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CAG’s ruling on who should pay Dowans

Discussion in 'Habari na Hoja mchanganyiko' started by BAK, May 23, 2011.

  1. BAK

    BAK JF-Expert Member

    May 23, 2011
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    CAG's ruling on who should pay Dowans Send to a friendSunday, 22 May 2011 22:50 digg

    By Bernard James,
    The Citizen Reporter

    Dar es Salaam. The Controller and Auditor General has added his voice to the chorus opposing payment by Tanesco of Sh94 billion compensation to Dowans for breach of contract.Instead, Mr Ludovick Utouh says the government should take full responsibility for the payout if the High Court dismisses the petition contesting the award.

    The International Chamber of Commerce (ICC) awarded the compensation to Dowans SA and Dowans Tanzania Limited after concluding that Tanesco was in breach of the contract it entered into with Richmond Development Company in 2008, which was later transferred to Dowans SA.

    However, it is not clear who is supposed to shoulder the burden, with Tanesco saying the government had the final say on the contract. Mr Utouh says in a letter to the Finance and Economic Affairs ministry that he had studied developments leading to the agreement, and concluded that the government should take responsibility for the compensation after interfering in Tanesco's contract mandate and obligations.

    The CAG has also suggested that the government reviews Tanesco's debt portfolio and ease the burden on the public utility arising from contracts in which the State is involved."This will enable Tanesco to be evaluated on fair grounds and be held accountable for its own decisions," says the CAG.

    The letter, dated March 12, 2011, is addressed to the Finance and Economic Affairs permanent secretary and Paymaster General and dwells on Tanesco's audited financial statements for the year ended December 31, 2009.
    The ministry had written to the CAG on February 9 suggesting that cash-strapped Tanesco bears responsibility for the compensation.

    Richmond had transferred its rights and obligations to Dowans SA before the contract was terminated.
    But in his response, the CAG says the government cannot in any way escape full liability after overruling the procurement functions of Tanesco's board of directors and management with regard to the Richmond deal.

    "I have been able to evaluate the sequence of events pertaining to the procurement process of the 100MW rental emergency generating plant in Dar es Salaam, which was awarded to Richmond Development Company USA, and the transfer of its rights and obligations to Dowans SA.

    "I have noted with concern the ministry of Energy and Minerals' override on the procurement functions of the board of directors and management of Tanesco and on non-compliance with the Public Procurement Act, 2004 and its related regulations of 2005," says Mr Utouh's letter, whose copy was seen by The Citizen.

    The CAG's verdict is likely to end a four-month dispute between the government and Tanesco on who should pay the compensation.Finance minister Mustafa Mkulo said in January that the Treasury did not have funds to pay the compensation, adding that it was the burden of the Energy and Minerals ministry.

    Contacted on Wednesday, Mr Utouh declined to comment further on the issue, saying it was still pending in court. "The issue is still pending in court and at this point in time neither you nor I can comfortably say the what the outcome will be. Let's be patient as we wait for the court's decision," Mr Utouh told The Citizen by telephone.

    Energy and Minerals minister William Ngeleja also declined to comment on the matter.But Mr Utouh says in his letter that it was evident the Energy and Minerals ministry handled the procurement process of the emergency power supply contract, and the transfer of Richmond rights and obligations to Dowans.

    "It is evident that if the government, through the ministry of Energy and Minerals, had not directly been involved, the Richmond and Dowans saga would not have occurred," says the CAG. He further observes that Tanesco's current financial position is not sound, with the situation worsening every year.