Sunday, 12 October 2014

IPTL is the brainchild of CCM

Those looking for the link between Independent Power Tanzania Limited  (IPTL) and Chama Cha Mapinduzi (CCM) should carefully read an excerpt from IPTL dossier I got from a friend.
In a nutshell, IPTL is a brainchild of CCM and its bigwigs. The father of IPTL is Ali Hassan Mwinyi while the uncles are Benjamin Mkapa, Jakaya Kikwete, Kighoma Malima, Andrew Chenge, and many more. 
Follow the story hereunder.

Ruling party CCM Secretary General and Minister for Planning, Horace Kolimba (since deceased) was involved in the original brokering that led to IPTL. In July 1994, Kolimba visited Malaysia and raised the power-rationing problem with the Malaysian government. The latter advised Kolimba that Malaysia had solved similar problems by licensing and promoting independent power producers (IPPs). The Government of Malaysia arranged for Kolimba and his delegation to meet with potential Malaysian investors, who were then invited to visit Tanzania for an assessment of the situation. Datuk Baharuden Majid of Mechmar made his first visit to Tanzania in August 1994. Mechmar had already built a 2.75 megawatt wood-fuel plant for the Commonwealth Development Corporation (CDC) in Tanzania (1993), and already knew Tanesco well. He held discussions with the Minister for Water, Energy and Minerals Jakaya Kikwete, Simon Mhaville of Tanesco, Esther Masunzu, Assistant Commissioner for Energy, and Juma Ngasongwa, Personal Assistant to President Mwinyi responsible for economic affairs, all of whom confirmed that Tanesco and the government welcomed the IPP solution. A month later, an MOU was signed and IPTL was launched.

Tanesco's Managing Director Simon Mhaville was heavily pro-IPTL, as was his PS at the time, Raphael Mollel. Mollel continued to support IPTL from the Treasury, where he was appointed Deputy PS. A friend of Mhaville told me that Mhaville claims to have been anti-IPTL, and Mollel claims he was “only following orders.” Mhaville's successor, Baruany Luhanga has distanced himself from IPTL. Minister of Energy and Minerals, William Shija, was pro. There is widespread agreement that President Mwinyi gave IPTL his tarnished imprimatur. It is precisely the Mwinyi heritage surrounding IPTL that Mkapa has struggled to contain since coming to power in 1995.

A major player throughout was Andrew Chenge, the Attorney General and a personal friend of Mkapa. Chenge's office reviewed the IPTL contract on behalf of the government, and found it acceptable to the letter. At the time, Tanesco advisors--Acres (Canada) and Hunton and Williams (U.K.)--had written damning reports pointing out that IPTL: (1) was a long-term solution to a short-term problem; (2) did not constitute part of a ‘least cost' power policy;10 (3) constituted excess capacity;11 and that (4) the project was highly overpriced.12 Both also criticised the proposed IPTL contract, which was generous to the supplier and passed all the risk to the government of Tanzania. IPTL was not time bound, and the final cost to Tanesco would be negotiated after the project was completed!

The PPA was appraised for the government by Mary Ndosi, a State Attorney in Chenge's office. Acknowledging that the Acres and Hunton and Williams comments on IPTL had been reviewed, Ndosi states, with magnificent insouciance: ‘Their advice should be treated as part of our advice on this proposal only to the extent it is not in contradiction to what is contained herein.' There is an affidavit (see below) claiming that Mary Ndosi actively supported IPTL.

Dr Abdallah Kigoda was appointed Minister of Energy and Minerals by President Mkapa in February 1997. Kigoda's rise from a relatively junior post in the Planning Commission to high office was meteoric. On becoming Treasurer to CCM, he joined the inner circle of the ruling party. After one visit to Malaysia, he came home with a large cash contribution to finance an important CCM meeting, though the amount that was eventually used for this purpose is open to dispute. Until events forced him to fall in line behind the Mkapa/Rutabanzibwa position, Kigoda was a staunch supporter of IPTL. He had stated that there was no contradiction between IPTL and Songas, and that both would be commissioned.

After the 2000 presidential and parliamentary elections, Kigoda was replaced by Edgar Maokola-Majogo, a career politician who had consistently toed the pro-IPTL/anti-Rutabanzibwa line in Cabinet, arguing on at least one occasion for Rutabanzibwa to be sacked.

Mkapa's first Minister of Finance, Daniel Yona, another senior pro-IPTL figure, likewise declared nonchalantly that the government could always foot the bill if Tanesco ran out of cash.

From early on, the Prevention of Corruption Bureau (PCB), which reports directly to the President, took a lively interest in IPTL. Edward Hoseah, Director of the Bureau and Co-ordinator of the government's anti-corruption strategy, actively pursued the case, and at one point was ready to arrest Rugemalira on corruption charges. Hoseah was systematically thwarted by the Bureau's Director General, Maj. Gen. A L Kamazima, who along with Chenge, repeatedly told the President that there was no evidence of corruption in IPTL.

I was struck by the fact that there was very little adverse commentary from the business community or from the opposition parties concerning IPTL. Looking for a critical local voice, I approached John Cheyo, an opposition Member of Parliament and Chairman of the Public Accounts Committee (PAC). We met in the lobby of the Dar es Salaam Sheraton. It was not a good choice. As we talked, none other than James Rugemalira came over to greet him in the warmest manner. I hastily turned over my pile of newspaper cuttings so that he could not see what we were talking about. But it was too late. The following day, Cheyo held a press conference in which he sang the praises of private investments in the power industry, telling the government not to meddle with them! I later heard that he was aggressively anti-Rutabanzibwa in meetings of the PAC. On other occasions, Cheyo has been a strong critic of official misuse of public funds.

Much of the anti-IPTL commentary came from the donor community or from foreign journalists. The World Bank's Resident Representative Ron Brigish was more guarded than his predecessor Motoo Konishi, but he did not hide the Bank's concerns with the economic implications of IPTL. Just before becoming Swedish Ambassador to Tanzania , Sten Rylander also went on record criticising IPTL. The Swedish aid agency SIDA, heavily involved in supporting Tanesco over many years, had noted:

Recent events, especially the IPTL affair, (an unsound contract … for capital costs, commercial arrangements, and security package resulting in a cost of procured energy to Tanesco significantly above its own selling price) have shown that in spite of support to least cost discrete infrastructure projects like Kihansi and Kidatu, the total cost structure for power production can be jeopardised by uninformed Government-private sector deals outside the agreed least cost project frame. … The IPTL contract and the energy policy review have highlighted the need for a proper regulatory regime, anchored in legislation, to ensure competition on fair and equitable conditions … to make the market in the energy sector work…' (Swedish International Development Agency, Dar es Salaam, 1999)

The IPTL issue was raised at the Consultative Group meeting between Tanzania and donor agencies in Dar es Salaam in December 1997 and again in May 2000. In an interview with Reuters, European Delegation Head Peter Christiansen gave voice to continued donor concerns: ‘The European Union was concerned that the government was silent in cases where top ruling party officials and senior government officers were implicated as in the case involving Malaysian-backed IPTL.' (Guardian, 24 May 2000:1).

Reuters' Mark Dodd left Tanzania in July 1998. He regretted that he had failed to get a final interview with President Mkapa “to ask about the role of the Attorney General and Minister for Minerals and Energy in the signing … of a contract … with IPTL … described by the IMF as ‘an unsustainable burden on the economy.’ ” He continued:

10 Hydro and natural gas are much cheaper, and both locally available; fuel oil has to be imported.
11 IPTL clamed--though it was not part of the PPA--that they would run at a minimum capacity utilisation rate of 85%; otherwise they would increase their price from 10 cents per unit to nearly thirteen, or even more.
12 At that time, neither advisor knew that IPTL had switched medium for slow speed engines: the project was actually much more overpriced than either imagined.

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