15 April 2014

Tanzania: Dar to Attract Investors in Logistics Industry

TANZANIA is among ten African countries offering enormous potential for strategic investors in the transportation and logistics industry, a PricewaterhouseCoopers report says.

Titled Africa Gearing Up, the report, says Tanzania is expected to become one of the fastest-growing economies in the world with the key drivers being the recent natural gas discoveries, regional integration supported by an extension of transport infrastructure networks, reforms to ease of doing business in the country and long-term stable democracy.

According to the report which focused on ten selected economies in Africa, infrastructure performs fairly well compared to its African peers, but the quality is still too poor and has a negative impact on the economy's productive capacity.

Tanzania is already one of sub- Saharan Africa's most rapidly growing economies. It has registered a strong economic growth for over a decade with levels of growth reaching 7 per cent last year and projected to reach 7.3 per cent this year.

Recent discoveries of natural gas offshore and a broad number of planned infrastructure projects are expected to further boost to the economy.

With estimated 46.5 trillion cubic feet of natural gas reserves that is expected to rise to 200 trillion cubic feet after the next two years, Tanzania is now firmly on the global energy map as one of the hottest spot for the global energy industry.

Major international energy companies, including British gas firm BG Group, Norway's Statoil, Brazil's Petrobras, Royal Dutch Shell and Exxon Mobil Corp from the US have invested in seven deep offshore blocks and one onshore block that have been so far offered for oil and gas exploration.

It is expected that Tanzania will become a leading exporter of liquefied natural gas (LNG) by 2025, supplying markets as diverse as Pakistan, China, Spain and Chile. The PWC report notes that the infrastructure in Tanzania has witnessed impressive investment in recent years and there is more to come.

Transport and utilities infrastructure projects worth $19 billion are in the pipeline. Last year, Tanzania signed a framework deal with China Merchants Holdings (International) to construct a new port at Bagamoyo, 75 kilometres north of Dar es Salaam in a project expected involve more than US$10 billion.

The construction of the port will also involve building infrastructure for a special economic zone and railway network. The new port will be able to handle 20 times more cargo than the Dar es Salaam port and is expected to relieve pressure of the Dar port once it begins operating in 2017.

Construction of the ambitious project is expected to begin in earnest this year after bureaucratic hurdles were resolved, President Jakaya Kikwete said in Dar es Salaam last week at Reuters Africa Investment Summit.

Tanzania has also ambitious plans for investment in rail infrastructure to serve the neighbouring landlocked countries of Uganda, Burundi, Rwanda, DR Congo, Zambia and Malawi.

The report says rail projects with an estimated value of more than US$14 billion are currently in various stages of development. These include a US$2.7 billion project to develop a new railway line from Tanga at the Indian Ocean to Musoma on Lake Victoria.

The Chinese Government has signed a US$42 million agreement with the Tanzania- Zambia Railway Authority (Tazara) enabling Chinese companies to rehabilitate the railway, which is an important regional transport network connecting Eastern Africa to Asia and the Far East through the Port of Dar es Salaam.

Once completed, the deal will drastically increase capacity. Tanzania, together with Rwanda and Burundi, is also developing plans for a new railway linking the three countries.

The 1 651-km line is planned to link Dar es Salaam with Isaka (Tanzania), Kigali (Rwanda) and Musongati (Burundi). It is estimated the project will cost US$ 5.1 billion.

The PwC report further notes that logistics performance has improved significantly in recent years with a performance index showing Tanzania's overall logistics ranking has shown significant improvement over the past few years.

From an overall global ranking of 137th in 2007, it is now ranked 88th out of 155 countries and 9th in Africa, it notes adding however that despite significant improvements in international shipments, infrastructure, track & trace and logistics competence since 2007, customs and timeliness have declined slightly since 2010.

However, the performance of customs procedures is likely to improve in the near future, since Tanzania has started implementing the Pre-Arrival Declaration (PAD) system, an electronic submission system for customs declarations to promote trade and to improve the business environment generally.

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