The Tanzanian government signed a facility agreement with Standard Chartered Bank Tanzania for a $1.46 billion loan on Thursday 13, February 2020. This is to finance the standard gauge railway (SGR) construction covering a distance of 550 km (341.75 miles) from the commercial capital to central Tanzania.
The Finance and Planning Ministry together with Standard Chartered Bank Tanzania said in a statement that the funding is set to include the first and second phases of the railway project running between Dar es Salaam to Matukupora.
Similarly, Standard Chartered Tanzania who acted as a global coordinator, bookrunner and mandated lead arranger on the facility agreement, is the largest foreign currency financing raised by the ministry of finance to date.
Although details of the interest rate on the loan were not stated, Ben Mwaipaja the Finance Ministry’s spokesman said that it would have a 20-year tenure.
With funding in place, the East African country is set to build a new network of SGR to replace the existing narrow-gauge railway built more than a century ago. Machibya Kadogosa the corporation’s project manager, told TheEastAfrican that the two phases are currently being constructed by a Turkish firm Yapi Merkezi, in partnership with Portuguese firm Mota-Engil Africa.
Subsequently, Tanzania is building the rail in sections with each fraction handled by different companies and a new set of funds. Earlier on the country mentioned that the biggest part of the financing would come from Sweden’s and Denmark’s export credit agencies.
Once the SGR is completed, the rail network will connect Tanzania’s port of Dar es Salaam to its land-locked neighbors (Burundi, Rwanda, Democratic Republic of Congo, Uganda). The short term-goal of the railway is to drive down transport costs, increase rural-urban linkages, and improve access to markets. While in the long run, SGR will serve as a catalyst to improve the economic growth of East Africa through regional trading.
Originally, Kenya was the first East African country to start the construction of a modern railway to serve the region, but they faced recurrent failures to secure funding for their SGR. This lack of finance has given Tanzania an advantage to finish their project and gain trading access to other East African countries ahead of Kenya.
China refused to partake in Kenya’s SGR funding because they wanted “sufficient proof of viability” before they could authorize any kind of deal after the project made a loss of Sh10 billion in the first year.
With Tanzania’s newly acquired fund, the country’s SGR will encourage job creation, increase industrialization, reduce road maintenance costs, and most importantly improve regional trade within East Africa.
