Tanzania Infrastructure Report Q2 2012

BMI View: We see the government's major infrastructure expansion programme - which will involve the construction of new ports, railways and power infrastructure - as not only positive for overall economic development, but also as presenting new opportunities for sponsors and engineering, procurement and construction (EPC) contractors with the expertise to undertake the major projects. Nascent oil and gas upstream activity will drive new ventures in auxiliary infrastructure, including gas pipelines, and facilitate the economic viability of gas power plants. However, regulatory risks and the prohibitive cost of the projects remain the greatest obstacles. Opposition to projects on environmental grounds will also delay implementation.

Key developments include: Reinforcing our view that infrastructure will be a priority public policy area, the government's budget for 2011/2012 places strong emphasis on development expenditure, with part of the TZS13.52trn (US$8.6bn) budget earmarked for infrastructure investment. However, BMI's Africa country risk team highlights that the budget remains reliant on loans and grants from foreign entities, thus limiting the scope for full implementation.

Huge gas deposits have been found in Tanzania. According to the Citizen, the country is expected to receive an FDI of around $7bn from just one company: Ophir Energy and its partners British Gas. Other multinational companies such as Petrobras and Statoil are involved in drilling programmes in 2012.

Tanzania and Uganda have revealed plans for a US$2.7bn joint venture (JV) to develop a railway line and ports on Lake Victoria. The new 800km railway will link a deep water port at Mwambani Bay in Tanga with Musoma Port at Lake Victoria. In parallel, Tanzania, Rwanda and Burundi are planning to invest US$3.5bn in upgrading an existing rail line in Tanzania between Dar es Salaam and Isaka. Work will also include the construction of a new 1,651km railway from Isaka to Kigali, in Rwanda, and Keza to Gitega and Musongati in Burundi.

The Tanzania Airports Authority (TAA) has announced that it is to construct a new terminal at Julius Nyerere International Airport in Dar es Salaam, reports airport-technology.com. A feasibility study was undertaken in 2010, and the TAA will now begin a tendering process for the design and construction of the terminal. Eight companies have already expressed an interest and the project will be financed through a Public-Private Partnership (PPP) initiative.

The Tanzanian Government and Export-Import Bank of China are negotiating the financing of the US$700mn Mnazi Bay gas-for-electricity project in southern Tanzania. The realisation of the Mnazi Bay project is of strategic importance to the country, which is suffering from acute power shortages.