Tanzania’s government has revealed that the much-vaunted Bagamoyo port project will be constructed on its terms, issuing an ultimatum to Beijing-based China Merchants Holdings International (CMHI) to either accept the conditions or drop its interest.
The Bagamoyo port project was initiated under the administration of the retired President Jakaya Kikwete with a framework agreement signed on March 24, 2013. But when President John Magufuli came to office in 2015, the project was temporarily abandoned as the government focused on improving existing ports at Dar es Salaam, Mtwara and Tanga.
It encountered further delay when Magufuli in January 2016 ordered an immediate suspension of the project on the basis that the conditions set by the investor were as good as selling Tanzania to China.
The Chinese investor had given certain conditions on the $10 billion project which authorities deemed not beneficial to the country. The government rejected and revised the demands according to Deusdedit Kakoko, the chief executive of Tanzania Ports Authority.
As reported by The East African, the new stringent terms of the contract offer the Chinese company a 33-year lease instead of the 99-year one it had demanded. There will also be no tax holiday for CMHI and the company will be subjected to all taxes designed by the Tanzania Revenue Authority (TRA).
The third condition states that there would be no special status and the firm would be required to pay the market rate for water and electricity like any other investor.
CMHI is prohibited from starting and running any other business deemed necessary within the port without the government’s approval. It is also open to scrutiny and regulation by relevant agencies in line with the law as any other investor.
Lastly, the government of Tanzania is free to develop other ports to be in direct competition with Bagamoyo. The project can move to the next stage once the Chinese investor agrees in principle with the government’s new terms.
The latest disagreement on contract terms is just another hindrance in the implementation of the Bagamoyo port project, which has been marred by funding difficulty and delays by the government over time.
If constructed with funding from Oman’s State General Reserve Fund (SGRF) and China, the port will be the biggest in Tanzania and East Africa. It is located about 75 kilometres from Dar es Salaam and 10 kilometres from Bagamoyo town.
Together with its affiliate industrial zone, the new port will help address congestion at the old one and help Tanzania become the region’s leading shipping and logistics centre. Apart from supplementing other ports in the country, the goal is to rival Kenya’s port at Mombasa (East Africa’s major trade gateway) and enhance competition on the regional coast.
About 190 industries have been marked for development within the Bagamoyo Special Economic Zone (SEZ), including a fertilizer processing plant to be constructed around the port by the Omani government. When fully developed, the SEZ is expected to attract about 700 industries, thus becoming a strategic investment zone in East Africa.