Tanzania bows to Chinese investor over setting up new state airline

Tanzania is to set up a new state airline to replace the ailing Air Tanzania Company, bowing to pressure from Chinese investors who are refusing to take over debts incurred by the airline over the past four decades.

The formation of a new airline, to be announced after the end of the national parliamentary session, was at the centre of prolonged negotiations with Hong Kong-based Sonangol International, which have taken about three years.

Recently, it was reported that the government was considering abandoning the negotiations altogether and was in talks with Air Zimbabwe for a possible joint venture.

It now appears the Chinese temporarily pulled out of the discussion because some officials of ATCL solicited a 10 per cent bribe from Sonagol.

The investor wanted stern measure to be taken against the culprit but nothing so far has been done despite evidence being presented to the authorities.

The Minister for Infrastructure Development, Shukuru Kawambwa, ruled out the possibility of “dirty deals.”

The EastAfrican has been informed that Sonangol does not want to be associated with the debts ATCL accumulated over the years due to poor management, corruption and overstaffing.

ATCL’s debt is estimated to be over $20 million.

The government has since 2007 allocated Tsh14.89 billion ($10.6million) to save the state-owned airline from bankruptcy.

Dr Kawambwa said the Chinese company agreed to take 49 per cent of the government’s stake in the company and its corporate strategic plan needs $507.7 million to implement.

An odd aspect of the deal is that Sonangol invested $21.27 million in the airline, which partly went to buy two Dash 8-Q300 aircraft, in 2008 before any formal agreement was reached.

The Chinese investor also “showed commitment” by constructing the new VIP building at the Julius Nyerere International Airport in Dar es Salaam.

The Deputy Minister for Infrastructure Development, Hezekiah Chibulunje, said in Dodoma last week that the government has not set a timeframe but the discussion should end soon.

“After an agreement was reached, the Chinese company in co-ordination with ATCL came up with a long term strategy, dubbed the ATCL Strategic Plan,” he said.

It is expected that the operations of ATCL will return to normal after securing a partner investor, but Mr Chibulunje expressed concern over the delay in concluding the talks.

“We have started initiatives to look for other strategic investors, if talks with the current Chinese investor stall,” he said.

ATCL is still haunted by the failed 49-per cent privatisation to South African Airways, which ended in 2006.

According to the country`s Privatisation Act, publicly owned companies should be privatised through a tender process.

Sonangol first approached the government as a lender.

It expressed willingness to bailout the failing airline on condition that the government acted as a guarantor to the lending process.

The company also promised to finance ATCL’s long-term plan to acquire a modern fleet of Air Bus A320-214, a multimillion dollar project that was set to start delivery by 2011.

But Sonangol later changed its tune, and started to negotiate as a strategic partner, insisting that it would only release additional money after the takeover deal was signed and sealed.

Air Tanzania came into being in 1977 after the collapse of the first East African Community, and the splitting of the East African Airways into national carriers.

Earlier, the government had said it was seeking new bidders to strengthen ATCL in order to lure US investors who have shown interest.

US firm firm, Celtic Capital Air Corporation, had shown interest in the airline, as has five other firms based in the US, the UK and the United Arab Emirates.