CAG zeros in on TANESCO By ThisDay Reporter 15th December 2009 One of the TANESCO company houses refurbished at excessive cost, and said to be lined up for purchase by Rashidi and other senior company managers at bargain prices. AUDITORS from the office of the Controller and Auditor General (CAG) have uncovered serious financial mismanagement at the state-run Tanzania Electric Supply Company (TANESCO), including excessive purchases of luxury vehicles, luxury furniture, and construction of swimming pools at company houses. The reports of a lavish spending spree apparently authorized by TANESCO's outgoing managing director, Dr Idris Rashidi, come against a backdrop of serious liquidity problems that have dogged the public utility for quite sometime now. Rashidi bowed out of TANESCO this month after the expiry of his employment contract, and has been temporarily replaced by the power utility's general manager in-charge of power generation, Stephen Mabada, during the transitional period until President Jakaya Kikwete appoints a new MD. Officials from the National Audit Office told THISDAY that the CAG's office is expected to conclude a special audit on TANESCO next month, and submit its report to the board of directors. A "special investigation" by auditors into financial accounting at TANESCO has already uncovered various dubious expenditures made by the company's management. "The TANESCO management recently purchased eight new (Toyota) Land Cruisers at a cost of 160m/- per vehicle. This is considered wasteful spending considering that the company has been facing serious financial difficulties," a NAO official familiar with the matter told THISDAY. "Hundreds of millions of shillings have been spent on renovating company houses, including the installation of stand-by power generators, state-of-the-art swimming pools, and expensive furniture," the official added. While the TANESCO management doled out the undisclosed amounts of money on the afore-mentioned items plus other above-board amenities, the power utility is reported to have suffered a total loss of 137.9bn/- in the 2006/07 financial year. The amount is almost three times the loss of 54.5bn/- that TANESCO incurred during 2005/2006. MD Rashidi is understood to have secured a massive syndicated loan for TANESCO in September 2007 amounting to a healthy 300bn/-, and the loan was intended to pay off some of TANESCO's long-term creditors and assure cash flow for operations. Stanbic Bank is the lead bank in the loan syndicate that also includes the National Microfinance Bank (NMB), CRDB Bank, Exim Bank, Tanzania Investment Bank (TIB), Parastatal Pension Fund (PPF), National Social Security Fund (NSSF), Government Employees Provident Fund (GEPF), and the Public Service Pensions Fund (PSPF). The loan was expected to bankroll TANESCO's five-year financial recovery plan, which also involves some capital investment. Under the terms of the agreement, the loan was to be repaid by installments in six years with an 18-month grace period, at interest pegged on 182-day treasury bill (TB) rates. Sumve Member of Parliament Richard Ndassa (CCM) raised questions in parliament about renovations of TANESCO houses, which he claimed were intended to be bought by Rashidi and other senior company managers at bargain prices. The MP's queries directly led to the government ordering a special audit into TANESCO. "Auditors have been dispatched to the regions to investigate how the TANESCO management spent some 80bn/- earmarked for infrastructure maintenance and purchase of line materials such as electric poles and other equipment," said another NAO source. According to TANESCO's website, the power utility has paid out more than 192.5bn/- for various procurement contracts this year alone (by September 2009). This includes a staggering 17.45bn/- paid to Toyota Tanzania Limited for the supply of motor vehicles. TANESCO also spent another $4.29m (approx. 5.75bn/-) this year to purchase vehicles from Quality Motors Limited, a company linked to controversial local businessman Yusuf Manji. In response to questions from THISDAY, the TANESCO management confirmed that it has already received 235bn/- out of the syndicated loan. According to the power utility management, some 101bn/- of this has already been spent on the purchase of service line material for rural electrification, upgrading the power transmission/distribution networks, and other projects. Another 117bn/- was used to service a long-standing World Bank loan, while the Independent Power Tanzania Limited (IPTL) was paid by TANESCO some 7.79bn/-.