SHIFT TAZAMA PIPELINE OVERSIGHT TO MINISTRY OF TRANSPORT AND LOGISTICS
…Tazama Pipeline is a transport system, aligning oversight will remove conflict of interest
THE Tazama Pipeline, is a 1,710-kilometre long crude oil pipeline from the port of Dar-es-Salaam, Tanzania, to the Indeni Petroleum Refinery in Ndola. Although it is not well documented, Tazama Pipeline is the longest oil pipeline in Africa; a feat deserving to be entered in the book of records.
The government owns 66.7 percent while the Tanzanian government owns 33.3 percent. It has a board of directors from both countries chaired by the Zambian Ministry of Energy unless there has been recent changes. There is also a Ministerial Council which supervises the board.
Unlike Indeni Petroleum Refinery, Tazama Pipeline Limited is a transport system and not an energy production system. As a transport system, lead oversight from the Zambian government perspective is supposed to be the Ministry of Transport and Logistics, and not Ministry of Energy.
However, due to legacy issues, the Ministry of Energy has been the lead oversight structure over this transport system. Building on the same legacy, the same ministry has also been advancing other pipeline projects which are also transport systems.
I have raised this matter previously but may be one day it will receive better attention. Keeping the status quo is not appropriate corporate governance model as it has been creating a conflict of interest.
The Ministry of Energy has oversight over the Energy Regulation Board (ERB) a quasi-government agency which sets tariffs for Tazama, a transport system.
It cannot be the same ministry to provide lead oversight over this transport system and even chair the board of this transport system. This is a significant inappropriate corporate governance issue which has been perpetuated for decades due to legacy issues.
When compared with Zesco, its corporate governance alignment was taken away from the Ministry of Energy to the Industrial Development Corporation (IDC) as part of enhancing corporate governance.
To improve the governance around Tazama, the Ministry of Transport and Logistics must at a bare minimum chair the board and take a more visible role in national fuel pipeline projects in a similar way that South Africa’s Transnet which runs the ports, rail and fuel pipeline falls under the Department of Public Enterprises (DPE) and not Energy.
There is no harm to even put lead oversight of Tazama under the Ministry of Commerce, Trade and Industry or IDC but chaired by the Ministry of Transport where transport technocrats are found or may be Ministry of Commerce to enhance the business mandate of Tazama.
The current model of having the same ministry which is responsible for lead oversight and also vicariously responsible for regulatory governance such as tariff setting is not encouraged corporate governance. I have raised this concern many times when discussing industry governance issues.
To operate as pure business outfits, South Africa shifted almost all State-owned Enterprises (SoEs) to the Department of Public Enterprises where business development and management technocrats are situated although Eskom has been shifted a number of times.
This includes Transnet, a fuel pipeline transportation and logistics business which sits under the Department of Public Enterprises. By comparing with South Africa, I am highlighting how the possible conflict of interest has been avoided.
Can you imagine Transnet fuel pipeline business falling under the Department of Energy from an oversight point of view while the same department is vicariously responsible for tariff setting through the regulator - National Energy Regulator of South Africa (NERSA)?
My opinion is that Tazama pipeline is a transport system. Therefore, shifting the oversight lead mandate from the Ministry of Energy to the Ministry of Transport and Logistics will improve governance.
If this is not tenable, at least learning from South Africa
by placing Tazama under the Ministry of Commerce, Trade and Industry or IDC would be a welcome corporate governance development. This will minimize if not eradicate the conflict of interest while placing this SoE under correct business oversight structures of the State.
With more fuel pipeline transportation business being reported there is even more need for clarity of oversight. Should investors be going to the Ministry of Energy or Ministry of Transport and Logistics or Ministry of Commerce, Trade, and Industry and who is supposed to take lead oversight?
Looking behind and foreseeing the future, this is why in one of my more than 600 previous articles, I called on the previous government to come up with a Fuel Pipeline Master Plan for the country to provide clarity of oversight among other perspectives. This will save everyone a lot of headaches from entertaining all sorts of pipeline projects.
The Fuel Pipeline Master Plan does not cover transnational pipelines only but also inland pipeline possibilities to some extent.
For instance, in some countries, fuel transportation beyond a certain distance is by pipeline and not by road unless there is no pipeline on that route.
The Tazama pipeline extends from Dar es Salaam, to Ndola. In some sections, the pipeline has a diameter of 200 mm and 300 mm respectively. The pipeline passes through or near Dar es Salaam, Morogoro, Epass, Iringa, Mbeya, Chinsali, Kalonje and Ndola.
The Tazama Pipeline was constructed in 1968 to transport refined fuel from Dar-esSalaam into land-linked Zambia, as a long lasting cheaper and easier option. After Zambia’s independence, it started facing significant challenges bringing fuel in the country through Southern Rhodesia. In some instances, fuel was being
imported by air.
The leadership decided to look for an alternative route for fuel importation - hence the birth of Tazama. The pipeline was later converted to trans
porting crude oil after commissioning Indeni Petroleum Refinery.
If this decision had not been made the extent of damage on Zambia from hostilities from
Southern Rhodesia could have been worse.
According to information in public domain, the pipeline had an annual carrying capacity of 1, 100, 000 tonnes in 1968 when it was commissioned. By 2002, the carrying capacity had deteriorated to 600, 000 tonnes annually. The new dawn administration has made numerous policy pronouncements to convert the pipeline from carrying crude oil to transporting refined low sulphur diesel.
Since Indeni Petroleum Refinery was placed on care and maintenance by the previous government, Tazama Pipeline transportation business has also been on hold for over two years now. *Dr. Johnstone Chikwanda is an energy expert, consultant, and a Fellow of the Engineering Institute of Zambia (EIZ),