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Parliament Debate Intensifies Over EPC+F Contracts

Members of parliament queried why the government suggested that it was looking for fund for the EPC+F projects instead of the contractors

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Dar es Salaam. On Thursday, May 30, 2024, a heated debate erupted in Parliament during the discussion of the Ministry of Work’s budget, as members queried the Engineering, Procurement, and Construction – Finance (EPC+F) projects the government entered on June 16, 2023.

The EPC+F contracts involved six Chinese companies: China Civil Engineering Construction (CCECC), Railway 19th Bureau Group Corporation Ltd (CR19), Sinohydro Corporation Ltd, China Overseas Engineering Group Co. Ltd (COVEC), China Railway No. 4 Engineering Group Co. Ltd (CREC4), and China Railway 15th Bureau Group (CR15G).

While passing the Ministry of Work’s 1.7 trillion TZS budget, MP Halima Mdee questioned the government’s statement that it would continue talks with financiers for the EPC+F projects. She pointed out that under EPC+F, the contractor is supposed to secure financing, asking the government to clarify its position. “What does it mean by saying, ‘It will continue talks with financiers for the EPC+F project,’ while the whole idea of EPC+F is that the contractor is supposed to also come up with mechanisms for financing the project?” Mdee asked.

Responding, Minister of Finance Mwigulu Nchemba attributed project delays to rising global interest rates. “When we entered this contract, the interest rate in the global market was around 4 to 5 percent, but now it is between 10 and 12 percent,” he explained.

Dissatisfied, Speaker of Parliament Tulia Ackson queried why the government was seeking financing instead of the contractors. “If the government was the one looking for financing, why should it give it to the companies (under EPC+F) instead of following the normal procurement procedures?” Ackson asked. Mwigulu clarified that under EPC+F, the contractor looks for financing, but the Speaker countered, noting, “In the budget book, the government says it was the one who was going to look for finances.”

The debate saw contributions from nine MPs, all raising concerns about the contracts. Konde MP, Mohamed Said Issa, suggested possible corruption and called for an investigation.

He argued:  “I am surprised. Why are we going to look for finance when the contractor committed that they can bring financiers? By the look of it, it seems there might be some corruption red flags on this EPC+F financing. It should be investigated, and we should revert to normal procedures.”

Kisesa MP Luhaga Mpina criticized the government’s shifting positions on the issue, citing inconsistent statements about design completion, pre-implementation payments, and interest rate impacts. “Government has changed its position on this issue three times. First, they said the design has to be made, then they said the contract requires them to pay 10 percent before implementation, now they say it’s because of the rising interest rate,” Mpina argued.

He added: “Because of this contradiction, the project should be removed from government proposals. Most of our projects are tied to this EPC+F, which seems to be stuck. I suggest the budget should be reconfigured to return our project to normal mechanisms.”

In the heated debate, Minister of Transport Makame Mbarawa, who oversaw the signing of the contracts, argued that the EPC+F financing mechanism involves the companies securing financing but emphasized that the government must be vigilant about the terms of financing.

Following contributions from nine members of Parliament, which extended the debate until 8 PM, it concluded with an agreement to amend the budget proposal’s wording to ensure it does not imply that the government is responsible for securing project financing.

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One Response

  1. Wizi mtupu. I think in the current circumstances across all public projects, CORRUPTION is at its apex.

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