kenya -- before the same poles were transported back to Tanzania with documents showing that they originate from South Africa.

He also said the government had since noted that while Tanesco claimed to have purchased spare parts from the UK at a cost of Pound Sterling 50,000 (Sh125 million), investigations showed the box merely contained nails.

Prof Muhongo also told the House that the suspended Tanesco boss, William Mhando, awarded a tender worth Sh800 million for the supply of office stationery to a firm known as Santa Clara Supplies Co. Ltd – which was, in fact, his own family venture, knowing it was against public service ethics. The shareholders, according to the minister, were the children of the suspended Mhando – who is under investigation by the Controller and Auditor General (CAG) for abuse of office, among other allegations.

The minister also said Tanesco had been losing million of shillings through its digital power metres, mainly phantom vending systems, used by some vendors selling power to the firm before they were duly registered to do so, but were still reaping huge financial benefits from such shoddy services.

In other cases, metres in some customer accounts were said to hold “huge amounts of units of electricity” when they had not paid a penny to the power company. The list of customers includes St Mary’s International School, Access Bank and Akuba Paradise Hotel.

Prof Muhongo vowed to ‘clean up’ Tanesco and the entire ministry—judiciously implementing the government resolve to cut down government expenditure by buying low-cost and fue-efficient vehicles for its commissioners and directors. He said that the move on vehicles would save his ministry some Sh.14 billion per year.

Prof Muhongo also talked of a ‘possibility’ of dissolving the Tanesco board in the wake of the current management problems.

“There is a possibility of dissolving the board as well … because we also doubt its credibility … but we would not like to rush into this … we would like to go step by step,” he said.

Prof Muhongo said that once the board was dissolved, he would place adverts encouraging capable individuals to apply, saying the sme arrangement had since worked well for the Tanzania Petroleum Development Corporation (TPDC).

Meanwhile, the minister said Tanzania should now think of holding gold reserves, as it is done in other countries, arguing it was imperative to have such reserves in order to stabilize the country’s currency market.

Citing the American example, Prof Muhong said that unitl January, this year, the United States led the rest of the world with 8,133.5 tons of Gold, followed by Germany with 3,396.3 tons. In the meantime, the International Monetary Fund (IMF) is ranked third with 2818.1 tons while Italy was ranked fourth with 2,451.6 tons.

France was in the fifth slot with 2,435.6 tons followed by the second largest economy in the world ( China ) with 1,054 tons of Gold in its reserve. South Africa , the largest economy in Africa is placed at the 29th slot with 125 tons of Gold.

The ministry’s budget was passed.