Tanesco: Six decades of finding its way in lighting up the nation

Dar es Salaam. At 60 years, Tanesco - a key body part in the life of Tanzania - needed a rebirth to enable the country to carry on in the next sixty years. Well: it has got just that! On September 25, 2021 news broke of major reshuffle not only in the power monopoly’s top management but also in the key departments in the Ministry of Energy.

President Samia Hassan Suluhu appointed Omari Issa to the position of chairman of the board. She also appointed Maharage Chande as the Tanesco chief executive officer, taking over from Tito Mwinuka.

In fact, a fortnight previously the President had made a mini-cabinet reshuffle in which she appointed the new minister for Energy, Mr January Makamba. After his appointment, Mr Makamba, named a new member of Tanesco’s board of directors mainly from the private sector.

As he addressed the power utility’s senior staff when he presented the new board and management on September 26, 2021 Mr Makamba did not mince his words highlighting the need for Tanesco’s renewal.

“We want in three years the company to enter on the list of respected corporations in Africa,” Mr Makamba told zonal, regional and district managers as well as senior staff from the headquarters.

Mr Makamba also told the senior managers that it was time for Tanesco to operate commercially and efficiently in order to increase its contribution to the national economy.

The most important message from Mr Makamba was his promise to put a stop to political interference in daily operations of Tanesco. “Going forward, the government won’t interfere with operations of Tanesco. I promise you that Tanesco will not be pressured to make decisions from a political standpoint…”

Commentators and netizens got their tongues wagging in reaction to Tanesco’s changes. While there were genuine concerns in the social media commentaries about whether the new team will be able to overhaul what is seen as the lost cause, if Tanesco’s huge financial losses are anything to go by (Sh112.5 billion loss in the year ending June 2018), others claimed the changes were politically motivated.

Some commentators noted the implications of Mr Makamba’s words over whether the appointment of the outgoing team by President Hassan’s predecessor was politically motivated. And yet the most pessimistic of commentators alleged that the changes could be a comeback plot by the corrupt elements who caused huge losses to Tanesco in the past.

Despite the varied reactions to Tanesco’s ‘new changes’ it is wise to take Mr Makamba at his word. At least his promises to de-politicize Tanesco were matched by actions in as far as appointments of the CEO and the board of directors is concerned. Almost all of them are from the private sector; a few of them have mixed experience in both the private and public sectors.

One biography says this about Omari Issa, the new Tanesco chairman. “[He] has extensive business experience at the highest level of both the public and private sectors, having worked in Africa, Asia, Europe and Latin America.”

Mr Issa worked as CEO of the Investment Climate Facility for Africa (ICF) and as executive director and chief operating officer of Celtel International, which later changed hands and names and is currently known as ‘Airtel.’ But, Mr Issa has also wide experience with multilateral organizations as he worked for 20 years with the World Bank Group, 14 years with the International Finance Corporation (IFC) and six years with the World Bank proper. When President Kikwete was seeking to ‘de-politicise’ the civil service in order to achieve results more quickly he turned to Omari Issa to head the Presidential Delivery Bureau (PDB). PDB was responsible for the implementation of the Big Results Now initiative.

Some observers argue that it is ironic that 60 years after independence the government would still be seeking basic organisation changes to a corporation whose contribution to the very survival of the country is beyond explanation.

They contend that the changes, though timely and seemingly well-meant for Tanesco’s turn around, should have taken place 30 years ago when the country, still deep into the economic liberalization process, launched the first ever Energy Policy or in 2003 when the government launched the second Energy Policy that was specifically aimed at reforming the energy market and attracting private sector participation in the energy sector. It was the 2003 Policy that provided a policy standpoint for the hiring of NETGroup Solutions (Pty) Ltd of South Africa to manage Tanesco from 2002 to 2006.

An analyst who spoke to The Citizen on conditions of anonymity said those mocking or speaking lightly of the new team are missing the point. He said the changes in management have far reaching ramifications for the future of the company and, probably even the very survival of CCM as the ruling party. “I agree that changes in Tanesco are a step forward in ‘de-politicizing’ the electricity utility, but what we should understand is that the decision itself to remove politics from the running of Tanesco is political,” the analyst said.

He said by appointing people who have accomplished much in the private sector the government has raised expectations to stakeholders who matter most; the private sector, development partners and to keen individual consumers of Tanesco’s services.

“How genuine the appointments were will not be measured by the CVs of the members of the new team. It will be measured by the results. If Tanesco continues making losses or if it goes back into the huge corruption scandals, then people will look back in hindsight and see sinister motives in the appointments,” the analyst noted.

The analyst noted that the concerns of those who think that Tanesco is beyond repair should be seriously considered by the government. “Splitting the power utility into three entities - generation, transmission and supply - was an idea that was floated a long time ago. Every keen watcher of energy affairs feels that you can’t start thinking of reviving Tanesco in its current organisational set-up,” he said. He added that dividing Tanesco into three parts can also facilitate the entry of private operators to supplement the government’s efforts to invest in issues such as power generation in the country. This is because as a public utility, under a government ministry Tanesco can’t avoid being political and by extension inefficient, the analyst argues. He quips that Tanesco’s monopoly and lack of fear to make losses is the main hindrance to the entrance of private players in the electricity sub-sector as it will stifle competition.

The 1992 National Energy Policy opened the energy sector to private participation in areas such as electricity generation. The policy allowed private companies to engage in power distribution only in areas where Tanesco had not established a public power supply system. Private power generation companies responded but led to losses to the government of billions of shillings in endless court cases as well as huge capacity charges that increased the burden to power consumers. Some of the power generation companies - popularly known as IPPs (Independent Power Providers) - got the CCM government entangled in allegations of corruption that it has not yet fully recovered.

Professionally stunted?

Tanesco is one of the oldest institutions in the country. Background information shows the utility has been in existence for the past 90 years as it started operations in 1931, a cool 30 years before Tanganyika’s independence. It is understood that colonists had no programme to train Africans to carry over sophisticated technical duties after independence but institutional memory and the treasure troves of expertise since independence should have made Tanesco one of the most efficient utilities in Africa. The only problem as analysts contend is politics. Probably in anticipation of how toxic being attached to a government the power utility can be the British colonialists meant for Tanesco to be independent

After taking over from the Germans, the British formed an Electricity Department in 1920 to carry on electrification duties started by the former in 1980, according to background information obtained by The Citizen. But, in 1931 the British let the private sector take over power supply services. Under this arrangement the Dar es Salaam and District Electric Supply Company Ltd (Daresco) and the Tanganyika Electric Supply Company Ltd (Tanesco) were formed.

In 1964, three years after independence, the government bought all the shares from the two private companies and merged them into a single utility under the Tanganyika Electric Supply Company Ltd. In 1968, the company changed its name to the Tanzania Electric Supply Company Limited, as it is known today, according to the Tanesco Corporate Plan 2016-2017. Despite its good performance in urban areas during Tanzania’s golden years of 1970s the power utility, now running as a parastatal organization, increasingly failed to meet new demands and to electrify rural areas and periphery regions. According to Tanesco’s own self-assessment published in the company’s corporate plan its performance started deteriorating in the 1980s “and has remained poor ever since.” It was the poor performance that made the government succumb to pressure by the International Monetary Fund and the World Bank to privatize Tanesco.

The Parastatal Sector Reform Commission (PSRC) put Tanesco on the privatization list in 1997. In 2001, as Tanesco’s troubles intensified, the government initiated a management contract with the NETGroup Solutions Pty. The management contract ended in 2006 and the government, eventually, dropped the idea to privatize Tanesco, probably, after realizing that the company was financially untenable.

Solutions without...

Tanesco’s SWOC (strengths, weaknesses, opportunities, challenges) analysis serves to show that most of the solutions to Tanesco’s problems should come not from within but from without. An increase in efficiency from an efficient management team will help improve and expand power supply but might not end persistent poor quality of the power supplied or the annual losses of the company.

While some of the external solutions such as inadequate funds to cater for operational and development activities are easier to find, others are extremely difficult.

It would take extra courage and amazing political will to deal with high cost of capacity charges in power production agreements and corruption, which are listed in Tanesco’s corporate plan as weaknesses and challenges to its operations.