Tanzania to prosecute three officials over $41m aircraft leasing scandal

By JOINT REPORT The EastAfrican

In Summary

• According to a new audit report on the 2007 contract, the government says it has fresh evidence to prosecute three former managers who committed the country to the deal.
• The three are also facing charges over failure to keep tender records for the purchase of 26 worn-out motor vehicles worth $809.3 million from a company called Dalmouk Motors Ltd based in Dubai.

The Tanzania government is poised to prosecute three officials over a controversial aircraft-leasing contract that has left the country with a $41 million debt.

According to a new audit report on the 2007 contract in which Air Tanzania Company Ltd, the national carrier, leased an Airbus A320 from Wallis Trading Company, the government says it has fresh evidence to prosecute three former managers who committed the country to the deal.

The report by the Controller and Auditor General (CAG), which was done late last year but is yet to be made public, recommends the prosecution of David Mattaka, the former director general at Air Tanzania, William Haji, the former chief internal auditor and Elisaph Ikomba, who was the then acting chief accountant. The three left office last year.

The government, which had guaranteed Air Tanzania to take up the loan to purchase the aircraft, is seeking fresh negotiations with Wallis to write off the debt.

This will be the second time the government is seeking legal action against the officials involved in the deal. A similar recommendation was made by the CAG in his 2009/2010 financial year audit report but the government is said to have had inadequate evidence.

The three are also facing charges over failure to keep tender records for the purchase of 26 worn-out motor vehicles worth $809.3 million from a company called Dalmouk Motors Ltd based in Dubai.

The leased aircraft, which was delivered in 2008, was found defective because six months after its arrival, it had to undergo major maintenance in Mauritius in March, 2009 and thereafter in France in July 2009.

Ludovick Utouh, the Controller and Auditor General (CAG), says that there is no doubt that there was massive misappropriation and mismanagement of the leasing agreement of the aircraft.

Mr Utouh said that the National Audit Office has recommended disciplinary action be taken against officials who were involved in committing the government to the unfruitful deal, which resulted in the government being exposed to an accumulated debt of $41.4 million.

According to Mr Utouh, by October 2012, the outstanding debt had accumulated to $41.4 million from $39 million recorded in October 2011.

The report shows that in 2011, the Ministry of Finance told Wallis Trading that the payment schedule for the debt would be in 26 instalments from October 31, 2011 to November 26. On October 26, 2012, the ministry had already paid lease rent of $1.5 million as the first instalment.

“The government should negotiate this debt with Wallis Trading Company with the possibility of cancelling it on the grounds that the government received no value from the deal,” he said.

The report has also revealed that Air Tanzania has debts due to South African Airways and Citi Bank amounting to Tsh6.5 billion ($4,129,298.38) and Tsh2.3 billion ($1.46 million) respectively, which the government is servicing.

The government said it has started rectifying some of the problems resulting from private public partnership transactions including the one entered into by Air Tanzania.

“Measures implemented include terminating contracts with the companies which failed to observe terms and conditions including the contract between South African Airways and ATCL,” says the report.

It says that, during the 2013/2014 financial year, the government intends to conduct a review of existing projects to measure and determine the magnitude of risk that Tanzania is exposed to on private public partnership projects to rectify some of the risks.

All private public partnerships that are likely to cause contingent liabilities will need to be approved by both the Ministry of Finance and parliament before their contracts are signed.

By Mike Mande and Joseph Mwamunyange