History was made in Tanzania this month when a syndicate of the country's own local commercial banks and pension funds raised $240 million to fund the recovery of the Tanzania Electric Supply Company (Tanesco) in a deal that illustrates the increasing depth of the country's capital markets.
It is the single largest corporate finance deal ever in East Africa and it signals that Tanzania is more able to rely on its own finance institutions and less dependent on foreign financiers such as the World Bank.
With this deal, Tanzania becomes the first country in East Africa to use resources held by its pension funds to finance infrastructure. The deal is part of a growing trend where companies in East Africa are preferring to finance expansion and recovery through locally sourced, shilling-denominated long-term debt.
Tanesco managing director Dr Idris Rashidi, the immediate former governor of the Bank of Tanzania, described the deal as a landmark transaction that will pave the way for the return of the utility to its past financial strength.
Part of the money will be used to strengthen the company's transmission and distribution network in order to reduce power losses, to connect new customers and to train staff to improve customer service delivery.
Under the recovery plan, Tanesco will embark on an ambitious capital expenditure programme to sustain an average load growth of 15 per cent per annum over the next five years. Also targeted in the plan are new infrastructure, new customers and upgrading of old infrastructure.
Increased electricity capacity is vital for Tanzania’s economic development. Tanzania has an electricity per capita consumption of about 64kWh/y (compared with over 10,000kWh/y for developed and 900kWh/y for emerging countries like India and China). In Tanzania, electricity is expensive and unreliable – these are major obstacles to global competitiveness.
The School of St Jude is educating the kids who will become the next generation of engineers, accountants, lawyers, bankers, entrepreneurs, teachers, and policy makers. Improved infrastructure, and better education will help Tanzania climb out of the poverty trap.