6 July 2019

Tanzania: China Could Finance Part of Tanzania's SGR Project

China is back as one of the potential financiers of Tanzania's flagship standard gauge railway project, Foreign Affairs Minister Palamagamba Kabudi confirmed this past week.

"The Chinese government has declared its intention to support the SGR construction at a later stage, and is now doing its own evaluation of the project before engaging us in further talks," Prof Kabudi said, after attending a co-ordination meeting of the Forum on China-Africa Cooperation (FOCAC) in Beijing.

The SGR, stretching 1,457km from Dar es Salaam to western Tanzania, is one of the mega-infrastructure projects being touted by President John Magufuli's government as key to its industrialisation agenda over the next decade.

The budget for the railway is $7.5 billion, with a five-year completion timeline.

Funding

Earlier plans for China's Exim Bank to provide most of the funding for its construction fell through after the administration rejected the Chinese in favour of a Turkish-Portuguese consortium.

After that deal failed, Tanzania declared that it would pay for the project out of its own pocket. That has worked for the first two phases of the project, Dar es Salaam-Morogoro and Morogoro-Makutupora, covering 726km and costing Tsh4.89 trillion ($2.5 billion).

Tanzania Railways Corporation (TRC) officials say the first phase of the project (Dar-Morogoro) is two-thirds complete, and preparatory work on Phase Two (Dar-Makutupora) is underway.

However, funding has become an issue. TRC communications manager Jamila Mbarouk confirmed in an interview with The EastAfrican this past week that:

"The government is now striving hard to get some financing assistance in order to complete the remaining phases of the SGR construction, starting from Makutupora to the Lake Victoria zone and the western part of the country -- covering about 731km."

The Tanzanian parliament last month approved a Tsh2.5 trillion ($1.1 billion) allocation in the country's 2019/20 budget for the SGR project, almost half of the entire Ministry of Works development expenditure budget for the year.

China is understood to have also told Kenya and Uganda to work on their respective financing modalities for their joint SGR project in order to receive funding.

China had initially declined to fund the project, with analysts saying the risk of default for both countries was high.

Tanzania

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