The current legal process – 20 court cases which are still counting – surrounding the External Payment Arrears (EPA) account at the Bank of Tanzania (BOT) started in August, 2005 when the Controller and Auditor-General (CAG) made public its annual auditing books for the Central Bank.

The report revealed, among other things, that the Central Bank had paid out some $30.8 million (about 40bn/-) to a suspicious local company claiming to have been “assigned” to collect on debts owed to 12 foreign creditors by that material year (in 2005).

Immediately after, the then Finance Minister Zakia Meghji ordered that an audit be carried out on the External Payments Arrears Account, then held at National Bank of Commerce, which became famous for its acronym, NBC-EPA – which was administered by BOT on behalf of the Government.

Under the scheme, local companies negotiated settlement of foreign creditors’ debts and received deeds of assignments, which they presented to the BOT for redemption in local currency. The questionable payments in relation to debts owed by 12 European, Japanese and US creditors were then paid to Kagoda Agriculture Limited, which presented deeds of assignment signed between September 10 and November 3, 2005.

All went quiet thereafter – until September 15, last year when Chama Cha Democrasia na Maendeleo (Chadema), held a public rally in Dar es Salaam where its Member of Parliament (MP), Dr Willbroad Slaa (Karatu) announced the famous ‘list of shame’ in which listed people he alleged had misused those funds – the NBC-EPA cash which was administered by BOT on behalf of the Government..

The Opposition MPs then alleged there had been ‘massive theft’ of public funds within BOT, subsequently kicking of a public outcry that was soon to be echoed within the precincts of the National Assembly itself. The Executive (read President Jakaya Kikwete) ordered the CAG to facilitate an external investigation to be conducted by Ernest and Young – to be done within three short months (from September to December) of last year.

The global accounting firm presented its report to the president on January 7, this year. The report revealed that a staggering 133bn/- had been ‘improperly’ paid out to 22 firms through the EPA account of the Central Bank in a record one financial year alone. On January 9, this year, President Jakaya Kikwete, fired the Governor of Bank of Tanzania (BOT), Dr Daudi Balali, after an audit investigation uncovered fraudulent transactions involving the repayment of the country’s external debt.

The EPA account was originally set-up by the government to help service balance of payments, whereby local importers would pay into the account in local currency, after which foreign service providers would then be paid back by BOT in foreign currency. However, due to poor foreign currency reserves in the 1980s and 1990s, the debt within the account ballooned to $677 million by the year 1999.

Efforts under a scheme known as ‘Debt Buyback’ – which involved some debt cancellations – was then negotiated under Paris Club helped to reduce the debt level to $233 million in 2004. Despite these efforts, unscrupulous officials and businesses were able to take advantage of one of the plans devised to reduce the account debt, under which a creditor could endorse debt repayment to a third party.

The audit report, sanctioned by the Government’s Controller and Auditor General (CAG) covering Bank of Tanzania’s 2005/2006 financial books, revealed that 13 companies used falsified records and claimed third party status and allegedly received BOT payments – but nine such companies allegedly couldn’t substantiate the payments they received.

Among them, two companies were not even registered by the – Business Registrations and Licencing Agency (BRELA). These companies are owned and operated by some of the most prominent business people in Tanzania. By then, the President had replaced (the late) Balali with one of his two deputies, Prof Beno Ndulu, who before joining BOT was a senior official with the World Bank offices in Tanzania and lectured at the University of Dar es Salaam.

In his most decisive (some said ‘brutal’) crackdowns on corruption ever since he came to power in 2005, President Kikwete also formed a team of three senior government officers to investigate and take appropriate legal steps against individuals and firms implicated in what is now called the ‘the EPA scandal.’

The probe team comprised the Attorney General, Mr Johnson Mwanyika, the Inspector General of Police, Mr Said Mwema and the Director of the Prevention and Combating Corruption Bureau, Dr Edward Hoseah. He gave the team six months within which to complete its assignment. The president also directed the BOT Board of Directors to study the report and take appropriate reprimand actions against all Bank officials involved in the scandal.

The report of these three men contained, among other things, findings which showed that 13 out of the 22 companies were paid $90 million by using forged documents. These included Bencon International Ltd, VB & Associates, Bina Resorts, Venus Hotel and Njake Hotel & Tours Ltd. Others were Maltan Mining Company, Money Planners & Consultants, Bora Hotels & Apartment, B.V. Holdings, Ndovu Soaps, Navy Cut Tobacco, Changanyikeni Residential Complex, and Kagoda Agriculture Ltd.

A further nine firms received $42 million for which there was no documentation of why they were paid at all. These were G&T International, Excellent Services Ltd, Mibale Farm, Liquidity Service Ltd, Clayton Marketing, Rashtas Ltd, Malegesi Law Chambers, Kiloloma and Brothers and Karnel Ltd. The audit further revealed that registration documents of two companies were missing from the Business Registration and Licensing Authority.

These were Rashtas (T) Ltd and G&T International. Quite early in the course of its assignment, the probe team confiscated some properties belonging to people suspected to have been involved in the ‘theft’ of the EPA money, and in the process ‘quietly’ started recovering money that was so misappropriated.

As a result, the government came under intense pressure from the public, activists and the media, who demanded the release of names of people involved in the scandal, all the while also calling for their immediate prosecution. On August 18, this year, the probe team presented its report to President Kikwete, who promised to make his decision known within the “next few” days – which turned out to be three days.

This is the day the president addressed the Parliament in Dodoma, where he announced that 53bn/- of the 133bn/- drawn from EPA account had been returned – and announced his landmark presidential amnesty (up to end of October) when all the 13 firms to should have made good the balance. He warned that any company failing to return the money it had drawn from the EPA account would face prosecution.

His statement was, however, met with resounding doubt, or ‘mixed’ feelings as some media reports euphemistically put it. However, the president did not specify whether or not the government has offered some form of amnesty deal in so many words, but he categorically declared that the government will take custody of the recovered EPA funds and use it to finance an expanded fertilizer subsidy programme for the agricultural sector.

He said part of the recovered EPA monies would further be channeled into the capital-starved Tanzania Investment Bank (TIB), specifically to start offering loans to farmers. This immediately kicked off a flurry of demands, with politicians and civil society generally demanding that all people involved in the EPA scam should be prosecuted – even if they had returned the loot.

Indeed, on November 5, this year, ten people were taken to court charged with, among others, theft of over 31bn/-. They were also charged with conspiracy, forgery and alternative count of obtaining credit by false pretences to the offence of stealing. They include tycoon Jayantkumar Chandubhai Patel, alias Jeetu Patel.

Other accused are Devendra Vinodbhai Patel, Amit Nandy, Ketan Chohan, Johnson Mutachukurwa Lukaza, Bahati Mahenge, Manase Mwakale, Davis Kamungu, Godfrey Mosha and the lone woman, Eddah Mwakale. Two days later (November 7), four Bank of Tanzania (BOT) officials, who allegedly authorized External Payments Arrears (EPA) payments, were also charged with occasioning loss of about 2.5bn/- to the government of Tanzania.

They were Ester Mary Komu, the Acting Director Debt Department, Imani David Akim Mwakosya, the Head Bilateral and Commercial Debt Division and two Acting Secretaries to the bank, Bosco Ndimbo Kimola and Sophia Joseph Lakila. As that was not enough, three more businessmen were taken at the Kisutu Resident Magistrate’s Court in Dar es Salaam on November 10, charged with stealing total of 12bn/-, property of Bank of Tanzania (BOT).

They were Mwesiga Rutakyamilwa Lukaza, Ajay Suryakant Somani and his brother Jai Chhotalal Somani. As of now, all accused, except two have been released on bail. Those remained in custody are Farijara Hussein, a businessman and Imani Mwakosya, a former official with the Central Bank. The arraignment of the said 20 accused connected with EPA scam does not satisfy the public outcry, as most are calling “big fishes” should also be brought to justice, particularly those from Kagoda Agriculture Limited, which was reported to have alone received illegal payments of over $30.8m (approx. 40bn/-).

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