Govt orders review of privatisation contracts

Dar es Salaam. The government has summoned investors who bought public farms and factories in a new bold move to review the largely failed privitisation of state-owned entities.

Treasury registrar Lawrence Mafuru has issued a 30-day ultimatum to individuals and companies that bought the formerly public-owned firms to furnish his office with up to date status reports of their business contracts.

Mr Mafuru’s order is contained in a public notice issued yesterday through the media. The notice warns that the government will repossess the farms or factories if the investors do not act on his directive by expiry of the 30 days’ notice from yesterday.

“The office of the treasury registrar is currently reviewing all contracts for privatized farms and factories because some investors have violated their sale agreement,” said Mr Mafuru.

According to Mr Mafuru, some investors have not developed the privatized firms as agreed, do not have investment plans, have changed the use without permission, vandalized machinery while some owners have not paid for the said properties.

The notice yesterday is the first and early indication of the commitment by President John Magufuli to revisit the thorny privitisation saga that proved a hard nut to crack for the 10 years of former president Jakaya Kikwete’s reign.

President Magufuli pledged during his campaign to revisit the privitisation plan if he won as part of his plan to revive the country’s ailing industrial sector and boost employment creation.

He said if he won, his administration would not hesitate to reposses failed ventures and return them to public ownership or give them out to new and serious investors who will be ready to develop them. Quick industrial development is a key element in the 2015-2020 CCM manifesto.

Most of the formerly state owned farms, ranches or factories were sold on a need-to-develop basis during former president Benjamin Mkapa’s tenure in office from 1995 to 2005 but the process began in 1993 when Mr Ali Hassan Mwinyi was president.

The failed ventures have since returned to haunt the government, with privitisation often blamed on corruption and influence peddling as whole communities lost jobs and income from the once thriving manufacturing sub-sector.

Official statistics show that some 274 state firms had been privatized by 2012. Among these, 95 were in the agricultural sector, 94 in industry; 23 in infrastructure, 34 in Natural Resources and Tourism, 15 in the Energy and Minerals sector and 13 in other sectors.

A report by the defunct Consolidated Holding Corporation (CHC) which audited 170 of the privitised firms in 2013 revealed that only 42 were operating on profit while 70 were loss making while 58 were not operating.

CHC was the body lately charged with overseeing privitisation after inheriting the work from the Parastatal Sector Reform Commission (PSRC) in 1997. CHC formerly registered as NBC Holdings but its tenure ended in June 2014 and its responsibility shifted to Mr Mafuru’s office.

Going by the last audit report by CHC, Mr Mafuru would have more than a plateful of headache in shifting through the records of the targeted firms in the impending review exercise.

The report released in May 2013, revealed serious gaps in the privatization process which could end costing the tax payer billions of shillings.

It detailed serious flaws that hampered its own mandate and would also likely test Dr Magufuli’s pledge.

For instance, the report said in its 52-page findings, that CHC did not have any sale agreements for the state-firms which were privatised before the establishment of PSRC.

“Some of the sale agreements have no investment plans … leading to difficulties in carrying out post-privatization monitoring and evaluation hence failing to meet the intended goals which is to ensure the investors fulfill their commitments to the government which is to revamp the corporations,” reads part of the report.

Some investment plans did not have clearly defined time-frame for their implementation while the government lost track of some of the investors it was dealing with long time ago.

Several investors have altered their postal and physical addresses and have changed the corporations’ ownership. Stubborn or uncooperative investors were said to have declined to furnish CHC with their company reports on finance, tax and production.

The CHC report also revealed that most of the debts owed to the government were ‘bad’ largely due to the fact that they were ‘unsecured,’ and that even those with secure collaterals were still very weak.

The debts included Sh60 billion owed to NBC by defaulting borrowers who dubiously obtained the loans. No collateral was issued or traceability of the borrowers was a problem.

There were 330 privatization-related cases in various courts under CHC by the time its mandate expired.

Before it was disbanded in 2014, CHC had lined up 40 state-owned firms for privatization. Among them were the New Africa Hotel and National Bank of Commerce, National Insurance Corporation (NIC), Air Tanzania Company Ltd (ATCL), the Tanzania Railways Limited (TRL), the Tanzania Telecommunication Company Ltd (TTCL), Tanzania Postal Corporation (TPC) and the Kiwira Coal Mine.

Some of these were once privatized but the government repossessed them following poor performance but are yet to return to making profit, relying on treasury for subsidies to operate.

Some 47 other firms have since undergone divestiture following long periods under receivership. They include Mwanza Textile (Mwatex) Kilimanajro Textile (Kiltex) Dodoma Wine Company Limited, Musoma Textile (Mutex) and Tanzania Textile Corporation (Texco). CHC noted that 18 more were due for the same divesture.