The 19 June court appearance of Harbinder Sethi Singh and James Rugemalira is the Tanzanian government’s single most significant act against corruption. The two men are facing six charges for ‘economic sabotage’ related to the sale of Independent Power Tanzania Ltd (IPTL) to Sethi’s Pan African Power (PAP) Ltd in 2013. They have been refused bail and are now detained in Dar es Salaam’s Keko Prison, facing charges relating to: conspiracy; organised crime; forgery; obtaining money by false pretences; and causing the state to lose US$122 million.

IPTL has been running a 100MW diesel fuelled power plant in the Dar es Salaam suburb of Tegeta. It was a joint venture (JV) between Malaysia’s Mechmar Corporation (70%) and Tanzania’s VIP Engineering and Marketing Ltd (30%). The latter was owned by Rugemalira and was credited as the mastermind that won IPTL its original deal. What had originally been proposed as a temporary emergency power solution was transformed into a hugely expensive long term power purchase agreement, with the connivance of then attorney general, Andrew Chenge (1993-2005).

Mechmar went into receivership in 2005 whih prompted Standard Chartered Bank Hong Kong to buy the firm’s US$125 million debt for US$75 million. The following year, an escrow account was set up to receive capacity charge payments, while the International Centre for the Settlement of Investment Disputes (ICSID) heard Tanzania Electric Supply Company’s  (TANESCO) case against IPTL that the latter had been over-paying for capacity charges. This was known as the Tegeta Escrow Account.

By 2013, there was over US$120 million in the Tegeta Escrow Account. That year, Sethi claims he purchased Mechmar’s shares in IPTL from a British Virgin Islands (BVI) registered firm, Piper Link, although this claim has been rejected by both the High Court in the British Virgin Islands and Mechmar’s liquidators.   … [article continues] …

This is an excerpt from an article in our fortnightly East Africa Politics & Security publication.