Dar se­cures $1.46b SGR loan from Stan­chart

Funds will en­able Tan­za­nia to build the 430km line be­tween Moro­goro and Maku­tu­pora

The East African - - NEWS - By AL­LAN OLINGO

Tan­za­nia has se­cured a $1.46 bil­lion con­ces­sional loan from the Stan­dard Char­tered Bank's Group to fund its stan­dard gauge rail­way line be­tween Moro­goro and Dodoma.

Fi­nance Min­is­ter Dr Philip Mpango said the new loan was part of an agree­ment reached with Stan­dard Char­tered Bank Group ex­ec­u­tive di­rec­tor Bill Win­ters in Dar es Salaam, which would go to fund the 430km line be­tween Moro­goro and Maku­tu­pora.

Al­ready, the gov­ern­ment has al­lo­cated $700 mil­lion for its SGR projects in the 2018/2019 an­nual bud­get.

“We are still seek­ing more funds from other part­ners to fund the re­main­ing sec­tions that will see us ex­tend the line to the Rwan­dan bor­der,” Dr Mpango said.

The Stan­chart loan means that the gov­ern­ment has se­cured more than 75 per cent fund­ing for the $1.9 bil­lion project, which it awarded a joint ven­ture of Por­tuguese and Turk­ish firms, Yapi Merkezi and Mota Engil. It is also un­der­stood that it will be is­su­ing a last con­tract for the third phase of the project this year, and other two con­tracts to be an­nounced in the first quar­ter of 2019.

Last year, Pres­i­dent John Magu­fuli launched a 525km line be­tween Dar es Salaam and Moro­goro, which is be­ing funded by the Turkey Exim Bank to the tune of $1.2 bil­lion. Tan­za­nia ex­pects to spend close to $14 bil­lion on the line from its cap­i­tal to its bor­der town with Rwanda at Rusumo, cov­er­ing al­most 2,600 kilo­me­ters. On Wed­nes­day, Dar said that it had al­ready re­ceived the first con­sign­ment of 7,100 tonnes of rails for the first phase from Ja­pan.

Tan­za­nia’s SGR project man­ager Maizo Mgedzi said their coun­try opted to im­port rail from Ja­pan be­cause of the qual­ity and also busi­ness re­la­tion­ship the con­trac­tors have with their Ja­panese coun­ter­parts.

Mr Mgedi also re­vealed that the first phase of the project was at 22 per cent com­ple­tion, with the con­trac­tors al­ready work­ing on the pro­duc­tion of the con­crete sleep­ers, pre­cast girder pro­duc­tion and lev­el­ing of the track sur­face.

In 2016, Tan­za­nia chose Por­tuguese-turk­ish joint ven­ture of Yapi Merkezi and Mota Engil to build the $1.2 bil­lion first phase, the long­est sec­tion of the project. The line is ex­pected to be elec­tric ac­com­mo­dat­ing speeds of up to 160 kilo­me­ter per hour for pas­sen­ger trains and 120 kilo­me­ters per hour for cargo trains.

Last week, Tan­za­nia's Pub­lic In­vest­ment Com­mit­tee ex­pressed con­cern that the coun­try’s power gen­er­a­tion ca­pa­bil­ity might not be enough to power the SGR project, ask­ing the Tan­za­nia Rail­ways Cor­po­ra­tion to table be­fore it be­fore the end of Novem­ber, the elec­tric­ity sup­ply plan for the line, sched­uled for com­ple­tion in Oc­to­ber 2019.

Dar is yet to award con­tract ten­der for the last two phases of the project, in­clud­ing the 300 kilo­me­tre Maku­tu­pora to Tab­ora, the 135 kilo­me­ter Tab­ora to Isaka and an off­shoot from Isaka to Mwanza then the Rusumo bor­der, which will cover close to 250 kilo­me­ters.

The news came as Tan­za­nia’s neigh­bours Kenya and Uganda were go­ing back to the draw­ing board over their SGR projects. A fort­night ago in Bei­jing, Kenya failed to sign a fi­nanc­ing agree­ment for the third phase of its SGR line, cit­ing com­mer­cial vi­a­bil­ity con­cerns from the Chi­nese.

“We had car­ried a pre­drawn con­tract to Bei­jing and ev­ery­thing was ready. How­ever, we had a dis­cus­sion with our Chi­nese coun­ter­parts and even though they sup­port this project, we all agreed to do a fea­si­bil­ity study for the whole line so that we can es­tab­lish its com­mer­cial vi­a­bil­ity,” said Trans­port Cabi­net Sec­re­tary James Macharia.

Pres­i­dent Uhuru Keny­atta had also re­quested China’s Pres­i­dent Xi Jin­ping to con­sider hav­ing half of the project cost of $190 mil­lion as a grant in­stead of a loan, which could have changed the fi­nan­cial agree­ment terms of the Naivasha-kisumu phase.

Be­fore the Fo­rum on China-africa co­op­er­a­tion sum­mit took place, of­fi­cials in Kam­pala had said that firm­ing up plans for fi­nanc­ing the SGR, would be high up on Pres­i­dent Mu­sev­eni’s agenda. This lat­est turn of events could por­tend fur­ther de­lays for the Ugan­dan phase of the project, which has been bank­ing on Kenyan get­ting a fi­nan­cial com­mit­ment from Bei­jing for its last phase of Kisumu to Mal­aba so that it can se­cure a fi­nan­cial close on its first phase be­tween Mal­aba and Kam­pala.

Opin­ion among ex­perts is di­vided on how fruit­ful Pres­i­dent Yow­eri Mu­sev­eni’s re­cent trip to the China-africa fo­rum was af­ter it emerged he failed to ink a deal on fund­ing for the the stan­dard gauge rail­way.

Be­fore the Fo­rum on China-africa Co-op­er­a­tion sum­mit held last week, of­fi­cials in Kam­pala had said that firm­ing up plans for fi­nanc­ing the SGR would be high on Pres­i­dent Mu­sev­eni’s agenda.

But th­ese plans were scut­tled af­ter Pres­i­dent Uhuru Keny­atta asked China to give Kenya a grant to com­plete the Naivasha –Kisumu leg of the SGR. The SGR has been pro­moted as the most im­por­tant link for East Africa since the Uganda Rail- way was built in 1900.

Ini­tial plans en­vis­aged a rail­way line from the Mom­basa Port in Kenya to Uganda, Rwanda and con­nect­ing back to Tan­za­nia and the DRC. A sec­ond line would con­nect South Su­dan to the north. Cur­rently the Kenya, Uganda and South Su­dan links are the only ones in the dis­cus­sion.

Kenya’s fail­ure to con­clude a fi­nanc­ing deal means Uganda is a long way from start­ing to build its side of the SGR.

China had al­ready told Uganda that it would only fund the Mal­aba-kam­pala sec­tion of the SGR if Kenya com­mit­ted to fund­ing the en­tire Nairobi-mal­aba leg of the project.

“Once Kenya and China com­mit to fi­nance the re­main­ing leg of the SGR, Uganda will be ready to start. We in Ugan­they da are ready to con­clude the fi­nanc­ing agree­ments,” said Ki­eth Muhakanizi, Sec­re­tary to the Trea­sury.

Some economists say that it is good that Uganda got to­ken fi­nanc­ing from the sum­mit in­stead of con­clud­ing what would have been a costly white ele­phant for Uganda.

“Tech­ni­cally and eco­nom­i­cally the fail­ure to get fi­nanc­ing for the stan­dard gauge rail­way is a good thing as it saves us from a white ele­phant, but politi­cians and thieves will dis­agree,” said Fred Muhu­muza, an in­de­pen­dent re­searcher who pre­vi­ously worked as pol­icy ad­viser to the Min­istry of Fi­nance.

Ezra Mun­yam­bon­era, head of the Macroe­co­nomics De­part­ment at the Eco­nomic Pol­icy Re­search Cen­tre agrees.

Dr Mun­yam­bon­era said a num­ber of African coun­tries are in­creas­ingly trapped in debt due to China’s pre­vi­ous un­will­ing­ness to pay more at­ten­tion to the types of projects lend to.

Most of this debt was ac­quired to in­vest in high cost in­fra­struc­ture projects like the stan­dard gauge rail­way and ports. The State House press team pre­sented the me­dia with sign­ings of Mous that Pres­i­dent Mu­sev­eni wit­nessed in­clud­ing one be­tween the Ugan- da Na­tional Oil Com­pany and the state-owned Chi­nese Na­tional Off Shore Oil Com­pany (CNOOC) for oil ex­plo­ration in the Al­ber­tine graben.

Sources say th­ese were a face-sav­ing ef­fort as they could have been con­cluded with­out the in­volve­ment of the pres­i­dent.

Pres­i­den­tial spokesper­son Don Wanyama con­firmed that the agree­ments signed at the sum­mit were re­ally the busi­ness of the Min­istry of For­eign Af­fairs and that State House didn’t know much about the con­tents.

Other doc­u­ments signed while Pres­i­dent Mu­sev­eni was in Bei­jing in­clude an eco­nomic and tech­ni­cal co-op­er­a­tion agree­ment worth $29.1 mil­lion.

Pic­ture: File

Pres­i­dent Magu­fuli launches the first phase of SGR be­tween Dar es Salaam and Moro­goro.

Pic­ture: AFP

Ugan­dan Pres­i­dent Yow­eri Mu­sev­eni (left) meets Chi­nese Pres­i­dent Xi Jin­ping in Bei­jing on Septem­ber 6.

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