How private sector influence is changing Tanesco's fortunes

The agency, which enjoys a monopoly on power transmission and distribution, was financially troubled, making it unable to perform at its full capacity.

The government reforms saw changes in top management and the board.

By that time, Tanesco’s performance was characterised by power outage complaints, political interference, and debts close to Sh1 trillion. The new top management and board members included members with vast experience from the private sector, signaling a move to embrace business culture and efficiency in the state-run company.

The new team also included people who worked with the disbanded Big Results Now (BRN) initiative, which was established under President Jakaya Kikwete's administration to solve development challenges through quick and efficient results in the priority sectors of education, energy, agriculture, water, transport, health, business environment, and resource mobilisation.

Deficiencies

The Minister for Energy, Mr January Makamba, who then visited the firm in his first official trip since appointment, hinted at the "major reforms," saying the company was operating like it did in the 19th century.

He said the company had the largest annual revenue in the country, estimated at Sh1.8 trillion by that time, but all the money was being spent while debts approached Sh1 trillion.

According to him, 88 percent of the revenue was generated through the sale of electricity to 3.2 million users.

"There is a great possibility to triple the number of customers," he said.

The Controller and Auditor General (CAG) has repeatedly raised concerns over deficiencies that affect the performance of state entities, including Tanesco.

In a 2019 public authorities audit report that was released in March 2021, the CAG, Charles Kichere, listed some deficiencies noted in Tanesco, which he said limited the entity from competing in the market.

The challenges related to financial constraints, inadequate investment in technology, low implementation of strategic projects, longer turnaround days, and a slow pace in collection of outstanding receivables, which could boost their financial strength and encourage them to invest in profitable ventures,

Mr Makamba said Tanesco was one of the largest employers in the country, with close to 8,000 staff and 6,000 casual workers, but there were still complaints of delayed response in cases of power challenges.

Mr Makamba said with the estimated Sh1.8 trillion in Tanesco revenue by that time and assets of up to Sh13 trillion—the largest of all local companies—it should not struggle the way it did.

He said Tanesco’s old power machines caused it to lose up to 16 percent of the power generated, far above the international standard, which allows for a maximum loss of five percent.

The minister cited the example of 120 megawatts (MW) that were lost in 2020 alone, adding that it’s enough to supply eight regions with electricity.

Mr Makamba also accused the utility firm of operating in the old way even as the world was moving fast technologically.

Political interference

Tanesco was also faced with political interference, with politicians turning down some of the decisions made by the management. In January 2017, for instance, the then Energy and Minerals Minister revoked an 8.5 percent increase in power charges that had been approved by the Energy and Water Utilities Regulatory Authority (Ewura).

Tanesco managing director Felchesmi Mramba was subsequently fired for what was described by then President John Magufuli as "sabotage to the government’s efforts to industrialise the economy."

In March 2017, the then CAG, Prof Mussa Assad, said Tanesco bought power at an average price of Sh544.65 per unit and sold it at Sh279.35 to customers, leading to a loss of Sh265.30 per unit.

To revive Tanesco and make the company perform effectively, he recommended that the energy charge tariff approved by Ewura reflect the actual cost incurred by Tanesco after taking into account the costs relating to capacity and energy charges paid to independent power producers (IPPs) and emergency power producers (EPPs).

He said the price should also include a margin to allow the state company to meet its other operational costs and additional investment costs to enhance its sustainability.

In response to the recommendation, the government rejected increasing the tariff, saying that the move would have a "diverse impact on the country's economy."

Instead, the government stated that it had been providing subsidies to the utility in order to enable it to meet its financial obligations and render the required services to its customers.

Achievements of new management

Under the new management, Tanesco has become a profitable entity. According to the company managing director, Mr Maharage Chande, the company recorded a profit of Sh109.45 billion last year.

The government rescued Tanesco and Tanzania Petroleum Development Corporation (TPDC) by converting their debts of about Sh5 trillion into equity.

The move was meant to clean the balance sheet and build the parastatals’ capacity.

Tanesco also changed the electricity connection tariffs to reflect the operating costs and sustain the delivery of services.

Previously, it charged a flat amount of Sh27,000 for connecting electricity in both rural and urban areas.

The cost was increased to between Sh320,960 and Sh696,670 for a single phase, depending on the distance from the line.

Tanesco’s new management has also embraced technology by introducing a new digital system that allows prospective customers to apply for electricity connections without physically visiting the company offices.

Called Nikonekt, the application also enables users to follow their application status and view a list of valid contractors.

Tanesco has also changed the way customers can report emergency cases.

The agency has established a customer care unit, operated by an outsourced team that receives customer calls through a central phone number.

The customer care officer reports the incident to the nearby Tanesco office for response to the respective emergency case.