Dar secures $1.46b SGR loan from Stanchart
Funds will enable Tanzania to build the 430km line between Morogoro and Makutupora
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.
President Magufuli launches the first phase of SGR between Dar es Salaam and Morogoro.
Ugandan President Yoweri Museveni (left) meets Chinese President Xi Jinping in Beijing on September 6.