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Can Professor Muhongo repeat his claims about Tanesco`s finances?

15th December 2012
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Editorial Cartoon

In June, this year, the Minister for Energy and Minerals, Professor Sospeter Muhongo claimed that the Tanzania Electric Supply Company (Tanesco) was earning about Sh70 billion a month, but he put a rather disturbing qualifier: he didn’t know where all the money was going.

According to Professor Muhongo, salary pay cheques were Tanesco’s main budget line, estimated to be Sh11 billion a month, and so the rest of the monies were either stolen by corrupt officials or misused.

Professor Muhongo who got away with his remarks, was trying to build a case that Tanesco’s major problems was theft and misuse of resources. He managed at least at the short-run to win the sympathy of those who didn’t want to reason beyond political statements, but in the long-run, Professor Muhongo’s claims were outrageous, built on a fabricated theory.

One week after his flawed claims, we published a front-page story detailing the financial details of the state-owned power utility. In that story, we revealed how Tanesco was facing financial difficulties caused by excessive dependency on emergency power generating plants.

We stated quite clearly that Tanesco was forced to spend about Sh40 billion in paying capacity charges every month, apart from the cost of buying diesel and heavy furnace oil to operate power generating plants.

Without going into more detail, we proved that Professor Muhongo’s claims were unjustifiable because of the reality that Tanesco was facing following the prolonged drought that affected hydropower production.

For a minister, especially a well-educated man like Professor Muhongo, to claim that Tanescso was collecting revenues of Sh70 billion, but spending only Sh11 billion on salaries a month was cheap propaganda that doesn’t help this country to get out of its power crisis.

This week, we are told by the Acting Managing Director, Felchesm Mramba that his company spends $5.2million (Sh8.32 billion) per day – just to buy diesel and Heavy Furnace Oil to operate emergency power plants.

This is apart from capacity charges, which is about Sh40 billion a month ($25 million). According to Mramba’s figures, Tanesco needs roughly $181 million (Sh286.9) a month for diesel, heavy furnace oil and capacity charges to fund emergency power production.

If these figures are accurate, which we believe they are because they have been issued by the right person, then it means that every month Tanesco has a deficit of about Sh170 billion because its monthly collections stands at just Sh90 billion -- taking the company’s financial forecast for June-December, 2012.

Tanesco was promised a Sh408 billion loan in August 2011, but till today, the loan has not been secured because the government either declined or failed to issue that badly needed guarantee to enable the power utility firm borrow the money.

Under the current situation, it costs Tanesco Sh359 to produce a single unit of electricity, which it then sells at a much lower price than the production cost. Our industries and mines pay Sh118 per single unit, up from the previous Sh 94, while medium-scale users and domestic households pay between Sh Sh132 and Shs 273 respectively.

By the end of 2011, the state owned power utility firm was overburdened by operational costs whereby about 88 percent of its monthly revenue was paying independent power producers. Today, with the latest figures from Tanesco’s Acting MD, the situation has surely worsened.

While we fully agree with the minister that there’s massive corruption and misuse of funds within Tanesco, what we don’t accept is flawed statements, which mislead the public about the actual financial situation of the state owned power utility.

If you produce electricity at high cost and then proceed to sell the same at a lower price that’s not business; it’s charity. This being the situation, we then ask today if Professor Muhongo can repeat the remarks he made about Tanesco’s financial situation?

It’s time Tanesco’s financial situation was analysed thoroughly to enable it operate efficiently and profitably. This could only be done if the minister and his team will stop the ‘blame game’ and focus on how to build a well-structured power utility firm -- managed independently and professionally without political interference.

Not only that, the government should also honour its financial pledges to support Tanesco. It promised to give Sh136 billion last year, but nothing has been paid till today, putting the power utility at the crossroads.

SOURCE: THE GUARDIAN