Tanzania: Tanroads Terminates Norconsult Contracts
The Citizen (Dar es Salaam)
9 June 2008
Posted to the web 9 June 2008
Tom Mosoba
The Tanzania National Roads Agency (Tanroads) has terminated all its contracts with Norconsult AS of Norway, The Citizen can reveal today.
Tanroads is also demanding over Sh3 billion from the engineering consulting firm.
The Citizen could not reach Norconsult AS president and CEO John Nyheim for the whole of last week to comment on the latest development.
In an official letter dated May 21, 2008, Tanzania National Roads Agency (Tanroads) CEO Ephraem Mrema directed Norconsult AS to immediately surrender all projects it was undertaking in Tanzania.
The Tanroads move came a few weeks after The Citizen reported exclusively that the company had been operating illegally in the country for nearly a decade.
According to the letter, Tanroads has with immediate effect cancelled projects worth Sh7.1 billion that were at various stages of implementation by Norconsult AS.
Mr Mrema said Tanroads had already paid the Norwegian firm Sh3.31 billion, which it has demanded to be refunded.
Many of the projects involve the building of roads and were being jointly undertaken by Norconsult AS and its local affiliate Norconsult Tanzania Ltd.
Mr Mrema also said in his communication that the Norwegian company would be liable to compensate Tanroads for any losses it may incur in the engagement of other consultants to complete work previously undertaken by Norconsult.
"Also you will be required to compensate Tanroads for the advantages you gained from works contracts relating to expenses for usage of motor vehicles, office facility and accommodation for consultant," read part of the four-page letter.
The letter was copied to the Infrastructure Development permanent secretary, Norwegian ambassador, Tanzania Revenue Authority (TRA) commissioner general, Engineers Registration Board (ERB), World Bank and Nordic Development Fund based in Helsinki.
Mr Mrema said Tanroads had decided to halt its working relationship with Norconsult because the firm had been operating since 2002 without registration from ERB.
According to our findings, the Norwegian firm had also been operating in Tanzania since 1998 without official registration from the Business Registration and Licensing Agency (Brela).
It was only in March this year that it sought Brela registration.
Mr Mrema also accused the company of alleged fraud, saying it evaded paying tax to TRA as stipulated in their contracts.
Reports and documents seen by The Citizen indicate Tanzanian authorities are already probing the Dar office of Norconsult for tax evasion amounting to Sh2.4 billion for the period between 2002 and 2007.
Mr Mrema wrote in his letter; "Any reasonable person would conclude that your persistent evasion of taxes from 2002 to date and not registering with mandatory professional boards and with other relevant authorities from 2002 to 26/3/2008 while undertaking assignments in the above contracts cannot be taken as unintentional but deliberately premeditated, pre-arranged and designed for the purpose of taking away money and other contractual advantages you did not deserve.
"This defeats the spirit of observing the highest standard of ethics during execution of those contracts which is the standard you were obliged to observe."
The Tanroads move effectively puts paid to attempts by Norconsult AS to amend its relations with the Government after it had taken a unilateral decision to withdraw from the country while leveling corruption allegation against its local partners.
Mr Nyheim May announced in May that the company was pulling out of Tanzania over corruption that he said had cost its operations Sh332 million in its Dar es Salaam office and contravened its global operation ethics.
He blamed the pullout on Norconsult Tanzania, whose managing director Francis Kifukwe was removed from the post.
He said its local office had been closed down and all operations moved to Norway from where it will operate.
But soon after the government threatened to sue the firm for breach of contract, he reversed the decision and said they will be committed to finishing the remaining projects.
It was not made immediately clear how the business would be run from Norway without a local office.
The Tanroads letter would therefore come as a surprise to the Norwegian firm that has established its name as a major consulting engineering firm in many other countries and also raise more questions with its dealing with its local affiliate.
Sources have told The Citizen that Norconsult AS and Norconsult Tanzania have been at loggerheads since the row on its legal backing in the country broke out.
The two firms have hitherto maintained a relation as one running unit that blurred their line of responsibility and fueled the alleged illegal tax evasion.
Mr Kifukwe, who had earlier been listed as "sacked", was later said to have voluntarily left the operations, but he has since not been keen on explaining to the press what could be going on within the Norconsult operations in the country.
When he was announcing the deciaion to quit Tanzania, Mr Nyheim said: "Internal and external reviews of the activities of Norconsult's partly owned subsidiary in Tanzania have revealed activity that is not in accordance with the company's Code of Ethics and contracts."
He said the misconduct was revealed through Norconsult's own internal review followed by an external review by PricewaterhouseCoopers (PwC).
"It has been established that in the past several irregular cash payments have been made from Norconsult's partly owned subsidiary in Tanzania, NTZ, totalling approximately NOK (Norwegian Kronor) 650.000 (Sh156 million)," he said.
He noted that last year, $146 500 (Sh176 million) had been paid out in cash from the project office in Dar es Salaam, with only petty cash receipts as documentation.
This particular case apparently involved Norconsult's participation in the World Bank funded Dar es Salaam Water and Sanitation Project (Dawasa).
Some of the projects being run by the firm include Marangu-Rombo Mkuu, Usagara-Geita, Tarakea-Kamwanga and the Unity Bridge on the Tanzania-Mozambique border.
The firm was also doing a feasibility study and design for the Nzega-Tabora road.
Other projects, in which the company has been involved in recent years, include the Sengerema-Busagara road (Sh35.7 billion), Geita-Sengerema road (Sh39.5 billion) and the Unity Bridge is southern Tanzania.
Others are the Rongai-Kamwanga road (Sh14.5 billion), Marangu-Rombo Mkuu road (Sh23.3 billion) as well as the Tarakea-Kamonaga and Mwika-Kilacha roads.
Others include the World Bank-funded Dar es Salaam Water Supply and Sanitation Project, a joint venture with a local company and a reported Dutch firm that was signed in July 2003.
A Norwegian publication, Development Today, says the $6.7 million project might lead to Norconsult's blacklisting by the Work Bank
The Citizen (Dar es Salaam)
9 June 2008
Posted to the web 9 June 2008
Tom Mosoba
The Tanzania National Roads Agency (Tanroads) has terminated all its contracts with Norconsult AS of Norway, The Citizen can reveal today.
Tanroads is also demanding over Sh3 billion from the engineering consulting firm.
The Citizen could not reach Norconsult AS president and CEO John Nyheim for the whole of last week to comment on the latest development.
In an official letter dated May 21, 2008, Tanzania National Roads Agency (Tanroads) CEO Ephraem Mrema directed Norconsult AS to immediately surrender all projects it was undertaking in Tanzania.
The Tanroads move came a few weeks after The Citizen reported exclusively that the company had been operating illegally in the country for nearly a decade.
According to the letter, Tanroads has with immediate effect cancelled projects worth Sh7.1 billion that were at various stages of implementation by Norconsult AS.
Mr Mrema said Tanroads had already paid the Norwegian firm Sh3.31 billion, which it has demanded to be refunded.
Many of the projects involve the building of roads and were being jointly undertaken by Norconsult AS and its local affiliate Norconsult Tanzania Ltd.
Mr Mrema also said in his communication that the Norwegian company would be liable to compensate Tanroads for any losses it may incur in the engagement of other consultants to complete work previously undertaken by Norconsult.
"Also you will be required to compensate Tanroads for the advantages you gained from works contracts relating to expenses for usage of motor vehicles, office facility and accommodation for consultant," read part of the four-page letter.
The letter was copied to the Infrastructure Development permanent secretary, Norwegian ambassador, Tanzania Revenue Authority (TRA) commissioner general, Engineers Registration Board (ERB), World Bank and Nordic Development Fund based in Helsinki.
Mr Mrema said Tanroads had decided to halt its working relationship with Norconsult because the firm had been operating since 2002 without registration from ERB.
According to our findings, the Norwegian firm had also been operating in Tanzania since 1998 without official registration from the Business Registration and Licensing Agency (Brela).
It was only in March this year that it sought Brela registration.
Mr Mrema also accused the company of alleged fraud, saying it evaded paying tax to TRA as stipulated in their contracts.
Reports and documents seen by The Citizen indicate Tanzanian authorities are already probing the Dar office of Norconsult for tax evasion amounting to Sh2.4 billion for the period between 2002 and 2007.
Mr Mrema wrote in his letter; "Any reasonable person would conclude that your persistent evasion of taxes from 2002 to date and not registering with mandatory professional boards and with other relevant authorities from 2002 to 26/3/2008 while undertaking assignments in the above contracts cannot be taken as unintentional but deliberately premeditated, pre-arranged and designed for the purpose of taking away money and other contractual advantages you did not deserve.
"This defeats the spirit of observing the highest standard of ethics during execution of those contracts which is the standard you were obliged to observe."
The Tanroads move effectively puts paid to attempts by Norconsult AS to amend its relations with the Government after it had taken a unilateral decision to withdraw from the country while leveling corruption allegation against its local partners.
Mr Nyheim May announced in May that the company was pulling out of Tanzania over corruption that he said had cost its operations Sh332 million in its Dar es Salaam office and contravened its global operation ethics.
He blamed the pullout on Norconsult Tanzania, whose managing director Francis Kifukwe was removed from the post.
He said its local office had been closed down and all operations moved to Norway from where it will operate.
But soon after the government threatened to sue the firm for breach of contract, he reversed the decision and said they will be committed to finishing the remaining projects.
It was not made immediately clear how the business would be run from Norway without a local office.
The Tanroads letter would therefore come as a surprise to the Norwegian firm that has established its name as a major consulting engineering firm in many other countries and also raise more questions with its dealing with its local affiliate.
Sources have told The Citizen that Norconsult AS and Norconsult Tanzania have been at loggerheads since the row on its legal backing in the country broke out.
The two firms have hitherto maintained a relation as one running unit that blurred their line of responsibility and fueled the alleged illegal tax evasion.
Mr Kifukwe, who had earlier been listed as "sacked", was later said to have voluntarily left the operations, but he has since not been keen on explaining to the press what could be going on within the Norconsult operations in the country.
When he was announcing the deciaion to quit Tanzania, Mr Nyheim said: "Internal and external reviews of the activities of Norconsult's partly owned subsidiary in Tanzania have revealed activity that is not in accordance with the company's Code of Ethics and contracts."
He said the misconduct was revealed through Norconsult's own internal review followed by an external review by PricewaterhouseCoopers (PwC).
"It has been established that in the past several irregular cash payments have been made from Norconsult's partly owned subsidiary in Tanzania, NTZ, totalling approximately NOK (Norwegian Kronor) 650.000 (Sh156 million)," he said.
He noted that last year, $146 500 (Sh176 million) had been paid out in cash from the project office in Dar es Salaam, with only petty cash receipts as documentation.
This particular case apparently involved Norconsult's participation in the World Bank funded Dar es Salaam Water and Sanitation Project (Dawasa).
Some of the projects being run by the firm include Marangu-Rombo Mkuu, Usagara-Geita, Tarakea-Kamwanga and the Unity Bridge on the Tanzania-Mozambique border.
The firm was also doing a feasibility study and design for the Nzega-Tabora road.
Other projects, in which the company has been involved in recent years, include the Sengerema-Busagara road (Sh35.7 billion), Geita-Sengerema road (Sh39.5 billion) and the Unity Bridge is southern Tanzania.
Others are the Rongai-Kamwanga road (Sh14.5 billion), Marangu-Rombo Mkuu road (Sh23.3 billion) as well as the Tarakea-Kamonaga and Mwika-Kilacha roads.
Others include the World Bank-funded Dar es Salaam Water Supply and Sanitation Project, a joint venture with a local company and a reported Dutch firm that was signed in July 2003.
A Norwegian publication, Development Today, says the $6.7 million project might lead to Norconsult's blacklisting by the Work Bank
