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BoT gold reserves financed radar deal

Discussion in 'Jukwaa la Siasa' started by BAK, Oct 6, 2009.

  1. BAK

    BAK JF-Expert Member

    Oct 6, 2009
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    BoT gold reserves financed radar deal


    THE third phase government of former president Benjamin Mkapa used national gold reserves from the Bank of Tanzania to secure a $40m loan from Barclays Bank used to finance the controversial purchase of military radar equipment from British firm BAE Systems in 2002, it has been revealed.

    In order to secure the hefty loan, the Mkapa government went out of its way to minimize the financial risk carried by Barclays Bank in lending to Tanzania.

    Measures taken included accepting a financing arrangement that allowed BoT money backed up by the national gold reserves to be held in London as collateral.

    The Mkapa administration also agreed that English law, and not Tanzanian law, should prevail in the event of any litigation arising out of a possible default on the Barclays Bank loan.

    At the time the loan was being processed between 1999 and 2002, the Barclays Bank Tanzania Limited board of directors was chaired by Jayantilal Chande.

    Chande, also commonly referred to as Sir Andy, also served as chairman of the board of directors of the then state-run Tanzania Railways Corporation (TRC).

    He was knighted by Queen Elizabeth II of the United Kingdom in 2003, just a year after the radar transaction with BAE (Britain’s leading defence manufacturer) was concluded.

    Officials say as Barclays Bank (Tanzania) board chairman, Chande was a person of influence in the loan negotiations between the UK-headquartered bank and the Tanzanian government.

    Tanzania, being a beneficiary of the Highly Indebted Poor Countries (HIPC) debt relief initiative, had at the time agreed with the International Monetary Fund (IMF) not to borrow any money from commercial banks.

    In order to persuade the IMF to allow this loan to Tanzania, Barclays Bank reportedly declared that over a third of it was to be considered a grant.

    Investigations by Britain’s Serious Fraud Office (SFO) have already identified key roles played by then attorney general Andrew Chenge and Bank of Tanzania governor Dr Idris Rashidi in the radar transaction.

    Both Chenge and Rashidi are now considered suspects by the SFO in its ongoing investigation of corruption indications related to the whole deal.

    According to the SFO investigations, the legal opinion given by Chenge in support of the financing agreement for the purchase of the radar system had ?put the economic interests of Tanzania at risk.”

    Various UK members of parliament last year questioned the role of Barclays Bank in the BAE radar deal with Tanzania, and precisely how the bank came to the decision to extend the loan to the Mkapa government to finance the dubious deal.

    They included Liberal Democrat MP Norman Lamb (North Norfolk), who has long been a fierce critic of the deal.

    Debating the matter in the British House of Commons, Lamb said: ?Barclays provided the loan finance (to Tanzania) at a time when all the allegations were in the public domain and concerns were being raised that it was a dodgy deal.?

    He noted the widespread public criticism against the deal that prevailed at the time.

    According to latest THISDAY findings, a previous attempt by the Mkapa government to purchase an air traffic control system from Siemens Plessey System (SPS) for $88m was aborted due to failure to secure financing for the deal.

    BAE Systems acquired SPS in October 1997 and inherited negotiations which were at an advanced stage. In an attempt to avoid opposition to the radar deal from the World Bank and IMF, the contract price was ”reduced” to $40m for the first phase of the project, and there was to be a second phase.

    The Mkapa government is understood to have rejected an available loan from the European Investment Bank to install a state-of-the-art air traffic control system for Tanzania and its two neighbours, that would have cost less than half the price quoted by BAE Systems.

    Instead, it opted for the BAE Systems radar, described by the International Civil Aviation Organisation (ICAO) as ”very old technology” and more suitable for military, not civilian use.