AT LEAST $46.2 billion in power investment is required over the next 20 years to revamp Tanzania’s aging energy infrastructure and meet soaring demand for electricity in east Africa's second biggest economy.
Investors have long complained that a lack of reliable power is one of the obstacles of doing business in the country.
A power system master plan released on Monday by the Ministry of Energy and Minerals said 70 per cent of capital expenditures would be financed by debt and the rest by the government's own resources.
"Currently, power supply in Tanzania cannot meet the demand. Such imbalance has to be solved as soon as possible," said the government's updated power blueprint.
"The power demand growth rates for industrial and commercial sectors are expected to reach 18 per cent per year from 2015 to 2020," it added.
Tanzania aims to boost power generation capacity to 10,000 megawatts over the next decade from around 1,500MW at present, by using some of its vast natural gas and coal reserves to end chronic energy shortages and boost industrial growth.
The government announced last year it had discovered an additional 2.17 trillion cubic feet (tcf) of possible natural gas deposits in an onshore field, raising its total estimated recoverable natural gas reserves to more than 57 tcf.
The power system master plan says around 40 per cent of the estimated national population of 50 million currently has access to electricity, but the government wants to boost the electrification rate to 90 per cent by 2035.
The government said in January it was seeking a loan of $200 million from the World Bank for the debt-ridden Tanzania Electric Supply Company (TANESCO) after President Magufuli refused to allow the state-run utility to hike tariff prices to cover costs.
Although Magufuli has said he wants cheap electricity to drive industrialisation, the World Bank is likely to insist the loss-making utility increases prices so it can cover the cost of producing power and begin much-needed reforms.
TANESCO has debts of $363 million, up from $250 million at the end of 2015.
The Energy and Water Utilities Regulatory Authority (EWURA) on December 31 approved a tariff hike of 8.53 percent, less than half of what the utility said it needed to cover the losses.
But the next day, Magufuli blocked the tariff increase and sacked TANESCO’S chief executive officer, saying the price hike would stymie his plans to ramp up industrial output.
Decades of mismanagement and political meddling means TANESCO sells electricity below cost. It also struggles to cope with transmission leaks and power theft.
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