‘Tegeta escrow will go down in history as a major scandal’

Judge Werema: resigned

What you need to know:

  • With the Attorney General forced to resign, a minister sacked and the fate of another one hanging in the balance over the scandal, the Tegeta Escrow scam will still make headlines beyond 2014
  • Drought that hit the country in 1994, led to power shortages as hydro catchment areas run dry. Tanzania Electric Supply Company Limited (Tanesco) invited emergency solutions, eventually settling for two turbines financed by foreign aid. 
  • A joint venture known as Independent Power Tanzania Ltd is set up between Mechmar Corporation of Malaysia (70 per cent) and VIPEM of Tanzania (30 per cent)

Dar es Salaam. The Tegeta Escrow Account scandal is undoubtedly not just characterised the 2014 political scene, but will go down in history as one of the major scandals that shook the reign of President Jakaya Kikwete.

With former Attorney General Frederick Werema forced to resign, a minister (Prof Anna Tibaijuka) sacked and the fate of another one (Prof Sospeter Muhongo) hanging in the balance over the scandal, the Tegeta Escrow scam will still make headlines beyond 2014.

The Citizen first broke the news of the scandal in March, setting the stage for the national debate on siphoning of whopping Sh306 billion from the account at Central Bank which was jointly opened by Tanzania Electric Supply Company (Tanesco) and Independent Power Tanzania Limited (IPTL) pending a tussle over capacity charges between the two in local and international courts.

In the beginning, IPTL was founded by two companies VIP Engineering owned by Mr James Rugemalira who had 30 per cent stake and Mechmar of Malysia.

But before the withdrawal of the escrow funds, Pan African Power Solutions Tanzania Limited (PAP) owned by Kenyan tycoon Mr Harbinder Singh Sethi purportedly took over 70 per cent of IPTL from Mechmar, as reported by The Citizen and later verified by investigation team was dubious.

What brings the transaction into question is the fact that at the time of the purported sale of shares, IPTL had power plants located in Tegeta, Dar es Salaam, worth millions of dollars plus cash totalling $250 million—including $122 million sitting idle in an escrow account that was under the custody of the Bank of Tanzania (BoT).

Billions of shillings were paid to Mr Sethi from the account after he convinced the relevant officials he had acquired the 70 per cent stake in IPTL from Mechmar, 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 reach a deal with VIP, Mr Sethi had to pay a whopping $75 million to acquire 30 per cent of IPTL in order to have full control of the Tegeta escrow billions as well as the power plants.

What does not add up, however, is 70 per cent of IPTL being acquired for only $3,750 (Sh6 million) and, a few weeks later, 30 per cent of the same company being bought for $75 million (Sh120 billion).

The documents show that Piperlink, a British Virgin Island offshore company, bought the 70 per cent IPTL stake for Sh6 million before transferring it to Mr Sethi for $300,000 (Sh480 million).

The revelations from this newspaper led the Parliament’s Public Accounts Committee (PAC) to order an investigation on the matter by Controller and Auditor General (CAG).

The matter became hot in the parliament in May during passing the budget of ministry of Energy and Minerals where minister Sospeter Muhongo and his deputy Stephen Masele put a spirited defence.  Mr Masele went further to accuse UK envoy to Tanzania Ms Dianna Melrose of undiplomatic behaviour charging her of influencing other development partners to cut aid and support to Tanzania.

The government quickly through Foreign Affairs and International Cooperation minister Bernard Membe cleared the diplomat and apologized to her and UK for the spat.

At the end the day government through Prime Minister Mizengo Pinda committed itself in the parliament to see an investigation by CAG is done and also ordered Prevention and Combating of Corruption Bureau (PCCB) also to investigate the matter.

Outside the Parliament PAP went to court and sued The Citizen and sister paper Mwananchi for defamation demanding a whopping $5.5 billion as general damages and business losses the company claims it suffered following the series of articles published in March.

Concerned about the development of events, the donor community locked the country out of the $558 million (Sh937 billion), that had been pledged to boost Tanzania’s 2014/15 Budget. Saying that they will only give it out upon seeing—and being satisfied with—the outcome of the investigations into the controversial payments and until today not even a single coin of the money has been released to the government.

After long debate and speculations both the CAG and PCCB finalised and handed their reports by November,  PCCB to the government and until today the public is in the dark on its contents and CAG to PAC which was tabled and debated in the Parliament.

The CAG report damned a number of public leaders who were involved in the scandal, some orchestrating the withdrawal of funds and some received part of the money. The list included top government officials, judges and religious leaders.

The parliament in unison passed resolutions of which they asked the President to act on the scandal. The parliament among other things wanted the President to sack, AG Judge Fredrick Werema, minister for Lands and Human Settlements Prof Ana Tibaijuka who received Sh 1.6 billion from VIP Engineering owner, minister for Energy Prof Muhongo and the ministry’s Permanent Secretary Mr Eliakim Maswi for their roles in the scandal.

PAC also implicated premier Pinda but he was later rescued following negotiations which were agreed between the committee, government and opposition.

AG Werema resigned from office mid-December   before the President made his mind on his fate, but Prof Tibaijuka called a press conference to defend herself and said she could not resign and the President would not want her to do so. In span of five days the President spoke to the Nation and sacked Prof Tibaijuka, and said his office was still investigating Prof Muhongo and Maswi. However, Maswi was suspended pending investigation-a day later.

The President however, said he could not set a special tribunal to investigate two High Court Judges who also received part of the money from Mr Rugemalira as petitioned by the Parliament.

He said the call for investigation is supposed to start from the Judiciary and tasked the Chief Justice to take over the matter, but The Citizen has also reported that, according to the Constitution, it lies within the powers of the President to initiate the process.