Minister woos banks, contractors object to REA delayed payments

18Jul 2019
Aisia Rweyemamu
Dar es Salaam
The Guardian
Minister woos banks, contractors object to REA delayed payments

ENERGY Minister Dr Medard Kalemani yesterday appealed to financial institutions to advance loans to private contractors implementing the 7trn/- phase III of the rural electrification programme without fear of default because the contracts are protected by government guarantees.

ENERGY Minister Dr Medard Kalemani.

Speaking in Dar es Salaam yesterday during an energy stakeholders meeting to discuss challenges facing execution of the projects under the Rural Energy Agency (REA), Dr Kalemani said contractors faced difficulties in their loan applications because they are private entities.

“I call upon banks to advance loans to these approved contractors because they are not a default risk as their contracts are protected by government guarantees,” he said.

The minister declared that the government has set aside more than 600bn/- guarantee funds posted with the Bank of Tanzania to ensure purchase of materials in the implementation of phase III of the programme.

“The contracts entered between the government and these service providers should serve as assurance to financial institutions that loan repayment is guaranteed,” Dr Kalemani said.

But according to contractors, the banks usually demand documentation from them apart from their contracts with the government as loan conditions.

“Among the documents they demand is letter of credit from the government which takes long to process,” said Jonathan Mshiu.

Apart from access to loans, another challenge raised by the contractors during the meeting was delayed payments by the government, which they said makes it impossible to complete the works as per their contracts.

“Payments from our employer (the government) normally take too long and as a result we stay idle as we cannot buy materials and complete our works on time,” said Sebastian Mteleke.

On delayed payments and its impact on the completion of works, the minister responded by challenging the contractors that it means that they are ill-prepared.

“I’m surprised to hear you complain about financial challenges. There are three qualities of a good engineer: one, you must have enough capital, two you must be able to deliver quality job within a scheduled time and three, you must have enough resources,” he declared.

He warned that with effect from yesterday, he would not entertain contractors stopping the job on account of delayed payments.

He said he expects the projects will be implemented at high speed because all the necessary equipment including electricity poles, meters, cables and transformers are available in the country.

Dr Kalemani directed REA to take serious measures upon those who fail to complete projects within a given time frame, including blacklisting then so that they cannot be involved in future projects.

According to the minister, the phase III project is bigger than previous projects, of which the first stage of phase three is being implemented by 16 contractors, eleven being Tanzanian and five foreigners.

However, the phase III project aims to electrify around 7,873 villages, so that all villages have power access by 2021.

The total cost of the project is 7trn/-, where 4trn/- will be spent on electrification of villages that have never been connected and 3trn/- for refurbishing power connection where electricity infrastructure already exists.

As of June 2016, 4,395 villages were already connected to electricity during Phase I and II of the project, the minister noted.

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