The United Republic of Tanzania has signed a $1.2 billion commercial financing facility for the Tabora-Kigoma section of its Standard Gauge Railway (Lot 6). The African Development Bank (AfDB), acting as Initial Mandated Lead Arranger (MLA), structured and arranged the Partial Credit Guarantee (PCG) of $800 million which is the Bank's largest to date.
Tanzania mandated the Bank to structure and mobilise up to $3.2 billion for its regional railway development through Standard Gauge Railway Project. Delivering this ambitious project required a financing approach capable of mobilising capital from multiple investor classes. A key priority was to align the financing requirements and risk appetites of various institutions within a unified financing structure to support this strategic infrastructure investment, while managing the country's other debts and various geopolitical political events which affected interest rates.
The operation combines the Bank's transport sector expertise with its financial structuring and guarantee capabilities to advance the Central Corridor's development as a productive regional economic corridor.
The Bank mobilised a nine-bank syndicate for the $1.2 billion commercial facility, co-arranged by Deutsche Bank and Société Générale. Other lenders include HSBC, Commerzbank, Nedbank, Stanbic Bank Tanzania, First Abu Dhabi Bank, FirstBank UK and Bank of Africa United Kingdom. Their commitments comprise $720 million of guaranteed lending and $480 million of lending based on clean risk to the sovereign. The $1.2 billion signed facility forms part of the overall $2.3 billion financing package, which outside of this commercial tranche comprises an ECA tranche and a further tranche to be mobilised in collaboration with a co-guarantor, all within the Bank's broader mobilisation mandate.
The transaction illustrates blended finance in practice. At the centre of the commercial tranche is a non-market priced AfDB PCG of up to $800 million, covering the principal of the covered tranche plus two years of interest. AfDB remains Guarantor of Record, while credit insurance arranged by insurance broker Texel distributes $405.5 million of exposure to a panel of international insurers, including Lloyd's syndicates. This brings additional private sector risk-bearing capacity into the transaction, strengthening the guarantee structure and enabling greater commercial financing to be mobilised for Tanzania's railway development.
The financing will support the construction of the 411-kilometre electrified Tabora-Kigoma line, known as Lot 6, a strategic link in Tanzania's railway network. For Tanzania, the investment will support the development of western regions by providing a long-haul high-volume transport link for production and trade. Farmers, mining operators and the general population are expected to benefit from more efficient transport, lower transport costs and employment opportunities during construction and operation. Connected to Tanzania's wider railway network and the port of Dar es Salaam, the line will also support trade with the Democratic Republic of Congo across Lake Tanganyika through Kigoma and Kalemie ports, while the wider regional railway programme will strengthen links with Burundi and further into Eastern DRC.
"By combining development finance, commercial lending and insurance capacity, we have successfully unlocked the scale of financing required to deliver this type of transformational regional infrastructure. It reflects the vision behind the New African Financial Architecture for Development (NAFAD), focusing on private capital mobilization and partnerships in risk sharing to mobilise resources at scale," said Max Ndiaye, Senior Director African Development Bank Group.
"The strategic value of this railway lies in the productive investment it can unlock along the Central Corridor. By connecting agricultural and mineral production areas, industrial centres and markets, the investment can strengthen regional value chains and expand opportunities for businesses and communities. Our ambition is to translate this landmark financing into a corridor that supports competitive industries, creates jobs and deepens regional integration," said Mike Salawou, Director of the African Development Bank's Infrastructure and Urban Development Department.
The transaction advances the Bank Group's Ten-Year Strategy 2024-2033 and its Four Cardinal Points, particularly unlocking Africa's capital and building resilient infrastructure and competitive value chains. By mobilising commercial finance for a regional transport corridor, it translates the Bank's capital mobilisation mandate into tangible support for trade, industrial development and regional integration. It also illustrates how the Bank leverages its infrastructure expertise and financing capabilities to strengthen regional competitiveness and generate sustainable economic opportunities.
