Chenge
JF-Expert Member
- Oct 5, 2011
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[h=1]Bank of Tanzania (BoT) External Payment Arrears (EPA)[/h]
In the 2005/6 financial year, the Government of Tanzania lost about US$131 million from the External Payment Arrears (EPA) account held at the Bank of Tanzania (BoT) in what was then described as "dubious payments" to local companies. The EPA account was originally set-up by the Government of Tanzania to help service balance of payments, whereby local importers would pay into the account in local currency and foreign service providers could then be paid by BOT in foreign currency. Due to low foreign currency availability in the 1980s and 1990s, the debt within the account reached $677 million by the year 1999. Efforts under the Debt Buyback Scheme and cancellations negotiated under the Paris Club helped to reduce the debt level to $233 million by 2004.1 Officials at the Bank of Tanzania and businesses took advantage of one of the strategies devised to reduce the account debt, whereby a creditor could endorse debt repayment to a third party.
A special audit by Messrs Ernst & Young discovered that more than $131 million was improperly paid to 22 local firms. It is alleged that all the 22 firms used forged documents to withdraw the external payment arrears on the grounds that they had entered into agreements with external creditors. 2 While thirteen (13) companies used falsified records to claim third party status and received BOT payments, nine (9) companies couldn't substantiate payments they received. Among these, two companies, for example Deep Green Finance, were not even registered by BRELA - Business Registrations and Licencing Agency. Other companies linked to the scheme include Meremeta Gold (a failed joint venture company of the Tanzania Ministry of Defence and South Africa's Trinnex (Pty) Limited), Tangold (state-owned company registered offshore in Mauritius), and Kagera Sugar Co, for which BoT guranteed a syndicated loan from three pension funds and four banks. These companies were owned and operated by some of the most prominent business people in Tanzania. 3
Five major banks colluded in laundering the money (including the National Bank of Commerce - NBC), and in some cases facilitated the opening of offshore accounts. In some cases these banks coordinated with FOREX bureaus by giving out cash to complete transfers. The banks, both local and international, were hiding behind the letters of BoT confirming the transfers to be legitimate, but they violated their own internal code of conduct and international financing regulations. 4 Nine firms received $42 million for which there was no documentation of why they were paid at all. 5 These were G&T International, Excellent Services Ltd, Mibale Farm, Liquidity Service Ltd, Clayton Marketing, Rashtas Ltd, Malegesi Law Chambers, Kiloloma and Brothers and Karnel Ltd. 6 The findings showed that 13 out of the 22 companies were together paid $90 million by using forged documents. These included Bencon International Ltd, VB & Associates, Bina Resorts, Venus Hotel, Njake Hotel & Tours Ltd., Maltan Mining Company, Money Planners & Consultants, Bora Hotels & Apartment, B.V. Holdings, Ndovu Soaps, Navy Cut Tobacco, Changanyikeni Residential Complex, and Kagoda Agriculture Ltd. Kagoda Agricultural Limited got US$ 30.8 million with the knowledge of BOT governor at the time, Dr Daudi Ballali, whom it is alleged acted on instructions from the highest levels of the ruling CCM party. during the tenure of Benjamin Mkapa's government. 7 It is further alleged that Deep Green Finance acted as a shell company established as a conduit for public funds from BoT to undisclosed destinations during the general elections of 2005. 8.
It is estimated that about 70 percent of the $131 million swindled from the EPA account was stashed in foreign banks, mainly in Dubai and Switzerland. The remaining 30 percent was used to buy plots of land in prime areas in Dar es Salaam city, houses, cars and other fixed assets. 9
By August, it was reported that 13 of the firms alleged to have pocketed state funds dubiously repaid US$46.56 million, and were given a deadline of October 2008 to pay up the balance amounting to US$ 8.51 million (TZS 10 billion). 10 In December 2008, it was reported that close to Tsh69.3 billion ($63 million) of the loot was restored under strict secrecy, which the reporters described as proof enough that some crime was indeed committed. 11Since then several of the individual business persons and involved BoT officials have been charged, and the cases are currently in progress at a Dar es Salaam magistrate court. 12
[h=2]Notes[/h]
- 'Kikwete sacks his Central bank governor over corruption' (10 January 2008) TZ Common Cents
- Xinhua (22 August 2008), 'Cheating firms given more time to return cheated money in Tanzania', http://english.people.com.cn/90001/90777/90855/6483568.html
- 'Kikwete sacks his Central bank governor over corruption' (10 January 2008) TZ Common Cents
- Daniel Said 'Tanzania: Five Banks Involved in BoT Scandal to Be Sued', East African Business Week (Kampala) (11 February 2008), http://allafrica.com/stories/200802111926.html
- Faustine Kapama 'EPA: The sequence of events' Daily News h ttp://dailynews.habarileo.co.tz/sports/index.php?id=8597
- Faustine Kapama, ' EPA: The sequence of events' Daily News, http://dailynews.habarileo.co.tz/sports/index.php?id=8597
- 'KAGODA: The secret document that ''tells all'', This Day, http://www.thisday.co.tz/News/4913.html
- ThisDay, 5 November 2007
- Daniel Said 'Tanzania: Five Banks Involved in BoT Scandal to Be Sued', East African Business Week (Kampala) (11 February 2008), http://allafrica.com/stories/200802111926.html
- Xinhua (22 August 2008) 'Cheating firms given more time to return cheated money in Tanzania'http://english.people.com.cn/90001/90777/90855/6483568.html
- Karl Lyimo (East African) Since mid-2008, 'EPA: Mkapa, Mangula can save Dar from embarassment', (13 December 2008) EPA: Mkapa, Mangula can save Dar from embarassment*- Comment*|theeastafrican.co.ke
- East African Business Week (31 January 2009) 'Top BoT officials to appear before court',Airtel launches lower rates for post paid service