TPSF idea on gas sector participation workable

By Editor

Editorial Cartoon

While the floor of the National Assembly has seen more of vitriolic exchanges of sentiment than evident intentionality of resolving the problem of how local investors could participate in exploration and production of natural gas, some new ideas are worth trying.


One such idea is the one floated by Dr Reginald Mengi, chairman of the Tanzania Private Sector Foundation (TPSF), for the setting up of the Tanzania Oil and Gas Corporation (TOGC), expecting to partner with the Tanzania Petroleum Development Corporation (TPDC) in that field.
The latter hasn’t as yet expressed a well sounded position, but on the whole it is evident that the idea is practicable.

On the whole, the positive feature about this idea is that it places the local private investing community interested in that field on the same sphere of privileges as when TPDC conducts activity of its own in that field, as different from getting involved with foreign companies via production sharing agreements.

As a matter of fact, the idea to create TOGC   was included in the Natural Gas Policy floated mid last year but now seems to have run aground. TPSF plucked a branch from that policy and sought to reorganize its framework so as to suit a specific purpose.
It is something the responsible minister says  cannot be done, not at all.

The use of that idea is not just for TPSF or local investors as such but also for TPDC, which has attempted to form an operating company of its own that has been on the drawing books since 2009 when it was nominally formed, and in 2011 apparently recognized by the Energy and Water Utilities Regulatory Authority (EWURA).

 As of mid last year the business section of the local media was reporting that EWURA wants to cancel the company’s operating licence because it is not in a position to do business, since it has, as usual, waited for capital advance from the Treasury or some financial institutions by the good offices of the government.

That has not happened, so TPSF takes it up, and in that case TPDC should awaken to the fact that it may also provide the solution it is seeking.

A major problem comes up though, namely, that TPDC is more used to playing government than corporate entity, in which case this corporate misdirected outlook could complicate matters.

The fact that the corporation’s natural gas sector outlook is laced with that problem is the manner it has been handling the formation of its operating company, that since 2009 it lacks capital, and TPDC has not found a means of obtaining capital for it, outside the box in which it usually conducts its thinking.

Usually, state-run companies think merely in terms of political will, first relying on their own chief executive to convince the minister, who should in turn convince the prime minister, etc and then when it fails, start waiting for a new minister, then a new government, and later on a change of its CEO.

It scarcely ever dawns on state-run companies that there are other ways of doing things, that it is workable when, for instance, a major group of local investors obtains up to 30 per cent of such a company, and TPDC owns something similar, and then some major bank or venture fund places in the rest – in like manner as the type of participation in CRDB Bank.

If there is proper share distribution, and a management set up that is not directly under the thumb of TPDC but is professional and transparent, it can help TPDC realize its dream as well.

When the private sector is seen to actually dominate the company, and its management is not based on a particular individual or TPDC but is professional and accountable to serious strategic investors, banks can lend it money. Otherwise the idea could fail.

There is need for TPDC to recognize that the TPSF idea provides it with a symbiotic arrangement which it also needs for its original idea to work, as the wider plan where it is the government which forms a National Oil and Gas Company to dominate the sector is being fought from all sides.

Development partners are keen that the level playing field between local stakeholder and foreign companies be kept intact, and this is one sphere where the TPSF and other stakeholders are being misconstrued. If they work with TPDC in a realistic set up, it may assuage sentiments of doubt on the participation of local stakeholders and even TPDC itself could readapt their convictions.

The government should understand that empowering indigenous Tanzanians in this area would help localize the country’s economy that is otherwise seen dominated by non-locals.
 

SOURCE: THE GUARDIAN