NDC’s MD outlines plans to turn around financially-crippled parastatal

16Sep 2018
Mtapa Wilson
DAR ES SALAAM
Financial Times
NDC’s MD outlines plans to turn around financially-crippled parastatal

It has been six months since President John Magufuli appointed PROF DAMIAN GABAGAMBI (pictured) as managing director of the National Development Corporation (NDC).

PROF DAMIAN GABAGAMBI.

Financial Times Staff Writer MTAPA WILSON interviewed the chief executive officer of the cash-strapped corporation about various projects it is implementing and his plans for its future. Read on…

Q. You were appointed NDC Managing Director in March this year. What have you set as your priorities as the new chief executive of this state-owned enterprise?

A. I have joined NDC at a time when the organisation is financially crippled and almost all of its projects and investments are dwindling. Thus, my priority is to ensure that the organisation is able to generate adequate funds to be able to meet is financial obligations including paying staff, suppliers, and dividends to the government.

We will do that by identifying different sources of income and ensure that we get every cent that we deserve; for example from rents and management fees from our joint ventures and subsidiary companies. To be brief, my priority is to restore the lost glory of NDC and make it great again.

Q. As an economist, what role would you like to see NDC playing in Tanzania's economy and the drive towards industrialization?

A. NDC’s main task is to stimulate the development of basic industries in Tanzania, in partnership with the private sector. It is supposed to initiate and facilitate the development of world-class industrial infrastructure for sustainable and competitive industrialization.

I would like to see NDC leading the industrialization process in the country by implementing strategic integrated projects such as the Chukwuma-Liganga complex for iron ore mining and soda ash extraction at Engaruka village in Monduli district, among many other projects.

I would also like NDC to play a leading role in strategic agribusiness value chains, particularly the production of oil seeds, cassava, and rubber in the country.

Q. What are the expected benefits of the Liganga iron ore project to Tanzania?

A. You can appreciate the benefits of the Liganga iron ore project if you imagine what would happen if we eliminated iron products from our everyday life.

There would be no magnificent buildings, no vehicles, no railways, no bridges, etc. The economy would simply collapse.

But all our iron products are currently imported. If we produce our own iron and steel products within the country, we could save enormous amounts of foreign currency that could be used to import other capital goods.

This is not to mention the potential tax revenues, employment and business opportunities that will be linked to the iron mining and steel production activities.

Q. The government is currently investing heavily in the construction of the standard gauge railway (SGR) network. How does the Liganga iron ore project plan to take advantage of the opportunities offered by the SGR project?

A. Iron and steel products produced at Liganga will be utilized in different parts of the country. As such, an efficient transport system via the standard gauge railway is imperative.

The Liganga iron ore project will benefit from (another) railway that is planned to be constructed from the Chukwuma and Liganga area to the port of Mtwara. But the opposite is also true; the SGR will benefit from the steel to be produced at Liganga.

Q. What's the latest progress in implementation of the Lake Natron and Engaruka Basin soda ash projects?

A. Drilling explorations conducted at Engaruka have established the presence of 4.68 billion cubic metres of brine, which co-exists with solid salt crust amounting to 9.36 billion cubic metres.

The brine samples have been tested and the results show that Engaruka brine is suitable for soda ash production. Project land has been demarcated and Monduli district council has agreed to offer 27,000 hectares.

Field work for land surveys and valuation of properties of Project Affected People (PAP) in order to compensate and re-locate them has been completed, and the survey and valuation reports are being finalized. NDC is looking for an investment partner for this project.

Q. NDC is taking part in several power production projects. Please tell us about these projects and the latest progress in their implementation.

A. I have already mentioned the Chukwuma coal-to-electricity project in Ludewa district. It is being implemented together with the Liganga iron ore project. The project involves the establishment, among other things, of a power station with a capacity of 600MW plus a 220kV power transmission line between Chukwuma and Liganga.

About 250MW out of the 600MW will be utilized by the Liganga project, and the balance of 350MW will be connected to the national grid at Makambako through a proposed 400kV power transmission line to be constructed by the government.

Negotiations on the power purchase agreement (PPA) between TCIMRL and TANESCO have yet to be concluded, and the main issue is the power tariff.

Another is the Katewaka coal-to-electricity project implemented by Maganga Matitu Resource Development Company Limited (MMRDL), a joint venture between NDC and MM Steel Resources Public Limited. It is proposed to start with the establishment of a coal mine with a capacity of 1.0 million tons of coal per annum, and later on add a coal-fired power station.

We have another power generation project in Ngaka, Mbinga district being implemented by Tancoal Energy Limited, a joint venture company between NDC and Intra Energy Corporation of Australia. The project was conceived to establish a power station with a capacity of up to 400MW.

The feasibility study for the Ngaka power station has been completed by Sinohydro Corporation of China, in collaboration with Tancoal. Also the initial negotiations on the PPA with TANESCO have been held but not yet concluded, and again the main issue is the power tariff.

We also have a solar power project in Singida municipality aimed at creating a solar farm for the generation of 100MW of electricity for supply to the national grid. The feasibility study and economic and social impact assessment studies have been completed and certificate obtained.

Lastly, we have the Singida wind power project which has the potential to generate 300MW of electricity from wind resources, and supply that power to the national grid. The project is being implemented by Geo Wind Power Tanzania Limited (GeoWind), a joint venture company involving NDC, TANESCO, and Power Pool East Africa Limited. Part of the land for this project has been acquired and discussions over the remaining land are going on.

Q. How is NDC working with the private sector in implementing its projects under the public-private partnership (PPP) set-up?

A. From its conceptualization, NDC was established to work in partnership with the private sector. It is essentially a private sector wing of the government. PPP is a special engagement format with the private sector.

There are two common forms, namely ‘Build Operate and Transfer (BOT)’ or ‘Build–Own–Operate–Transfer (BOOT)’ and ‘Build Own Operate (BOO).

Because of that, not every engagement with the private sector qualifies to be a PPP. Unfortunately, NDC has no PPP project. We are engaged with private investors in ordinary business partnerships.

Q. NDC is taking part in the URSUS tractor assembly project with a Polish company. When did this project begin production, and what is the total investment in it?

A. NDC, on behalf of the government of Tanzania, is implementing the tractor assembly project at the TAMCO Industrial Estate at Kibaha.

The project is based on an Agreement between the United Republic of Tanzania and the Republic of Poland on a Tied Aid Credit and a Contract for Supply of Tractors, Implements, Spare Parts and Related Services signed between NDC and URSUS S.A of Poland, who is the supplier of the Tractors and farm implements.

Under the supply contract, URSUS S.A will supply 2,400 tractors, 1,300 ploughs, 1,100 harrows, tractor spares parts, and technical expertise. The project objective is to mechanize agriculture in Tanzania and improve agricultural production for both domestic consumption and industrial feedstock.

It has several components including supply of tractors in semi-knocked down form (SKD), the setting up of a tractor implement assembly plant in Tanzania, training of local experts, and establishment of eight service centres across the country.

Q. How many tractors and farm implements have been produced so far, and what is the project’s future expansion plan?

A. So far, 823 tractors out of 2,400 have been imported from Poland. Out of these, 430 have been assembled. A total of 813 ploughs out of 1,300 have been imported and 140 assembled, while 941 harrows out of 1,100 have been imported and 225 assembled.

The assembly works are being conducted by Tanzanian staff under the supervision of URSUS S.A of Republic of Poland.

The future expansion plan entails receiving tractors in Completely Knocked Down form (CKD) and locally producing all the spare parts required to service the tractors.

We shall do that by creating linkages between the tractor assembly plant, Kilimanjaro Machine Tools Company, and the Chukwuma-Liganga projects in collaboration with other stakeholders such as the Tanzania Automotive Technology Centre (Nyumbu), etc. But our long-term plan is to use the skills and knowledge obtained to embark on motor vehicle assembly.

Q. How different are tractors and farm implements produced by URSUS compared to other similar products in the market, and do you target only the domestic market or export market as well?

A. These are modern tractors from a company with a long experience of more than 100 years in the business. Ursus is the licensee of AGCO's Massey Ferguson. Our tractors have been tested and verified by the Centre for Agricultural Mechanization and Rural Technology (CAMARTEC) as suitable farm implements for Tanzanian conditions. Apart from that, our sales arrangements are friendly.

They could be purchased in cash or loan from the Tanzania Agricultural Development bank (TADB), Agricultural Input Trust Fund (AGITF), or by civil servants with letters of support from ministry permanent secretaries.

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