A group of 12 international donors have delayed budget support for Tanzania until findings of an investigation into charges of corruption in the energy sector are released and appropriate action taken, a leading donor said. Tanzania has made big discoveries of natural gas, but its energy industry has been dogged by allegations of corruption in the past. Businesses have long complained graft is one of the main reasons for the high cost of doing business in Tanzania.
The government denies the charges of graft related to the energy deal in question. It says it investigates all such allegations and comes down firmly on any cases uncovered. The donor group - comprising Finland, Germany, Britain, Norway, Sweden, Denmark, the European Commission, Ireland, Canada, Japan, the World Bank and the African Development Bank - has so far paid $69 million of $558 million pledged, said Kati Manner, head of co-operation at Finland's Embassy in Tanzania.
"What we are waiting for now is the findings of the CAG's (controller and auditor general's) report, and the government's action. This will inform the decision on further disbursement of funds," Manner, whose country currently leads the donor group, told Reuters.
Prime Minister Mizengo Pinda announced in May to parliament that the government had ordered investigations by the CAG and the state anti-corruption watchdog into fraud allegations. Pinda said opposition MPs had accused senior officials of fraudulently authorising payment of at least $122 million of public funds from an escrow account held jointly by state power firm TANESCO and independent power producer IPTL to IPTL's owner Pan Africa Power (PAP) in 2013. PAP said the transfer was legal.
The parliamentary public accounts committee had also previously called for audit investigations into the allegations. The CAG said in May it would conclude its audit into the escrow account in 45 days, but any findings have not been made public. The government's anti-graft watchdog, PCCB, is still conducting an investigation. Opposition MPs said top officials in the energy ministry, central bank and attorney general's chambers could be implicated. Energy Minister Sospeter Muhongo, Attorney General Frederick Werema and central bank Governor Benno Ndulu have all denied any impropriety.
"There are some people who are just spreading fabricated information," the attorney general told parliament. "Let's wait for the outcome of the investigations." When asked for comment, state-run TANESCO said the case was being handled by the Energy Ministry. IPTL did not respond to a Reuters request for comment by publication. PAP, which took control of IPTL around 2010, said in March that money in the escrow account belonged to IPTL and PAP, so nothing barred its release when PAP took over. "So there is no controversy at all," PAP said.
The east African nation of 45 million people has said it expects donors to contribute about 15 percent in both grants and concessionary loans to its 2014/15 fiscal budget. The Finance Ministry said linking support to the IPTL case was affecting budget implementation. Permanent Secretary Servacious Likwelile said in a statement that making such a link "is something that was not part of our initial agreement". Former Prime Minister Edward Lowassa and three of his ministers resigned in 2008 over accusations of corruption in the energy sector, prompting the president to sack the whole cabinet and sparking a political crisis until a new cabinet was named.