Friday, December 30, 2011
January Makamba - @JMakamba
All politicians have a common need: a friendly platform to communicate their ideas, to rationalize their actions, to defend themselves and, a favourite pastime, to attack each other.
Technology has made modern combat lethal, yet impersonal. Gone are the days of the Ngoni warrior up-close battles when the smell of your enemy lingers with you for as long as you lick your wounds or bask in triumph. With technology, you can kill with precision from 45,000 feet up above the skies - in the comfort of a Nintendo-like console.
Likewise with political communication. Technology has made public discourse so impersonal that you can now manage to debate, to offend, to dazzle or make a fool of yourself all in 140 characters – all from the comfort of your bedroom, boardroom, or even bathroom.
Here I am talking about Twitter, a powerful social media platform which no politician worth his or her salt can ignore. Presidents, Kings, Prime Ministers, celebrities and all sorts of journeymen are on it. Twitter has been so lionized lately to a point of suggestion that it facilitates revolutions.
In Tanzania, in recent years, and within a small but important circle of individuals, it has spiced up and opened a new venue for public discourse. But that has not come without pain and pleasure and without annoyance and great rewards.
I joined Twitter reluctantly after a good friend of mine - @chiume - decided to open an account for me in September 2010. And my handle is a safe and uncreative @JMakamba. Also, another good friend of mine - @zittokabwe – who is also a Member of Parliament and who has been active on Twitter for a while, inspired me. Before then, I was a Facebook boy and had figured that nothing could beat the illusory psychotherapy and awesome voyeurism in the Facebook prompt: “What’s on your mind?’
But I was wrong. Twitter proved to be a big hit for me for its sheer power of compelling you to reveal who you really are – no matter how long you try to pretend. It forces slips into honesty and true identity. My experience on twitter has been quite good. As a public figure, you will necessarily have a lot of people who want to hear what you have to say. Questions come in rapid fire - and on matters public and personal. Some with presumptions and insults, some with sincere desire for information and insight. I have learnt the hard way to treat all questions with the presumption of sincerity. I haven’t always been successful. The good thing about Twitter is that it empowers people on it to directly confront their politicians with their questions and ideas without the protocols and formalities. Some have abused this access but to a large extent twitter engagements are civil.
As a politician, you learn to accept and deal with both blame and praise, with ridicule and adoration – it comes with the territory. Because of impersonal nature of social media, questions and confrontations on twitter can be quite bold, visceral, unreasonable and irritating. I have seen colleagues in politics lose their cool on twitter upon provocation. I also have had to tell one gentleman to “get a life” after making a whole lot of meal out of lack of a certain information he thought should have been in the CCM website. One thing is certain on Twitter debates: you cannot win an argument there. And you must not attempt to. You debate on Twitter not with the view of changing someone’s mind but to state and put your views on record.
As a public personality, people read your words carefully. And mainstream press has in recent days been digging for news and quotes from Twitter and Facebook feeds. It places a huge burden to be forced to be always serious and careful on such an informal platform. But somehow Twitter offers this sense of security that it is alright to be frivolous at times, to be emotional in public, and that you must not always take yourself too seriously.
Some of us in politics have massive egos, and flashes of those can be evident on Twitter. You somehow expect those you follow to follow you back. In some cases, that doesn't happen. Depending on the size of your ego, you may take offense. I've learnt not to - and even not to ask for a follow back.
Civil society activists and entertainment industry people dominate twitter in Tanzania – not necessarily by their numbers but by the frequency and intensity of their tweets. As a Tanzanian politician on Twitter, you are more likely to be engaged by civil society activists. In many cases, they will not be asking questions but will be telling you what you should be doing or what is important or how bad things in the country are or, on occasion, peddling the latest negative report on whatever issue they are working on. That is understandable as the “industry” survives on a negative tone.
In general, Twitter can be like a family – and there are a variations of names to affirm this: twifam, twam, twitfam, etc. You start your day with an understanding of the moods of those you follow. You know people without really knowing them. Much as you may resist, you feel obliged to share news – good or bad, to offer sympathy, and to rejoice in the success of others. You witness fights and take sides – even quietly. You search for encryption keys to cryptic tweets. And you become nosy, digging up threads of conversations that have nothing to do with you. And you rejoice in a retweet as if it is an affirmation of your wit or wisdom.
Twitter has also been a good source of news and information for me. Somehow someone on twitter has updates on happenings around town: be it traffic updates, Dar floods, fuel crisis and so forth. And, depending on who or what you follow, you can get a very good aggregate of all news you need – sometimes as they break. I am personally interested in economic development issues and follow a lot of development people and organizations – and, from twitter, everyday I read some interesting reports, updates and news on development issues.
Twitter can also be a place to make real-life connections with people, create friendships and work for common objectives. I have met a lot of interesting people whom we have made connections through twitter. Few highlights includes during my recent trip to India when I tweeted Shashi Tharoor - @shashitharoor – former United Nations Assistant Secretary General, candidate for UN Secretary General post, and currently India’s foremost intellectual and Member of Parliament, and managed to meet and have a good long chat about global politics and development. I also tracked down my old friend Uhuru Kenyatta - @UKenyatta – Kenya’s Finance Minister and Deputy Prime Minister and had breakfast with him in Kampala early this year because he tweeted that he will be there. Through twitter, I got an intern, Economic Development student from Stanford University in California USA, who did fantastic work with the Bumbuli Development Corporation (BDC) last summer. Through twitter, I hired a PA and Administrator for BDC. I have managed to meet so many different people through Twitter and collaborate in undertaking worthy endeavours.
In the end, twitter, just like any other social media, is just a platform. The key is content. We must not celebrate politicians just for being on it – as is often the case – but for how they use it, and how and what they communicate. If you just come on Twitter to post links to your statements on your website, as one politician I know, then just don’t be on it at all. Twitter certainly doesn’t work as a propaganda platform as most people on it are somehow immune to propaganda.
One of the weaknesses of some of us in politics is that we always calculate and peg our actions in terms of votes and elections. Surely, if I am to run again for MP for Bumbuli, I will not be reelected because I am on Twitter or because of things I say on it. And most of my constituents, with almost zero access to the internet, are not on twitter. So, in terms of electoral calculus, I shouldn’t be on Twitter. But I have made a decision that I cannot afford to miss the opportunity to be intellectually challenged, to be quizzed, to be informed, to be annoyed, and to understand the psyche of the urbane and sophisticated segment of Tanzanians who are on Twitter. And I cannot afford to miss the chance to engage the global citizenry that follow Tanzania.
Moral of the story: tweet!
January Makamba is a Member of Parliament for Bumbuli constituency, Chairman of the Parliamentary Committee on Energy and Minerals, and CCM Secretary for Political Affairs and International Relations. He tweets using @JMakamba.
Saturday, November 26, 2011
Monday, November 14, 2011
We have tried a middle of the road type of a socialism that never truly worked. Behind it was an exemplary idealist and once in a generation leader in Mwalimu. Four years into his retirement, Berlin Wall fell; with it, 31 years of socio-economic experiment came to an end—with mixed results. Tanzania is a unified republic with a clear national identity; albeit with unperfected union. At 50 years old, Tanzania’s potential for human development is yet to be realized, the increasing income inequality (the fallacy of 7% growth) is squandering away the social capital that Mwalimu and Mzee Mwinyi had accrued. It has yet been clear to our governments that embracing untamed and imported neoliberal economic policies will not only wreck havoc to our fortunes, but also threatening our social fabric. The 2008 financial crisis was largely caused by income inequality*. Nevertheless, previous Tanzania’s government embraced the market economy wholeheartedly, though in some cases it was imposed upon us. If 17% of your budget is beyond your means, there goes your sovereignty—on everything. But I will argue that our embracing of bad economic policies is mainly caused by a misinformed leadership at helm more than anything.
For starters, our government is a massive, slow bureaucracy that is also inefficient. As it is, our government incentivizes her inefficiency—which sustains the crisis. The longer it takes for your passport to be issued, increases your likeliness to bribe. Why should the passport manager hurry up to issue you a passport? This is the model of our government from bottom-up. Its pretty shitty. No private company would be able to survive under this model. Too bad citizens are not allowed to shop for governments of their residence. That would be the perfect market solution to punish our lousy governments. Surprisingly, national dialogue on development continues to bypass the fundamental flaw of our country, an ancient governing model. As I pointed earlier, this too is the leadership problem.
Tanzanians have always elected career politicians for the presidency. Mzee Mwinyi, Mzee Mkapa, and currently Jakaya Kikwete were all career politicians prior to the presidency. Even opposition parties also nominated career politicians. Dr. Slaa is the embodiment of a career politician, so as Prof Lipumba (by virtue of running more than twice). Folks who after decades of running sections of the inefficient bureaucracy have convinced themselves that, only they have the wisdom to take us to the promise land. But they almost always underperform. To me, this is a manifestation of their lack of policy knowledge, and lack of understanding of intricate ways of the barbarous globalized economy. I am not saying wonkish president will save us, few politicians are wonkier than Bill Clinton and yet he repealed Glass-Steagall Act . I am saying that, the next election might be the appropriate time to elect wonkish president, because for our government to work for the people, it needs a leader who has intimate knowledge of how to reform a demented institution with 6 billion dollars budget. Career politicians do not possess such knowledge. More than anything, he will increase the size of it all to accommodate all his political allies he accumulated over the years. In Italy and Greece, career politicians have all retired leaving the position for more technocratic Prime Ministers. The ground is shifting beneath us.
The next presidential election in Tanzania, might be of the most important for this generation. We still have our social fabric intact, which is vastly needed for any growth; but we do not know how long this fabric will remain intact—with the increasing income inequality**. We will need the president who can best articulate the policy prescription to our government so that she can live within her means, while also protecting the society from the externalities generated by our investors. We ought to look for the leader who can dare to create an income inequality that would benefit the poorest, bridging the technological gap, and reform our rather messed up education system. To get that kind of a leader will require political parties to nominate for more technocrat candidates and shy away from the good ole names that we have been used to hear for decades.
* Stagnant incomes of Americans, made subprime mortgage a trillion dollar industry. Basically, a trillion dollar of garbage loans that did not qualify for government backed security.
**Arab awakening is the results of income inequality that is threatening social fabrics of these countries. Tanzania can be next.
Tuesday, November 1, 2011
Tuesday, October 11, 2011
It’s a laid back place; there is casual sense of urgency. The air is thick, and the sun is shining throughout the year. Her indignant are a unique alloy of diverse pool of people. They have all kinds of blood. There is sound of music everywhere, everyday, all the time. Music leaves here; you will find children moving around with their textbook bags and trumpets on their hands. There is always a distinct sound that follows you everywhere you go. For those who come to visit, you can call them tourists; this is a carefree environment. Where folks choose to retire their orderliness and pursue a lifestyle free of constraints. Liberty at its purest form resides in New Orleans. For those who reside here, this is their way of life.
People here do not need reasons to celebrate. The biggest Halloween party I have ever been stretches over 6 blocks of Frenchmenn Street packed with people on all kinds of costumes. The party will go on all night. On Mexican Independence Day, St. Charles Ave & Antoine Street shuts down and folks party up more than those in Mexico City. There is a weekend of French Quarter Festival which is one of my favorite; live music, good food, and booze at the bank of Mississippi river on the edges of The Quarters. Every Wednesday evening at Lafayette square, locals get a treat of live music and good food—and there is no cover charge. Just show up. St. Patrick’s Day brings out a little Irish in everybody. Although the city is known for its major events like Mardi Grass and Jazz Festival, there are small festivals which take place throughout the year that are equally entertaining. With a little encroachment from those tourists.
You see, you can catch good music at Soul Rebel in Magazine Street, maybe random concert at Tipitina any day of the week. Speaking of Magazine Street, although upscale-ish it resides most comprehensives restaurant and booze joints in the city. Wide selections of beer at The Bulldog, drunken- greasy food at Balcony Bar, and maybe random chilling/sport bars of Rendezvous and Tracies. You can't go wrong with Rum House's Tacos; But the true gem in Magazine Street is The Bridge’s Lounge. A hipster place which also hosts a variety of good music and a diverse crowd of young urbanites. Heading downtown, in central business district and lower garden district are few gems worthy exploring. Many bars in this area are full of Abercrombie & Fitch crowd. The Fraternity crowd extends from The Republic, RedEye, and Lucys. But one joint stands out from the fraternity crowd, 12 Bar on Fulton has been one of my favorite in central business—also Whisky Blue at The W lounge, and LePhare on Gravier St have always been a perfect pre-game pubs.
Mid-City is rather quiet and more residential, but don’t get it twisted. Best fried chicken in the world is at Ms Willie Mae’s restaurant, while best Po-Boys in town are at Parkway Bakery; both located in Mid-City. The best brass band experience in the city is at Candlelight, also in Mid-City, coming with complimentary NOLA’s signature red beans and rice. Every Wednesday night candlelight is lively with brass band music, and you can swiftly transition to Dragons Den’s to cap the night in a reggae club with DJ T.Roy. Mid-city also host the iconic Finns McCool pub, here is where you can catch a live Arsenal game—sipping a fresh Guinness at 9 am. That is how many Saturdays usually start. And Arsenal disappoints most of the time.
The quarters are fun and always crowded, Bourbon being Bourbon, is the epitome of it all. Not being the biggest fan of the quarters, but it remains the center of entertainment in New Orleans. Best brunch joint on weekends at Café Amelie on Royal Street. Probably the best street in the Quarter is Royal, with its mix of residential/restaurant/artistry stores. I caught The Wailers at the legendary House of Blues on Decatur Street. Stretching the Quarters further, you will find Frenchmenn Street, which is always musical. You can catch Little Fred King live at DBA, Brass-A-Hollic at Maison, and a Mannie Fresh concert at Maison’s penthouse. Frenchmenn also host reggae nights on Wednesday, Thursday, and Friday at Dragons Den, Blue Nile, and Café Negril respectively. A very old form of European Jazz and blues is at display at The Spotted Cat, while in Frenchmenn Street, Vaso is always worthy of exploration. You can show up to Frenchmenn at 2 am in Tuesday morning, and you will have fun. Stretching further away from Frenchmenn is Marigny area—and there is Mimis pub located in this part of NOLA. Saturdays night is full of 70s and 80s funk music under the watchful eye of Dj Soul Sista. The Orange Couch coffee shop is also located in this area. Whenever you are in need of a quiet work time, this is the ultimate coffee shop to get work done.
The city is not the same, compared to its pre-Katrina days, but it is definitely not dead. As the matter of fact, very few folks in the city talk about Katrina anymore. Although the population has vastly decreased and low income communities are pushed away from their housings near city center. The City continues to be a distinct place and there is no place like New Orleans. My most memorable NOLA moment began when The Saints won Super Bowl, followed by Saints parade, and Mardi Grass shortly followed; it was crazy!
Thursday, September 15, 2011
Friends, Ladies and Gentlemen,
I would like to thank the membership of CEO Roundtable for your kind invitation to join you for this dinner and speak before you.
I thank you Ali – for your stewardship of this important forum, and as one of thought leaders in business and society.
You have asked me to speak on two very important issues. Electricity and Fuel. These two issues are complex and multifaceted – and greatly implicate the wellbeing of our country.
It is therefore always a challenge, given the time we have, to exhaust all facets of any of these issues, let alone all. So, I will focus on just a few dimensions that are relevant to as many of us as possible.
I will spend more time on energy – as I know that is of particular interest to most of you. And in this respect I would like to recognise your statement made in July, which not only delivered concrete ideas on how to deal with the crisis but also improved the quality of the energy debate – quality which hitherto had been so wanting.
I would hope that these kinds of dialogue – between government and private sector, between Members of Parliament and business community will continue – as we strive to make our country better.
First, what is the situation now? I don’t need to tell you this, but for many years now, the electricity that is generated has not been meeting the demand. In addition, we have not been able to ascertain and plan for the actual demand for power in this country. Still, not being able to meet the demand for only 14 percent of households, for these many years, speaks for the challenge we have in the sector. Anyway, this is another debate, but if we are talking about power shortage as a crisis, then we have really been in a permanent crisis.
According to the Energy Minister’s report in Parliament last month, the installed generation capacity in the country is 1,102MW. For a country of 43 million people, this is a very small amount. As of last month, according to the same report, production at all sources was 623MW. Therefore, as we speak, 479MW that we previously had in the grid is now off grid. This is about 40 percent of the capacity. The current crisis is deeper perhaps because this is a record amount of power to go off the grid. For there to be no load-shedding, we need to add at least 300MW back to the grid.
You obviously have read about what transpired in Parliament last month that led to the initiation of the current emergency measures to deal with the current crisis. My assessment of the plan here tonight is with clear understanding that some of the measures promised are ongoing, but also I recognize that there were milestones to be met before December, including statements made by the Minister last week that there will be movements and relief this week, relief that has so far not materialized. And indeed some of us are duty bound to speak up when we see the public losing trust and confidence in public officials.
So, what entails in the current Emergency Plan?
In short, there are two phases of the Plan. First phase: between July – December, where a total of 572MW is aimed to be added into the grid through additional generation from existing Symbion (37MW) and IPTL (80MW) plants, and introduction of 100MW from Aggreko, 205MW from new Symbion contract, 150MW from NSSF.
Aiming to add 572MW in a matter of four months is quite bold and ambitious. I was excited when it was presented in the Parliament because this kind of ambition and boldness is what I have been calling for. But I was – and I remain – cautiously optimistic. We have seen many broken promises before, most recently the one to generate 260MW by July – a plan that was approved in the cabinet in February but has not materialized up to today.
Nevertheless, we know that the 37MW Symbion generation will be done. We know that Aggreko is already here – because they started the process early during the year (although they were supposed to deliver on August 15). And we all know the story of IPTL – running out of fuel every so often. So, what we are guaranteed by December is at least 137MW.
The 205MW from Symbion is still a “story” as contract has not been signed yet as we speak. Story goes that it is at EWURA waiting for approval. And here lies another question: as a regulator of utility, at what point exactly does EWURA supposed to be involved in power projects? From contract negotiations – as an enforcer of good contracts? Or, during tariff application process – as an enforcer of tariff generated from “prudently incurred costs”? So, while people in government are mentioning Symbion as a solution, Symbion has not yet shipped the plant because I don’t think any businessman would mobilize a $300m equipment without a contract. I still retain confidence that this, in the end, will be done – not so much as a result of urgency in the government bureaucracy, but for the sheer persistence and need for certainty from equipment supplier and contractor.
The 150MW from NSSF – I know I will be unpopular for saying this: but you can forget about it, at least during this year. They promised to deliver 150MW by December with foggy idea of where they are going to get the plant, and where in Dar es Salaam they are going to install it. They relied on word from people who didn’t have even offices, and I heard that a team of 9 people from NSSF and other government institutions went to the United States (why 9 people? I really don’t know) and found nothing. Now, there is yet another word that there is a plant in France – and a team of people is going there again tomorrow to have a look – and do “due diligence”. But this Paris plant is, first, of less than 150MW and, secondly, of Frame Six type – which is technically complex and takes minimally eight months to install. So, it will not be here before Christmas – if in fact that is what they choose to go with. In any case, one expects that NSSF, as a public institution, will procure this plant through a tender process, which again complicates the matter.
So, again this is phase one of emergency plan. What is the cost? 523 billion shillings. What will be TANESCO’s revenues? 115 billion. Deficit: 408 billion. How will it be funded? Through commercial loans. But who will be willing to lend money to TANESCO? None that I know. Therefore, we will most certainly rely on a government guarantee. Now, we just have to be honest with ourselves. This is not just a loan guarantee for TANESCO. This is straight loan to the government. And it will be serviced through taxpayers’ money. And there is an injustice here. 86 percent of households do not have electricity, but through the taxes they also pay, they are in effect subsidizing those 14 percent of us who enjoy it.
Another feature of the financing of this plan is that the payments will be in foreign currency. Power producers are paid in foreign currency and fuel to run these generators are imported by foreign currency. Given the magnitude of the payment – if you add phase two of the Plan, which comes to 1.2 trillion shillings – the plan will have implications on balance of payment, foreign currency reserves and strength of the shilling. So, measures will have to be taken so that these expensive emergency power plans do not come at the expense of the stability of the economy.
For the Second Phase of Emergency Plan – running from January to December 2012, there are three projects, which will aim to bring additional 460MW into the grid. Jacobsen Gas Plant in Ubungo, Semco HFO Plant in Nyakato Mwanza, and another Jacobsen Plant of 150MW in Dar es Salaam as well. The interesting thing about these projects is that the first two were supposed to be finished this year – but they are now termed as emergency plans for next year.
And secondly, there are serious issues of fuel to run these plants. As it is today, there is no enough gas to run the existing gas plants. The earliest time that you can deliver gas to Dar, given the existing gas infrastructure upgrade plans, will be the first quarter of 2013. So, in essence, you will have 250MW of plants sitting idle as white elephants.
I think that it is scandalous to have ordered this Jacobsen gas plant for $124m almost two years ago, and not plan for the gas to run it. There is a talk that once it arrives, the gas currently used by Symbion to produce 75MW will be diverted to this plant and Symbion will run on Jet A1. That is fine, but it does not, and should not, absolve some people at TANESCO and the Ministry for poor planning – and compelling the nation into an expensive proposition.
Of course, they may have ordered dual-fuel plants – meaning that they can fire them using liquid fuel as well as gas. But, if you consider that the entire 572MW of generation between now and December is supposed to use expensive imported liquid fuels, this will mean for more than a year, our country will be generating a total of 1,032MW using imported liquid fuels. This is next to impossible to sustain.
To conclude on the emergency plans, my general view about the emergency plans is that while they are necessary at times, they cannot be something we resort to every time. You can’t be in an emergency for five years – as five years is enough time to sort out a permanent solution. Emergency power should be a bridging power, a temporary solution to give you space to find a permanent solution. My hope, which I expressed in the Parliament, is that this will be the last emergency plan.
And ideas on permanent solutions are plenty. This is a country blessed with almost all sources of energy in plentiful: gas, coal, hydro sources, wind, solar, and geothermal. It is scandalous for a country such as ours to generate grid electricity using expensive imported liquid fuels. The question to ask is why, for instance, we don’t have a single coal plant despite massive amounts of coal in the country. I am sure you have read about these many plans, some in the books since 1980s. I do not intend to review them here.
But I want to say that the main issue is planning. In energy, nothing is more important than planning. And, in energy planning, 10 years is short term. I just hope that our planners have thoroughly thought beyond December 2012, and 2014 when some of these rental contracts will expire and generation will go off the grid.
So, what do I propose as way forward?
1. Sort out TANESCO –
For better or for worse, TANESCO sits squarely at the centre of energy problems or solutions in this country. It is a massive utility that is very impressive on paper. Last year, it booked 500bn revenue. It has operating capital of more than $1bn, and assets worth more than a couple of billion dollars. And it has the capacity to triple its revenue and assets in just five years. Few companies in Tanzania, both private and public, can match these numbers. But TANESCO is not performing as it should – constantly in the red, and having to be subsidised by government. In many other countries, utility companies are blue chips – whose stocks are hot. I remain confident that TANESCO can be the same.
If we can transform TANESCO to what it can be, we may start to see light at the end of the tunnel. But the government will have to figure out what it wants to do with TANESCO. All of us can help to put pressure for the right structure and role for TANESCO.
There have been so many ideas – and so many studies - about the right structure and role for TANESCO. The most popular one is splitting it into three functional and business units.
But the question is: split it and then what? Do you split it but still keep the units in government hands? Or do you privatise all the units or not? Perhaps only one or two? And if so, which ones exactly?
I am in favour of the Kenyan model. TANESCO has too many functions. It generates power, it runs the grid, buys power from IPPs, it owns and operates transmission and distribution system, and it supplies electricity. These are complex functions for one organisation at this point in time. And with the law permitting IPPs and competition in the industry, one can conclude that there is anti-competition environment in the industry. TANESCO should not be negotiating tenders with firms it is by law supposed to compete with – and may one day compete with.
Henceforth, I would say split TANESCO into three functional and business units and issue IPOs for its units. I can guarantee that they will be oversubscribed and you will get all the money you need to invest in energy. Transmission unit will have to be largely owned by government initially – given the big differential between investment and margins. Of course, this is not panacea because the principles of running a business will still have to be adhered to whether you have one or three units, or whether it is a publicly traded company or a parastatal. But at least you will guarantee focus on each business and functional unit. You will also guarantee pressure from shareholders for transparency, better management, better business decisions and accountability for failure – critical elements that are missing at the moment in TANESCO.
In the end, the maturity of business culture and environment will be critical in the success of this idea. The quality of service of each unit will depend on the efficiency of the other unit. Therefore, there ought to exist commercial discipline that ensures that all three units of the industry – generation, distribution and transmission – are legally bound to honour their obligations to each other. The beauty though is that once you get to a level where you have multiple firms in each unit, competition for high performance will arise and end-users will be able to choose who to do business with.
In the meantime, as it is today, TANESCO can and should be able to make sound business and management decisions – only if politicians stop to be its manager and spokesperson.
A lot of us – and even TANESCO – has been talking a lot about putting new power plants to ease the crisis. But electricity is beyond generators. What about repairing transmission and distribution systems that are currently not in good shape?
For instance, last year alone, mainly because of poor transmission and distribution infrastructure, TANESCO lost 21 percent of power it produced and/or bought. This lost electricity amounted to more than 1,200 GWhr – which is more than all electricity used in factories and businessplaces for the entire year, and amounted to about 75 percent of all electricity bought from Songas in the entire year. These are massive losses – which, if curbed, in themselves would have helped with the power situation. But TANESCO will need to invest in Repair and Maintenance for this to be possible. And we know that this is not happening. While it is required by best [utility] industry practice to spend 12 percent of revenue on Repair and Maintenance, TANESCO spent only 2.8 percent of its revenue on R and M between 2005-2008 – and result is lots of broken transformers and service lines and a huge amount of lost electricity.
2. Make it easy for private investment in energy sector
One of the things I hear the most when I talk to businesspeople is how difficult it is to do business in Tanzania – particularly to invest in energy sector. I am told of people who had come here keen on investing on energy but simply could not bear the red tape and the uncertainty. But what I don’t understand is why and how we make it so difficult for people to come in and invest in a sector we so desperately need. The last non-rental private investment in energy in Tanzania was in 2004 – seven years ago. And the last three plants to be built in Tanzania were by the government.
Now, if electricity generation pays – both for private investors and for TANESCO – as it surely does when gas is the fuel, why should the government spend billions of shillings in taxpayer’s money to buy generators?
As it is now, there is no power investment guideline – both in terms of process and basis for PPA negotiations – for investors to rely on. Energy deals are structured so differently depending on how desperate the energy situation is at the time, and permits and approvals depends on the depth of your contacts and the kind of pressure or incentives you are able to put.
This must change. Power projects are complex. Private investors commit a big number of people – some up to 30, lawyers and financial people and so on – in a single project just to get the project to take off. And over here, you have few people who are so scattered across government – TIC, BRELA, NEMC, TRA, EWURA, TANESCO, and Ministry of Energy – and who have so many other things to deal with such that these projects do not receive the needed attention.
I believe that planning and overseeing fast execution of power projects should be coordinated at the very top level of leadership of the country, with absolutely no tolerance for delays and excuses. In Nigeria, President Goodluck Jonathan has formed, and chairs, the Presidential Action Committee on Power (PACP) which consists of Ministers and Heads of Agencies that have a critical role to play in Nigeria’s power sector. It acts like a “War Cabinet” for Nigeria’s power sector, setting policy and granting expedited approvals for critical decisions. The PACP meets every Tuesday, yes, every week! This ensures that issues connected to the power sector enjoy priority attention at the highest level of government. I think we ought to do something like that here given the gravity of the situation – and importance of energy to the economy.
3. Sort out gas issue
Gas, which we have plenty of – and plenty more onshore for the future, is critical for the permanent solution to the power crisis.
So, it is critically important that we sort the fuel question. Why? Because, even if you are able to airlift a 300MW gas power plant to Dar today, you will get Zero power as there is simply no gas. It is not that there isn’t enough natural gas in the country. It is just that we haven’t planned well to extract and get it to where the generators are at critical moment.
As it is today, in this coming year, we will produce more power from very expensive imported fuel than from cheap gas which we already have in the country.
If you consider when gas was discovered and wells we dug in Songosongo, we are 20 years behind in gas utilisation. If we had planned better in terms of gas infrastructure, today 70 percent of our power generation would have been coming from gas. Given the desperate situation we are in today, everyone is talking about gas infrastructure project or a gas power plant. This is good but it requires better planning and coordination. There ought to be coordination on who is doing what and when, and at the same time analysing the implications of all these efforts on price and availability of power. A Gas Master Plan is badly needed.
4. Sort out tariff issue
We seriously need to look at the electricity tariff structure. No doubt that TANESCO could do better to manage its cost of service. But we need to decide in this country whether electricity is a business or a subsidized service. The current tariff is not commercially viable. The government recognizes that the current tariff does not work. That is the reason it is subsidizing to the tune of 5bn shillings per year a private company in Mtwara to sell electricity at a price equal to TANESCO’s.
Not only does the current tariff hurt TANESCO’s balance sheet and its repair and maintenance capabilities, it also discourages private investment in energy sector, particularly in alternative energy. For instance, for solar generation to be commercially viable, the tariff has to be in the upwards of 20 cents (mostly because of the heavy initial investment).
Some may say that it is impossible for the majority of people to afford higher tariff. I don’t believe so. Look at how much Tanzanians are spending on phone airtime. The current tariff structure is such that TANESCO sells power at the more or less the same rate to end-users, regardless of whether it is to a barber shop in Namanga or to a Barrick Gold Mine in North Mara. The tariff should be dynamic and flexible given the volatility in the fuel prices and different capacities of TANESCO customers. There are those who will be willing to pay higher tariff as long as power is steady and reliable. For instance, with industries, power, even at higher price, features insignificantly to the cost of production; but when it is NOT available it is a very significant contribution to losses.
4. Coal, Wind, Solar and Geothermal
Ambition and innovation can – and should – be brought to fore to exploit the four critical sources of energy (coal, wind, solar, and geothermal) that we have in plenty, and which other countries are producing huge amounts of electricity from. There is absolutely no excuse that, as it stands today, all these sources – cheap and plentiful – are not being used to produce electricity.
Coal powered industrial revolution in many developed countries. We have it in plenty – in Ngaka, Mchuchuma, Kiwira and other places. Coal is so cheap that, even if you ferry it in ships from South Africa to generate electricity in Dar es Salaam, that electricity may still be cheaper than the one we are going to produce using diesel.
I am happy that at least there are two companies in Tanzania exploring the possibility of producing electricity through wind. We need to move fast the approval processes.
On solar, few companies have come in to express interest in putting up solar farms – and produce up to 300MW. The issue, of course, with renewable has always been the high tariff. But one company that has such big solar projects in different parts of the world presented a proposal to sell solar power to TANESCO at 25 cents per KW. But we said it is too expensive – which is true because TANESCO sells power at about 10 cents. But then again, we are now buying power from some companies at about 37 cents, power generated from fuels which we import through foreign currency!
Geothermal energy is generated from steam resulting from underground volcanic activity – steam that run turbines to produce power. Many countries with underground volcanic fields – Iceland being the leading one – are producing electricity. Kenya is. There is no reason we shouldn’t. We have more volcanic fields, the Rift Valley, a case in point – and therefore higher potential – than Kenya, but Kenya decided that, by 2018, 50 percent of its electricity will be produced through geothermal. And 25 percent of this year’s Kenya’s energy budget has been set for development of geothermal power. Of course there is a huge initial cost of exploration of fields that discourages the private sector investment. What Kenya has done, and what we ought to do, is establish geothermal authority, in which government funds exploration, and put proven fields to tender. The outcome is that those who win tender even reimburse the government for exploration costs. This we must do.
I want to end up here on energy issue, as there are simply too many things to talk about – things that we may take up as we interact later.
Very briefly on fuel crisis: The nation almost went to a standstill weeks ago when a new price announcement by EWURA resulted into protest by OMCs. It was embarrassing both for the government and for EWURA, causing great inconvenience to the people and businesses. This is what I know:
1. In a new indicative price formula that EWURA used, the platts (base) price for diesel that EWURA used was for a cheaper, high-in-sulphur diesel type that we don’t import anymore (5000ppm). So, that led to an arrival in lower indicative price.
2. The exchange rate that EWURA used was BOT’s with a margin of 20-25 shillings against the actual rate used by importers.
3. We know that ships waits for an average of 30 days to offload fuel at the port – and each day a ship is charged $20,000 – $22,000, and these charges are reflected in the cost of fuel import, and eventually pump price. But EWURA provisioned for 3 days at a cost of $18,000 per day – something against reality.
4. On wharfage (port) cost on diesel, EWURA’s indicative price formula put it at $7 per metric ton, while Tanzania Port Authority charges at $10.4 per metric ton. In Mombasa and Beira, the same is charged at $3 per metric ton. More interestingly, fuel for neighbouring countries that passes through the port of Dar is charged at $3 per metric ton. Now, why would you charge your people $10.4 while neighbours who don’t have ports charge $3? And why would EWURA put wharfage at $7 while it is clear that importers are charged at $10?
5. Then there is an issue of conversion from metric tonnes (used for importation) to litres (used for setting indicative price). The conversion was not realistic.
6. Also, again on exchange rate: the basis that EWURA uses is the rate of first day of the following 14 days that the indicative price is applicable. This would have been okay if fuel importers were paying cash. But we know that most of importers import on credit, and also do not finish their stock in 14 days, and so when the shilling is falling it implicates on their margins.
7. Now, we know that EWURA has been issuing indicative prices since January 2009, and there hasn’t been a crisis like this one despite some of these imperfections. This is because some of these imperfections were taken care by a cushion of 7.5% that EWURA had been featuring in the pricing formula. But EWURA immediately removed it – saying that importers are making too much money.
And then there is a folly of EWURA suspending BP, a company which government has 50 percent stake in. Now, if you could not force a company you partly own – and which you have access to all its books and costs – to abide to your new price, then something must be very wrong. The result of BP suspension is that you also share the loss as a shareholder; and as a big importer TRA suffers in revenues.
A debate in necessity for price setting is one we should have. More importantly, I would think that the relationship, the understanding and communication between the regulator and regulated entities is very critical in the functioning of the industry. There is absolutely no need for public fights and show of machismo. And there is absolutely no need to sow divisions among oil importers and treat them differently and isolate others so that industry regulation can prevail.
So, as Government you can force oil companies to sell fuels at the pumps and deliver it from depots – since you control instruments of order. But you can’t force an importer to place an order from the refineries overseas. From what I hear, and I hope it is not true, some companies have reduced their fuel orders to Tanzania, and some have turned around ships that were heading this way.
The biggest impact of the crisis was not just that weeklong of inconvenience – but the deterioration of confidence in EWURA as a regulator, and more so on Tanzania as a market and reliable place to do business.
Finally, I would like to challenge you to look at the power situation in Tanzania from a different perspective. I think most in business community have looked at it as constant bottleneck to business progress – and rightly so. But we need to broaden that outlook. With our economic growth expected to hit double digits within this decade, infrastructure investment, especially in power, is obviously the next big thing. Seven years from now, conservative estimates show that Tanzania power demands will hit around 10,000 GWh, and triple that by 2030 at 30,000 GWh. Within the next 20 years, the power sector will attract investments of well over $30 billion. Generation costs per kWh are projected to drop substantially to 10 cents from current 15.3 cents, and still by 2020, revenues to power providers are expected to hit $3 billion annually, while their expenditure around $2 billion. At current values of power to the economy, the power sector will contribute well over $11 billion to our national GDP by 2030.
This opens up an array of extraordinarily impressive business opportunities for you. And it will be a shame if you stay on the sidelines.
Time is now.
I thank you for your kind attention!
Monday, September 12, 2011
The late Prof Abdulrahman Mohamed Babu had pointed out these facts in his important book, An Economic Strategy for the Second Liberation of Africa (1994).
1. Dependence on the developed world for Africa’s own development
2. Excessive use of socially necessary labor time in the production of useless goods for export, instead of useful goods for our own human development
3. Unequal trade terms, about which, position of economic weakness arise from export of primary commodities only.
4. Unproductive use of the foreign debts incurred (and the corruption that goes with it), and debt service obligations at extremely unjustified high cost
5. Poor energy policies that make us heavily dependent on external sources of energy and the depletion of our meager foreign exchange earnings in paying for the rising cost of oil imports
6. An irrational world economic order as a whole which, again cannot be changed from a position of economic weakness.
Monday, August 22, 2011
- Creation of National Health Insurance (NHI) modelled from UK's NIH (what Americans call socialism ). NHI will be the sole provider and payer of health expenditure in SA. It will make sure everybody has access to a defined "comprehensive package of healthcare services'". NHI will definitely help control the escalation of cost and there will be rationing of care as well. NHI eventually will transform the way health services are provided, managed, and increase priority towards primary health care.
- Ideally, NIH being the sole funder--will be able to pool and reallocate the funds in a more egalitarian fashion, and revitalize public health sector that will vastly improve access, and will regulate for the higher quality of care.
- Foreign students, tourists, and visitors will be required to show health insurance prior to entry in SA. (potential impact on tourism industry?)
- Re-engineered primary healthcare system focusing on community outreach with an eye on health promotion and preventive measures. They need to look at Ethiopia's Health Extension Workers, who are attributed to a revolutionized rural health in Ethiopia.
- School health services. This is a simple and effective way to improve child hood health.
- Over 14-year implementation period, the overhaul will cost $17 billion (Same price US spend in Afghanistan in 8 months). It will be funded by taxes--which raise concerns for a country with 24% unemployment. It might be regressive to bombard the tiny middle class with extra taxes. I wonder how rich folks feel about that.
Thursday, August 11, 2011
As a result, Thaler and Sunstein argue, many of the familiar arguments for why people should simply be left to make choices on their own, and especially for why government should stay strictly out of the way, have little practical force. In many important areas of choice that matter both to the individual and to the rest of us (for example, when overuse of medical care drives up our insurance premiums and our taxes), the operative question is not whether to bias people’s decisions, but in which direction.
Thaler, a professor of economics at the University of Chicago, and Sunstein, a law professor formerly at Chicago but now at Harvard, apply this line of argument to a wide array of familiar areas: saving, borrowing, energy consumption,smoking, teenage pregnancy and many others. Along the way they present fascinating findings about how people actually make decisions, together with lots of personal advice: save more, diversify your investments, don’t invest much in your employer’s stock, don’t pay points on mortgages, buy insurance with the biggest deductible you can afford, don’t pay for extended warranties. But their main objective is to reshape public policy (Sunstein is an informal adviser to Barack Obama, who has advanced some “Nudge”-like policy ideas), and it’s clear that the suggestions they care most about apply to ways in which governments can do a better job of guiding the choices made by their citizens. The goal, in part, is to nudge people toward healthier, safer, more prosperous lives while also addressing pressing issues like environmental damage and the rising cost of health care.
If all this sounds paternalistic, that’s because it is. Thaler and Sunstein adopt the deliberately oxymoronic label “libertarian paternalism” to describe their general approach. It’s libertarian in that people retain the right to make their own choices: they’re free to select the savings plan with the lowest projected return if that’s what they really want. But the government — or an employer, or the person in charge of laying out the food in the cafeteria — is nonetheless nudging people in the direction that somebody thinks will make them better off.
The conceptual argument is powerful, and most of the authors’ suggestions are common sense at its best: Set up 401(k) programs so that employees have to opt out if they want, rather than making them opt in. (At present, roughly 30 percent of employees eligible for 401(k)’s don’t sign up, despite the enticement of employer matching contributions.) Do the same for organ donation. Make credit card companies offer an automatic full-payment option. Offer investment vehicles that provide automatic portfolio rebalancing. Most of these ideas work because of the human tendency, widely documented, toward what Thaler and Sunstein call “inertia.” Most of us just call it laziness.
In the end, however, “Nudge” is somewhat thin on practical ideas for public policy that follow from the authors’ core insight. Many of the suggestions Thaler and Sunstein make, in contexts like savings and mortgages and credit cards, amount to calls for greater disclosure (what did all of those credit card fees total last year?) or for presenting information in a clearer way (to make price comparisons for mortgages easier). Surely no one except the companies making the profits would oppose more disclosure and clearer information. But we don’t need behavioral economics, or libertarian paternalism, to think such proposals might be helpful.
And the authors occasionally strike a false note. Their recommendation to allow patients to sign away the right to sue doctors for malpractice, for example — presumably in return for lower medical bills — doesn’t resemble the argumentation elsewhere in the book. The threat of lawsuits, they reason, gives doctors little incentive to be more careful because malpractice insurance isn’t “experience rated”; in other words, the premium charged doesn’t depend on the doctor’s past record as it does for, say, drivers. (Oddly, they accept the seemingly conflicting view that the threat of lawsuit is expensive because it leads doctors to prescribe unnecessary tests.) Why don’t they suggest that malpractice insurance be experience rated too? Read The Rest Here.
Thursday, August 4, 2011
I should start by declaring that two of my family members were directly appointees of Jakaya in his first term of presidency. To that end, I have indirectly become a benefactor of his presidency, and this fact might persuade some readers to delegitimize the contents of this document. Also, I have spent not more than 90 days in Tanzania throughout his presidency; education and work assignments have kept me outside of my homeland for a long time. I might not be the best judge of his performance. But as every other African will tell you, Tanzanians love their country—and I have been keeping tabs of the state of our politics throughout my adulthood.
We have had 4 presidents so far in our infant country, and these gentlemen brought different style of leadership. But Jakaya is probably the most criticized for rather deserving or undeserving reasons. You see, we Tanzanians are luckly. Nyerere presided a nation with a clear vision to empower and create independent thinkers out of Tanzanians. He pushed education in its empowering version—not to accumulate knowledge, but to become the means of livelihoods. This foundation had enabled our transition towards democracy much easier and more meaningful. Democracy is useless, and can be an authoritative tool if the mass is misinformed. However, during Benjamin’s (who I regard as an intellectual) presidency he did treat Tanzanians as children. There was a free press that was fearful of the state and you can say that Benjamin was not comfortable enough to be ripped (or his government) in the press daily. This had resulted into fewer leaks and fewer scandals being presented to the press. It doesn’t mean that there were no scandals.
Jakaya is massively criticized because Tanzanians are being aware of how the government is functioning, and we do have an awful ineffective bureaucracy (this is not new). Contrary to Benjamin, Jakaya truly believe that Tanzanians deserve to know everything. He is comfortable enough to be ridiculed in the press because he understands that is how a democratic system should work. Nowadays, we complain about the press being too free that they write upuuzi. From Tanzania Daima, MwanaHalisi, Raia Mwema, to name few dailies and weeklies that make a living ripping this government. To me this is one of his biggest achievements, trusting the people to know everything, and make their decisions on the ballot accordingly. He has had his disappointments (umeme & corruption), and his triumphs (hardcore part of education and infrastructure) but I do commend him for allowing us to talk sh!t about him freely.
Moving forward, Tanzania is on the cusp of taking off. We have this great foundation in place, we just need a reformer and visionary at helm to steer us the right way. Unfortunately (or fortunately), this is our generation challenge. Anybody who was alive during independence shall not attempt to run for presidency in 2015. You have the wrong mentality. We are free already. We just need a leader who is blind of 1961 euphoria, who understand the global dynamics and can negotiate with global leaders without feeling inferior to them. In mean time, let us scrutinize these politicians regardless of their party affiliations—and question the authenticity of the dubious journalism, because the well-being of our republic depends on an informed citizen. At our inner core, Tanzanians are independent and moderate, it is the way we have been engineered. We cannot afford to lose this trait now, as the future has never been so bright.
Saturday, July 30, 2011
Wednesday, July 6, 2011
Wednesday, June 29, 2011
Thank you for your email - and your good questions. I think the discussion on energy has taken an interesting tone and, as ever, characterized by finger pointing. For me, as an MP and the Chairman of Parliamentary Committee on Energy and Minerals, the most important question is how do we get out of current crisis. But, before that, we need to look at how we got here.
A bit of history.
All tragic stories begin with “once upon a time…”
So, once upon a time, there was no power cuts. Yes, those who were connected to the Grid were relatively few, but had power most the time. Today, those connected to the Grid do not get power most of the time. Question is: what happened? The simple answer is: we did not invest in power generation, and transmission and distribution system to keep up with increasing demand. This is the crux of the matter.
Why did we not invest? I will explain a bit. The critical period in the history of electricity in Tanzania was between 1996 and 2006. In 1996, at the height of privatization fever, we decided that TANESCO should also be privatized. So, it was “specified” i.e. put under the list of companies to be privatized. This meant that no investment was undertaken – in generation, in transmission and transmission systems and in human resource in TANESCO – except for a couple of donor-funded projects that were in the pipeline already.
So, while no major investment was undertaken, the following also took place between 1996-2006:
1. Faster growth of the economy – at an annual average of 7 percent. And the drivers of this growth were big energy consumers – mining, construction and telecoms.
2. Initiation and expansion of the donor-driven rural electrification program.
3. Growth of SME sector which relied on power – garages, salons, etc, and medium industry, including packaging and so forth.
So, by 2002, 5 years after the decision was made, TANESCO was still not ready to be privatized. It was therefore decided to bring a private management company to run TANESCO and prepare it for privatization. Enter NetGroup Solutions from South Africa. The management contract was (initially) to run for two years and was funded by the Swedish government. It was further expanded to two more years until 2006. Whether or not NetGroup delivered per contract, and whether or not the engagement was a good idea, are matters of debate until today. In the provision of the contract, there was a bonus (beyond management fee) to be paid to NetGroup if they improved the financial condition of TANESCO. Of course they did so (and got the bonus) by doing two things: they succeeded in collecting massive amounts of unpaid bills – even from the Army, and other notorious defaulters including many government agencies. They even went after Zanzibar! They also heavily relied on hydro (they went even below allowed Mtera depth) for generation so as to minimize the costs. As a result, TANESCO's balance sheet improved. But the decision to rely entirely on hydro had its costs - some of which we are seeing today.
So, in 2006, the decision on the fate of TANESCO was finally made: we will not privatize it. So, in essence, these were lost 8-9 years. Then, from 2006 – now, we entered a new phase: a phase of emergency power, and politicization of power sector. And this is entirely another story. But, it is worth remembering that, during the last five years (2006 – 2011), we have only managed to put up 145MW of our own generation while the new increased demand per annum is 100-120MW. So, while we need to catch up fast and close the gap, we are still falling behind even on the new demand.
So, this is where we are. A country of 43 million people, with meager 1,117MW installed capacity, and production of 630MW as of today. This is miserable, to say the least.
But, the critical question is: how do we get out of here? And, most importantly, beyond the question of power cuts, how do we bring electricity to majority of Tanzanians who have not had it since the beginning of the earth?
What to do end power cuts TODAY?
There are two components to producing electricity: generators and fuel. While we need and can do with more generators, TODAY the crisis is of fuel: not enough gas to run Symbion plant to capacity; in some cases, TANESCO is asked by gas suppliers to lower generation in its own two gas plants because of low gas pressure; no fuel to run IPTL plant; and no water to run hydro turbines.
So, the immediate solution is to sort the fuel issue. Why: because, even if you are able to airlift a 300MW gas power plant to Dar today, you will get Zero power as there is simply no gas. It is not that there is no gas in the country. It is just that we haven’t planned well to get it (from SongoSongo and Mtwara) to where the generators are at critical moment and/or those foreigners controlling our gas have not allowed for this to happen.
So, we should sort fuel issue. To start with, we need to buy fuel for the IPTL plant. While this is painful, it is necessary. The cost of producing one unit of electricity at IPTL is 32 cents, and TANESCO sells electricity for 10 cents. So, basically we are buying power from IPTL at loss. But then again, for one unit of electricity that is not produced, the cost to the economy is US$1.1. So, the costliest power is still cheaper than not having it at all.
In addition, the government should sort out the gas issue. The situation as it stands today is scandalous. The bottom line is that we have gas in Tanzania but we do not control its production, its transportation, its distribution and its price. We might as well be importing it via tankers from Qatar. If, for instance, today we have just enough gas to produce only 100MW of power, it will not be directed to TANESCO gas plants (where we do not pay capacity charges) but to Songas plant (where we buy power and pay capacity charges). I even worry if the upcoming TANESCO (Jacobsen) gas plant to be commissioned in December 2011 will have gas to run on. If it wont, then this will be a scandal because we contracted it and we knew of its arrival 18 months ago. We will deal with gas issue in detail in our Committee report to the Parliament later next month. We will have to make some bold proposals.
In the interim, to cover for the shortage of gas, the government should compel Songas and Symbion to invest in combine-cycle turbines to produce more power from steam coming out of the current gas turbines – and wasted in the air. In other countries, if you use jet engines (as in Symbion and Songas plants), you are compelled by regulation not to “waste steam” that can produce additional power. (TANESCO's Wartsilla gas plants use piston engines that do not produce sufficient steam/force to enable a combine-cycle system). This is just an issue of government being assertive and change the regulation given the current emergency situation.
In the medium term, we seriously need to look at the tariff structure. We need to decide in this country whether electricity is a business or service. The current tariff is not commercially viable. Full stop. EWURA sets the price of tariff after receiving request from TANESCO. Of course they do a diligent job of looking at the cost and whether they are "prudently incurred". But then they call a public meeting to ask people what they think of the tariff request. Then people and politicians go there and bully everyone into a lower tariff. Of course TANESCO could do better to cut some of its costs so as to produce electricity cheaply, but we have to realize that 36 percent of tariff is a result of capacity charges, which TANESCO can do nothing about (at least for now) and therefore the more we do away with these the better, and the more TANESCO gets power from its own sources the more it is able to sell it cheaply. Even the government knows that the current tariff does not work. That is the reason it is subsidizing to the tune of 5bn shillings per year a private company in Mtwara to sell electricity at a price equal to TANESCO!
Not only does the current tariff hurt TANESCO balance sheet, it also discourages private investment in energy sector, particularly in alternative energy. For instance, for a solar generation to be commercially viable, the tariff has to be in the upwards of 20 cents (mostly because of the heavy initial investment), likewise with wind power. No one will come here – only to sell power to TANESCO at price below 10 cents.
People may say that it is impossible for poor people to afford higher tariff. I don’t believe so. Look at how much poor people are spending on phone airtime. And the tariff structure is such that TANESCO sells power at the same rate be it to a barber shop in Namanga or Barrick Gold Mine in North Mara. The tariff should be dynamic and flexible given the volatility in the fuel prices and different capacities of TANESCO customers. There are those who will be willing to pay higher tariff as long as power is steady and reliable. With industries, power, even at higher price, feature very insignificantly to the cost of production but when it is NOT available it is a very significant contribution to losses. For me, for the poor, the prohibitive cost is the electricity connection cost – at 500,000 shillings at a go, most rural people can’t afford it. If the tariff will continue to not reflect the cost of producing power, TANESCO will continue to underperform and investors will be less inclined to come (recently TANESCO announced a tender and the most competitive bidder offered to sell power to TANESCO at 1,028 shillings while TANESCO sells power for 157 shillings!) or will seek to make money off capacity charges.
Now, as we look for solutions to the power crisis, we also need to look at TANESCO (as our sole power producer and distributor at the moment) itself. What do we need to do to it? What is its cost structure? On the ground, and given the assets it owns, this company should be the pride of Tanzania. Last year, it sold power worth about 500bn shillings. Few companies in Tanzania can match that kind of revenue. And it has assets worth $1bn (more than 1.5 trillion shillings) and more than 5,000 employee. It has the potential to triple the assets and revenue in 5 years if the right decisions are made. But, what are those and why aren’t they being made. I will not dwell much on this as this thing will be longer (and will go beyond the issue of power cuts) and I will let my friend Zitto whose Committee deal with parastatal finances to chip in on this. But, suffice it to say that, we have a sleeping giant in TANESCO, and people ought to be much more thoughtful in their calls for its split and/or privatization.
But I agree that TANESCO has to do better. At the moment, it spends 70 percent of its revenue buying electricity from Songas – which only has about 15 percent of installed capacity. This is painful, and needs to change. Also, while it is required by best [utility] industry practice to spend 12 percent of revenue on Repair and Maintenance, TANESCO spent only 2.8 percent of its revenue on R and M between 2005-2008 – and result is lots of broken transformers and service lines and a huge amount of lost electricity. TANESCO needs to invest in transmission and distribution system as part of the solution to the current power crisis. Last year, mainly because of poor transmission and distribution infrastructure, TANESCO lost 21 percent of power it produced and/or bought. This lost electricity amounted to more than 1,200 GWhr – which is more than all electricity used in factories and businessplaces for the entire year, and amounted to about 75 percent of all electricity bought from Songas in the entire year. These are massive losses – which, if curbed, in themselves would have helped with the power situation.
I want to wind up as I am just on a roll – and can’t seem to finish. But last point: we need to manage better private [prospective] investors in energy sector. There is a lot of bureaucracy and red tape within government where people come in with project plans and proposals and end up going in circles in government offices and end up being captured by middlemen and influence peddlers - and eventually corruption kicks in. There are projects that should have been in the pipeline now but were delayed because of bureaucracy and our incapacity to deal with their complexity. Also, we need to be serious on how we handle energy projects. Most energy investors dedicate a team of around 20 people in a single project – lawyers, finance people, etc. Power projects are very complex. I feel that we in government aren’t looking at them as such. We assign 4 or 5 people who already have other tasks in the Ministry to look at these projects and engage these guys. There ought to be a full time project management team at the Ministry that will live and breath power projects everyday and how to get them executed faster and to the benefit of the country. And I also think that there are many clever energy financing avenues that we haven’t explored thoroughly, and have been stuck in the traditional grants, loans and treasury guarantees.
Finally, the government has plans to do 2,780MW by 2015. This is quite an ambition, and will go long way towards covering the gap and catching up with the demand. I like it when we think big and attempt big things. But to achieve it, we need to do better than business as usual.
So, these are some of my thoughts. You also asked me clarify on my comment on Minister Ngeleja. I didn’t want to dwell on people and personalities. As you can see, there are enough issues to fill many paragraphs. As a Member of Parliament, I will continue to ask these questions and advice the government to make the right decisions and policies. As MPs, we will hold the government (via Minister responsible) accountable for its promises in the Parliament, and we will demand answers (including answer to my letter), and the appointing authority will have to judge on his Ministers' performance. But to say that the Minister is a source of power crisis in Tanzania is being simplistic. And I am not one to jump into simple answers. I have realized that part of my problem as a politician is that I am probably too nuanced, and should probably have chosen academia. But I believe that we can do better as a people to embrace nuance and complexity.
As Chairman of Parliamentary Committee on Energy and Minerals, people always ask me when will these power cuts end? In my PERSONAL view, intermittent power cuts will continue until 2013. And this is being optimistic. Leaders will have to be honest that it may be impossible to completely end the current phase of power cuts before the end of the year.
Call me if you have further questions,
January Makamba (MP)
Chairman of the Parliamentary Committee on Energy and Minerals
June 29th, 2011
PS: The views in this email are my own, not Committee's.