Tanzania secures US $1.46bn loan for SGR

Tanzania has secured a US $1.46bn concessional loan from the Standard Chartered Bank Group to fund its Morogoro-Dodoma standard gauge railway (SGR).

According to Dr. Philip Mpango, Finance Minister the new loan is part of an agreement reached with Standard Chartered Bank Group Executive Director Bill Winters in Dar es Salaam, which will go to fund the 430 km line between Morogoro and Makutupora.

The government has so far allocated US $700m 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,” said Dr Mpango.

The Stanchart loan means that the government has secured more than 75% funding for the US $1.9bn project, which it awarded a joint venture of Portuguese and Turkish firms, Mota Engil and Yapi Merkezi respectively. 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 525 km line between Dar es Salaam and Morogoro, which is being funded by the Turkey Exim Bank to the tune of US $1.2 bn.

However, Tanzania expects to spend close to US $14bn on the line from its capital to its border town with Rwanda at Rusumo, covering almost 2,600 km. Meanwhile, Tanzania has 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. Mgedzi also revealed that the first phase of the project was at 22% completion, with the contractors already working on the production of the concrete sleepers, precast girder production and levelling of the track surface.

Project section

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

Also read: Tanzania SGR project still open for tendering

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.

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

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 pre-drawn 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 US $190m  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 Kenya 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.

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