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Wednesday, May 7, 2008

Norwegian firm quits Tanzania over corruption

May 7, 2008: A leading engineering consulting firm has pulled out of Tanzania over corruption.

The Norwegian firm, Norconsult AS, has also sacked its Tanzania managing director after audit reports by PricewaterhouseCoopers linked its business to corruption.

“We do not accept any kind of misconduct or corruption. As a consequence, we cease our activities in Tanzania,” said the global president, Mr John Nyheim.
The firm was in charge of government and donor funded projects running into billions of shillings.

Mr Nyheim said the audits done over the last one year revealed that about Sh332 million had been used in irregular payments adding that the company failed to adhere to the international code of ethics.

“It has been established that in the past several irregular cash payments have been made from Norconsult’s partly owned subsidiary in Tanzania, totalling about Sh156 million (Norwegian Kronor 650,000),” he said.

He also noted that last year, Sh176 million ($146,500) had been paid out from the project office in Dar-es- Salaam, as petty cash. This transaction involved a World Bank water and sanitation project. The Bank sighted the anomaly and sought an audit for the project, an investigation that unearthed more irregularities.

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.

The decision to halt its lucrative contracts in Tanzania comes after The Citizen, a publication of the Nation Media Group, reported that the Norwegian company had been operating in the country for a decade without official registration.

The Engineering Registration Board confirmed the report saying the firm did not obtain official registration from the Business Registration and Licensing Agency until 2008.

Norconsult AS’s local partner and managing director, Francis Kifukwe declined to comment. Mr Nyheim said the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime had been notified about the embezzlement and is expected to take legal action.

Norconsult does a full review of all international activities to detect misconduct emphasising that its aim is to help bodies like the World Bank fight corruption.

“Norconsult is also reviewing the internal procedures for evaluation of co-operating parties, bidding, contracting, execution, financial control and accounting in order to prevent corruption in connection with our assignments,” Mr Nyheim said.

The shutting down of the Tanzanian office by a firm that has several offices spanning across several countries is likely to unearth more corruption cases in the region.

Tanzanian authorities are reported to have started probing 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 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, says the $6.7 million project might lead to Norconsult’s blacklisting by the Work Bank.

What raises the eyebrows of those who have been aware of the company’s 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.