Roving Journalist
JF Roving Journalist
- Apr 18, 2017
- 2,797
- 11,959
By Brian Cooksey, PhD
Summary
The National Social Security Fund (NSSF) in Tanzania is accused of squandering pension contributions by its contributors through various corrupt practices. The disposal of the abandoned Dege EcoVillage project is the latest instance of this. The fund's management is said to be working in league with members of the political elite and private sector operators with criminal records. Citizen columnist J.M. Lusagga Kironde argues that the fund is an extension of the government, with little public accountability, limited access to information, and obscure management practices. Charles Makakala analysed the Dege project and defines it as "an audacious scheme to defraud NSSF contributors out of hundreds of billions of shillings." The project was supposed to be financed 45% by NSSF and 55% by private company Azimio Housing Estate Limited (AHEL), but in the event, Azimio invested only Sh12 billion in the project compared to NSSF's Sh271 billion, making NSSF the majority shareholder. Members of the notorious Iqbal family established Azimio, and Dr Ramadhan Dau, former director general of NSSF, is said to have a personal relationship with its CEO. Dr Dau complains that the projects he was promoting when he left the institution have apparently been abandoned.
On October 21, 2022, the National Social Security Fund (NSSF) announced that it was disposing of its ‘flagship’ Dege EcoVillage project, a large housing development located 25 kilometers south of Dar es Salaam that was abandoned seven years ago. The sorry story of Dege EcoVillage is well known to JamiiForums subscribers (see earlier postings), many of whom are contributors to the NSSF and are therefore among the key ‘stakeholders’ in the efficient management of the fund.
Yet NSSF contributors watch helplessly as their retirement pension contributions are systematically plundered and squandered by the top NSSF management, in league with members of the political elite and ‘private sector’ operators with criminal records. NSSF could be described as the ‘Ministry of Private Sector Pensions’ (MPSP). The Fund’s director general and his deputy are presidential appointees, and the board of directors represents state agencies rather than private sector workers. At least that’s the opinion expressed by Citizen columnist J.M. Lusagga Kironde (see: ‘Pension funds’ mega projects: What is the role of the contributors in the deals?’ 3 November 2022). Kironde asks: ‘When all this money flaunting is taking place, where are the funds owners? The contributors?’. Kironde details the sordid trickery involved in the land acquisition for the project as revealed by the Controller and Auditor General’s 2018/19 report, which also flagged eight ‘investment properties’ worth Sh650billion and other so-called ‘joint ventures’ with private companies which were ‘bleeding the fund.’ He concludes that NSSF is ‘as an extension of the government’ and cites a World Bank report arguing that investment decisions by pension funds in poor countries: “…typically occur in a regulatory vacuum, with little public accountability, limited access to information, and obscure management practices.” These four criteria certainly characterise the NSSF/Dege case.
Kironde is not the only critical voice concerning Dege. In a think piece published on 17 November last year, Charles Makakala analysed ‘How billions went down the drain in a dubious NSSF project’ (the Citizen), defining Dege as ‘an audacious scheme to defraud NSSF contributors out of hundreds of billions of shillings.’ Dege was originally a joint -venture between NSSF and private company Azimio Housing Estate Limited (AHEL). AHEL ‘claimed’ to own 20,000 acres of land at the Dege site, out of which the Dege complex of nearly 7,500 apartments occupies only 300 acres, equal to 1.5 percent of the ‘Dege’ land area. Moreover, the NSSF-AHEL agreement valued the 300 acres at Sh233 billion, which is nearly Sh800 million per acre! According to Makakala, in 2013, an acre of land in Kigamboni cost less than Sh10 million! NSSF already possessed land in Kigamboni, so what useful role did Azimio play in the project? Dege was ‘abandoned’ two months after Magufuli came to power. The author concludes: ‘The Dege fiasco is far from over. Watch this space.’
Priced at a staggering $627million, the Dege project was supposed to be financed 45 percent by NSSF and 55 percent by Azimio. Azimio was to finance 35 percent of the project through equity, with the land value accounting for the remaining 20 percent. Makakala reports that in the event Azimio invested only Sh12 billion in the project compared to NSSF’s Sh271 billion, making NSSF the de facto majority share-holder. Thus, the Dege sale is an NSSF initiative: Azimio no longer figures in the sale of the ‘joint venture.’
Azimio was established by members of the notorious Iqbal family, headed by property developer Mohammed Iqbal Hajji, aka ‘Baghdad’, who is also CEO of the company. Iqbal is a personal friend of NSSF’s Dau. Both Dau and Baghdad are involved in promoting Islamic causes and charities.
Dr Dau is back in the frame
In an article published on 6 January 2023, Dr Ramadhan Dau, former director general of NSSF, complains that the projects he was promoting when he left the institution have apparently been abandoned (see Louis Kalumbia 2023. ‘Former NSSF head opens up on project portfolio’, Citizen). These projects included a $530 million 1,000MW natural gas power station in Mkuranga, a so-called ‘metro’ transport system in and around Dar es Salaam, a JV to build a hospital in Dar es Salaam in collaboration with India’s Apollo Hospitals, the ‘development of football talent in collaboration with Spanish giants Real Madrid’, the upgrade of the Dar es Salaam-Chalinze highway, and the Kiwira coal mine project that involved a former President. The article also quotes current NSSF DG Masha Mshomba as saying ‘that only profitable projects would be implemented after comprehensive assessment and analysis of their viability’, suggesting that these criteria did not apply to Dau’s portfolio. Mshomba added that: “Implementation of projects will strictly adhere to the relevant laws and regulations, Bank of Tanzania guidelines, and directives from the Prime Minister’s Office.” The article hints at a struggle between Dau and Mshomba over who controls NSSF investments and suggests that Dau’s portfolio consisted largely of questionable projects.
Dege is up for sale: any takers? None so far!
An article by Mainda Mhando published in the Citizen on 9th February 2023 claimed that there is: ‘No bidder yet as NSSF struggles to sell its Dege housing project’. The author quotes NSSF boss Masha Mshomba as claiming that ‘the decision to sell the project was reached because it was found that there were some shortcomings in the initial evaluation as the cost (sic) required to complete the project was Sh1.5 trillion, which is … beyond the capacity of the Fund.’ This, to say the least, is a feeble explanation of why Dege was initiated in the first place and why construction stopped more than seven years ago. A follow-up article on 12 February titled ‘Reporter 2023. NSSF: Tender for Dege Eco Village sale is still in progress’, Citizen) quotes Mr Mshomba as claiming that: ‘The tender was recently announced and is now being processed. The project will be sold if we are able to find a buyer who will allow us to recoup our costs, but the tender will be renewed if we are unable to do so.” Apart from Mshomba’s gross misrepresentation of why the project failed, his version of the timing of the tendering process was incorrect. The facts, known to numerous journalists, are as follows:
How many NSSF members would choose to relocate their families to these ugly, prefabricated concrete boxes in the middle of nowhere?
A free lecture from Dr Dau on what we can learn from effective Malaysian institutions
Dr Dau’s time as Tanzanian High Commissioner in Kuala Lumpur has convinced him that we have a lot to learn from how Malaysians run their affairs. For example, in the article ‘Dr Dau on the lessons that TZ can learn from Malaysia’ (Louis Kalumbia, Citizen, 7th January), Dr Dau explains how Tanzania can ‘to use institutions to attain its development goals’ the way Malaysians do. According to Dau, the Employees Provident Fund (EPF)—Malaysia’s equivalent to our NSSF—‘invests … in projects that foster the nation’s economic prosperity’, including in toll roads and power projects. Dr Dau argues that the Malaysian example helps explain why Malaysia, which was at a similar stage of development at independence as Tanzania, currently has a per capita GDP of $15,000 compared to Tanzania’s $1,100. Malaysians are 14 times better of than Tanzanians.
Dr Dau is, of course, right in suggesting that effective public institutions are a precondition for attaining ‘development goals’, though this is hardly news. Allow me to quote a well-known example in support of his argument. Readers are familiar with the Independent Power Tanzania Limited (IPTL) and Escrow corruption scams that began in the 1990s and climaxed in 2013-14. Those driving IPTL were a small Malaysian company called Mechmar Berhad, who hired a local fixer to assure the complicity of CCM and the rest of Tanzania’s ruling elite in what was a ruinously wasteful and avoidable project that cost the Tanzanian taxpayer and the economy billions of dollars in excessive power costs and outages for over two decades. The plunder of the Tegeta Escrow Account in the Bank of Tanzania led to public outrage and a concerted attempt to bring the culprits to book, involving the parliamentary Public Accounts Committee (PAC) and a series of in-depth investigative articles by the Citizen. In the end, CCM and the government of President Kikwete stubbornly resisted demands for accountability, and initiated a containment strategy that led in quick order to the repressive thuggery of the 2015-21 period. Tanzania’s attempt to mobilise institutions in the name of public accountability prompted a rapid backlash from the country’s ruling elite.
Two decades ago I concluded in my review of IPTL that: ‘… Tanzania will never be able to aspire to the rates of economic growth and social development achieved by countries like Malaysia in the absence of ruling élites whose rent-seeking strategies contribute to rather than subtract from the public good. It is one thing for politicians and bureaucrats to take a cut from a valid investment that generates significant employment, turns out useful products, and contributes to government revenue. It is quite another for this group to take a corrupt cut from a project that derails a key national policy, and imposes huge additional costs on the end-users and tax payers. If IPTL continues, Tanzania will be one significant step further down the road to permanent underdevelopment, and an unholy alliance of Malaysian investors and Tanzanian politicians and bureaucrats will be to blame.’ (See Jomo Kwame Sundaram 2002. Ugly Malaysians? South–South Investments Abused, Chapter 5, Institute for Black Research.
The point is not that cronyism and corruption are absent in Malaysia, but that projects involving cronyism and kickbacks are generally economically viable as well. Where Malaysia’s Employees Provident Fund invests in viable road and power projects, which no doubt involve kickbacks and cronyism, Tanzania’s NSSF invests in bogus projects doomed to fail like Dege Eco Village, where cronyism and kickbacks drive the entire project, not economic viability.
It's the institutions stupid!
The total absence of any attempt to reign in the daylight robbery of pension contributions of hundreds of thousands of working- and middle-class Tanzanians is an appalling reflection of the poverty of our governing institutions and the terrifying hegemony enjoyed by our ruling elite.
A decade after Escrow there is no parliamentary PAC with teeth and no investigative capacity in the private press, and Dr Dau is allowed the space to pontificate about the developmental role of pension funds when his own role in the routine plunder of NSSF money in Dege and other bogus projects for more than two decades has never been publicly questioned. When Magufuli promoted Dau to diplomatic status in 2016, a dozen NSSF managers were suspended pending investigations of corruption by PCCB. As usual, the second layer of corrupt officials carries the can for the main offenders.
Though much is known about Dege, much remains unclear. For example:
President Samia to the rescue?
But there is hope. In the last two years, the present government has loosened up on press censorship, backed down on laws to limit private research and polling, and allowed opposition parties to hold rallies unmolested, all in an attempt to distance itself from the undemocratic excesses of the Magufuli regime. These are all steps in the right direction, but they do not amount to basic institutional change. To address Dege and all the plunder and squandering that has gone on in NSSF over the years would require at least:
Summary
The National Social Security Fund (NSSF) in Tanzania is accused of squandering pension contributions by its contributors through various corrupt practices. The disposal of the abandoned Dege EcoVillage project is the latest instance of this. The fund's management is said to be working in league with members of the political elite and private sector operators with criminal records. Citizen columnist J.M. Lusagga Kironde argues that the fund is an extension of the government, with little public accountability, limited access to information, and obscure management practices. Charles Makakala analysed the Dege project and defines it as "an audacious scheme to defraud NSSF contributors out of hundreds of billions of shillings." The project was supposed to be financed 45% by NSSF and 55% by private company Azimio Housing Estate Limited (AHEL), but in the event, Azimio invested only Sh12 billion in the project compared to NSSF's Sh271 billion, making NSSF the majority shareholder. Members of the notorious Iqbal family established Azimio, and Dr Ramadhan Dau, former director general of NSSF, is said to have a personal relationship with its CEO. Dr Dau complains that the projects he was promoting when he left the institution have apparently been abandoned.
On October 21, 2022, the National Social Security Fund (NSSF) announced that it was disposing of its ‘flagship’ Dege EcoVillage project, a large housing development located 25 kilometers south of Dar es Salaam that was abandoned seven years ago. The sorry story of Dege EcoVillage is well known to JamiiForums subscribers (see earlier postings), many of whom are contributors to the NSSF and are therefore among the key ‘stakeholders’ in the efficient management of the fund.
Yet NSSF contributors watch helplessly as their retirement pension contributions are systematically plundered and squandered by the top NSSF management, in league with members of the political elite and ‘private sector’ operators with criminal records. NSSF could be described as the ‘Ministry of Private Sector Pensions’ (MPSP). The Fund’s director general and his deputy are presidential appointees, and the board of directors represents state agencies rather than private sector workers. At least that’s the opinion expressed by Citizen columnist J.M. Lusagga Kironde (see: ‘Pension funds’ mega projects: What is the role of the contributors in the deals?’ 3 November 2022). Kironde asks: ‘When all this money flaunting is taking place, where are the funds owners? The contributors?’. Kironde details the sordid trickery involved in the land acquisition for the project as revealed by the Controller and Auditor General’s 2018/19 report, which also flagged eight ‘investment properties’ worth Sh650billion and other so-called ‘joint ventures’ with private companies which were ‘bleeding the fund.’ He concludes that NSSF is ‘as an extension of the government’ and cites a World Bank report arguing that investment decisions by pension funds in poor countries: “…typically occur in a regulatory vacuum, with little public accountability, limited access to information, and obscure management practices.” These four criteria certainly characterise the NSSF/Dege case.
Kironde is not the only critical voice concerning Dege. In a think piece published on 17 November last year, Charles Makakala analysed ‘How billions went down the drain in a dubious NSSF project’ (the Citizen), defining Dege as ‘an audacious scheme to defraud NSSF contributors out of hundreds of billions of shillings.’ Dege was originally a joint -venture between NSSF and private company Azimio Housing Estate Limited (AHEL). AHEL ‘claimed’ to own 20,000 acres of land at the Dege site, out of which the Dege complex of nearly 7,500 apartments occupies only 300 acres, equal to 1.5 percent of the ‘Dege’ land area. Moreover, the NSSF-AHEL agreement valued the 300 acres at Sh233 billion, which is nearly Sh800 million per acre! According to Makakala, in 2013, an acre of land in Kigamboni cost less than Sh10 million! NSSF already possessed land in Kigamboni, so what useful role did Azimio play in the project? Dege was ‘abandoned’ two months after Magufuli came to power. The author concludes: ‘The Dege fiasco is far from over. Watch this space.’
Priced at a staggering $627million, the Dege project was supposed to be financed 45 percent by NSSF and 55 percent by Azimio. Azimio was to finance 35 percent of the project through equity, with the land value accounting for the remaining 20 percent. Makakala reports that in the event Azimio invested only Sh12 billion in the project compared to NSSF’s Sh271 billion, making NSSF the de facto majority share-holder. Thus, the Dege sale is an NSSF initiative: Azimio no longer figures in the sale of the ‘joint venture.’
Azimio was established by members of the notorious Iqbal family, headed by property developer Mohammed Iqbal Hajji, aka ‘Baghdad’, who is also CEO of the company. Iqbal is a personal friend of NSSF’s Dau. Both Dau and Baghdad are involved in promoting Islamic causes and charities.
Dr Dau is back in the frame
In an article published on 6 January 2023, Dr Ramadhan Dau, former director general of NSSF, complains that the projects he was promoting when he left the institution have apparently been abandoned (see Louis Kalumbia 2023. ‘Former NSSF head opens up on project portfolio’, Citizen). These projects included a $530 million 1,000MW natural gas power station in Mkuranga, a so-called ‘metro’ transport system in and around Dar es Salaam, a JV to build a hospital in Dar es Salaam in collaboration with India’s Apollo Hospitals, the ‘development of football talent in collaboration with Spanish giants Real Madrid’, the upgrade of the Dar es Salaam-Chalinze highway, and the Kiwira coal mine project that involved a former President. The article also quotes current NSSF DG Masha Mshomba as saying ‘that only profitable projects would be implemented after comprehensive assessment and analysis of their viability’, suggesting that these criteria did not apply to Dau’s portfolio. Mshomba added that: “Implementation of projects will strictly adhere to the relevant laws and regulations, Bank of Tanzania guidelines, and directives from the Prime Minister’s Office.” The article hints at a struggle between Dau and Mshomba over who controls NSSF investments and suggests that Dau’s portfolio consisted largely of questionable projects.
Dege is up for sale: any takers? None so far!
An article by Mainda Mhando published in the Citizen on 9th February 2023 claimed that there is: ‘No bidder yet as NSSF struggles to sell its Dege housing project’. The author quotes NSSF boss Masha Mshomba as claiming that ‘the decision to sell the project was reached because it was found that there were some shortcomings in the initial evaluation as the cost (sic) required to complete the project was Sh1.5 trillion, which is … beyond the capacity of the Fund.’ This, to say the least, is a feeble explanation of why Dege was initiated in the first place and why construction stopped more than seven years ago. A follow-up article on 12 February titled ‘Reporter 2023. NSSF: Tender for Dege Eco Village sale is still in progress’, Citizen) quotes Mr Mshomba as claiming that: ‘The tender was recently announced and is now being processed. The project will be sold if we are able to find a buyer who will allow us to recoup our costs, but the tender will be renewed if we are unable to do so.” Apart from Mshomba’s gross misrepresentation of why the project failed, his version of the timing of the tendering process was incorrect. The facts, known to numerous journalists, are as follows:
- On October 21, 2022 NSSF announced that ‘it intends to dispose the entire Dege Eco Village Project in its current state’ and that all ‘tenders should [be] submitted by November 14.’ (Citizen ‘NSSF puts up Dege Eco Village for sale, 26 October).
- From November 14th to February 8th (12 weeks) there was no word from NSSF on the results of the tender process, suggesting that there were no bidders meeting NSSF’s conditions, whatever they were. During this period, repeated requests by journalists for information on the tender results were ignored by NSSF.
How many NSSF members would choose to relocate their families to these ugly, prefabricated concrete boxes in the middle of nowhere?
A free lecture from Dr Dau on what we can learn from effective Malaysian institutions
Dr Dau’s time as Tanzanian High Commissioner in Kuala Lumpur has convinced him that we have a lot to learn from how Malaysians run their affairs. For example, in the article ‘Dr Dau on the lessons that TZ can learn from Malaysia’ (Louis Kalumbia, Citizen, 7th January), Dr Dau explains how Tanzania can ‘to use institutions to attain its development goals’ the way Malaysians do. According to Dau, the Employees Provident Fund (EPF)—Malaysia’s equivalent to our NSSF—‘invests … in projects that foster the nation’s economic prosperity’, including in toll roads and power projects. Dr Dau argues that the Malaysian example helps explain why Malaysia, which was at a similar stage of development at independence as Tanzania, currently has a per capita GDP of $15,000 compared to Tanzania’s $1,100. Malaysians are 14 times better of than Tanzanians.
Dr Dau is, of course, right in suggesting that effective public institutions are a precondition for attaining ‘development goals’, though this is hardly news. Allow me to quote a well-known example in support of his argument. Readers are familiar with the Independent Power Tanzania Limited (IPTL) and Escrow corruption scams that began in the 1990s and climaxed in 2013-14. Those driving IPTL were a small Malaysian company called Mechmar Berhad, who hired a local fixer to assure the complicity of CCM and the rest of Tanzania’s ruling elite in what was a ruinously wasteful and avoidable project that cost the Tanzanian taxpayer and the economy billions of dollars in excessive power costs and outages for over two decades. The plunder of the Tegeta Escrow Account in the Bank of Tanzania led to public outrage and a concerted attempt to bring the culprits to book, involving the parliamentary Public Accounts Committee (PAC) and a series of in-depth investigative articles by the Citizen. In the end, CCM and the government of President Kikwete stubbornly resisted demands for accountability, and initiated a containment strategy that led in quick order to the repressive thuggery of the 2015-21 period. Tanzania’s attempt to mobilise institutions in the name of public accountability prompted a rapid backlash from the country’s ruling elite.
Two decades ago I concluded in my review of IPTL that: ‘… Tanzania will never be able to aspire to the rates of economic growth and social development achieved by countries like Malaysia in the absence of ruling élites whose rent-seeking strategies contribute to rather than subtract from the public good. It is one thing for politicians and bureaucrats to take a cut from a valid investment that generates significant employment, turns out useful products, and contributes to government revenue. It is quite another for this group to take a corrupt cut from a project that derails a key national policy, and imposes huge additional costs on the end-users and tax payers. If IPTL continues, Tanzania will be one significant step further down the road to permanent underdevelopment, and an unholy alliance of Malaysian investors and Tanzanian politicians and bureaucrats will be to blame.’ (See Jomo Kwame Sundaram 2002. Ugly Malaysians? South–South Investments Abused, Chapter 5, Institute for Black Research.
The point is not that cronyism and corruption are absent in Malaysia, but that projects involving cronyism and kickbacks are generally economically viable as well. Where Malaysia’s Employees Provident Fund invests in viable road and power projects, which no doubt involve kickbacks and cronyism, Tanzania’s NSSF invests in bogus projects doomed to fail like Dege Eco Village, where cronyism and kickbacks drive the entire project, not economic viability.
It's the institutions stupid!
The total absence of any attempt to reign in the daylight robbery of pension contributions of hundreds of thousands of working- and middle-class Tanzanians is an appalling reflection of the poverty of our governing institutions and the terrifying hegemony enjoyed by our ruling elite.
A decade after Escrow there is no parliamentary PAC with teeth and no investigative capacity in the private press, and Dr Dau is allowed the space to pontificate about the developmental role of pension funds when his own role in the routine plunder of NSSF money in Dege and other bogus projects for more than two decades has never been publicly questioned. When Magufuli promoted Dau to diplomatic status in 2016, a dozen NSSF managers were suspended pending investigations of corruption by PCCB. As usual, the second layer of corrupt officials carries the can for the main offenders.
Though much is known about Dege, much remains unclear. For example:
- How much has Dege cost NSSF contributors to date?
- What role did Dr Dau play in creating the Dege EcoVillage project?
- What payments have been made to Azimio Housing Estate Limited?
- What was the fate of the 12 NSSF officials arrested on suspicion of corruption?
- The number of the fund’s contributors and pensioners. How many workers are being ripped off 20 percent of their wages and salaries on a monthly basis?
- The number of NSSF offices, staff numbers and wage-bill countrywide.
- Trends in NSSF income from contributions and investments.
- NSSF ‘loans’ to CCM and opposition politicians for constituency development purposes ,and repayment rates.
- Etcetera.
President Samia to the rescue?
But there is hope. In the last two years, the present government has loosened up on press censorship, backed down on laws to limit private research and polling, and allowed opposition parties to hold rallies unmolested, all in an attempt to distance itself from the undemocratic excesses of the Magufuli regime. These are all steps in the right direction, but they do not amount to basic institutional change. To address Dege and all the plunder and squandering that has gone on in NSSF over the years would require at least:
- An activist and incorruptible Public Accounts Committee in the Bunge.
- Investigative capacity in Tanzania’s media.
- Public interest civil society organisations prepared to ‘speak truth to power’, and
- A criminal justice system (including the PCCB) prepared to initiate and prosecute cases against the main perpetrators of NSSF theft.
- A ruling elite committed to transparent and accountable government.
