JPM calls for a review of Ticts lease contract

Dar es Salaam. President John Magufuli has directed Tanzania Ports Authority (TPA) to review its contract with Tanzania Internal Container Terminal Services Limited (Ticts), five months after Controller and Auditor General (CAG) Musa Assad revealed that it is marred by numerous shortfalls.

In his maiden tour of Dar es Salaam Port yesterday, the President tasked the ministry of Works, Transport and Communication to oversee talks between the two parties and ensure the country gets what it actually deserves from the contract.

Back in April this year, the CAG tabled in Parliament his 2014/15 Audit Report of the public entity and others, listing a number of deficiencies in the contract and suggested that “the government should review the Ticts lease agreement with a view to ensuring that public interests are protected therein.”

The government through Parastatal Sector Reform Commission (PSRC) and TPA entered into a 10-year lease with Ticts and International Container Terminal Service Inc, (ICTASI) on May 5, 2000. The lease became effective later in September when designated area together with identified equipment and spares parts were handed over to Ticts.

The CAG noted that according to Clause 9.1 of the lease agreement, amendment to the term of the lease isn’t permitted. However, on December 30, 2005, five years before the expiry of the terms of the lease agreement, Addendum No 2 to the lease agreement was executed, in which case the lease period was extended from 10 to 25 years.

For that, the CAG recommended: “The legal implication of the extension of the lease agreement before the first lease agreement had expired, should be considered and evaluate the possibility of terminating the lease agreement.”

Ticts was also given an additional operational area comprising of Berth No.8 and its surrounding/back-up area together with Ubungo Inland Container Depot which were not previously in the lease agreement.

The CAG Report noted that the objectives of privatisation was to let go areas or entities which were underperforming in order to enhance productivity. However, contrary to that, the lease agreement covered managing Berths 8-11, including the current container terminal, Kurasini and Ubungo Inland container depots, areas which, according to the management, were very productive.

The report also noted that TPA proposed to PSRC to engage a consultant to establish the overall effect and modality of the new lease. The consultant recommended for the project level of traffic in respect of the new designated area which was a super profit one the government should be paid $50 million to 100 million as extension fee. However, the amount was not paid to the government.

Clause 7.4.2(2) of lease agreement states: “The lease may be terminated if the performance targets in any one year falls short of the target for that year by more than 25 per cent. In 2007, TPA conducted an analysis of Ticts performance since 2000 and based on the poor performance observed, TPA in 2008 served Ticts with a notice of intention to terminate the lease as the agreed targets fell by 26 per cent.

“However, the government through the ministry of Infrastructures directed TPA to put the notice on hold to pave the way for negotiations between the parties,” reads the CAG report in part adding:

“Negotiations were held and culminated in the review of the agreement in 2009 whereby other issues under negotiation were concluded in the MoU signed on October 5, 2009 as working guidelines to improve performance.”

Clause 6.1.6 of Addendum 2 to the contract requires the lessee to widen the ownership of Ticts preferably by offering shares to the general public. According to the agreement, the lessee was required to include a number of Tanzanian shareholders in Ticts by 31st December, 2011 so that Tanzanian shareholders own at least 40 per cent of total shares.

However, the CAG noted that up to the time of concluding his Audit Report in February 2016, there was no evidence of Ticts shares having been offered to the General Public as per the lease agreement.

“TPA management should closely follow up with the matter with Ticts to ensure that Ticts abides to the terms of the lease agreement,” was also part of the CAG recommendations.

Meanwhile, President Magufuli also directed TPA to purchase four brand new scanning machines after learning that out of four existing machines only two were operational.

“The minister, Prof (Makame) Mbarawa is here… I direct you, together with TPA and Tanzania Revenue Authority (TRA), to purchase four machines within the next two months. All cargo that passes through here must be thoroughly inspected so that we can enforce quality control,” he said. He also directed a speeded up procurement process of the flow meters for the port and construction of its own Inland Container Depot (ICD) in Ruvu, Coast Region, in order to avoid private ICDs in the city which he said are being used to evade tax.