Non-performing parastatal organisations were privatised between 1990 and 1996. Utility and infrastructure parastatals, however, were left out, but in 1996 the government decided to privatise them too.
Haruna Masebu
EWURA Public Relations Manager, Mr Titus Kaguo talked to the Authority’s Director General, Mr HARUNA MASEBU, on the whole privatisation process. Excerpts….
QUESTION: To start with, can you briefly tell me your background? How and when you became involved in the setting of Regulatory Authorities? Was it before the Act on Regulatory Authorities was passed?
ANSWER: Well the whole issue began way back in 1990 when the government thought of taking action on the huge parastatal sector that was not performing well. At that time the Government made an appraisal of the public service and realised that it could no longer continue taking the burden of servicing the parastatal sector and made a breathtaking decision to privatise all the parastatals.
The privatisation of non-performing parastatals kicked off in 1990 and ended up in 1996. Utility parastatals were left out. In 1996, the government felt there was need to revisit its decision of not privatising the utility parastatals and those involved in infrastructures because experience had shown that although they were trying to prop up their services through performance contracts, the system of monitoring was not there, it was not working and over time they were not doing well. So, the decision was made in 1996 to also privatise those utilities and infrastructures. So, first and foremost, it established the PSP to take charge of them.
Secondly, in order to create an environment which would be conducive for PSP in these sectors, there was need to establish regulatory authorities and permanent regulatory institutions. So that was a decision made in 1997.
Q: Mr DG, was there any documentation on the whole process? Was there something set or a policy formulated?
A: Yes, a policy was formulated and policy documentation came out in 1999, which called for the establishment of independent regulatory authorities to regulate infrastructure and utility sectors. At the same time the formation of a Fair Competition Tribunal which was tasked to handle appeals from those institutions was established and a Fair Competition Commission which looked like an anti-trust institution was also formed.
Q: Who set them up?
A: Well after that decision was made, the Act for establishing PSRC, the institution entrusted with a special role of handling the privatisation process of parastatals in the country was enacted. So once this decision was made, the privatisation exercise was extended to utilities and infrastructure and later on an amendment was made to the PSRC law allowing it to establish the regulatory authorities. So they employed a regulatory coordinator and I was the one.
Q: So you essentially worked for PSRC?
A: Yes, for five years. My duty was to establish these (regulatory authorities). So in 1999, this policy document was made and I was recruited in 2001. At the same time the law for establishment Energy, Water Utility Regulatory Authority (EWURA) and the Surface and Marine Transport Regulatory Authority (SUMATRA) was also passed in 2001.
So my next duty was to bring on board a regulator for the telecoms sector and the aviation/air transport sector, which is what we did. So, by 2003, we had new legislation, the one establishing the Tanzania Communication Regulatory Authority (TCRA) and the Tanzania Civil Aviation Authority (TCAA), Fair Competition Commission (FCC) and Fair Competition Tribunal (FCT).
So that’s what I did and by 2005, I’d already established all of these and EWURA was the last one to be established. When I was recruited, the recruitment was such that the person who would be coordinating this would, at the end of it all, be employed in one of these. So I got employed in EWURA. Q: Who else was involved?
Were there any Ministries involved? A: You know, PSRC’s role was coordinating, doing the professional work. However, the government had its hands on in decision making. The Government does not have the time or the expertise to make a follow up on issues. So they created PSRC to be the one coordinating this. So whenever there is a task, PSRC would do it.
If there’s need for consultants to help, they’d help prepare terms of reference for consultancy, get the consultant, supervise him preparing recommendations like these ones and then they sift them and then send to Government for decision making. So that was the role of PSRC. Now, in the process of consultancy, evaluation and before you’ve made the preparations, you look at other Ministries, through an institution which we were calling, Divestiture Technical Teams.
Q: Why does EWURA now report to the Ministry of Water?
A: Well a second decision was made to simplify matters or the process. It was decided that the involved institutions were to report to relevant ministries instead of reporting to one ministry. Where these cover more than one Ministry, the President will decide.
So when it came to SUMATRA, TCAA and TCRA, they were all placed under the Ministry of Communication and Transport. When it came to EWURA, the President decided to put it under the Minister for Water. Maybe one of the reasons was because the Minister of Water, at that time, had been playing a role of the regulator in a contract/concession agreement between DAWASCO and City Water. So for continuity they said, since you’ve already played this role, then it should be the one to handle EWURA too.
Q: Why was EWURA Act not passed until 2006?
A: With SUMATRA and TCRA, there was a merger of what was called Tanzania Broadcasting Commission (TBC) and Tanzania Communications Commission (TCC). At the time TBC was already there, with employees and resources, TCC was also there with employees and money, only that the law that established them was deemed to be out of date. So the new law had to establish a new regulatory authority.
But then, there were resources, human resources as well as financial resources. So when this decision was made in 2004 – we decided that we shouldn’t go for two but five – so what was left was to make a decision on how to merge the resources into one.
Similarly, for SUMATRA, there was a Tanzania Central Freight Bureau (TCFB) which was already operational. So it had human resources and financial resources. So it was easy for them to get started. Similarly TCAA was there before and had human resources and the financial resources so it was easy too.
But for FCC, FCT and EWURA, these were new institutions. They had no resources. So there was a credit from the World Bank, to get everything sorted out after all this mess, an exercise that took another nine months or so to prepare new project appraisal documents which would now just limit to this. So that explains why these started a year earlier.
Q: Can you tell us what the World Bank’s role was?
A: PSRC was funded by the World Bank and the Government. I think the proportions were 90% World Bank and 10% Government. By then there were also some other consultancies that were funded by SIDA (Sweden), CIDA (Canada). The main funding was from the World Bank. There was also a component which was used for the establishment of the regulatory authorities.
Q: Do you really think that EWURA enjoys any autonomy? To what extent do you feel this needs to be improved, and how can you do it?
A: We feel we are reasonably independent, independence here being defined as the ability to make final decisions on matters for which you have got powers on, without making reference to another authority, the Minister, or without sharing for short-term repercussions at the personal level that you make this decision, tomorrow you are removed. So if these are the two definitions of independence…no.
The third one being having an independent source of funding, we have achieved all the three. So far, that’s the situation. We have made decisions that the Government was not happy about. But we have created a system whereby, you see the key stakeholders are Government – that is policy – then the operators and consumers.
So this is the famous triangle, and here is the regulator in the middle. When we make a decision, we have to make it appear that it takes into account Government policy, protects the interests of the operators but also protects the interests of consumers. And a good system is the one that has got good stakeholder consultation. If a system is to be good, it has to consult with the stakeholders. Now, these people, you can never avoid consulting with.
There are two ways: one is to have them represented on the Board, so you find some other authorities in other countries they have got a Permanent Secretary sitting on the Board, a consumer sitting on the Board, or may be a utility person sitting on the Board; the other approach is to have the Government make final decisions, that way you also involve all of these because the Government makes a decision – in some jurisdictions, the regulator does everything and then sends a recommendation to the Government for it to make a decision. But we have opted to have all of these three stakeholders play an advisory role.
Q: How do you do it?
A: Well, the process is just too long. Regarding consumers, we have formed a Consumer Consultative Council (CCC). And for the Government we have formed a Government Consultative Council (GCC). This has got the Ministry of Energy, Ministry of Water, Ministry of Finance, etc. So, when there is a proposal from an operator, it is sent to the CCC, they peruse it and then send to the GCC where they carry out the same process then as part of the enquiry, they all come and make a joint statement.
The consumers will come up with own decision to support or oppose it. But then they’ll have to give reasons on why this application is defective. The Government is expected to elaborate on the policy, whether they support it, if this will not be given the full tariff, will the Government pay subsidy?
They will say these things. So when all of these have registered their comments and opinions, these points are given to the operator to make the final recommendation. When the final recommendation comes, we are the one to come up with a final decision. We are not referring it to any body; we do not have to involve any body on the Board. We are very independent, very professional.
Q: Is the Board independent?
A: The Board is independent professional people. It is advertised in the papers, interested participants apply and selected on competitive basis (interviewed) it is a talent search process. Most of them if not all, have their own professional consultancy firms. They are not employed in Government, they are not in utilities.
Q: So, in terms of governance of the sector, would you say EWURA is the governing body of the sector, or only the operational side of things?
A: The policy and legislative part of it is the Ministry and we respect that and we don’t want to interfere. We do the regulation, to balance the interests of consumers, operators, and take into account Government policy in a manner that will make the sector sustainable; so that where we started we should be better as we go along.
Q: Interestingly there is a debate that you are funded by the service providers; you are getting money to fund your organisation through levies. They argue that you are supposed to be funded by Government. What is your comment?
A: What I’m seeing in this policy of being financed through levies has many advantages. You can be funded and left to be independent. But once you are funded by Government, investors also will just know that you are not independent, because one of the key indicators of independence internationally is independence of finance. Secondly, with this kind of arrangement (being financed by Government), you will be financed by all taxpayers.
Because money from the Treasury is financed by all taxpayers, even those who don’t have access to regulated services. The levy has been designed in a way that – internationally best practise, why they chose that system was that first of all you’ll be assured of independence, you will be assured of adequacy of funding and thirdly it will be paid by those who are likely to benefit the most from your duty as a regulator.
Now, what has happened is that, the regulatory authorities in the country – there are many in the various sectors, financial sector, even the utilities, TCRA, SUMATRA – are all funded the same way. The limit there is up to 1.5%. Our limit is 1% and for some we are actually going lower.
Every time they make a telephone call, there is that levy, they pay it. But they don’t know it. When you are using the bank system, you will pay bank charges, 1%, maybe you don’t realise it. Everyone is paying these levies, but none has made it appear on a bill. We EWURA said, we want it to be transparent.
In all bills it should be indicated EWURA Levy. So when you are paying a bill for TSh50,000 (TANESCO) , there will be TSh400 – not even TSh1,000 – which is the EWURA levy. They see it now. You know, people, they’re always discussing what they see, which is there.
Why don’t they talk about is the bank charges, the telecommunications levy for airtime? They pay many levies. This is legitimate, there are checks and balances on how we prepare our budget, how we spend our budget; everything is crosschecked.
Q: What do you see as the key challenges for EWURA that you’re facing as a regulator? How do you envisage overcoming them?
A: You see, one reason why the Government established these regulators, they know that the best way of policy management is to always have a long-term view; to have the cathedral approach. In Europe, you’ve seen some of the cathedrals, if you look at them, they were not built over one year.
They were built over 20-30 years ago. So the people who designed it and who built the first stone were not there to see the church when it opened. So regulators, by treating our systems we look into things then try to put things in a manner that will end up with a cathedral, long-term. Politicians want results tomorrow, the day after tomorrow. Continue with the same thing, operate same thing.
Now, where are we now, when you’re making decisions, so long as the right balance is there – sometimes it will be in interest of consumers. But then people will not have the long-term trend. They just take that as an issue and they say, you’re wrong, or, your right.
There should be a tariff increase, consumers will say, you are protecting the consumer that is not true! But you know that if you don’t allow the operator to get enough money to enable him to provide the services, over time the services will crumble. Consumers will always think we are not doing enough to protect them.
Politicians, especially during election time, will certainly complain. And if, for example, some of these providers are private people, international companies, the consumers and politicians will think regulators are in league with them. So what we want to make sure is that everything has to be transparent. I see there are many challenges because of the people’s expectations.
Q: What would happen if you didn’t have a regulator?
A: That’s the new challenge. The other challenge is the other sector we are regulating – petroleum. They have been used to a situation which is near anarchy. They don’t want any system which brings them into discipline.
So we want to really discipline this sector. Other challenges include, the need to reach out to consumers; issuance and enforcement of Licence Conditions and Standards; Move to cost reflective tariffs, Power supply constraints and high and volatile petroleum prices.
Source Tanzania Daily News
