Ministerial house cleaning took another turn lately when Tanesco managing director William Mhando was shown the door, albeit for a while, in a situation where it would appear the responsible minister opted to take a low profile, unlike his cabinet colleague who holds the transport brief.
The issue is that a real war is unfolding between ministries and state-owned firms; it’s not a war of words as such, because the heat reached so high that a cabinet reshuffle was conducted, perhaps to appease an openly rebellious Parliament. It would appear that MPs were focusing on the lesser or non-issues, and now ministers are tackling issues.
While there have been plenty of accusations of misconduct or handling of tenders in purchasing this -- or that -- item in the giant public firm, the real issues are starting to come out which, if one should gloat about them, had already been noticed by keen observers.
The pattern of temporary or partial blackouts over the years, for instance, had started to look suspicious because they followed a routine, a sort of rehearsed text where one knows precisely what the company is going to say was the reason for new power cuts. At the end of the day. that is precisely what permanent secretary Eliakim Maswi leveled on the company, even though it has teething problems and one would expect that the government knows this quite well.
What’s more significant was the manner in which the government attempted to resolve the 408bn/- loan quarrel; on the surface, this was part of a package agreed last year to end power problems but, noticeably, the plan wasn't government policy: it was forced on the government by MPs.
In that case, it was clear from the start that the government would only take it up half-heartedly, except for the aspect of ending continuous power shedding because this was raising not just discomfort but public anger as well. Once power rationing had been placed under control, there wasn't much else that the government was obliged to do, save to follow up on its own proper plans, especially the construction of a gas pipeline.
The issue of signing up the loan guarantee has been a key trigger in the current soured relations between Tanesco and -government relations for a while now; it once so moved board chairman Gen. Robert Mboma that he wrote a scathing letter to erstwhile energy minister William Ngeleja, even though the proper destination of the letter should have been the Treasury.
How far former finance minister Mustafa Mkulo was personally troubled by the issue is hard to say, but it appeared – at the start when Dr William Mgimwa was taking over -- that the new man Treasury would sign the loan guarantee straightaway. But someone, possibly the central bank governor, could have ‘bitten his ear’ in caution; after all, there are red lines of government indebtedness which have to be observed to assuage donors, for all we know.
It is unclear what led to the signing of the loan guaranteee at this time, whether it was the scuffle that the ministry has engaged with the company management, or the two aren't tied up - but they must, as in his explanation on what is wrong, the managing director had harsh words for the government about the stalled loan arrangement.
Since most policy commentators have little awareness on indebtedness as such, except when they are criticising the government Budget, the ministry would have tended to be on the defensive, if only as an attempt at running away from issues. At the same time, now that the financial year is over, the central bank may have a bit of leeway with new debts, especially if the debts at the Ministry of Works are settled too.
Yet when the ministry finally obtained the loan guaranteee it wasn't for the original 408bn/-, which everyone expected with breath but in the end only a quarter of it, precisely 102bn/-, implying that the government simply wishes to enable Tanesco follow up on the gas pipeline arrangements and servicing of debts owed to independent power producers, not the whole plan as agreed last year.
How far that loan would enable Tanesco to move forward is another matter, but the point is that Tanesco is becoming a debt burden to the government, and finally a management burden as well, in like manner as Dr Mwakyembe has shown clear irritation with 'business as usual' attitudes in Transportation parastatals, not caring a fig what it costs the government to shore it all up.
Still, some of the muck is at times generated from the ministry, where everyone presumably wants to make a fast buck.
At one time, there was strident criticism of the central bank from the local office of the International Monetary Fund (IMF) in relation to high public debt, to which it was clear that it is the IMF and not the central bank that was at fault – because the same IMF has never impressed on the government on the need to privatise the major parastatals.
The World Bank under ex-chief economist Joseph Stiglitz in the mid-1990s led the shouting and booing of the IMF, then under managing director Michel Camdessus, even bringing him to resign before the end of his term, as radicals all over the world condemned structural adjustments. The Treasury often toys around with the idea of privatising large public firms, always to no avail.
In that case, it was up to the local office of the IMF to realise that since the Washington consensus on structural adjustments has disappeared, central banks are expected to make it possible for states to continue holding to their parastatals as an aspect of sovereignty, which is the principal concern.
The issue has, in the local context, shifted from one of policy to patriotism, such that when a minister makes it known that he would wish to sell shares outright or liquidate a parastatal, MPs like Zitto Kabwe don't have to put up questions on the rationality of that policy but they look around to see who bribed that minister. That is how the last cabinet reshuffle came about, as ministers fell without a clue as what hit them – nor from where the blows were coming.
The nearest that the fourth phase government has come to thinking of privattising large firms was in the 2010 Budget estimates, at paragraph 56 and 57, when the public was promised that the government would look into the performance of state firms to bring them into line with the purpose of their being formed, that is, to contribute to bring home government revenue.
Needless to add, not a single parastatal makes a profit, with possible exception of the ports authority, even as the rest take nearly one trillion shillings per year in loan guarantees and subsidies. This invocation of the purpose of starting parastatals wasn't raised or debated when MPs debated the Budget, implying that they didn't hear what he said, or treated it with contempt.
What might still save Tanesco is the fact that once the gas pipeline project takes off, the government could use projected savings in purchasing heavy fuel from outside for purposes of thermal power generation, to allow Tanesco to borrow more funds.
Still this option has a number of hounds pursuing it, in that no serious shortages should come up before that period. And since it is said that Tanesco has a Sh300bn debt it owes independent power producers, or slightly above, offsetting that debt by a third might do for a while. A crisis looms, unless perhaps the government expects funds from certain sources for infrastructure and energy, say, the Chinese $20bn Africa fund, to be spent over the next three years.
We are not likely to see some balancing between prudent economic policies of low inflation and low public debt vs continuing to hold unto loss-making parastatals which take a tenth of the budget and more – by implication – via higher costs in all sectors of production and services.
Reformists may have to wait a while longer because it is not the failure of economic policy per se – given past records – that forces a country to sell off public firms or start some other course of action, but social contention. It is the politics which fails first.