Dar orders probe into sale of 600-plus state firms The Raiply factory in Eldoret, Kenya. The Rai Group acquired Tanzanias biggest paper manufacturer, Mgololo Paper Mills in Iringa. Picture: Anthony Kamau By MIKE MANDE THE EAST AFRICAN Posted Monday, May 11 2009 at 20:48 Tanzania has ordered investigations into more than 600 privatised firms and entities and halted the privatisation process over concerns of widespread fraud in the exercise. More than 275 firms and 366 entities will be placed under scrutiny following the government order to investigate malpractices during the privatisation process. The investigation will take in among others the acquisition by a Kenya-based firm, Rai Group, of the countrys biggest paper manufacturer, Mgololo Paper Mills in Iringa, as well as a tree farm in Hanang district in the northern zone of Tanzania over an alleged failure to streamline the operations of the two enterprises as stipulated in the privatisation agreement. This follows discrepancies that have been found between the list of privatised firms issued by Consolidated Holdings Corporation (CHC), the custodian of the state assets, and a list compiled by the Public Corporations Accounts Committee, an oversight body of parliament. In a bizarre development, it turns out that CHC has given the Controller and Auditor General, Ludovick Utouh, a list of 158 government enterprises that have been privatised, while an investigation by the parliamentary committee has found that the Register of Public Assets lists a total of 193. Besides the discrepancies, some of the firms and entities were found to have been sold to former and current senior government officials at throwaway prices or even given to them for free. The EastAfrican has been informed that the government has not been able to collect more than $8 million from investors who took over the privatised firms and that some of the privatised enterprises have already been abandoned by the investors after taking out huge loans from local banks. The preliminary investigation report compiled by the parliamentary committee, which has been made available to this newspaper, states that gross irregularities were committed during the process that could result in a loss of $276 million if the process continues unabated. This is why the government stepped in and stopped the exercise, which is apparently viewed as a goldmine by corrupt officials. The most brazen malpractice uncovered by the committee involves government shares in five joint venture firms, which from a scrutiny of the Register of Government Assets at the Ministry of Finance appear to have been secretly transferred to the investors in the privatised firms without the knowledge of the government. The government has in effect been elbowed out with nothing allocated to it from the proceeds. The enterprises in which the government owned shares ranging from 25 per cent to 45 per cent are the Tanzania Tea Authority, Lupembe Branch, in which the government had a shareholding of 30 per cent and Morogoro Shoe Company, in which the government owned 30 per cent shares. The others on the list are Moro Tanneries, in which the government owned 45 per cent shares, Tanzania Electrical Goods Manufacturer (30 per cent) and Kilombero Sugar Company (25 per cent). The fraudulent removal of the shares from the five joint-venture enterprises will cost the government another $100 million in revenue and assets of the firms. Zitto Kabwe, chair of the Public Corporations Accounts Committee, confirmed to The EastAfrican in Dar es Salaam last week that the government lost its shares fraudulently. Mr Kabwe said that the committee had ordered investigations into the omission of the shares from the enterprises, the majority of which are now owned by senior government officials and prominent businessmen. According to Mr Kabwe, the government must halt plans to sell off the remaining state-owned enterprises until investigations are complete. We are very sceptical about the privatisation process and believe that the government needs to provide answers to these questions and conduct investigations into the whole process as some of the enterprises privatised were given free to some senior government officials, he said. A senior government official said in Dar es Salaam last week that more than 15 state enterprises with a total value of $21 million that are now under CHC after it took over from the Parastatal Sector Reform Commission (PSRC), face liquidation and total collapse. Since its inception in 2007, CHC has sold 441 out of 443 properties to individuals, public and private institutions for a total of $20 million. The government still has shares in some 25 enterprises, which are also under scrutiny due to their dismal performance.