History in the making

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.

Where is East Africa?

Sometimes it is not quite what you may think it is. Usually Tanzania is counted as East Africa, but for some purposes, it it counted as part of a bloc of countries in Southern Africa.




Perhaps this kind of ambiguity will diminish with the latest steps towards the formation of the offical East African Community (EAC). This community is intended to become a political federation, including a common market for the region's combined population of 110 million, a monetary union and a common president and parliament by 2010.

Three countries at the core of the EAC are Tanzania, Kenya and Uganda which joined in 2005 to establish a common tariff zone. Last week they were joined by Rwanda and Burundi, and the five countries are working towards a shared future with a common East African court of justice, customs union and an EAC anthem.

Rwanda is rebuilding an economy shattered after a 1994 genocide in which 800,000 people were butchered, while Burundi is still in talks with rebels to end an insurgency that has killed some 300,000 of its citizens since 1993.

Their inclusion in the EAC is vital to their future development because both are land locked countries. Land locked countries are severely disadvantaged in world trade because of the transport barriers that cut them off from access to world markets.

In time, the EAC has the potential to help this group of countries that share geography, history and culture to share economic development in mutual harmony with their neighbours and to reap the dividends of living at peace.

UPDATE 7 July: The enlarged East African Community has attracted investors from the Indian sub-continent barely a month after its was launched in Kampala.

The Confederation of Indian Industrialists is visiting the region to explore opportunities for investing in the new trading block that now has a population of about 115 million.

Kenya's Minister for Regional Co-operation, John Koech, took the opportunity to announce that a joint East African energy master plan and other forms of infrastructure were being worked on to boost industrialisation.

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