Tanzania Bunge: Demands Comprehensive SOE Financial Reforms

• Tanzania's National Assembly is pushing for significant financial reforms in public institutions and State-Owned Enterprises.
• Public capital investment increased by 20.3% over three years, but returns grew by only 2%, prompting calls for stricter oversight from the Parliamentary Standing Committee on Public Investments.
• The Office of Treasury Registrar is mandated to strengthen monitoring, assess underperforming entities, and establish clear contribution criteria for the Consolidated Fund.
• Reforms aim to reduce reliance on government subsidies, with commercial entities required to plan for financial self-sufficiency within three years.
• The government is encouraged to increase private-sector participation in development projects to attract investment and improve efficiency.

The Parliamentary Standing Committee on Public Investments emphasized that these proposed reforms for the 2024/25 financial year are designed to tackle persistent operational and financial challenges, ensuring that increased public capital investment translates into tangible benefits for citizens.

Tanzania's National Assembly, known as the Bunge, has initiated a significant push for comprehensive financial reforms within its public institutions and State-Owned Enterprises (SOEs). This move comes amidst growing concerns regarding their financial performance, overall accountability, and the returns generated from substantial government investments. The impetus for these reforms stems from a notable disparity: while public capital investment in Tanzania surged by 20.3 percent, reaching 92.27 trillion Tanzanian shillings over a three-year period, the returns on these investments saw only a modest two percent increase during the same timeframe.

This widening gap prompted the Parliamentary Standing Committee on Public Investments (PIC) to advocate for more robust oversight, greater accountability, and improved management across these entities. The committee's report, presented by Chairperson Douglas Massaburi in the National Assembly, specifically addressed public capital investment for the 2024/25 financial year. It underscored that these proposed reforms are designed to tackle persistent operational and financial challenges, with the ultimate goal of ensuring that increased public capital investment translates into tangible benefits for citizens and taxpayers.

A central recommendation from the Parliamentary Standing Committee on Public Investments is for the Office of Treasury Registrar (OTR) to significantly enhance its monitoring and supervision of public capital. The OTR is expected to ensure that all institutions receiving government investments demonstrate measurable improvements in their productivity, financial performance, and the quality of services delivered to the public. Furthermore, the committee called for comprehensive assessments of underperforming public institutions and enterprises, specifically targeting those grappling with issues such as inadequate project funding, insufficient capital, weak debt collection practices, persistent financial losses, and difficulties in implementing procurement systems.

The purpose of these assessments is to pinpoint the underlying causes of poor performance and to establish concrete corrective measures aimed at boosting efficiency and productivity. Regarding financial accountability, the committee mandated that all public institutions and enterprises contribute to the Consolidated Fund in accordance with existing legal frameworks. The Treasury Registrar is tasked with developing clear criteria and rates for these contributions, which will be determined based on each institution's specific responsibilities, financial standing, and operational capacities. Additionally, effective mechanisms are to be put in place to monitor compliance, ensuring that both boards of directors and management are held accountable for any failure to meet their statutory obligations.

A key concern highlighted by the committee is the ongoing reliance of some public institutions and enterprises on government subsidies, even when they possess the potential to generate sufficient internal revenue to cover their salaries and operational expenses. To address this issue, the PIC recommended that the Office of Treasury Registrar (OTR) evaluate the extent of this subsidy dependence and formulate strategies to reduce it. Commercial public entities are now expected to develop medium-term plans, not exceeding three years, aimed at eliminating their dependence on government subsidies. Institutions whose internally generated revenue already surpasses the subsidies they receive should adopt even shorter-term plans to achieve complete financial self-sufficiency.

The proposed reforms also actively seek to increase private-sector participation in the financing and implementation of development projects. The committee believes that greater private involvement could attract additional investment, accelerate project execution, and alleviate pressure on the government budget. Specific examples cited for potential collaboration with private investors include the Tanzania Shipping Agencies Corporation (TASHICO), the Tanzania Fisheries Corporation (TAFICO), and the Tanzania Fertiliser Company (TFC). The government is encouraged to explore these opportunities to mobilize additional capital and enhance operational efficiency across the Tanzania State-Owned Enterprises accountability landscape.

Lawyers advising Tanzanian SOEs or public institutions must anticipate stricter financial oversight, new compliance requirements, and potential changes in contribution criteria to the Consolidated Fund, necessitating a review of internal governance and financial reporting practices. Compliance officers should prepare for enhanced monitoring by the Office of Treasury Registrar and potential assessments of underperforming entities, particularly regarding subsidy dependence and procurement systems.

Source: Original reporting via Tanzanian parliamentary proceedings.