TANZANIA:DAR PURSUE CCM OFFICIAL,MP's ON LIST OF $ 180 MILLION CIS FUND DEFAULTERS

The East African (Nairobi)
21 April 2008Posted to the web 21 April 2008
Mike MandeNairobi
Borrowers from the Tanzania Commodity Import Support (CIS) fund are in trouble as the government is engaging a collection agency to recover the debts owed by individuals and firms that have defaulted.
The move comes as the names of prominent figures in the ruling party, Chama cha Mapinduzi (CCM), former ministers and Members of Parliament are emerging among individuals and firms that have defaulted on payments to the $180 million CIS fund.
The names, which are to be made public in two months' time, interestingly also include individuals and firms that have also been mentioned in the External Payment Arrears account (EPA) scandal at the Bank of Tanzania.
A director of one of the 980 firms that have defaulted on repaying funds loaned to them from 1980 to 1992/1993, said their names would be published in the print media in the next two months.
Investigations by The EastAfrican have revealed that the businessman, who is on the 10-member board of trustees of CCM, obtained a loan of $500,000 from the Fund through his firm.
It was established that some borrowers have started to sell off properties including family houses to service the loans before the three-month deadline for returning the money to the government.
The investigation further showed that most of the Tanzanian firms and businesses who obtained the money from the CIS coffers did not have the 30 per cent cash collateral required to be paid before securing the loan.
Some local firms and businessmen that did not have the 30 per cent cash instead sought the assistance of Tanzanian businessmen of Asian origin, who paid the money and later obtained 50 per cent of the loan as their cut. The borrower ended up securing 50 per cent of the loan, while paying nothing as collateral.
A former Minister of Transport and Communication in the second and third phase government, Ernest Nyanda, who is now deceased, was said to have obtained more than $150,000, which he used to buy the ill-fated passenger vessel mv Zahara through his firm, Victoria Marine Passenger Transport Services Ltd. The firm has since been liquidated.
The ship, which was built in 1965 in Greece as a military cargo ship before it was brought to Tanzania in 1999 as a passenger ship plying the Dar-Mtwara route, and was until recently still lying at Dar es Salaam port, had a capacity of 300 passengers and 285 tonnes of cargo with a gross tonnage of 1,369.4 and is now at the centre of a legal battle between the concerned parties.

Other firms mentioned among the CIS defaulters are the Noble Azania group of companies in Tanzania owned by JayantKumar Patel, alias Jeetu Patel, who is also mentioned in the EPA account scandal. He is said to have obtained $145 million from CIS through various deals with Tanzanian businessmen who wanted the collateral of 30 per cent deposit.
The other firms that allegedly benefited from CIS and EPA funds include Njake Hotel and Tours, which also owns petrol stations and truck transportation in the northern region. Others are Tanil Somaiya and his close associate Vimal Mehta through their firms Merlin International and Vithcorp Foods Packers.
Ketan Somaiya, based in Kenya, who managed through CIS to establish the defunct Delphis Bank, is also mentioned.
Ramadhani Kijjah, Deputy Permanent Secretary in the Ministry of Finance and Economic Affairs, told The EastAfrican last week in Dar es Salaam that the government intends to engage debt collectors during the financial year 2007/2008 to collect all outstanding debts owing to the CIS under the Japanese Non-Project Grant and Debt Relief Grant intended for various beneficiaries countrywide.
The deputy PS said that there were about 916 debtors countrywide with an outstanding debt of about 16.6 billion Japanese Yen ($162 million) who have not paid back their loans, including accrued interest.
The government has already issued an ultimatum to 916 firms that have failed to return money amounting to $180 million to do so or face legal action.
The 916 firms were given three months to return the funds they took as loans from the Tanzania Investment Bank and other local banks through the central bank.
The government move comes in the wake of the Bank of Tanzania scandal in which more than 133 million was improperly paid to 22 local firms through the External Payment Arrears (EPA) account during the period 2005/2006.