Government considers private investment in energy infrastructure

Dar es Salaam. The government is planning to amend laws to encourage greater private-sector participation in the development of the country’s energy infrastructure.

The proposed legal reforms will allow private investment not only in electricity generation but also in the construction of transmission lines and distribution networks, areas that are currently under state control. 

Under existing regulations, private companies can generate electricity and sell it to the state-owned Tanzania Electric Supply Company Limited (Tanesco), but they are not allowed to engage in infrastructure development or manage electricity transmission and distribution.

The new legal framework aims to create a more conducive environment for private participation, which is crucial for meeting Tanzania’s growing power demands and ensuring future energy security.

The proposed changes were outlined by the executive director of the Public-Private Partnership Centre (PPPC), Mr David Kafulila, in a recent interview with a local television station.

He acknowledged the significant progress the government has made in power generation and transmission but emphasised that private-sector involvement is necessary to achieve the country’s energy goals.

“The involvement of the private sector, particularly in building transmission lines, is essential. Despite the challenges, we have made considerable progress in meeting our energy needs,” he said.

He added that the legal amendments would facilitate the faster development of energy infrastructure, especially in electricity transmission, which is vital for boosting power supply and ensuring reliable delivery to consumers.

Tanzania’s energy needs are expected to increase significantly due to rapid population and economic growth.

By 2050, the country’s population is projected to reach between 120 and 140 million, and its economy could exceed $700 billion—nearly one and a half times the size of South Africa’s current economy. 

This population and economic growth is anticipated to drive a substantial rise in electricity demand.

The government has set ambitious power generation targets, expecting to produce between 4,000 and 5,000 megawatts of electricity by 2026.

Mr Kafulila noted that the increase in productivity, particularly in services and products, will lead to higher electricity consumption.

“It is widely believed that for every one million people, one megawatt of electricity is required,” he explained. “Given the country’s future energy needs, the rise in electricity demand will be significant.”

The government’s commitment to increasing private-sector involvement in energy generation, transmission, and distribution is part of Tanzania’s broader strategy to address the country’s electricity deficit.

During the recently concluded African Energy Summit, Tanzania pledged to leverage $5 billion from private investors as part of a total $13 billion initiative aimed at providing electricity to unconnected Tanzanians.

In addition to these efforts, legal reforms introduced in 2023 have already laid the groundwork for greater private-sector participation in Public-Private Partnership (PPP) projects. 

One key change allows disputes arising from PPP projects to be resolved through international arbitration bodies, such as the International Centre for Settlement of Investment Disputes (ICSID), providing reassurance to both the government and private investors.

Mr Kafulila also highlighted the introduction of tax incentives for private investors involved in PPP projects, which help reduce the cost burden for businesses and consumers. These incentives ensure that projects remain affordable and sustainable in the long term.

Transparency in the implementation of PPP projects remains a priority, with a strict legal framework designed to guarantee that contracts are negotiated fairly and without corruption.

Mr Kafulila pointed out that while corruption has been a challenge in the past, increased transparency in decision-making processes has led to fewer opportunities for unethical behaviour.

“The procedures for PPP projects involve multiple layers of scrutiny, including the PPP Centre and a board of senior government officials, to ensure that both private and public interests are properly balanced,” he stated.

This collaborative approach, he added, reduces the risk of errors and ensures that final decisions are made in the best interests of the country’s citizens.