Govt risks Sh9.6bn loss in disputed Kiwira sale

Chairman of the Public Organisations Accounts Committee (POAC), Mr Zitto Kab

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thursday, 19 January 2012  

 

By Florence Mugarula
The Citizen Reporter

 

Dar es Salaam. The government is likely to lose $6 million (Sh9.6 billion) after the ministry of Energy and Minerals approved the sale of part of Kiwira Coal Mine to Tanza Coal Tanzania Limited.The chairman of the Public Organisations Accounts Committee (POAC), Mr Zitto Kabwe, told The Citizen that part of Kiwira was sold behind closed doors with the blessings of the minister for Energy and Minerals, Mr William Ngeleja.

 

 

 But Mr Ngeleja said in a phone interview that the deal was signed in accordance with the law. “As a ministry, we issue licences based on laws and regulations,” he said. “We have all the information and reports on this issue and we will furnish the committee with the information.”

The government has fixed regulations to be followed in every transaction, the minister added, and it would be out of order for a minister to sanction a deal contrary to those rules.

But Mr Kabwe told The Citizen that it had been established that the State Mining Corporation (Stamico) took a loan of $6 million from the World Bank in 2004 to develop the Kiwira Coal Mine project. The government will reportedly be expected to pay off the loan without getting any benefits from the project.

The mine was fully owned by Stamico until June 2005, when the then minister for Energy and Minerals, Mr Daniel Yona, granted the licence to TanPower Resources, a firm in which he had shares.Mr Kabwe said the company owned 75 per cent of Kiwira and was granted another location called Kabulo, which is the richest coal zone in the mine. “TanPower Resources owned 75 per cent of Kiwira and 100  per cent of Kabulo area,” the Kigoma North MP added.

Such contracts were signed in unclear circumstances since there was conflict of interest on the part of the minister. “It is obvious that Minister Yona influenced the decision since he had shares in TanPower Resources Company limited,” said Mr Kabwe.

The current Permanent Secretary for Ministry of Transport, Mr Omar Chambo, was then the Commissioner of Minerals and, according to Mr Kabwe, he participated fully in approving the sale of the mine.  Only later did the committee discover that many mistakes had been made in granting the Kabulo area to a new company, he added. Moreover, legal and agreed principles were not followed.

The red flag has also been raised over the fact that the sale of Kiwira took place just before the 2005 General Election, when the focus was on the campaigns. Parliament directed the government to repossess Kiwira in 2009, but the mine remains in the hands of Tanpower Resources.

In April last year, the government started negotiations with TanPower to take back the mine but the company went on to sell part of the mine while the negotiations were still going on.

According to Mr Kabwe, Mr Ngeleja approved the sale of the Kabulo area knowing full well that the government was negotiating the return of Kiwira. “The Minister approved the sale while the government, through his ministry, was negotiating to repossess the mine,” said the POAC Chairman. “This was against the spirit of the government and it is a big scandal.”

 

The committee summoned the permanent secretary, Mr Eliakim Maswi, to explain on how the decision was reached when it was crystal clear that it was not in the interest of the country.

 

But the PS was unable to give a clear explanation on a deal that was defined as a big scandal and was ordered to produce all documents to do with the transfer of the mine from TanPower to Tan Coal Energy.
The committee has now ordered the government to repossess the Kiwira coal mine, revoke the minister’s decision and return the project to Stamico.

 

Amidst all these twists and turns, the government reportedly took responsibility for paying billions of shillings in loans taken by Kiwira under the government guarantee. Along with $6 million borrowed from the World Bank by Stamico, the government was also supposed to pay Sh32 billion to PSPF, CRDB and NSSF.

 

According to the Kigoma North MP, part of Kiwira coal mine has now been sold at a time when the government is looking forward to owning 100 per cent of the shares before embarking on a search for an investor who can run the business profitably.

Simanjiro MP Christopher ole Sendeka describes the sale as a disaster because it is likely to lead to a rise in the price of electricity given that various materials will have to be imported or bought from another firm.