Tanzania's Rural electrification faces a new hurdle of high equipment cost

Dar es Salaam. The rural electrification project is battling a challenge of meeting the December 2022 completion target and increasing equipment cost as Covid-19 posed delivery disruptions across the world.

The Sh1.2 trillion project is being implemented in phases to reach all Tanzanian villages by the end of this year.

The increase of equipment prices has forced the government to review its contracts with the contractors.

The impact of Covid-19 pandemic has disrupted the supply of some equipment and materials for the project implementation.

The Rural Electrification Agency (REA) said some countries that produce electrical equipment reduced production, halting equipment delivery for almost a year.

“This project was originally expected to be completed in December this year, but its implementation has been faced with various challenges, including delays in equipment due to the continued existence of conditions to control the spread of Covid-19 in the countries where contractors are ordering equipment.

In addition, there has been a significant increase in the price of construction materials for the project, including cables and machinery made from aluminum, iron and copper,” said the minister for Energy January Makamba during the budget presentation in June.

“However, the government is continuing with efforts to solve these challenges in order to fulfil the ambition of bringing electricity to every village, where it is currently reviewing implementation agreements to match the increase in equipment prices,” he said.

The rural electrification project is being carried out in three phases with the expectations that all villages will have access to electricity by the end of this year.

The government is in the third phase which was also divided into two rounds. The first round of the third phase worth Sh1.157 trillion started in 2018 to March this year.

Currently, the government is implementing the second round of the third phase which is scheduled to complete in December this year, the deadline which is facing challenges.

However, REA believes that its goals of supplying energy to all 12,345 villages in the country will be achieved as planned.

The agency acknowledges that the pandemic that affected many sectors also had slightly shaken the implementation of its projects that were scheduled to have been finished by the end of this year.

“The projects are being accomplished in accordance with the contract and we told the contractors that by the end of this year, all the projects should be over and therefore the plans are intact,” said REA’s director general, Mr Hassan Saidy while answering questions from editors and journalists recently.

Tanzania has a total of 12,345 villages but until now, REA has connected only 8,804 villages, according to him, with the contractors continuing to connect the remaining villages.

When the agency began in 2007, the availability of energy in villages was less than two percent, but according to the director of policy, planning and research, Mr Elineema Mkumbo, measures taken have resulted into supplying power to most of the villages.

“We are currently implementing a project that will bring energy infrastructure to all villages and then it will be followed by a strategy to ensure that all the neighbourhoods get electricity,” explained Mr Mkumbo.

On the other hand, the agency’s director of marketing and technology development, Ms Advera Mwijage said that the institution was in the implementation of a project to supply cooking gas to 1,000 households in Mtwara, Lindi and Pwani regions served by a natural gas pipeline.

Ms Mwijage further stated that in the implementation of the project, the agency was collaborating with the Tanzania Petroleum Development Corporation (TPDC), a national oil company, to ensure that there is clean energy for cooking especially for people in rural areas.

Recently, the rural electrification expansion received a boost after the World Bank (WB) approved additional financing of $335 million to support Tanzania’s efforts to scale up grid extension and grid densification.

The WB which described Tanzania as “one of the fastest electricity access expansion rates in Sub-Saharan Africa” said the financing will facilitate an additional 1,000,000 last-mile grid connections, including 8,500 education facilities and 2,500 healthcare facilities, as well as provide renewable energy options and clean cooking solutions to rural households.

In 2016, the World Bank approved initial financing of $209 million which targeted to support expansion of rural access to electricity, increasing the supply of renewable electricity in rural areas, and strengthening the capacity of sector institutions to deliver.

According to the WB, Tanzania has made remarkable progress in increasing electricity access from seven percent in 2011 to 38 percent in 2020. However, the Bretton Woods institution said, a large gap remains between electricity access rates in urban areas (73.2 percent) and rural areas (24.5 percent) and between national grid coverage (78.4 percent) and overall connectivity rate (38 percent).

Africa’s energy demand is expected to nearly double by 2040, as populations increase, that also affects the improvement of peoples’ living standards. According to Data.one.org analysis, by 2040, at least 90 percent of people who do not have electricity will live in Africa.

It is estimated that 605 million Africans (44 percent) do not have access to electricity. For those that do, access is often unreliable and inadequate. In a year, the average Nigerian uses less energy than an air conditioner in the US.

At current projections, over 65 percent of the population in sub-Saharan Africa will still rely on wood fuel for cooking come 2050.

Rural projects stalled

Mr Makamba said after a recent tour of upcountry projects that some projects had stopped while others were delayed despite the fact that they were covered by the previous rounds of REA projects since 2016, 2017 and 2018.

He said, in some areas it was due to special circumstances, while in other areas the projects were diverted to areas not covered in the contracts.

“But the other side is the fact that some contractors were affected by the abrupt surge in prices of equipment used in the power distribution, particularly copper and aluminum as prices surged by 140 percent,” Mr Makamba said.

He added, “Unfortunately, the contracts that we had were fixed price contracts. This means the government will not be responsible with any impact caused by that change of price.

“In some places contractors openly asked us to take back the projects and they were ready to repay the advance we paid. So, because these projects have to be implemented, we as the government had to relook at the costs against the reality on the ground. Finally, we had to pump in more money and review contracts that took the new costs into consideration. Some contractors have resumed works.”

This story was produced in partnership with Data.one.org, which provides real-time data and analysis on the economic, political, and social changes impacting Africa.