Across the African continent, energy has emerged as a pivotal cornerstone for economic transformation and growth.
When supply is limited or if there are frequent interruptions, it can disrupt a country’s productivity and prosperity, as investors rely on reliable power to drive their interests, and a lack of it makes them hesitant to commit.
With that, governments and businesses continue to acknowledge the need for a sustainable and self-sufficient manufacturing ecosystem.
To support their industrialization agenda, the Tanzanian government quickly recognized the need for reliable and affordable power.
“Energy infrastructure is often referred to as the first domino in the chain of industrialization because it sets everything else in motion,”says Elias Ngunangwa, the Head of Client Coverage, Corporate and Investment Banking (CIB) at Stanbic Bank Tanzania.
Today, Tanzania’s energy sector is guided by the national energy policy drawn up in 2015 which places energy infrastructure and energy development at the centre of its economic strategy.
The industrialization agenda also asked that a greater share of products consumed in Tanzania be produced locally rather than imported. This, too, requires power. “Once that domino falls into place, it unlocks progress in manufacturing job creation, and you create a lot of inclusive growth in the country.”
The Vital Role of Energy Infrastructure
While the nation’s current energy mix is dominated by hydro (60%), this can present risks in times of drought, which is why renewable energy projects are gaining traction.
Not only has there been an uptick in renewable energy projects, especially solar, but more importantly, the government has begun issuing licences to potential investors that allow them to drill for more gas to further leverage Tanzania’s significant natural gas reserves.
“Tanzania is blessed with abundant natural gas reserves, such as the Songo Songo gas field. This positions it as a regional leader in the gas sector, which then helps to drive power initiatives, which supports the government’s industrialization goals, whereby energy is a key priority,” explains Ngunangwa.
Most industrial sectors in Tanzania are highly energy-intensive, ranging from cement and steel to glass and textiles; however, gas can help support these sectors as the country continues along the journey to cleaner energy sources.
For instance, a gas producer in southern Tanzania is currently transporting gas via pipeline to Dar es Salaam and supplying over 45 major industrial users.
This not only ensures a stable domestic energy supply but it also allows Tanzania to become a key enabler for regional trade competitiveness.
Ngunangwa calls it “one of the examples of a successful energy-manufacturing integration project in Tanzania” that illustrates how strategic energy investments can help power a country’s industrial production and enhance its economy.
Cross-Border and Public-Private Collaborations
Tanzania’s energy ambitions don’t stop at its borders and the country acknowledges cross-border energy infrastructure as a key enabler of regional industrialization in East Africa.
As a member of several regional bodies in Africa, Tanzania can tap into the East African power pool. In fact, thanks to these regional collaborations, Tanzania exports surplus gas to neighbouring nations during power shortages and is poised to become a net power exporter.
This regional energy trade and knowledge transfer will allow Tanzania to not only experience a boost in economic influence but can also enjoy regional manufacturing competitiveness.
As incredible as Tanzania’s infrastructure projects are, the reality is that they require a lot of resources, many of which are financial, which is how Stanbic Bank has grown to play a significant role in these developments.
“It goes beyond the traditional lending,” shares Ngunangwa, “We go further by offering tailor-made financial solutions, specifically those targeting Tanzania’s energy infrastructure sectors.”
In addition to tailored financial solutions, Stanbic Bank Tanzania also offers capacity-building programmes, which not only help to build relationships with key stakeholders but also assist investors to better understand the Tanzanian energy landscape. This empowers them to structure and execute complex transactions with confidence and clarity.
This increased clarity has led to an uptake for alternative funding models, such as green bonds and Public-Private Partnerships (PPPs), with the latter becoming the most popular alternative financing model.
As pointed out by David Kafulila, Executive Director of Tanzania’s Public-Private Partnership Centre that falls under the Ministry of Finance, the government cannot rely solely on borrowing or taxes, and PPPs can serve to mobilise additional sector capital, provide access to technical expertise and innovation, and essentially accelerate the roll out of critical infrastructure such as transmission lines.
