From: Sukhdev Chhatbar, Associated Press
Published May 25, 2005 12:00 AM

Tanzania Scrap Contract with Water Supply Firm in Dispute over Quality of Services

ARUSHA, Tanzania — Tanzania is scrapping a contract with a British-German-Tanzanian firm to supply water and sewage services in the country's largest city because the company failed to fulfill key provisions of its 10-year contract, officials said Tuesday.


City Water Services, however, has filed a complaint with the London Court of International Arbitration to press for an amicable resolution of the dispute, Chief Executive Officer Cliff Stone said.


Tanzanian Water and Livestock Minister Edward Lowassa said the country took the step because the company failed to improve Dar es Salaam's water supply and pay government fees since winning a contract to run a state-owned water company. The management contract was the first step toward privatizing state-run water supply services.


Lowassa said City Water Services failed to invest US$8.5 million (euro6.8 million) over two years to improve the flow of water, replace worn out parts of the water supply system and expand the water supply network in Dar es Salaam and neighboring districts.


"Water supply services in Dar es Salaam and its vicinity have deteriorated rather than improved since this firm was contracted," Lowassa said by telephone from the city, Tanzania's commercial capital.


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The company has also failed to pay government fees amounting to some 3.6 billion shillings (US$3.6 million, euro2.9 million) at the time of termination of contract, Lowassa said.


Water supply revenues have also fallen by at least 20 percent since the firm began servicing the city, Lowassa said.


Stone, however, said the company was losing money because it had been given misleading and inaccurate information when it signed a deal to take over state-run water and sewerage services in August 2003.


The dispute began after City Water Services pressed the government to review the contract, claiming that operating conditions were different from what it had expected, Lowassa said.


The government, however, hired independent consultants -- PriceWaterhouseCoopers and Howard Humphrey -- who determined that there was no justification for review of the contract, Lowassa said.


"If the government wishes to terminate the contract, we request them to act according to the contract and then agree amicable separation terms," Stone said.


The government has formed a new firm, the Dar es Salaam Water and Sewerage Corporation, to replace City Water.


Source: Associated Press


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