Why Tanesco overhaul was bound to happen

Dar es Salaam. The government yesterday overhauled the power utility in an effort to increase efficiency and unlock its potentials.

President Samia Suluhu Hassan appointed former head of the disbanded Presidential Delivery Bureau, Mr Omary Issa, as new Tanzania Electric Supply Company Limited (Tanesco) board chairperson, MultiChoice’s Maharage Chande to be managing director and transferred five senior officials from the financially-troubled state company.

The reforms were necessitated by the performance of the entity, which is marred by power outage complaints, political interference and debts approaching Sh1 trillion.

The new top management and board members include members with vast experience from the private sector, signalling a move to embrace business culture in the company which enjoys monopoly of the power transmission and distribution.

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

The minister for Energy, Mr January Makamba, who has made remarkable comments about electricity supply since his recent appointment, hinted on the “major reforms” saying the company was operating like it was in the 19th century.

He said the company had the largest annual revenue in the country, estimated at Sh1.8 trillion and all was spent while debts approaches Sh1 trillion.

According to him, 88 percent of the revenue was generated through sale of electricity to 3.2 million users. “There is a great possibility to triple the number of customers,” he said.

Deficiencies

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

In a 2019 public authorities audit report which was released in March this year, the Controller and Audit General (CAG) Charles Kichere listed some deficiencies noted at Tanesco, Tanzania Ports Authority (TPA), Tanzania Post Corporation (TPC) and Tanzania Telecommunication Company Limited (TTCL) which he said limit the entities from competing in the market.

The challenges relate to financial constraints, inadequate investment in technology, low implementation of strategic projects, longer turnaround days, and slow pace in collection of outstanding receivables which could boost their financial strength and invest in profitable venture.

Tanesco is said to be one of the largest employers in the country with close to 8,000 staff and 6,000 casual workers but there are still complaints of delayed response in case of power challenges.

Mr Makamba said with the current Tanesco revenue estimated at Sh1.8 trillion and assets of up to Sh13 trillion, the largest of all local companies, should not struggle the way it is today. 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 to lose a maximum of five percent.

“This is not acceptable at all,” said Mr Makamba, adding that 120 megawatts (MW) which is enough to connect eight regions (Iringa, Njombe, Ruvuma, Tabora, Manyara, Singida, Lindi and Mtwara) was lost last year alone.

The minister also accused the utility of operating in the old way even as the world was moving rapidly technologically.

He cited an example of it having no modern tools to detect power outage in its lines.

Unutilised potentials

The CAG also reported that some power plants were not producing to their full capacity, forcing Tanesco to dispatch expensive sources of energy to cover the country’s demand.

The report cited an example of Kinyerezi I and Kinyerezi II plants which generate only 290 MW while the installed capacity is 398 MW, leaving some 108 MW unutilised.

Political interference

Tanesco was also faced by 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, Prof Sospeter Muhongo, revoked an 8.5 percent increase in power charges that was approved by the Energy and Water Utilities Regulatory Authority (Ewura).

Tanesco managing director Felchesmi Mramba was subsequently fired, with President John Magufuli saying that increasing electricity prices was a sabotage to the government’s efforts to industrialise the economy.

In March 2017, the then CAG Prof Mussa Assad said Tanesco’s accumulated debt was in the form of capacity and energy charges from five Independent Power Producers (IPPs)/Emergence Power Producers (EPPs).

He 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 recommend that the energy charge tariff approved by Ewura should reflect the actual cost incurred by Tanesco after taking into account the costs relating to capacity and energy charges paid to IPPs and EPPs. He said the price should also include a margin to allow the state company meet its other operational costs and additional investment costs to enhance its sustainability.

However, in response to the recommendation, the government rejected to increase the tariff to reflect the operating cost, saying that the move would cause “diverse impact to the country’s economy.”

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