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Tanzania delegation visits London in pursuit of payment decreed by UK fraud office from BAE over radar equipment sale. The country had earmarked the money to improve education
Tanzania still waiting to receive compensation payout from BAE over radar equipment. Photograph: Christopher Furlong/Getty Images
BAE System's sale of radar equipment to Tanzania in 1999 provoked outrage at the time. A debt relief deal had just been agreed to help Tanzania invest in its education system, and the expenditure of just over £29m on a standard of radar far in excess of the country's needs was widely criticised by many, including Clare Short, the then international development secretary. It is still a cause of deep resentment in Tanzania, and this week a cross party delegation of seven Tanzanian MPs was in London for a round of meetings seeking justice.
In December, BAE was fined for concealing payments of $12.4m (£8m) to a marketing adviser in Tanzania in connection with the deal. BAE agreed with the Serious Fraud Office (SFO) to make an ex-gratia payment of £29.5m to the Tanzanian people.
The Department for International Development (DfID) and the Tanzanian government were both involved in drawing up plans on how to spend the payment by investing in education, particularly textbooks and teachers' accommodation.
But six months on and no money has been paid, and the Tanzanian delegation wants to know why. Delegation members are due to meet Andrew Mitchell, the development secretary, and on Thursday they meet the legal team of BAE in search of answers. The delegation insists the money should be paid for education through Tanzanian government channels as had been planned.
But BAE last week announced the formation of an "advisory board", chaired by Lord Cairns, who was for 10 years chair of the Commonwealth Development Corporation, which made substantial investments both in Tanzania and across other African countries. The board will guide the company on the best means of spending the money for the benefit of the Tanzanian people "in accordance with all applicable company policies".
There is no mention of putting the money through the Tanzanian government. BAE announced that there are four company executives on the board. It goes on to claim that the company has "made sustained efforts to become recognised as a leader in responsible business conduct", and that the fund will reflect that. BAE even added that it "is willing to explore opportunities to enhance its overall contribution by utilising its advanced technological capabilities to maximise the effectiveness of projects supported by the fund".
But Tanzanians argue that it is not up to BAE how the money is spent and that it should not backtrack on an agreement made with the SFO in December. "We are getting nowhere," Ayoub Mzee, a Tanzanian journalist travelling with the delegation told me. Mzee said the SFO and DfID convinced the Tanzanian government they were working on its behalf, and urged Dar es Salaam against taking legal action. "They have shortchanged [the government]," Mzee added.
The House of Commons international development committee is conducting an inquiry into BAE's deal with Tanzania, and Global Witness, a UK-based NGO, has urged the committee to look into the role of Barclays in providing the Tanzanian government with the loan required to buy the radar equipment. The World Bank and the IMF had refused to fund the deal, which they regarded as a white elephant. The bank said a civilian radar system could be bought at a fraction of the price. Barclays's role was heavily criticised by Clare Short, while Norman Lamb MP suggested it may have arranged the loan in return for the granting in October 2000 of a banking licence to operate in Tanzania.
Global Witness points out that existing regulations against money laundering don't cover the granting of loans, only of deposits. That leaves a gaping hole in terms of tracking corruption, as this case would seem to indicate. The loan arranged by Barclays was critical to the deal. The NGO also points to a request from the SFO to the Tanzanian authorities questioning a deposit of $1.5m into an account of the then attorney general of Tanzania, Andrew Chenge, in the Jersey branch of Barclays. The letter was leaked on the internet.
Chenge resigned in 2008 to fight the allegations of corruption, and was declared innocent in the SFO agreement with BAE. He returned to politics and is now an MP.
Global Witness argues that tighter banking regulations – and enforcement of those that exist – are critical if corruption is to be effectively challenged.
Global Witness wants a requirement that banks disclose loans to sovereign governments and state-owned companies with sufficient time for the parliaments of those countries to scrutinise them.
Tanzania still waiting to receive compensation payout from BAE over radar equipment. Photograph: Christopher Furlong/Getty Images
BAE System's sale of radar equipment to Tanzania in 1999 provoked outrage at the time. A debt relief deal had just been agreed to help Tanzania invest in its education system, and the expenditure of just over £29m on a standard of radar far in excess of the country's needs was widely criticised by many, including Clare Short, the then international development secretary. It is still a cause of deep resentment in Tanzania, and this week a cross party delegation of seven Tanzanian MPs was in London for a round of meetings seeking justice.
In December, BAE was fined for concealing payments of $12.4m (£8m) to a marketing adviser in Tanzania in connection with the deal. BAE agreed with the Serious Fraud Office (SFO) to make an ex-gratia payment of £29.5m to the Tanzanian people.
The Department for International Development (DfID) and the Tanzanian government were both involved in drawing up plans on how to spend the payment by investing in education, particularly textbooks and teachers' accommodation.
But six months on and no money has been paid, and the Tanzanian delegation wants to know why. Delegation members are due to meet Andrew Mitchell, the development secretary, and on Thursday they meet the legal team of BAE in search of answers. The delegation insists the money should be paid for education through Tanzanian government channels as had been planned.
But BAE last week announced the formation of an "advisory board", chaired by Lord Cairns, who was for 10 years chair of the Commonwealth Development Corporation, which made substantial investments both in Tanzania and across other African countries. The board will guide the company on the best means of spending the money for the benefit of the Tanzanian people "in accordance with all applicable company policies".
There is no mention of putting the money through the Tanzanian government. BAE announced that there are four company executives on the board. It goes on to claim that the company has "made sustained efforts to become recognised as a leader in responsible business conduct", and that the fund will reflect that. BAE even added that it "is willing to explore opportunities to enhance its overall contribution by utilising its advanced technological capabilities to maximise the effectiveness of projects supported by the fund".
But Tanzanians argue that it is not up to BAE how the money is spent and that it should not backtrack on an agreement made with the SFO in December. "We are getting nowhere," Ayoub Mzee, a Tanzanian journalist travelling with the delegation told me. Mzee said the SFO and DfID convinced the Tanzanian government they were working on its behalf, and urged Dar es Salaam against taking legal action. "They have shortchanged [the government]," Mzee added.
The House of Commons international development committee is conducting an inquiry into BAE's deal with Tanzania, and Global Witness, a UK-based NGO, has urged the committee to look into the role of Barclays in providing the Tanzanian government with the loan required to buy the radar equipment. The World Bank and the IMF had refused to fund the deal, which they regarded as a white elephant. The bank said a civilian radar system could be bought at a fraction of the price. Barclays's role was heavily criticised by Clare Short, while Norman Lamb MP suggested it may have arranged the loan in return for the granting in October 2000 of a banking licence to operate in Tanzania.
Global Witness points out that existing regulations against money laundering don't cover the granting of loans, only of deposits. That leaves a gaping hole in terms of tracking corruption, as this case would seem to indicate. The loan arranged by Barclays was critical to the deal. The NGO also points to a request from the SFO to the Tanzanian authorities questioning a deposit of $1.5m into an account of the then attorney general of Tanzania, Andrew Chenge, in the Jersey branch of Barclays. The letter was leaked on the internet.
Chenge resigned in 2008 to fight the allegations of corruption, and was declared innocent in the SFO agreement with BAE. He returned to politics and is now an MP.
Global Witness argues that tighter banking regulations – and enforcement of those that exist – are critical if corruption is to be effectively challenged.
Global Witness wants a requirement that banks disclose loans to sovereign governments and state-owned companies with sufficient time for the parliaments of those countries to scrutinise them.
