Temesa faces financial strain amid operational concerns

A three-month investigation by Mwananchi has exposed Temesa's fight for survival.

Read: Tanzania ferry fiasco: Temesa struggles under the weight of operational burden

The agency is drowning in debt and unpaid bills, caught in a tightrope walk between public service and financial sustainability. Calls for reform are growing louder, urging a restructuring to redefine Temesa's role and ease its crippling burden.

 Operational system

A senior official at Temesa (name withheld) says that the agency's operational system is based on service delivery.

This is because, according to him, the law establishing the agency in 2005 describes it as a government institution aimed at providing services rather than conducting business.

He says the systems require Temesa to provide services, while its actual activities have a commercial aspect.

"While Temesa operates as a business, generating revenue through government vehicle repairs and ferry services, our commitment to public service may not always align with your expectations," he says.

Vehicle maintenance

A reliable source within Temesa reveals that the agency is in dire straits due to mounting debts.

He says because the agency lacks capital, it is forced to stand between private-sector suppliers of spare parts and government institutions with vehicles.

As a result, he says they borrow spare parts from private suppliers for repairing government vehicles, including those of councils.

"We borrow from these suppliers to repair vehicles, and when we are paid by government institutions, we pay the suppliers," he says.

However, he says vehicle maintenance has been a nightmare for Temesa, as some of its clients, which are government institutions, do not pay maintenance costs.

"And this is not unique to Temesa; it's a matter of perspective for many institutions. When they see services provided by an agency or another government institution, they often don't pay," he explains.

In this environment, he says the agency remains owed by suppliers because the money to pay them is with the clients.

Mwananchi has found that the last debt report Temesa submitted to the Treasury indicated it was owed approximately Sh40 billion by government institutions.

According to the report earlier this year, besides owing that amount, Temesa itself is owed by suppliers over Sh35 billion.

These funds are mainly for spare parts loans provided to Temesa.

Another official within Temesa says annually, on average, between 60 and 70 percent of debts owed exceed one fiscal year.

"So it's true we're owed because we're not paid," he says.

Payment difficulty

The official explains that the difficulty in payment stems from the agency's lack of legal power to collect debts.

"Someone owes you, but you don't have anything of theirs to hold as collateral, yet we are not allowed to seize a vehicle even if you're owed," he says.

"Extending loans without collateral would be a significant risk. Traditionally, banks rely on collateral as a safety net in case borrowers default. Without it, the entire system hinges on trust and a borrower's creditworthiness," he says.

Stalled Toyota deal

A year ago, there was pressure for Temesa to collaborate with Toyota.

However, Temesa's operational systems stalled the collaboration after Toyota set tough conditions that were not beneficial for the agency.

"They brought that disaster list. First, they wanted 50 percent of the government's vehicle maintenance budget to go to them," he explains.

Another condition, he says, Toyota wanted was that when a customer was found, spare parts money would be paid to them and technical funds would be paid to Temesa.

If that had happened, he says Toyota would have had the power to seize vehicles that don't pay for services, and Temesa would have collapsed due to a lack of funds to sustain itself.

"Temesa won't be able to sustain itself on technical revenues alone; it is too little," he says.

He emphasises that the failure of that was because the government hasn't decided whether it wants to provide services or conduct business through Temesa.

When Toyota executives were sought, they claimed the authorised spokesperson was out of the country.

However, efforts to find the authorised person bore no fruit, as the company was not willing to provide the contact information of the individual.

Temesa's statement

Temesa's chief executive officer, Mr Lazaro Kilahala, speaking about these claims, says plans to change the agency's mode of operations are ongoing.

He mentions that these plans, among other things, involve operational reforms to ensure the agency generates profits from its activities.

However, Mr Kilahala acknowledges the agency's debts from suppliers, explaining they are paid as funds become available.

"All debts are paid according to procedures; the emphasis is on ensuring the agency is efficient; that's why we expect operational reforms for the agency," he says.

The head of the Finance Department of one of the councils in Dar es Salaam Region (name withheld) says councils’ OC (other expenses) budgets do not include vehicle maintenance.

He says since these budgets are not from the central government, councils are forced to borrow for maintenance and fail to pay because there's nowhere to get the funds.

"Have you not seen many government vehicles in councils breaking down? They are left to rot. The reason for all this is the lack of budgets for vehicle maintenance," he says.

The way forward

To solve these challenges, international business scholar Prof Francis Matambalya says there is a need to change the law that established Temesa so that the agency operates commercially.

In the legal reforms, he suggests that the operation of ferries be removed from Temesa and another arrangement be found.

"It should be an executive institution, not an agency, because it has many decision-makers; even when you're firing employees, it should be for performance reasons, not directives from decision-makers," he says.

A proposal of that nature was also made by one of the senior officials within Temesa when he spoke to Mwananchi.

According to the official, ferry operations are one of the burdens that Temesa carries, so he says there's a need for change.

"A company should be established to operate ferries, leaving vehicle maintenance activities to Temesa to reduce the burden," he says.