PoliticsNews & AnalysisAsian mega deal for Tanzania


Posted on Tuesday, 22 November 2011 17:57

Asian mega deal for Tanzania

By The Africa Report

Chinese companies are providing a much-needed injection of capital to finance key mining and infrastructure projects

Coal and iron ore mining will be boosted by the Chinese investment/Photo/Reuters

Tanzania is enjoying a flurry of new Chinese-led investment in its power and mining sectors.

In a deal heralded as the largest-ever single investment in East Africa, China's Sichuan Hongda Group signed a $3bn agreement with the government in late September to develop the Mchuchuma coal and Liganga iron ore projects in the south of the country. 

In an attempt to make sure profit revenues come back to the state, the projects will be run by a joint-venture company called Tanzania China International Mineral Resources, 80% owned by Sichuan Hongda and 20% by Tanzania's National Development Corporation.

The target is to mine 3m tn of coal per year that will help fuel a new 600MW electricity plant. This in turn will power a steel mill that will use iron ore from Liganga. 

A few days later, another joint venture was announced – this time a 532km pipeline linking the gas fields of Mnazi Bay and Songo Songo to Dar es Salaam.

The China Petroleum Technology & Development Company, a unit of the China National Petroleum Corporation, will work with the Tanzania Petroleum Development Corporation to build the pipeline, funded by a $1bn soft loan from the Export-Import Bank of China.

Demand for Tanzania's oil and gas blocks is also heating up. In early October, Brazil's state-owned Petrobras sold 50% of two blocks to Shell Deepwater Tanzania BV, while Dominion Petroleum agreed to farm out 20 percent of another deepwater block to Abu Dhabi's Mubdala Oil & Gas. 

At the same time, Tanzanian officials have received a telling reminder of what can go wrong in the power sector if contracts are not well managed.

On 28 September, the High Court upheld a $65m fine that the Tanzania Electric Supply Company (TANESCO) must pay to Dowans Holdings SA and Dowans Tanzania Ltd.

In this latest leg of the Richmond contract scandal, the courts ruled that TANESCO wrongfully terminated Dowan's power-generation contract after it took over from Richmond Development Company in 2008.

Last Updated on Tuesday, 22 November 2011 18:31

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