Ticts’ 22-year era over as TPA ends contract
- Ticts had a five-year lease agreement that expired on September 30, 2022 but it was extended for another three months to give more time for the two parties to discuss the possibility of contract renewal
Dar es Salaam. The Tanzania Ports Authority (TPA) will not renew its contract with the Tanzania International Container Services (Ticts) Limited, which has been handling containers at berths number 8 to 11 of the Dar es Salaam Port.
Reliable sources revealed that the TPA board has resolved to terminate the contract and look for another investor.
Ticts had a five-year lease agreement which expired on September 30, 2022 but it was extended for another three months to give more time for the two parties to discuss the possibility to renew the contract.
However, the source said the two sides failed to agree on renewal terms.
“The board of TPA agreed not to renew the lease contract with Ticts and look for another operator,” said the source who did not want to be named.
The board told the management to prepare a notice that will be served to Ticts, informing its resolve not to renew the agreement, in what the board described as to safeguard the interest of the authority, the government, and the nation at large. Efforts to get comments from Ticts did not materialize until the time of press.
It is said that Ticts’ new offer for consideration of renewal of the lease agreement for another term entailed that the firm should be allowed to manage berths 8 to 11 as well as berths 5 to 7 on behalf of TPA.
The offer also stated that Ticts will pay a fixed annual rental of $30 million, escalating at three percent per annum; and that the firm will also pay a royalty fee of $29 per container of twenty-foot equivalent unit (TEU), escalating at four percent per annum; as well as requesting a suspension of key performance indicators (KPI) targets.
However, the government negotiation team ruled that the offer never met its requirements which includes an annual fixed rental of $30 million with effect from October this year, escalating at eight percent per annum.
The negotiation team also required a royalty fee of $29 per container, effectively from October this year and escalating at eight percent per annum thereafter.
The team also demanded the container output target as per the existing lease agreement of 2017, shall be calculated as 7.4 percent of the minimum guaranteed throughput of 657,946 TEU of year 2021 effectively from October 2022 escalating at 7.4 percent annually for the remaining term.
Ticts was also said to have provided conditions that could not be acceptable by the TPA, including a demand to suspend key performance indicators. TPA said could not have a contract that does not have functioning key performance indicators (KPIs), which determine the royalty payment.
The condition to manage berths 5 to 7 could also not be accepted because there are other plans currently being implemented by TPA at the respective berths.
TPA takes charge
TPA will now operate berths 8 to 11 that have been under the private sector for over twenty (20) years so as to get the revenues forecasted to be collected from cargo handled at those respective berths.
According to the source, in fact the initial term of the lease agreement between TPA and TICTS Limited expired at the end of September this year. And the negotiations between the Parties for renewal of the Lease Agreement failed after not agreeing on terms for renewal.
In 2008, Parliament passed a resolution instructing the government to terminate the contract extension. However, that was followed by a five-year contract extension in 2017.
In September 2017, President John Magufuli directed TPA to review its contract with Ticts. That came only five months after the CAG, Prof Musa Assad, revealed that the contract had numerous defects. After reviewing the contract in 2017, the government doubled the annual fee Ticts pays for leasing the lucrative container terminal from $7 million to $14 million.
Ticts was also required to ensure 37 percent annual growth of container traffic.