Slowly but surely turning things around at MSCL

25Oct 2018
Mtapa Wilson
Financial Times
Slowly but surely turning things around at MSCL

Launching the 152bn/- Lake Victoria transport improvement project in Mwanza, President John Magufuli noted how he changed his mind about disbanding the Marine Services Company Limited (MSCL) owing to the exemplary performance of its acting chief executive officer ERIC HAMISSI (pictured).


Financial Times correspondent WILSON MTAPA sat with Hamissi after the launch event for an interview. Excerpts…

QUESTION: President Magufuli directed the Works, Transport and Communication Minister, Eng Isack Kamwelwe, to confirm you as MSCL general manager. As the new boss, what are your priorities for this state-owned marine company?

ANSWER: First of all, I would like to thank the president for recognizing my efforts and the collective initiatives of the board of directors, dedicated management team, and members of staff towards reviving Marine Services Company Limited (MSCL). His positive remarks towards me really motivated me and the entire MSCL workforce.

My core priorities in this turnaround, both at this juncture and over the next three years, will be to continue focusing on transforming the mindset of the workforce towards being more cost-conscious and productivity-sensitive, increase the fleet of vessels by fast tracking the building of new ships and rehabilitating old ones, strengthening our internal controls by installing effective electronic systems, changing the legal status of MSCL (including the scheme of service for employees and the organisational structure), and empowering the staff with additional skills through customized training programs. All these will be pursued concurrently.

Q: At the contract signing for the Lake Victoria transport improvement project in Mwanza, President Magufuli said at one time he thought of disbanding MSCL due to inefficiency, but it was your efforts as an acting general manager that got him to change his mind. What did you do to make the president change his mind?

A: When I joined MSCL in December 2016, I walked into a very bad situation. The company was in serious financial trouble, to the extent that we were among those companies that were discouraging the government from investing any additional resources in us due to poor performance.

Upon my arrival, I immediately - working closely with my new management team - devised a short term strategic plan to serve as the new roadmap towards revival of the company.

The strategy - which was named ‘A Short Term Turnaround Strategy’ - had a duration of 24 months and commenced in January 2017 after obtaining approval from the MSCL’s board of directors.

The strategy’s aim was to address, among others factors, the calculated lay-off of idle and unqualified workers, recruitment of competent personnel especially in the engineering department, and fixing of easily repairable vessels which were established to be low hanging fruits for instant revenue generation.

Under this strategic move, four vessels were rehabilitated and brought back into operation, supported by stringent cost control measures implemented to curb high costs linked to low productivity, installation of electronic ticketing systems on all operating vessels starting with the ones in Lake Victoria, and the enforcement of disciplinary action that included firing unfaithful employees.

I also ensured that we introduced a cost-centre business model for each vessel tied to each trip allowing for the justification of cost and revenue drivers.

The company had no money to implement the short term turnaround strategy, so we had to approach the Tanzania Ports Authority, which extended a repayable facilitation fund to the tune of 300 million/-, which was utilized for fixing the vessels.

We also approached the e-Government Agency to install an electronic ticketing system on credit.

We are 20 months down the line in the implementation of the 24-month turnaround strategy, and we are now able to meet many of our obligations from internally generated cash.

We have managed to sustain our medical insurance arrangements for the past 20 months, ensuring staff welfare, and we have succeeded in getting five operating vessels from only one which was operational when I joined the company.

We have managed to resume the trips of our cargo ferry, MV Umoja, to Port Bell in Uganda.

We have also paid salaries on time to at least the crew members of some operating vessels for the past four months, which was initially a tall order for us to achieve.

Furthermore, we have also been paying dues to pension funds in favour of some retired employees, to enable them access their entitlements. We have as well managed to finish the procurement processes for eight projects, out of which four contracts have already been signed and are ready to commence the implementation phase.

Most importantly, we have crucially restored the confidence of the government in us, to such an extent that we have been given funds to implement the projects in question.

We will reciprocate this confidence by ensuring returns on investment by starting to pay dividends to the government in the next three years.

Q: What are the expected benefits of this Lake Victoria transport improvement project?

A: It is clearly obvious that the project has a lot of accrued benefits not only for MSCL, but our nation at large.For our company, the said projects will create the needed capacity for the company to operate effectively and efficiently, bringing back its ability to operate profitably.

The communities around Lake Victoria will be assured of reliable marine transport which is safer, cheaper, and time saving, hence creating a multiplier effect on the economy.

Additional jobs will be created in the wake of these upcoming projects, both temporary and permanent, boosting employment for Tanzanians.

We are expecting to acquire technology and ‘technical know-how’ transfer for young wananchi who will get involved in the various development stages of the upcoming projects.

The said improvement will solidify efforts to make the port of Dar es Salaam a preferred gateway for goods bound for Uganda and South Sudan, which will in turn increase the wallet size of the Tanzanian economy.

Q: From your experience in the Tanzanian marine sector, which factors led to the under-performance of MSCL, which once had 14 ships and one boat?

A: There are several factors which led to the underperformance of MSCL. Those factors are both internal and external oriented. The historical background of MSCL plays a major role in the poor performance of the company, as way back in 2006 the company was identified as a candidate for privatisation.

This prompted deferred implementation of programs and strategic plans that would ordinarily have ensured the sustainability of the company from a policy level.

The failed move to privatise the company then paved the way for unfaithful employees to take advantage of poor supervision and controls, and thus begin the practices of corruption, sabotage, theft, and unprofessionalism for their own benefits.

There was no committed management during the transition period, which led to the absence of preventive maintenance schedules for the existing aged vessels, resulting in the grounding of most of the company’s fleet until now.

Q: The government is currently investing heavily in the construction of a Standard Gauge Railway (SGR) network from Dar es Salaam to Mwanza. How does the Lake Victoria transport improvement project plan to take advantage of opportunities offered by SGR?

A: MSCL is closely following up the progress of SGR as we plan to accommodate the flow of passengers who will be travelling by SGR.

With the introduction of a new passenger vessel in Lake Victoria, we are confident that the linkage for passengers arriving in Mwanza by SGR will create an avenue to various destinations along Lake Victoria for both domestic and international routes.

Moreover, for the envisaged increased volumes of freight cargo, MSCL is preparing a concept note for the construction of a big cargo ferry installed with meter gauge on board to accommodate the massive flow of SGR cargo at the Mwanza South port.

The proposed vessel will have the capacity to carry 5,000 tonnes of cargo and will be built within a period of five years from 2019, so as to match with the arrival of the SGR in Mwanza.

Q: What is your view of the Tanzanian marine sector?

A: I see the sector developing rapidly in the near future following the improvement of lake transport, which will act as a catalyst for other operators to venture into the industry.

The fifth phase government has undoubtedly demonstrated serious commitment in reviving marine transport throughout our Great Lakes region.

It is only at this juncture that we are witnessing budgets for massive new ship projects and major rehabilitations being set aside and effectively implemented.

There are still a lot opportunities that call for more exploitation within all the Great Lakes surrounding our nation, and in the Indian Ocean. Improvements in our services will act as the pilot to move other operators, especially the private owners, towards investing in these pending opportunities.

It should be noted that marine transport is the cheapest means of transport, as it involves the carriage of more bulk cargo compared to other modes of transport.

In this regard, there is a room for this sector to contribute significantly to the positive growth of our economy as we head towards an industrialised economy. Minimized transport charges following the sector’s improvement will lead to lower operational costs for businesses, encouraging stimulation of the local economy.

Q: What major challenges does MSCL face in its activities?

A: The major challenges currently facing MSCL hover around the fact that the company has an aged and worn-out fleet or cash-generating assets, leading to frequent grounding of some vessels, higher operating costs, lack of skilled labour - especially in the engineering department - and insufficient working capital to meet its capital requirements.

Clearly, this hampers the company’s ability to generate sufficient revenue. But we are taking stern measures to manage these challenges.

Q: What should be done to tackle the slow growth of Tanzania’s marine sector?

A: All stakeholders should get involved in promoting the sector by creating a friendly operational environment capable of attracting more participation in marine transport activities.

Workers in the industry should be well paid to minimise the current tendency of young mariners to run abroad in search of better pay. The Dar es Salaam Maritime Institute could advertise its courses widely to attract youngerwananchi to pursue them, so as to get a good influx of maritime professionals to work in the industry in question.

Q: It was revealed by the president that MSCL owed workers salaries arrears covering 27 months. How could you manage to run this state-owned firm while its employees were not getting paid?

A: In my opinion, during turnarounds there are two things which are crucial in managing expectations of employees and getting the best out of them. These are hope and constant communication.

Just like I have explained earlier, when I arrived here I found a demoralised workforce due to unpaid salaries and lack of essential services for employees such as medical treatment, etcetera.

I had the task of quickly coming up with a very short-term strategy. Definitely execution of the strategy would have been impossible without the buy-in of the employees.

Immediately after the approval of the strategy by the board, I called a company-wide meeting where I communicated the strategy to get ownership of the employees.

Honestly, it was not an easy task, but I managed to solicit that much-needed support. The strategy was practical and simple enough to be understood by all employees. Every quarter I conduct company-wide meetings to update employees on every step we were making, and with the visible progress, they remained hopeful and motivated.

The P&L reports were made transparent and everybody was aware of the company’s revenues, costs, challenges, opportunities. And they became part and parcel of the solutions through involvement.

I am not a mariner by profession and nor have I ever previously worked in the maritime sector. Retrospectively, being with experienced mariners, solutions to most of challenges lie within my staff themselves and I only coordinate and implement their ideas.

With time, and as some of the outcomes are being realised, most of the employees believe that what seemed impossible before can now continue to become part of the great future. This way you restore and manage hope.

Q: What is your expansion plan?

A: When we are done with the major rehabilitations of seven vessels as stipulated in our strategy, and whose initial funds have already been set aside by the government, MSCL foresees to add more vessels including fast moving boats in the respective lakes.

Having more operating vessels will enable the company to expand its operations by introducing other routes, especially to the remote islands along the lakes, and also introduce tourist voyages to islands such as Rubondo, Mahale, Ukara and the like.

New vessels we plan to build for expansion of our operations include a 5,000-tonne cargo ferry in Lake Victoria to take advantage of the opened Uganda route and upcoming, plusan oil tanker and container carrier in Lake Tanganyika to address the ever-increasing demand for such vessels in that lake plying the DRC, Burundi and Zambia routes.

Moreover, before 2025, we have plans for an extended spectrum of operations that will include creating ocean routes, particularly to Comoros Islands, by having a cargo ship.

We are closer to those islands than Mombasa and Durban. Why shouldComoro imports from such locations dominate while we have everything it takes to be major exporters to this ever-expanding market?

We are also looking into the possibility of investing in LNG transportation in the ocean in the future. Being a commercial entity, we are not bound to operate only in the lakes.