Parliament team raises red flag over public investment, return
What you need to know:
- When it comes to the return on investment, the committee said the government received a higher rate of returns from the companies in which it injected smaller investments.
Dar es Salaam. Parliament’s Public Investment Committee (PIC) yesterday asked the government to assess its investment and increase capital into more productive ventures.
The advice comes after the committee found that the size of the government investment does not match the return on the investment.
The committee said the government had invested Sh73.36 trillion by the 2021/22 financial year, of which Sh70.8 trillion was in state-owned entities and companies where it owns more than 51 percent of the shareholding and Sh2.56 trillion was injected in companies in which the government has less than 50 percent ownership.
However, when it comes to the return on investment, the committee said the government received a higher rate of returns from the companies in which it injected smaller investments.
For instance, the government received Sh850 billion as a return on investment, where Sh645 billion came from the entities in which the government invested Sh70.8 trillion and Sh204 billion came from 40 firms in which the government invested Sh2.56 trillion.
“From the numbers available, it’s obvious that the government has been receiving a higher rate of returns on investment from the companies in which it invested little capital,” said the committee chairperson, Deus Sangu.
“The committee thinks there is a need for the government to assess the situation and see the possibility of adding its capital to paying companies where it has lower shareholdings to get more returns,” he said.
The committee was presenting its annual report for the year to January 2024, in which it assessed public investment schemes.
The team raised concerns over some of the issues, which it said should be immediately addressed to promote the growth of state-owned companies. The issues include the delayed release of value-added tax (VAT) returns to companies that are not registered.
The committee cited an example of Stamigold, which the government owns for Sh12.3 billion, and Gasco, for which the government owes Sh3 billion. “Delays in paying the VAT returns affect the revenue and performance of the companies,” the chairman said. He said Stamigold was already operating with negative capital worth Sh11.7 billion, urging the Tanzania Revenue Authority (TRA) to comply with the legal requirement of refunding the firms.
Another issue raised is the fact that some public companies were operating without an investment plan, causing the entities to have multiple projects at the same time amid a shortfall in financial resources.
The companies mentioned to operate without an investment plan include the National Ranching Company (NARCO) and the Tanzania Fertiliser Company (TFC).
“Operating without an investment plan causes overlapping of the projects, which take time to mature and therefore lack efficiency,” said the committee chairman.
‘Rescue TIB’
The committee also asked the government to investigate TIB Development Financial Institution, which it said was in critical condition of collapsing.
The team said the bank was operating with a capital worth Sh24 billion, contrary to the Bank of Tanzania requirement of having at least Sh200 billion.
It said that the bank failed to pay fixed deposits worth Sh206.85 billion to some government institutions despite maturing.
According to the committee report, the bank recorded consecutive losses in 2021 and 2022, including a Sh195.91 billion loss in 2022.
The losses were mainly caused by the soaring non-performing loans (NPLs), which reached Sh159.73 billion in 2022, equivalent to 20 percent of all loans. The regulatory acceptance level of the NPLs should not exceed five percent, according to the central bank.
“TIB is in critical condition even though it’s an important institution. The committee advises the government to take deliberate measures to rescue the bank from collapsing and recapitalize it,” said Mr Sangu.
