Tanzania awards $9b in rail projects to China

Country aims to be a regional transport hub

Tanzania has awarded a standard gauge rail construction projects worth $9 billion to a consortium led by China Railway Materials.

The consortium has been awarded a contract to build new lines of 2,561 kilometers that will connect the port of Dar es Salaam to landlocked neighbors. Work is expected to begin in the second half of this year.

Samuel Sitta, minister for transport, told Parliament that the consortium would provide 10 percent of the funding for the project.

"A consortium of Chinese railway companies led by China Railway Materials has been picked to help us build the railway line," Sitta says.

Financial adviser Rothschild Group is finalizing procedures for financing of the project through banks, Sitta says. An agreement has been reached between the consortium and Rail Assets Holding Company, the company that oversees rail infrastructure in Tanzania, he says.

The consortium will construct new railway lines worth about $9 billion. The central line, operated by Tanzania Railway Ltd, which connects Uganda, Rwanda, the Democratic Republic of Congo, Burundi and Dar es Salaam Port, is expected to cost $7.6 billion.

Due to depletion of central line infrastructure, the number of passengers ferried by the Tanzania Railway fell more than 13 percent to 1.18 million passengers in 2014 from 1.34 million passengers.

Sitta says Tanzania signed an agreement with another Chinese company, China Railway No 2 Engineering Group Co Ltd, to build a railway line linking coal and iron ore mining projects. The project in the southern highlands of Tanzania, under development by China's Sichuan Hongda Group, needs a rail line to transport iron and coal to the southern port of Mtwara near big offshore natural gas discoveries. A total of $3 billion has been set aside for the projects.

The southern 1,000 km standard gauge railway line is expected to cost at least $1.4 billion, according to Tanzanian government estimates.

In March, the country said it expected to spend $14.2 billion to build a new rail network in the next five years. The network is to be financed with commercial loans.

Tanzania aims to become a regional transport hub by 2021. At the moment, rail transit is overseen by two companies, Tanzania Railway Ltd and Tazara, built by the Chinese in the 1970s.

The central line, started in 1905, was the second railway project in the colony of the German East Africa (present-day Burundi, Rwanda, and the mainland part of Tanzania) after the Usambara Railway. The central meter-gauge line was the largest technical inheritance of the German colonial era in Tanzania, which ended at the end of World War I with the colony being divided between Britain and Belgium.

Tanzania last year signed an agreement with China Merchant Holding International to build a new mega port and economic zone at Bagamoyo, expected to cost at least $10 billion. China is also financing a $1.2 billion, 532 km natural gas pipeline in Tanzania.

Recently China's ambassador to Tanzania, Lyu Youqing, said China will focus on three key sectors for investment: industrialization, aviation - mainly the cash-strapped Air Tanzania Co - and infrastructure, especially railways and ports.

The sectors are seen as vital to boosting Tanzania's economy.

For China Daily