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TANZANIA: Norweigian firm pulls out over graft

by Tom MosobaThe Citizen (Tanzania)
May 6th, 2008

A Norwegian engineering consulting firm undertaking government and donor-funded projects worth billions of shillings has pulled out of the country over corruption allegations.

The firm, Norconsult AS, announced on Sunday that it was winding up all its operations in Tanzania and terminating the employment of its managing director after audit reports linked it to corruption.

The decision to halt its lucrative contracts in Tanzania was taken a week after The Citizen exclusively revealed how the Norwegian company had operated locally for a decade without any form of official registration.

The decision was announced by Norconsult global president John Nyheim in a two-page statement posted on its official website. It said the decision to close down operations in Tanzania has been communicated to the relevant Norwegian authorities.

According to the statement, audits done over the last one year for instance, revealed embezzlement of up to a reported Sh332 million in highly irregular payments.

Norconsult AS had since 1998 ran business in the country as Norconsult Tanzania Limited but without obtaining official registration from the Business Registration and Licensing Agency (Brela) until this year, according to the Engineers Registration Board (ERB).

That anomaly did not, however, prevent Norconsult from executing mammoth projects funded the Government, World Bank and the Norwegian government. It has over the years evolved into one of the major engineering consultancy firms in Tanzania.

Yesterday evening, Norconsult ASs local partner and managing director Francis Kifukwe did not wish to respond on the latest development and appeared surprised when The Citizen sought his comments.

However, it was later established that Mr Kifukwe was in a meeting with Norwegian officials in Dar es Salaam.

Earlier, a call to the local offices of Norconsult also yielded a negative response from an unidentified woman staffer who said they had nothing on the matter.

In the statement announcing their withdrawal, Mr Nyheim said Norconsult AS was perturbed by its operations in Tanzania, which he noted do not measure up to the companys international code of ethics and contracts.

We do not accept any kind of misconduct or corruption. As a consequence, we cease our activities in Tanzania, said Mr Nyheim.

He added: Internal and external reviews of the activities of Norconsults partly owned subsidiary in Tanzania have revealed activity that is not in accordance with the companys Code of Ethics and contracts.

He said the misconduct was revealed through Norconsults own internal review followed by an external review by PricewaterhouseCoopers (PwC).

Mr Nyheim gave the example of Sh332 million which was believed to have been corruptly obtained from its local operations.

It has been established that in the past several irregular cash payments have been made from Norconsults partly owned subsidiary in Tanzania, NTZ, totalling approximately NOK (Norwegian Kronor) 650.000 (Sh156 million), he said.

He noted that last year, $146 500 (Sh176 million) had been paid out in cash from the project office in Dar es Salaam, with only petty cash receipts as documentation. This particular case apparently involved Norconsults participation in the World Bank-funded Dar es Salaam Water and Sanitation (Dawasa) project.

Interestingly, however, the Norconsult boss absolved his company from blame, saying none of its employees took part or was aware of the reported irregular payments at the Dar es Salaam office.

We have brought the irregular activities to an end. NTZ (Norconsult TZ) has been put under administration from Norway. The employment of the managing director is being terminated. Finally, we withdraw from Tanzania. Any kind of misconduct and corruption is contrary to all we stand for and believe in. No Norconsult employees have contributed to or known about the irregular payments, said Mr Nyheim.

He said the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime (KOKRIM) has been notified about the embezzlement with a view to taking legal action.

Norconsult, he said, did a full review of all international activities to detect misconduct emphasising that its aim was to help bodies like the World Bank fight corruption.

Norconsult is also reviewing the internal procedures for evaluation of cooperating parties, bidding, contracting, execution, financial control and accounting in order to prevent corruption in connection with our assignments, he stated.

The shutting down of the Tanzania office by a firm that has several offices span across several countries is certain to bear a lot of significance in the war against corruption in the country and gives credence to views that some international corporate bodies could be silent and implicit players in fueling the vice.

Tanzanian authorities are already reported to be investigating the Dar office of Norconsult for tax evasion amounting to Sh2.4 billion for the period between 2002 and 2007.

It has come to our knowledge that Norconsult AS has neither filed statutory returns nor paid any taxes from 2002 to 2007 despite being registered as a taxpayer with TRA, Tanroads notes in a March 25, 2008 letter.

Local projects in which the company has been involved in recent years and their values include the Sengerema-Busagara road (Sh35.7 billion), Geita-Sengerema road (Sh39.5 billion) and the Unity Bridge is southern Tanzania. Others are the Rongai-Kamwanga road (Sh14.5 billion), Marangu-Rombo Mkuu road (Sh23.3 billion) as well as the Tarakea-Kamonaga and Mwika-Kilacha roads.

The projects also include the World Bank-funded Dar es Salaam Water Supply and Sanitation Project, a joint venture with a local and a Dutch firm that was signed in July 2003. A Norwegian publication, Development Today, which is working closely with The Citizen on the issue, says the $6.7 million project might lead to Norconsults blacklisting by the Work Bank.

What raises the eyebrows of those who have been aware of the companys dubious activities is how it could have taken the relevant public organs and donors for a ride for that long. They question how a company could undertake public and donor-funded projects worth billions of shillings without paying a penny in taxes since 1991 without being detected.

These people are said to have a minimum turnover of between $3 million and $4 million annually in the country. If the allegations against the company are true, then it means that many hands have been greased and taxes amounting to billions of shillings not paid, a tax expert consulted on the matter noted.

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