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BAE payment to Tanzania undermines justice and accountability

Category : Business

BAE’s £29.5m for education is an unsatisfactory conclusion to a case with much wider significance for the people of Tanzania

So BAE has finally paid out £29.5m for education projects in Tanzania. The payment was agreed two years ago, as part of a settlement with the Serious Fraud Office (SFO) that brought to an end the SFO’s investigation into a sale in 2002 of a $40m (£25m) military radar to the Tanzanian government. BAE admitted a failure to keep proper accounting records, relating in particular to a $12.4m payment to a Tanzanian middleman for “marketing” purposes, but avoided any admission of corruption.

The case has been closed, with some accountability for BAE and some reparations for Tanzania. But for many Tanzanians it leaves a bitter taste.

First, the settlement undermines the cause of bringing the final recipients of the $12.4m to justice. Tanzania’s attorney general at the time of the deal, Andrew Chenge, was the focus of SFO investigations. After Jersey bank accounts in his name were found to contain $1m, he resigned and shocked the Tanzanian public by describing this money as “small change”. The BAE settlement means the evidence against him will never be presented in a UK court. More recently, Chenge has claimed the closure of the SFO investigation confirms his innocence, though neither the settlement agreement (pdf) nor the judge’s sentencing remarks (pdf) made any such declaration.

Tanzania’s Prevention and Combating of Corruption Bureau (PCCB) had been working alongside the SFO on the investigation. When it was brought to a premature close by the BAE-SFO settlement, the Tanzanian investigations lost all momentum, as well as a rare opportunity to bring to court a suspect in a major corruption case. After the settlement was announced, a PCCB spokesperson said: “Evidence collected by [the] PCCB and SFO on corruption allegations in the radar deal has failed to link Mr Andrew Chenge with the allegations”.

The US embassy cables released by Wikileaks included a report from 2007 in which the PCCB head, Edward Hoseah, described senior Tanzanian politicians as “untouchable”, and reported that “his life may be in danger”. A US official noted that the fact the PCCB was taking the case seriously “may actually reflect the notoriety of the case in the UK”, and that “a fully developed case file, brimming with detailed evidence, was presented by UK investigators to the Prevention of Corruption Bureau”. When the SFO stepped back, however, the PCCB case dissipated.

Second, the payment made by BAE is problematic because it overlooks some of the key lessons about aid effectiveness learned by the aid industry over the past 20 years.

BAE has specified the money be spent on school textbooks and other educational equipment. But the Tanzanian government already had a responsibility to provide these things and had promised to do so. The payment from BAE effectively absolves Tanzania’s government of its responsibility to provide a quality education for the country’s people, thereby undermining its accountability to its citizens.

A payment for something that the government had already promised opens up the problem of aid fungibility. BAE’s payment for textbooks allows Tanzania’s government to reassign its textbook budget elsewhere. The amount spent on school equipment remains unchanged, but spending on something else – military hardware, perhaps? – increases.

The UK gives a lot of aid to Tanzania. Much of this is rightly focused on improving governance and accountability, including anti-corruption work. But the SFO has undermined these efforts in its hasty and ill-considered settlement with BAE.

“We are glad to have finally been able to make the payment to the government of Tanzania and bring this matter to a close,” BAE said. No surprise there. BAE would like nothing more than to draw a line under the episode.

The SFO is also happy. Its director Richard Alderman said: “It provides a satisfactory outcome for all concerned but most of all for the Tanzanian people.”

I beg to differ. There is no satisfactory conclusion for the people of Tanzania, where the investigation’s premature closure undermines the cause of justice and accountability. As Tanzanian media tycoon Reginald Mengi tweeted (in Swahili): “The radar money has been paid. Nobody has been prosecuted. They say there’s no evidence. Is the war on corruption just words?”

• Ben Taylor leads a Tanzanian NGO, Daraja, focusing on local governance and accountability

BAE finally pays out £29.5m for educational projects in Tanzania

Category : Business

British firm belatedly agrees terms on payment for textbooks and other school materials in line with SFO settlement

All of Tanzania’s primary schools are to receive textbooks to be paid for by BAE Systems under a memorandum of understanding signed by the Tanzanian government, BAE and the Serious Fraud Office (SFO) on Thursday.

In all, BAE will pay £29.5m plus accrued interest for educational projects in Tanzania, following a settlement between the defence contractor and the SFO for concealing payments in connection with the sale of an air traffic control system to the east African country in 2002.

Textbooks will be purchased for all 16,000 primary schools in the country, benefiting 8.3 million children.

“Having a textbook alone will not improve the quality of education, so funds will also be used to provide all 175,000 primary school teachers with teachers’ guides, syllabi and syllabi guides to help improve their teaching skills,” the SFO said in a statement. “Up to £5m will be spent on the purchase of desks to benefit primary school children living in nine districts where the need for investment in education is considered greatest.”

BAE was fined £500,000 in 2010 for concealing payments of $12.4m to Sailesh Vithlani, a marketing adviser in Tanzania, in connection with the radar deal. The company agreed with the SFO to make an ex-gratia payment equivalent to the size of the contract to the Tanzanian people. MPs on the international development committee last year strongly criticised BAE for dragging its feet over the payment. BAE wanted the payment to be described as a “charitable contribution” to Tanzania in negotiations over the drafting of the memorandum of understanding.

The military radar deal went through just weeks after Clare Short, the development secretary at the time, had negotiated a large increase in aid to Tanzania to fund universal free education. Tanzania had no air force at that point and was receiving debt relief. GDP per head was just £465. Worried that the extra aid she had negotiated would be immediately swallowed up to pay BAE, Short attempted to block the deal, but it went ahead after Tony Blair, the prime minister at the time, intervened.

The SFO began an investigation into BAE Systems in 2004, prompted by allegations over the al-Yamamah defence contract with Saudi Arabia. The SFO investigation broadened into contracts between BAE and a number of other countries (including Czech Republic, Romania and South Africa). The SFO investigation in connection with Saudi Arabia was discontinued in December 2006 on grounds of national security.

In February, BAE finished settlement negotiations with the US department of justice in relation to contracts with Saudi Arabia and central and eastern Europe, and with the SFO in relation to the Tanzania contract.

Following Thursday’s memorandum of understanding, international development secretary Andrew Mitchell said: “The British government has been helping identify the best way for BAE’s settlement money to be spent in the interests of Tanzania’s poorest people … I am pleased that all parties have now signed the memorandum of understanding and urge BAE to make their payment as soon as possible.”

The Department for International Development said the entire process will be rigorously and independently monitored and audited on behalf of the four signatories to ensure the money is used solely for the benefit of the Tanzanian people.

BAE said the money had left its account. “We are glad to finally be able to make the payment to the government of Tanzania and bring this matter to a close,” the company said. “We are grateful to DfID for their work in agreeing the memorandum of understanding with the government of Tanzania.”