Magufuli orders Kiwira coal mine take back

Saturday May 11 2019

A coal mining site

A coal mining site. State-run Tanesco had signed a contract for the supply of 400 megawatts of coal-fired electricity from the Kiwira coal mine but it shut down operations in 2012. PHOTO | KUNI TAKAHASHI | NYT 

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Tanzania's road to privatisation has had many ups and down and once again, the Kiwira coal mine in Mbeya Region, a potentially lucrative former government enterprise is in focus.

Last week President John Magufuli directed Minerals Minister Dotto Biteko to hasten the transfer of all Kiwira shares still held by the initial investor, TanPower Resources Ltd, back to the government to pave the way for a fresh sale o potential new investors.

Kiwira was first privatised in June 2005 when it was sold in a controversial deal to TanPower Resources, at the end of Benjamin Mkapa's second term, at the height of the privatisation frenzy.

TanPower, according to documents filed at the Business Registration and Licensing Authority (Brela) in Dar es Salaam, was established and registered in 2004 by Benjamin Mkapa, (then the president of the republic) and Daniel Yona, then a senior Cabinet minister in charge of Energy and Minerals in Mkapa's government.

Other listed directors are their closest relatives; former first lady Anna Mkapa, Mkapa's son Nicholas Mkapa and his wife Foster Mbuna, Mr Yona's son, Danny Yona, and Joseph Mbuna who is Nicolas Mkapa's father-in-law.

TanPower paid Tsh700 million in the privatisation deal, an equivalent of $750,000 as per the foreign exchange rates at the time.

In 1991, an official valuation of Kiwira put it at an estimated Tsh7 billion (ten times the selling price 14 years later).

Since TanPower's takeover however, Kiwira has failed to turn the mine into the sure moneymaker it was expected to become, and things took a turn for the worst when details began to emerge of TanPower's close links with Mkapa and Yona.

According to the initial memorandum of association, a key objective of TanPower was to engage in coal mining and electricity generation activities.
TanPower gained 85 per cent ownership of Kiwira leaving the government with a 15 per cent stake. It was then placed under the Kiwira Coal Production Company (KCPC), a restructured TanPower Resources affiliate.

It emerged later that the state-run Tanzania Electric Supply Company, had signed a $271.8 million contract with KCPC for the supply of 400 megawatts of coal-fired electricity from the mine. Available records show that Kiwira's estimated coal production capacity stands at between 150,000 and 300,000 tonnes per annum.

The deal would have effectively earned TanPower and its shareholders a windfall on its initial $750,000 investment. But for reasons that were never made public, the coal-fired electricity deal was never executed.

Eventually in 2009, the government—under Mkapa's successor Jakaya Kikwete—announced its intention to regain 100 per cent ownership of Kiwira after TanPower reportedly agreed to relinquish its entire majority stake.


The Kikwete administration also pledged that as part of the buyback plan, it would reimburse both Mkapa and Yona families costs incurred during the four years of ownership.

The reimbursement offer was rejected in parliament, and the committee overseeing national mining and energy demanded instead that TanPower pays back Tsh17 billion ($7.3 million) reportedly given by the government for development purposes. It is claimed that the money was misappropriated.

Recent reports however claim that Mr Mkapa had ceased to be a shareholder of Kiwira having failed to pay for the shares.

The status of the other founding shareholders are unclear as no records are currently available at Brela.