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Chinese firm 'gifted' oil licences

Friday January 30 2009
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An Air Tanzania airplane. Photo/FILE

With Chinese firms operating in Tanzania already in the spotlight in the wake of the World Bank banning of three of them over a bribery scandal in the Phillipines, it has now emerged that some senior officials acted inappropriately in giving oil exploration rights to China Sonangol International Holding Ltd in exchange for the latter’s purchase of 49 per cent shares in the national airline.

The officials acted against the government procurement regulations and procedures by in effect granting three oil exploration licenses on the soil of Tanzania as a sweetener to induce the Hong Kong-based firm to purchase the shares in the troubled Air Tanzania Corporation (ATCL) for $21 million.

Sources in government told The EastAfrican in Dar es Salaam last week that the Tanzania Petroleum Development Corporation (TPDC) offered the Chinese government-owned Sonangol International rights for exploration in Rukwa outside normal tendering process, and this contravenes procurement procedures.

In return, the sources said, the Chinese injected $21 million into ATCL, which was used to purchase two used Bombardier 70-seater Dash 8 Q400 turboprop aircraft from Bombardier Aerospace Inc. of Canada for $16.2 million each. The remainder of the funds for the purchase of the aircraft came from the government.

However, Yona Killagane, managing director of the Tanzania Petroleum Development Corporation, told The EastAfrican that the oil exploration rights given to the Chinese had no link whatsoever to the ATCL share sale.

Mr Killagane said the Chinese firm was offered the oil exploration rights two years ago in a memorandum of understanding signed by the government with the firm.

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“The Chinese were supposed to come and conclude the deal with the TPDC, but to date there is nothing to that effect,” he said, complicating further an issue on which parliament is seeking clarification starting this week.

Chinese President Hu Jintao will this February lead a visiting delegation of 140 senior government officials and businessmen to Tanzania.

The EastAfrican has been informed sign the agreement to acquire the 49 per cent shares of the national carrier among other things.

The other agreement scheduled to be signed during the visit, The EastAfrican has been informed, will be for the construction of the $46 million, 560-metre Kigamboni Bridge, which was previously to be constructed by the National Social Security Fund with financing from the African Development Bank.

Already, an unnamed Chinese firm has tendered an architectural design to the government under a build, operate and transfer (BOT) arrangement in which the construction work is expected to take three and half years.

The new controversy, which is already being intensively investigated, could derail Sonangol International’s plans to invest in the airline, as it has further emerged that key procurement guidelines were not followed by the investor.

The Parliamentary Parastatal Organisations Accounts Committee (POAC) has already found serious discrepancies that undermine performance of several public utilities, including ATCL, and the government is expected to give a detailed account to parliament this week on what transpired during the signing of the agreement.

Zitto Kabwe, chairman of POAC, told The EastAfrican last week that there were fundamental questions that remain unanswered by the authorities in the case of ATCL, which is seeking to recuperate from years of loss making.

Mr Kabwe said that one of the key issues is how the Chinese got the ATCL deal.

“Parliament needs to know how oil exploration rights can be exchanged for an airline,” he said.

According to Mr Kabwe, in order to enhance accountability, it is suggested that directors of the parastatals should not be political appointees, but rather be appointed by the board, to which they should be accountable on the basis of a performance contract.

Mr Kabwe said for the better oversight of investments with public interests, which the government jointly operates with a private investor, parliament has agreed to extend its scope into public institutions.

Under the current system, oversight powers are limited to parastatal organisations and companies in which the government owns more than 50 per cent of shares.

Under the new arrangement, POAC will be called the Public Investment Committee, which will also be responsible for policy oversight of parastatals and investments.

It will be able to question managements of entities such as the Tanzania Railway Ltd, the Tanzania Electricity Supply Company (Tanesco), TPDC, the Tanzania Ports Authority and the Dar es Salaam Water Supply Company (Dawasco).

The privatisation of the Air Tanzania Corporation to the Chinese firm last week caused uproar after the managing director of the firm distanced himself from the deal, saying the privatisation process to Sonangol was inappropriate and against the procurement laws, which requires an international tender be advertised for such serious investments.

In August last year, The EastAfrican reported a secret deal between the government and the Hong Kong based Sonangol Holdings to take over 49 per cent of the airline, to the astonishment of the management of ATCL.

The deal, which was funded by the China Development Bank, did not involve either the senior management of the ATCL or the board of directors of the airline during the negotiations, which were clouded in secrecy.

Hezekiah Chibulunje, Deputy Minister for Infrastructure Development, told The EastAfrican in August that the process of negotiation of a share sale had commenced at a high government level.

The deal would see Sonangol International Holding Ltd buy shares in ATCL and inject funds to purchase brand new planes for the airline.

Investigations by The EastAfrican at the time indicated that the 49 per cent take over by Sonangol International Holdings Ltd would be funded by the Chinese Development Bank, which would also guarantee the airline in buying more Airbus and Boeing planes.

China Sonangol has also entered into agreement with Tanzania to develop Terminal III at the Julius Nyerere International Airport, and sources say the Chinese Development Bank may extend support in the form of equity participation or other forms of financing deemed feasible.

The construction of Terminal III and the expansion of the airport have already caused sleepless nights among senior government officials after the Chinese investor refused to provide money to the government to compensate more than 3,000 residents who will have to be moved from the area surrounding the airport.

The investor wants to take responsibility of compensating the residents itself instead of providing money to the government for the exercise.

The term of agreement will also see Sonangol International buy Airbus and Embarer aircraft for ATCL. The Chinese company also has a 30 per cent shareholding in SonAir of Angola.

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