- Mar 25, 2021
Tanzania seeks more SGR funding from European countries
What you need to know:
- Clarification: Yesterday, we published an article with the title 'Tanzania mulls plan B for SGR project as Turkish firm derailed'. This article, which has since been withdrawn, was incorrect in facts and context. The SGR lots allotted to Turkish company Yapi Merkezi are on track.
- What the story meant to address was that Tanzania's Finance Ministry was in Europe to seek out more funds for the expansive SGR project and not to look for a plan B to replace Yapi Merkezi. We would like to apologise for any inconvenience this might have caused.
Finance Minister Mwigulu Nchemba was joined by other officials from the ministry on the tour, which is also part of the close monitoring of the conclusive steps of the Export Credit Agency (ECA) financing of the SGR Lot 3 (Makutupora-Tabora) and Lot 4 (Tabora-Isaka) projects.
Last week, Nchemba toured Spain, Sweden, and Denmark, among other European countries, on a mission to secure investment for critical national development projects.
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“The tour aimed to enhance economic and trade relations between Tanzania and European countries, a relationship that has been in place for 60 years,” said the head of the communication department at the Ministry of Finance, Benny Mwaipaja.
The tour has seen Tanzania engage in constructive dialogue and high-level meetings with its European counterparts. These engagements aim to strengthen existing bilateral relationships while forging new ones that hold the potential for mutually beneficial collaboration.
While in Sweden, the finance minister held meetings with representatives of financial institutions and authorities for the closure of $2.2 billion in ECA financing, of which $370 million was closed in June 2023.
Efforts to mobilise financing for the SGR project undertaken by the Tanzanian government were done with the support of contractors of Lot 3 and 4, Turkish firm Yapi Merkezi, who, together with their vice chairperson Erdem Arioglu, accompanied the finance minister to monitor the company's financing team. Facilitation of financing is one of the main duties of the contractor in SGR projects.
During the tour, Mwigulu highlighted the significant economic and social progress that Tanzania has made while also emphasising the importance of the country's role in promoting economic diplomacy and attracting more investors from Scandinavian countries to invest in various sectors in Tanzania, including agriculture, infrastructure projects, particularly the construction of the SGR, poverty alleviation programmes, and trade.
While in Madrid, Spain, the Deputy Minister of Industry, Trade, and Tourism of Spain, Xiana Mendez, expressed Spain’s intention to participate in the construction of SGR by providing loans, credit guarantees, and insurance for Spanish companies involved in the construction of the railway.
SGR, whose estimated total cost upon completion is $10.4 billion (about 2,000 km), is developed in six phases. Dar es Salaam-Morogoro (Km 300), Morogoro-Makutupora (Km 422), Makutupora-Tabora (Km 294), Tabora-Isaka (Km 130), Isaka-Mwanza (Km 249), and Tabora-Kigoma (Km 506) for the sixth phrase.
Yapi Merkezi was awarded Lot 1 and Lot 2. The financial closure of Lot 1 and 2 was completed in 2018, and over $2 billion was raised. The two Lots are in the latter stages of completion.
The SGR is envisioned as a game-changer, revolutionising transportation within Tanzania, enhancing trade connectivity, and fostering regional economic growth.
On claims about financial distress by the main contractor of SGR, Mwaipaja said, “We are seeking funding for projects, not contractors, and issues related to the financial crises of a contractor firm are their internal matters, unrelated to the government.”
Mwaipaja elaborated that there is no direct connection between the contractor and the financing of the project.
“We are responsible for fiscal management for the country,” said Mwaipaja, adding that the European tour aimed to secure commitments and investments from European governments and financial entities that share Tanzania's vision for modernising its transportation infrastructure and other critical sectors.
Funding of Standard Gauge Railway (SGR) construction, agriculture, and poverty alleviation were some of the key issues that topped the Finance Ministry’s tour around Europe.