State, Investor to Part Ways

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Dododma, Jul 30, 2009 (The Citizen/All Africa Global Media via COMTEX) -- CTTAY | Quote | Chart | News | PowerRating -- The Government has decided to end partnership with a minority shareholder in the Arusha based General Tyre Company Ltd, the minister for Industry, Trade and Marketing, Dr Mary Nagu told Parliament here yesterday.

Dr Nagu accused Continental AG of "sabotaging the factory." The partner holds 26 per cent shares in the financially beleaguered venture and also enjoys a management contract.

Her deputy, Mr Cyril Chami also said an audit last year revealed that Continental AG had misused up to $5 million (Sh6.6 billion) out of $10 million (Sh13.2 billion) the Government paid four years ago to revive the factory.

Responding to questions asked by a number of MPs who demanded a Government statement over the fate of the company, Dr Nagu said talks were underway to end the failed partnership and take over management.

"Continental AG is not keen to revive the factory. They have snubbed a Government business plan to turn around the company and has engaged in other malpractices that go against our interests in the company," Dr Nagu told Parliament on Tuesday evening shortly before the house approved Over Sh55 billion for her ministy's budget.

She said among the suspect moves by the partner was locking out Tanzania from the lucrative Kenyan tyre market with a clause restricting sales to only Uganda and Burundi.

"This is suspect and we believe it is meant to protect other interests because the East African Community (EAC) Customs Union entitles Tanzania to unrestricted trade with all the member states," Nagu said.

However, the minister said before deciding on the final steps to be taken, the ministry was engaging the investor on the way forward as provided for in their contract.

But according to Mr Chami who was the first to respond, Continental AG and the Government are deadlocked in talks over expenditure of billions of shillings pumped into the failed venture.

He said nearly $29 million (Sh38.3 billion) was required to revive the company but no one was willing to pump in more money.

Chami said the company owed creditors, including Citibank and HSBC bank, $20 million at the time when the first contract with Continental AG expired in 2007. The contract has since not been renewed due to the differences with the Government.

The deputy Minister said the government was also concerned that the investor failed to properly account for $10 million that was advanced to the company in 2005 by the National Social Security Fund (NSSF) to keep operations going.

"An inspection last year revealed the money was not used for the intended purposes and the investor is not ready to own up," Chami explained.

He gave examples of how some of the money was misused, including spending $3.08 million on buying raw materials that according to the minister could not be ascertained.

The private investor also paid himself about $369,000 (Sh47.9 million) for use of his logo on the business and spent over $700,000 (Sh924 million) on unspecified expenditure.

The minister said the Government was committed to see the factory re-open and noted that it was paying workers' salaries since January last year.

However, he said, the state was not ready to shoulder the other financial burden occasioned by the management and day to day running of the company at the hands of Continental AG.

"The Government is not ready to pay any more debts but was keen to see the factory back in operation. We are currently in talks to see how to go about it. We may also consider another willing investor," Chami said.

The MPs earlier on Tuesday demanded in unison concrete steps be taken by the Government to re-open the factory and save rubber farms that were negatively impacted by the continued closure of the factory.

The Parliamentary Committee for Industry and Commerce and the Opposition spokesperson Ms Lucy Owenya said the factory ought to be re-opened without delay as it had the potential to contribute to national development.

The Committee's report by its Chairman, Hon Abdisalaam Khatib said the Government was paying Sh120 million in salaries to workers every month for a business that was not generating any income at the moment.

Ms Owenya said the Opposition would table a private motion should the Government fail to give a clear programme to revive the factory and retake the Kihuhwi rubber farm for supply of raw material instead of relying on imports from Malaysia and Brazil.

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