15 July 2014

Tanzania: Ex-CEO of Tanzania ports faces fraud charges over bloated Chinese contract

Dar es Salaam — The former head of Tanzania Ports Authority and his deputy were charged on Monday with fraudulently awarding a bloated contract worth more than $523 million to a Chinese company to expand the city's main port.

The port expansion was abandoned earlier this year after officials reported that costs from China Communication Construction were double those for similar port projects.

Efraim Mgawe, the former chief executive, and his deputy Hamid Koshuma were arraigned in Dar es Salaam court on charges of fraud and abuse of their authority by illegally awarding a tender in December 2011 to the Chinese company without obtaining competitive bids.

Mgawe and Koshuma denied the charges and were released on bail, pending further investigations. Mgawe had been suspended from office last year after allegations surfaced of cargo and oil theft at the port.

The charges come hardly a month after another senior official with the country's state-run utility firm TANESCO was charged with embezzlement after he had allegedly awarded a lucrative contract to a company he jointly owns with his wife.

Principal State Attorney Oswald Tibabyekomya alleged that the lack of competitive bidding for the port project was designed to give undue advantage to the Chinese firm.

Tanzania Transport Minister Harrison Mwakyembe in presenting budget estimates to parliament for the 2014/15 fiscal year said that the costs from the Chinese company were far out of line.

"We also discovered that so many other things were not included in the contractor's plan, which made us realize that the contractor had no good intention," he was quoted as saying.

Foreign bribery and China

Business with China is booming in the east African nation. China is the second largest source of foreign investment in Tanzania, rising from $700 million in 2011 to US$2.17 billion last year, according to Tanzania Investment Centre (TIC).

Most of the investments are in infrastructure - railways, ports, buildings, road construction, gas pipelines and wind power farms - which has helped boost Tanzania's economic growth and created over 150,000 direct jobs, TIC said.

Western companies and their governments complain that China turns a blind eye to bribery of foreign officials to garner international business, making it difficult for them to compete for contracts.

Open Data for International Development (AidData) also shows that Beijing has become Tanzania's largest single trading partner, accounting for 15 per cent of the country's trade volume in 2012, valued at $2.47 billion.

South Africa, the United Kingdom and Canada also are major sources of foreign direct investment for Tanzania accounting for about 71.5 percent of total FDI inflows.

Editing by Stella Dawson; stella.dawson@thomsonreuters.com

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