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BoT to ditch Mwananchi Gold, non-core functions

Discussion in 'Habari na Hoja mchanganyiko' started by BAK, Aug 11, 2008.

  1. BAK

    BAK JF-Expert Member

    #1
    Aug 11, 2008
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    BoT to ditch Mwananchi Gold, non-core functions

    GOVERNOR NDULU: Exercise will be carried out carefully ``to avert any problems.``

    -Part of ongoing efforts to clean up its act

    THISDAY REPORTER
    Dar es Salaam

    THE Bank of Tanzania (BoT) is in the process of withdrawing from various non-core functions of a central bank, including involvement in the controversial Mwananchi Gold Company Limited in which it has a 35 percent stake, it has been revealed.

    Well-placed sources say this is part of a strategy by the new BoT management under incumbent governor Prof Benno Ndulu to clean up the image of the key financial institution that was long dogged by widespread corruption allegations under former governor Daudi Ballali (now deceased).

    It is also in line with a recommendation made by auditors Ernst & Young for the bank to drop all non-core functions and ’’be left to perform only functions which are stipulated in the BoT establishing Act.’’

    The recommendation is contained in the final report of the special audit on payments made from the external payment arrears (EPA) account during 2005/06, conducted by Ernst & Young and endorsed by the Controller and Auditor General (CAG).

    Among other things, the BoT is reviewing the credit guarantee facilities it provides to private companies, its investments in various business undertakings, and other operations that are not pure central bank functions.

    Apart from its 35 percent equity in Mwananchi Gold Company Limited, the bank also provided an interest-free loan to the privately-owned firm amounting to $6,062,220.57 (approx. 7bn/-).

    Located in the Vingunguti Industrial Area on the outskirts of Dar es Salaam, Mwananchi Gold started its operations on January 1, 2006.

    Auditors uncovered that mortgages for loans to Mwananchi Gold were not duly registered with the registrar of companies in accordance with the prevailing laws of the country, which may render the mortgages void.

    Among the dubious BoT guarantees are a massive 72bn/- loan issued to Kagera Sugar Limited in 2004 by a group of lenders comprising several local banks and pensions funds.

    The central bank has found itself in serious liability due to its long-term, 80 per cent guarantee of the huge loan to Kagera Sugar, which has experienced difficulty in repaying the credit.

    On the strength of the BoT guarantee, the company went ahead and secured loans amounting to 72.178bn/- from various local financial institutions for rehabilitation and expansion of the formerly state-owned sugar factory.

    Records show that the lead bank in the lending consortium, Stanbic, by itself gave out 17.178bn/-. Other financiers in the deal were Barclays Bank (10bn/-), NSSF (12bn/-), PSPF (12bn/-), PPF (12bn/-), CRDB Bank (8.5bn/-), and the Tanzania Investment Bank (5bn/-).

    At the time of receiving the loan, Kagera Sugar was given a two-year grace period to start servicing the principal loan and interest, but the company’s management failed to honour these obligations despite frequent reminders from the lenders.

    Other past BoT operations that raised serious queries from auditors were the decision to purchase a five-year special treasury bond worth 155 billion/- from the government.

    It is understood that this money was later used by the BoT to make highly dubious payments in favour of the associated Meremeta, TANGOLD and Deep Green Finance companies.

    When contacted for comment yesterday, Governor Ndulu confirmed that the BoT was in the process of ditching operations that are not purely functions of a central bank.

    He said the exercise would be carried out carefully ’’to avert any problems.’’

    Prof. Ndulu said the function of administering credit guarantees would be taken up by another government institution once the BoT fully withdraws.

    He said in future, the central bank will focus on its principal functions, which include to formulate, implement and be responsible for monetary policy; to issue currency; to regulate and supervise banks and financial institutions; and to manage the country’s gold and foreign exchange reserves.

    Other core functions of the BoT include to promote sound money, credit and banking conditions conducive to the development of the country’s economy.

    The primary objective of the central bank is to formulate and implement monetary policies directed to the economic objective of maintaining price stability conducive to a balanced and sustainable growth of the national economy.

    Under the provisions of the BoT’s establishment Act, the board of directors is responsible for determining policies, approving the administrative budget, and ’’other functions specifically conferred or imposed upon the board by the Act or any other written law.’’

    The management of the bank and direction of its business and affairs are vested in the governor, while the deputy governor, subject to the general supervision of the governor, is responsible for the day-to-day bank business.
     
  2. B

    Bakari Muhogo Member

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    Aug 11, 2008
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    BoT could provide loans to foreign gold mining companies operating in Tanzania.In this way it will be participating in the fight against poverty in Tanzania. Investing in gold can help BoT in building it's finance since the gold price is very high at the moment.
     
  3. Chimbuvu

    Chimbuvu JF-Expert Member

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    Feb 11, 2013
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    Anyone who knows about the liquidated mwananchi Gold co. Ltd
     
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