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Tanzania: Richmond - briefcase firm that won lucrative tender

Summary & Comment: The Tanzania government fell on Thursday, in the parliamentary sense, with the release of a report on the Richmond power generating contract. The report identified Prime Minister Edward Lowassa as one of the architects of the 2006 contract between Texas-based Richmond Development Company and the Tanzanian government to provide the latter 100 MW to the national grid for US $179 million. The generators never arrived, and Richmond appears not to have been a real company but a shell corporation. Lowassa resigned, and President Kikwete subsequently fired the entire cabinet. On Friday Kikwete appointed a new cabinet, led by a new Prime Minister, Mizengo Pinda. Will President Bush due next week in Tanzania to showcase this íAfrican success show up? DH

Author: Rose Athumani Date Written: 7 February 2008
Primary Category: Eastern Region Document Origin: The Citizen, Dar es Salaam
Secondary Category: -none- Source URL: http://www.thecitizen.co.tz/
Key Words: Tanzania, power contract default, cabinet,

African Charter Article #21: All peoples shall freely dispose of their wealth and natural resources for their exclusive interest, eliminating all forms of foreign economic exploitation. (Click for full text...)



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Tanzania :† Richmond -†briefcase firm that won lucrative tender

Until June 2006, Richmond Development Company (RDC) was barely known to the Tanzanian public; but since then, it has quickly assumed notoriety for being arguably the most talked about firm in the country.† The firm previously linked to an almost forgotten attempt to implement the suspended construction of the Dar es Salaam-Mwanza oil pipeline, has generated a lot of heat, this time around over a lucrative tender to generate emergency power.

An apparent or suspect delay in generating even the first 20MW of the total 100MW supply contract, and with company officials sending mixed signals, Richmond had so far proved an enigma in President Jakaya Kikwete�s administration.† Events that led to the re-emergence of Richmond began early in 2006, when the country�s hydropower generation deteriorated owing to persistent drought.† Faced with a major electricity supply crisis then, Tanesco advertised a tender for emergency power supply and opened the way for what is now the Richmond story. Following the genesis of some of the major highlights around the matter:

Sometimes in February 2006, TANESCO rejects applications from a host of companies, Richmond included, for supply of 100MW of emergency power. The reasons given were that the applicants were incompetent and did not meet specified requirements, including showing financial capabilities and providing sureties.† A few days later, TANESCO floats suggestions that SONGAS be single-sourced to supply the power due to its experience.† But in an interesting twist, SONGAS, which had been given the go-ahead to present a programme, was stopped by the then Minister for Energy, Dr Ibrahim Msabaha, who then moves the tendering process to the ministry headquarters.

On June 23 2006, Richmond reportedly defeats other firms to sign a $172.5million contract to generate 100MW for two years with a possibility of renewal for up to five years.† The Government, through Dr Msabaha, announces that initial generation for 20MW by the firm would be available in October 2006 while the balance would be in place by December 2006.† Soon afterwards in early September 2006, Richmondís troubles began when the company failed to secure a guarantor to obtain a letter of credit from a commercial bank to implement the project.

It is reported that foreign banks in the US, the apparent home base of Richmond, refused to offer support after it reportedly failed a due diligence exercise. On September 12, Dr Msabaha announces at a press conference that CRBB Bank had offered the missing letter of credit to bail out Richmond. On September 27, William Pate, an official in the Texas Secretary of Stateís office (the department that registers private corporations in Texas), tells The Citizen that his office has no record on Richmond Development Company.

The US Business Directory puts Richmondís local sales in the United States in the range of $1,000 to $499,000 per year and also listed the number of the companyís employees at between 1 and 4. On October 8, Richmond fails to beat the dateline for availing the first 20MW turbine as had been promised. The date was quoted when President Jakaya Kikwete inspected various power projects a week earlier and also when Prime Minister Edward Lowassa visited SONGAS. Earlier, a State-owned newspaper blamed the failure on refusal by Treasury to release $10m (Sh12.5b at the time) as down payment to enable the firm lease and airlift the turbine from US.

On October 20, Richmond issues a press statement stating that the company was finally airlifting gas turbines to Dar es Salaam from US. On the same date, The TIC Executive Director, Emmanuel ole Naiko confirmed to The Citizen that the company had a week earlier filed for registration and investment incentives. Records held by Brela show that Richmond Development Company was officially registered on July 13 2006 and received a certificate of incorporation number 57014, exactly 20 days after it had signed the power contract. The companyís authorized share capital was given as Sh1.26bn.

Mr Mohammed Gire, (750,000 shares), a Tanzanian born businessman currently living in the US, is the majority share holder while Mr Naeem Gire, who is believed to be his blood relative, holds the rest of 250,000 shares to make a total of a million shares. After flying in the generators, the firmís financial director, Mr Zahoor Gire, announces that generation was expected to commence in December 2006, at the latest.

On November 24, 2006, Mr Nazir Karamagi replaces Dr Msabaha, removed in circumstances believed to be related to impatience with Richmond, defends its hiring saying it offered a cheaper price and showed the potential to act fast.
He also revealed that the remainder of generators would now be shipped from South Africa and not US as said before by officials. Mr Karamagiís move followed concerns by Tanzaniaís major donors, the business community and professionals who expressed displeasure on the manner in which the government handled the energy crisis and the emergency projects.

After missing the December dateline to generate the 20MW, on December 11, 2006, Richmond turns the heat on the Tanesco, whom it accuses of supplying sand-filled labeled natural gas, allegedly hindering its envisaged generation of power.
On December 12, 2006, the Minister for Planning, Economy and Empowerment, Dr Juma Ngasongwa, comes to Richmondís defence claiming it had been denied the use of the Songo Songo gas by SONGAS. December 13, 2006: Mr Karamagi witnesses the fitting of gas filters by Richmond following a row over dirty gas with TANESCO.

December 17, 2006: Richmond Development Company approaches South African based company, Dowans Holdings, to cut a deal in a desperate effort by Richmond to hang on to the lucrative $172.5million emergency power supply contract.

March 29, 2007: Dowans, the company that bought off Richmond Development Company, is slapped with a $10,000 per day penalty notice for failing to beat the deadline.

At the same time it emerged that Dowans was raising concern about incurring extra expenses to the tune of $500, 000 in unexpected costs to get the contract going.
Around May 2007, the State-run anti-corruption watchdog announces that investigation had found no irregularities in the Richmond power supply deal.
Mid-November 2007: The speaker of the National Assembly, Mr Samuel Sitta, forms a parliamentary committee to investigate the evaluation and the entire tendering process leading up to the controversial decision to award the contract to Richmond.

December 10, 2007: A team of five of the parliamentary committee team left for Washington DC, USA seeking to establish Richmondís existence and competence to run a multibillion-shilling project. December 24, 2007: It emerged that the government is to pay Sh100 billion in energy charges alone to Dowans, the company that inherited the 100-megawatts power generation contract from Richmond.

February 4, 2008: The national assembly speaker, Mr Sitta, postpones a trip to the US to preside over the presentation of the Richmond report in Parliament by the probe team.† February 6, 2008: The report is presented in Parliament where a number of top ranking government officials including the Prime Ministerís Office are implicated.

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