How payment delays cost Tanzania billions annually

Business Reporter

Mwananchi Communications Ltd

What you need to know:

The CAG office conducted a total of 56 special audits in 2020/21 and came out with a report that leaves many institutions exposed

Dar es Salaam. Tanzania is losing billions of shillings each year due to delays in disbursement of money to contractors undertaking development projects, illegal termination of investment contracts and a lack of coordination between government agencies.
Controller Auditor General (CAG) Charles Kichere said this when tabling the audit report for 2022/21.
He said during 2020/21 his office conducted a total of 56 special audits, 37 audits for local government authorities, 12 for the central government and six for public institutions and one for ICT systems.
Giving details on the losses, CAG Kichere said among them was the termination of the Symbion contract which resulted in a loss of $153.43 million that could have otherwise been avoided.
Explaining, he said on May 24, 2016, Tanzania Electric Supply Company (Tanesco) banned Symbion from supplying electricity to the national grid due to a dispute over the validity of its electricity purchase agreement, prompting Symbion to file a $1.57 billion case against the entity at the international investment dispute resolution centre.
“On May 21 in 2021 both parties agreed to settle the matter outside the court and signed an agreement under which Tanesco was required to pay $153.43 for terminating the contract,” he said.
Explaining, he said the loss was as a result of Tanesco illegal termination, lack of trust and taking decisions without looking at its implication.
On another note, he said the audit found that there was an interference of powers and responsibilities between Tanzania National Roads Agency (Tanroads) and Tanzania Airports Authority (TAA) for the improvements of airports leading to shortcomings in accountability and the implementation of those budgets.
“From 2016/17 to 2020/21 the government spent Sh1.02 trillion on building and upgrading 12 airports in the country, but costs increased by Sh22.35 billion following delay in paying compensation to 1,125 households who paved the way for the construction of Julius Nyerere International Airport (JNIA) in Dar es Salaam for more than 25 years that increased the cost from Sh7 billion to Sh29 billion,” he said.
Further, he noted that there was a delay in paying contractors, resulting in an interest rate levy to a tune of Sh14.14 billion of which Sh11.93 belongs to JNIA and Sh2.75 billion to Mwanza.
He said social security funds have been facing various challenges for three consecutive years where the private sector fund provided Sh1.17 trillion in loans to 10 government institutions that have not been repaid from 2017 to June 2021
On strategic projects, he said the delay in completing the Julius Nyerere Hydro Power project by 46.45 percent increased costs.
He said by October 2021 the project was scheduled to be completed by 94.47 percent, however, it was completed by 48.02 percent following the delay in the final approval of the design, flood disaster and Covid -19.
“Following the delay, the government had to pay a total of $ 8.53 million, which is equivalent to Sh19.51 billion,” he said.
Further, he noted that another loss was caused by roads that were abandoned by contractors worth Sh3.09 billion and another by Tanzania Rural and Urban Roads Agency (Tarura) worth Sh1.95 billion.
He noted that the Tanzania Railways delayed the arrival of train engines and 12 wagons for the SGR project, which were coming for testing and therefore delayed completion of the project and added costs to a tune of $ 4.04 million and Sh9.2 billion.
According to him, there were interest levies due to the delays in paying contractors in five projects implemented under the transport sector, whose interest rate stood at Sh4.79 billion where both Tanroads and Tarura were charged interest of Sh69.62 billion for delaying payments on Sh673.5 billion debt, which was payment for contractors and construction consultants.
He noted that a building for Tanzania’s embassy in New York owed $376,798, whereby the deadline for payment was on April 1, 2021, but only $172,704 was paid, leaving a total of $2464.35 June 30, 2021 whose interest increased to $2932.86.