Tanzanian politicians are calling for the resignation of the prime minister, Mizengo Pinda, after a government report implicated him in an energy scandal that resulted in the plunder of more than $120m (£76.5m) from the country’s central bank.

In a dramatic parliamentary session on Wednesday that was disrupted by power outages, Tanzania’s public accounts committee (PAC) revealed that senior officials authorised fraudulent payments to offshore bank accounts under the guise of energy contracts. The state-owned energy provider Tanesco, along with five senior politicians – including the minister for energy and the attorney general – are implicated in the scandal, the PAC said.

Last month, the UK and 11 other international donors withheld $490m in general budget support to Tanzania amid concerns that officials were siphoning off public funds. The country is one of Africa’s biggest per-capita aid recipients, with 29% of its annual budget coming from overseas development assistance, according to the PAC.

Investigators said that Tanesco formed a joint escrow (holding) account in 2006, known as the Tegeta account, with Independent Power Tanzania Limited (IPTL), which is owned by Pan Africa Power (PAP). Funds from this account were transferred to offshore bank accounts held by private businessmen and government officials, the committee said.

Tanzania’s Revenue Authority (TRA) has called for Interpol to investigate the role of Harbinder Singh Sethi, a businessman suspected of organising fraudulent payments, as well as James Rugemalira, who is suspected of siphoning off funds through his stake in IPTL.

“As far as we are concerned, the acquisition of IPTL was valid,” said Joseph Makandege, PAP’s company secretary and chief counsel. “The deal was done in good faith. Actually, we are in the process [of expanding] our plant capacity.”

The parliament committee said it had directed Tanzania’s Prevention and Combating of Corruption Bureau (PCCB) to arrest and prosecute Sethi for money laundering and using forged documents to transfer shares.

Busy street scene in Dar es Salaam, Tanzania, East Africa. Photograph: Jake Lyell/Alamy

Pinda said last month that Tanzania was desperate for a solution to its energy crisis and the IPTL deal offered a quick answer. “We entered into an agreement with that company [Independent Power Tanzania Limited] so that they can produce power. All these donors know where we were then – it was a crisis – and we had to chip in with measures to try and see how we could salvage the situation. So somebody comes in and says, ‘OK I’m ready to do this job for you, I’ll be producing this power, selling it to your institutions.’”

Tanzania’s energy sector has been dogged by allegations of corruption and 20% of its development funding is thought to have been looted in the past 12 months. Last year, the energy minister, William Ngeleja was forced to step down after a report uncovered massive abuse of taxpayers’ money in 2012. In 2008, the country was rocked by another energy scandal, involving the US firm Richmond Development, which led to the resignation of Edward Lowassa, the prime minister at the time.

Zitto Kabwe, an opposition MP and head of the PAC, said: “There is no story of power in Tanzania … without corruption. We have been having huge problems with electricity in Tanzania for the last 20 years. IPTL has been there for the last 20 years and it has been involved in all this corruption. Rugemalira has been with IPTL for the last 20 years and he has been part and parcel of the corrupt power deal that has been going on in Tanzania.”

People paid 300 Shillings (10p) to watch the parliamentary debate in bars and nightclubs, places where they usually watch football.

The committee’s deputy chairman, Deo Filikunjombe, told a parliamentary session on Wednesday: “The PAC has gathered adequate evidence to suggest that the prime minister was well informed on the progress of the transaction from the central bank but didn’t take any steps to stop the transaction from occurring. He was frequently assuring the parliament that the monies didn’t belong to the taxpayers. The prime minister has to be held to account for his misleading the public, so that people gain confidence in their government and their political leaders.”

MP Joshua Nassari said Tanesco often cuts electricity when sensitive issues are being debated in parliament in an effort to deny the public an opportunity to monitor their government.

The donors’ general budget support committee and the UK’s foreign office were not immediately available to comment on the report.

Tanzania has an estimated 50tn cubic feet of gas reserves, and is gearing up for an energy boom. Politicians worry that corruption could plague the sector before it gets off the ground.

Juvenalis Ngowi, a Tanzanian lawyer, said: “Constitutionally, it is for the prime minister to resign voluntarily, or the president [to] fire him, or MPs to impeach him. However, due to limited time – since the parliamentary session ends on Friday this week – the MPs will initiate the impeachment process in the parliamentary sitting in January 2015, when the next parliament sits.

“I watched the reaction of the prime minister when the report was being tabled and it seems he might want to step down voluntarily.”

Pinda said last month: “If [the PAC] finds anybody having committed some offence in the process of [IPTL], they will go through the due process of law: take him to court, prosecute him and the courts will find the solution to that problem.”

“This appears to be one of the biggest corruption scandals in Tanzania’s history and has been long drawn out at great cost to the Tanzanian people,” said a Transparency International spokeswoman. “This web of corruption in the energy sector risks undermining donor and investor confidence, and the country’s ability to secure much needed financing for power-production from development partners. This curtails Tanzania’s chances of meeting the current gaps in the energy sector and the growing demand for power.”















