BoT Governor Benno Ndulu.PHOTO|FILE
By The Citizen Team
IN SUMMARY
On July 5, 2006, a tripartite agreement was entered between the government through the Ministry of Energy and Minerals, IPTL and BoT in respect to the Tegeta electricity power generating plant in Dar es Salaam.
Dar es Salaam/Dodoma. The Attorney General’s office and Ministry of Energy and Minerals overruled queries raised by the Bank of Tanzania (BoT) on the legality of transferring $122 million (Sh207 billion) to the account of Pan Africa Power Solutions at Stanbic Bank, The Citizen can reveal today.
BoT also demanded evidence that IPTL and Tanesco had resolved the dispute on capacity charge—which ended up with the two parties going for arbitration in Washington, DC.
The revelation comes as the nation waits with bated breath to see what action will be taken against the key escrow billions masterminds by Parliament when the report is finally tabled for debate next week.
In an eight-page letter to Attorney General Frederick Werema and copied to the permanent secretary in the Ministry of Energy and Minerals, BoT Governor Benno Ndulu demanded proof that PAP lawfully acquired 70 per cent of IPTL.
But, according to documents seen by The Citizen, neither Mr Werema nor Mr Maswi provided any concrete evidence that PAP did legally buy a 70 per cent stake in IPTL from the Malaysian firm Merchmar Berhard.
Instead, the AG wrote a legal opinion advising that failing to release the escrow cash—which belonged to PAP in the estimation of the government’s chief legal counsel, would be interpreted as contempt of court.
The Citizen understands that there was a dispute to do with capacity charge between the state-owned power utility and IPTL, which was the basis for the establishment of the escrow account at the BoT, pending the outcome of arbitration by the International Centre for Settlement of Investment Disputes in Washington (ICSID) .
On July 5, 2006, a tripartite agreement was entered between the government through the Ministry of Energy and Minerals, IPTL and BoT in respect to the Tegeta electricity power generating plant in Dar es Salaam.
BoT was appointed an escrow agent and was charged with the responsibility of establishing and maintaining the Tegeta account. It was agreed that all Tanesco payments would go to IPTL and be deposited at the escrow account pending the outcome of the arbitration.
Standard Chartered Bank Hong Kong Limited, acting on behalf of IPTL, filed for arbitration after Tanesco disputed the high capacity monthly charges. On February 12 this year, ICSID ruled that IPTL overcharged Tanesco and instructed both parties to recalculate the tariff to determine who got what so that the escrow money could be withdrawn from the BoT.
By the time the ruling was announced, though, all the money in the escrow account had been transferred to PAP’s account between November and December, last year.
The Citizen has learnt that no resolution of disagreements on capacity charge between IPTL and Tanesco was presented to the BoT as requested by the governor.
Prof Ndulu further questioned the legality of the transfer of 70 per cent of IPTL’s shares from Merchmar to PAP, given that there was no record at the Business Regulatory and Licencing Authority (Brela) showing that the acquisition was approved and registered as required by the law.
The BoT letter read: “Amidst allegations that Merchamar was placed under liquidation in Malaysia and that the liquidator is opposed to the alleged transfer (from IPTL to PAP), ignoring this issue serves no interests to the GoT (Government of Tanzania).
“Release of funds to a company whose ownership of IPTL has not been regularised, notwithstanding the court’s decision, places the bank or GOT in a precarious position.”
PAP rushes to register the acquisition
Responding to this concern, PAP launched a registration process in October last year and submitted questionable documents that, according to the Controller and Auditor General, were falsified.
The documents submitted by PAP to Tanzania Revenue Authority (TRA) show that Merchmar purportedly sold its 70 per cent shares IPTL in September 2013 at a mere Sh6 million.
The sale allegedly took place in September, last year, when BoT raised concern that the acquisition was not registered by Brela as required by the law.
At the time of the purported sale of shares, IPTL had power plants located in Tegeta in Dar es Salaam worth millions of dollars plus cash totalling $250 million—including $122 million sitting idle in an escrow account at Bank of Tanzania (BoT).
According to the TRA’s letter dated November 15, 2013, and directed to Mechmar Corporation, the Malaysian firm allegedly sold its 70 per cent share at Sh6 million ($3,750), going by the prevailing exchange rate on that day.
The letter signed by the regional manager of Ilala Tax region, Mr Paschal Kabunduguru, shows that tax amounting to Sh776,000 was then paid by the Malaysian firm at CRDB’s Water Front Branch on December 6, 2013.
The escrow payments were paid to Mr Sethi after he convinced the officials he had legally acquired 70 per cent of Merchmar’s shares in IPTL—a claim which enabled him to reach out-of-court settlements with VIP Engineering and Marketing, a local firm that owned 30 per cent of IPTL.
To settle the deal with VIP, Mr Sethi had to pay a whopping $75 million to acquire 30 per cent of IPTL in order to gain full control of the Tegeta escrow billions as well as power plants. What does not add up here is how it was that 70 per cent of IPTL attracted only $3,750 (Sh6 million) when, a few weeks later, 30 per cent of the same company was bought at $75 million (Sh120 billion).
Prof Ndulu also warned that any rush to pay the $122 million to PAP would cost the government Sh8.04 billion it would have earned in March this year—when the Treasury bills that were part of escrow would have matured.
Neither the ministry nor the AG heeded BoT warning and, by December 8, 2013, all the escrow billions were in PAP’s account at Stanbic Bank.
Ever since the culprits of RADDA and RICHMOND scandals were not rounded up seven years ago, very rarely we can ever find the honest man to run our much needed economic resoucers!
This mess, and all other grand corruptions are engineered by CCM using the weakness and stupidity of most of Tanzanians. Tanzanians are called stupid wherever they go because they have failed to replace a party that is proven to be led by a bunch of thieves, killers, and heavily corrupt people.
There is no other way than REPLACING CCM.
It is the responsibility of Tanzanians to vote-off CCM which has infested their country with graft epidemic.
The problem is, CCM is regarded as religion by many Tanzanians. It is hard to convince them to disown it.
In-fact CCM is deliberately been transformed into one which operates on the strategies of a certain religious group in Tanzania. They are the same strategies Union Tanzania is been tuned (through the new constitution draft crafted and endorsed by a special Parliament recently) to operate on.
The Citizen newspaper is really an investigative one, kudos Citizen!!! Governor Ndulu has already been cleared of any mismanagement!
He should remanded first, by that way he could make confession that he has endorsed withdraw through no fault of his own!
Despite of the highly responsible quarries lodged by the Central Bank Governor, I still think the Governor should be included into the list of the category of Government officials considered culprits for endorsing at the different levels of the decision which facilitated illegal withdrawal from the escrow account in the absence of fully clearance of the quarries lodged by the Central Bank Governor.
AG, Bot governor, the board members of Tanesco, and minister of nishati, should be rounded up. The court is the only reliable place where it can prove them innocent .
All suspect culprits should have been rounded-up and held in custody as soon as the anti-corruption squad and/or CAG established their findings.
“Release of funds to a company whose ownership of IPTL has not been
regularised, .....notwithstanding the court’s decision....., places the bank or
GOT in a precarious position.” The whole saga stems from the interpretation of the court ruling (or the misinterpretation thereof ).
Did Werema misinterpret the court ruling ? It seems the AG fought tooth and nail to get the Escrow money released.Was his action bona fide ?
Thanks you verry much for making me aware on this Big Scam in JK Gvnt.
I always see this is the results of failure President.If the president cant show the way its difficult others govnt official to show good behavior.
RICHMOND,EPA are few scam which we have never experience the real culprits are taken to the court and liquidated??
-We should decide now whoever taken the public money in any way should be imprisoned for life.I thinks this will help much.
The only decision we can have is vote the corrupt and thieves out of power. You don't have the power to imprison any person, if you elect the same person/party to be your leader.
Voting CCM out is not effective because vote rigging plus the support of the army, police and the other security organs of state is what has maintained CCM in power throughout the Parliamentarian and Presidential elections the country had. It means wholesale people's led forceful removal of CCM from power is what could liberate the country from the status of CCM colony it is. The people simply need to be mobilized into the action, and our well learned defense and other security organs should manage rather than resit the peoples led forceful removal of the destructive CCm dictatorship ruining the country so heavily gifted with economic growth potentials.
One would also wish to know what TANESCO did when they learnt that the authorities were in frantic efforts to transfer to IPTL all the money deposited with BOT before the dispute that led to the opening of the Escrow account was resolved. Regrettably, this piece does not also shed light on the nature and salient features of the court's ruling made which it seems the AG has used very aggressively to effect the payment to IPTL, ignoring expert advice from BOT.
They grumbles against each others in order to carry favor to the wananchi. Shame on them! What type of these creatures, they think they are? I bet they are recluse yahoo people!
As investigations continue in preparation for court rulings on the matter, all suspect culprits should have been sitting in custody. Keeping them in custody is required to in denying them the opportunity to disrupt evidence and hide stolen wealth where it would be difficult for the Government to locate.
Not in CCM government. How can a thief keep his fellow thief in custody?? I will never happen in CCM government.
I agree with you. It is the responsibility of Tanzanians to liberate themselves from the mafia-type corruption the rule of CCM dictatorship has created in their society. Without the help of the lady UK Minister, the RADA scandal wouldn't have been investigated and a bit of compensation made to Tanzanians. Without the pressure of Western donors this escrow scandal too wouldn't have been investigated and the truth revealed. Majority Tanzanians still belief CCM is well-caring for them and their future, and won't realize the self-centered corrupt CCM is driving their country back into the slavery past until they finally find themselves in there.
Yap, we really need to liberate ourselves from this corrupt government, but who is our Ken Saro-Wiwa? CHADEMA? UKAWA? or Mtikila?
I humbly concur with your line of argument. Indeed it is the duty of some, who are educated at least, to critically inform the masses. The silence of our educated brothers, who goes by good names, doctors who never cure, professors, and even those holding certificates of various sorts, can not mean anything than betrayal to the nation. A nation brimming with minerals, oil, natural gas, natural forests, good weather, fertail soil to name a few. How can it be the least in the living conditions of her people?
Let us unite, against our common enemy, CCM and its sympathizers. Let us releave them the posts they hold. We can do more than what they are doing. Even without experience.
Problem is very big because it is most likely that it is a race factor behind the failure of western education to transform African leaders from ones who prioritize selfish interests rather than the interests of the societies they lead in the war they are supposed to lead against extreme levels of poverty majority Africans dwell in.
Most of progressive economies in the world are where they are because their populations and leaders understand that the prosperity of the societies they belong in matters most than personal wealth in the provision of economic security for all in the societies. The endeavors of such non-African populations and leaders have managed to create economies of scale because main they are focused on are the prosperity of the societies they belong in, then personal prosperity follow. Such populations won't take bribes which compromise common interests in the societies they belong in.
In the history of mankind, it is only African leaders are known to have sold their fellow country men and women into foreign slavery for pieces of cloth and other small-small presents from Arab slave traders. Isn't it a race factor?
And all black skinned indigenous populations (not all of African origin) found in Africa, India, South America, Australia and in the Caribbean are similarly poorer than their white skinned counterparts!!!. Isn't it a race factor?
Africans should emulate the Chinese who have managed to create modern economies of scale for themselves, thanks to their intolerance to corrupt practice and their self-reliance led collective hard-work focused on the creation of collective rather than individual prosperity.
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