Tanzania's new investment in infrastructure


Tanzania’s president John Magufuli has made infrastructure development a priority; with the government setting a target of raising generating capacity to 10GW and bringing electricity to half of the population by 2025. On 2 August, the Tanzanian government moved significantly towards this goal when it announced that it is launching a pre-feasibility study for a multi-purpose hydropower scheme that would include a proposed 300MW Kikonge hydroelectric facility on the river Ruhuhu.

The African Water Facility, hosted and managed by the African Development Bank Group (“ADBG”), has approved a €2 million grant to help finance the study. Additional contributions will be made by the Tanzanian government and the Climate Resilient Infrastructure Development Facility. Once the hydroelectric plant is developed, Tanzania will gain a 53% increase of the country’s hydropower capacity, according to the ADBG. This is a welcome investment as the country’s reliance on the existing hydropower infrastructure has been recognised as unsustainable following chronic electricity shortages in 2011 and 2012. The shortages led to a push to persify Tanzania’s energy sources through investment in alternative renewables, as well as oil and gas related infrastructure such as State-run Tanzania Petroleum Development Corporation’s cooperation with Ophir Energy, Shell, ExxonMobil and Statoil to build an LNG plant on Tanzania’s coast.

The grant is also encouraging to private investors interested in the country. The government has taken active steps to promote private investment in electricity generation, transmission and distribution projects such as this, and has developed a PPP framework through the Public Private Partnership Policy issued in 2009, the Public Private Partnership Act passed in 2010 and the PPP Regulations passed in 2011. Tanzania is one of the few African countries to have a PPP framework such as this and has established strong connections with foreign investors, such as Nigeria's Dangote Cement which recently built a $500 million factory in southern Tanzania and is now operating in the country.

Tanzania is also a signatory to the Multilateral Investment Guarantee Agency and the International Centre for Settlement of Investment Disputes, and has entered bilateral agreements on the protection and promotion of foreign investment including with the UK, Canada, Germany, Italy, Denmark, Sweden and Switzerland.

Following the announcement of the grant and Kikonge project, on 12 August, Tanzania Electric Supply Company (“TANESCO”) revealed its plan to set aside $205 million to upgrade the country’s power distribution system and accelerate the implementation of power projects such as this one and the 100 MW Singida wind farm project, which, if it proceeds to conclusion, would be one of the largest wind projects in Africa. Clearly, focus has turned to improving the country’s electricity supply and enabling rapid development in infrastructure. With a framework for, and commitment to, private investment, Tanzania continues to provide opportunities to foreign companies to get involved.