21 January 2017

East Africa: Turkey, China Caught Up in SGR Tender Confusion

Photo: Mohamed Mambo/Daily News
John Magufuli and his Turkish counterpart Recep Tayyip Erdogan observe the national anthems of their countries at the State House grounds in Dar es Salaam.

A dispute over the tender for the construction of the $7.6 billion standard gauge railway linking Dar es salaam to neighbouring countries has provided a tense backdrop to Turkish President Recep Tayyip Erdogan's visit to Tanzania on January 22-23.

Although EXIM Bank of China has signed an agreement with Tanzania to finance the 1,259km line, a Turkish firm is believed to be the front-runner to clinch the contract.

EXIM tends to tie its financing to Chinese contractors getting the job.

Chinese Foreign Minister Wangi Yi visited Tanzania two weeks ago to canvass for the tender, but government officials were said to have offered no guarantees.

Last year, Chinese companies had won the tender to build the railway before the process was cancelled over irregularities and fresh bids invited. Some government officials, however, fear a decision that goes against Beijing could force them back to the drawing board on the project's financing should Exim Bank withdraw.

The Chinese ambassador to Tanzania Dr Lv Youqing recently met with CCM Secretary-General, Abdulrahman Kinana, but details of their discussions were not made public.

The development comes amid government's announcement that it was turning to China, South Korea, India and Turkey for concessional loans after it had raised concerns over tough conditions imposed on the government by development partners.

Despite the government allocating Tsh1 trillion ($500 million) in the current budget as initial construction cost, there have been questions over the viability of the project particularly the government's ability to pay the debt.

Irregular award

The Tanzania-Zambia Railway (Tazara) which was built in 1975 is yet to return a profit.

Opposition leader, Zitto Kabwe told The EastAfrican that initial tender details showed that a Turkish company had won the tender prompting the Chinese government to threaten to pull out of the project.

"The project has put the government relationship with China at a crossroads and it is clear President Magufuli is determined to proceed with the project even if China doesn't provide funding. The question is where the money to build such a massive project will come from," said Mr Kabwe.

Some government officials also read mischief in the threat to withdraw funding, saying China had hoped that its companies would be awarded the tender without competitive bidding.

Tanzania had in May 2015 awarded the tender to build the railway to a consortium of Chinese railway companies led by China Railway Materials. On ascending to power last year, President Magufuli terminated the contract despite the consortium having already built five kilometres of the line.

Subsequently, a former managing director of Reli Assets Holding Company was arraigned in court over irregular award of the tender.

The original design ran from Dar es Salaam to Kigoma, branching off to Uvinza for the Musongati nickel mine in Burundi and extend to Kaliua. The plan was to use Burundi as a logistic hub for supplying goods into DR Congo and Rwanda.

During his Africa tour, President Erdogan is also expected to visit Mozambique and Madagascar.

Tanzania and Turkey have enjoyed good bilateral relations since 2009, when Turkey adopted a policy of improving its relations with Africa.

Trade volume between the two countries has almost tripled since 2009. In 2009 trade volume stood at $66 million but now it is around $160 million.

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