It may be symbolic that, beyond the state-run grid, Tanzania provides an enticing opportunity for innovative investors to build businesses in marginalised communities with aspirations to move beyond energy poverty. Tanzania has been a pioneer in the sub-Saharan off-grid revolution, where mini-grid operator Jumeme and other innovators have been able to build their businesses. Germany’s Redavia last year began operating its first two mini-grids, supported by InfraCo Africa. Mobisol and Rafiki plan hybrid grids (AE 365/12), while solar home system provider Off Grid Electric, with origins in Silicon Valley, expects further substantial growth after a $55m funding round led by Helios Investment Partners (AE 363/4). Kenyan trailblazer M-Kopa’s regional expansion is targeting Tanzania, helped by $55m debt funding arranged last year by Stanbic Bank.
Tanzania emerged as an off-grid success story because government did the right things (AE 313/7). Accepting that the national grid would not reach swathes of the country for decades – if at all – it put in place a coherent regulatory structure for off-grid and let investors do their work. It is a lesson ‘the Bulldozer’, President John Magufuli, would do well to ponder, as perceptions of Tanzanian risk increase, while levels of investment and projections for growth dip.
While Mozambique moves towards final investment decisions on its liquefied natural gas (LNG) projects, Tanzania’s talks with international oil company partners have moved ahead at glacial pace. Whether they can accept Tanzania’s terms – which will include a heavy commitment to domestic investment – is questionable. In key sectors including mining and electricity onerous legislation and high-profile spats with private companies have curtailed many investment plans (AE 350/1). Arbitration cases now under way include Symbion Power Tanzania’s claim at the International Chamber of Commerce in Paris for $562.41m in lost capacity payments, interest and future payments from a 15-year power purchase agreement that has been contested by government (AE 342/5). In another battle, over the Ubungo gas power plant, Symbion is set to seek recourse in the International Centre for Settlement of Investment Disputes (AE 358/5).
With commodities prices rising, the International Monetary Fund estimates 6.4% GDP growth in 2018, up from 5.3% in 2017, and inflation to fall to 4.8% this year. But the currency is weak and relations with business are poor and deteriorating. There may be substance to Magufuli’s widely popular claims that mining companies and other investors have scandalously underpaid for decades, but the way in which officials are demanding extra payments means mines are being shut in. The $190bn tax bill delivered last year to Acacia Mining highlighted the extent that government was pitted against business. Acacia announced a 55% year-on-year fall in gold production in Q1 2018, with output from Tanzania’s biggest gold producer at Bulyanhulu falling most dramatically.
In parallel to these developments are the authorities’ efforts to eradicate critics. Leading opposition party Chadema has been threatened with a ban; its leaders were detained and charged with sedition and incitement to violence on 27 March. Recent attempts to organise demonstrations have fallen flat after Magufuli warned that “some people have failed to engage in legitimate politics… let them demonstrate and they will see who I am”. London weekly The Economist claimed the progress that had made Tanzanians twice as rich as they were in 1990 is threatened, with Magufuli “transforming a stable, if flawed, democracy into a brutal dictatorship”.
Magufuli’s supporters claim he retains widespread popular support in a country forged in the ideology of ‘African socialism’. With Magufuli-era institutions now coming into operation – he has finally appointed a chairman and other officials to the Mining Commission, a centrepiece of the mid-2017 overhaul of the natural resources regime – the time has come for the Bulldozer to show he can sweep Tanzania’s governance record clean, setting the course for greater social justice underpinned by continued economic prosperity.
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