The Tanzania government could take over the finance portfolio of the privatised Tanzania Telecommunications Company Ltd (TTCL) this week to ensure control of financial records and security of the company's finances. 

Sources in TTCL and in the government said, "This must be done quickly as directed by the minister for communications," but did not give any details, suggesting the move could come as early as this week. 

The sources further said the impending retrenchment of over 1,000 staff could be put off until the financial mess was resolved, and that the internal audit department might start working again to verify expenditures.

An infuriated Minister for Communications, Prof Mark Mwandosya, said on June 1 that the government had been brought to a crossroads in dealing with the strategic investor in TTCL, Detecon/MSI, because of the latter's failure to pay the second and final tranche of $60 million for the acquisition of its 35 per cent stake in TTCL. 

Following an agreement in February 2001, the investor paid the first $60 million and immediately took over total control of the firm, promising to pay the rest by last December 31. The initial $60 million was paid back to the investor as a Tanzania government reinvestment to boost the capital base of TTCL.

Mr Mwandosya said an external audit by PricewaterhouseCoopers in the financial report for 2000 was "suspect." The foreign investor also wanted to borrow money from TTCL to pay the Tanzania government, as well as asking for extra time to pay the outstanding balance. 

However, the audit firm last Friday reacted to the government statement, saying: "In the case of the audit of TTCL's financial statements for the year ended December 31, 2000, the TTCL board of directors has yet to approve the financial statements and, as such, PricewaterhouseCoopers has not yet issued an audit report."

The year 2000 audited accounts are crucial because the strategic investor has pegged calculation of its payment of the outstanding balance on the results of the accounts for 2000. As a result, Mr Mwandosya said the government had decided to take control of the finance portfolio of TTCL, where it retains a 65 per cent stake, while it investigates TTCL's financial records. 

Some foreign expatriates in the firm were last weekend reported to be preparing to leave Tanzania because they feared they would not retain their posts when the government fills a number of senior management positions in TTCL. 

There are fears that the ongoing saga could be headed for international arbitration as both parties adamantly hold to their positions.

The investor first asked for more time to pay the outstanding balance, up to February this year, then moved the date to May 31, but has still failed to pay, claiming the crucial 2000 financial accounts were not satisfactory. 

If it ever happens, this will be the second international arbitration between the Tanzania government and a private investor. The first one, still ongoing, is between the Tanzania government and Tanesco on one side, and the Independent Power Tanzania Ltd (IPTL) on the other. The dispute is over power tariffs and the cost of the investment.

Sources told The EastAfrican in Dar that Detecon/MSI came close to issuing a default notice to the Tanzania government had a shareholders' meeting on May 31 failed to reach a consensus.

The extraordinary general meeting reached an "agreement to overcome the impasse on the finalisation of the year 2000 TTCL accounts and the consequent payment of the second tranche." 

Before then, another meeting had been held on May 22, chaired by Sir Alan Rudge for MSI, and attended by Wilfred Nyachia of the Treasury and 11 other delegates from TTCL, MSI, the Parastatal Sector Reform Commission and the government assistant accountant general, Joel Mwanza. The secretary of the meeting was a Dar lawyer, Ms Mwanaidi Maajar. 

At that meeting, Sir Alan urged the members "to avoid having the shareholders battling among themselves, which could result in unnecessary prolonged legal wrangling." 

The controversy covers three areas: Additional provisioning on bad debts ranging between Tsh9.2 billion ($9.2 million) and Tsh10.7 billion ($10.7 million); the provisioning for the interconnect sum representing claims by mobile operators, which the Tanzania government felt should be reduced by Tsh4.1 billion ($4.1 million) from the current level of Tsh7.9 billion ($7.9 million), while MSI felt that there was need for full provisioning; and the Service Order and Billing System (SOBS) records and the general ledger accounting at Tsh2.7 billion ($2.7 million) of revenue.

The latest agreement states that MSI will pay the second tranche of $60 million in September, but after key issues have been resolved. 

The June 1 government statement identified another problem as relations between the TTCL management and the firm's external auditors, PricewaterhouseCoopers, saying the 2000 audit "was done without the knowledge of the government."