Why power export deal could herald new era for Tanzania

Tanzania and Zambia already have an energy agreement for Rukwa Region, which was signed when Tanzania lacked grid connection there. However, with a new 400kV transmission line linking Sumbawanga and Zambia and excess power from JNHPP, Tanzania is in a position to become a regional energy supplier.

Zambia, facing electricity shortages in its mining sector, presents an immediate market. Private investors, including Kanona Power, are constructing new transmission lines to facilitate this trade. The partnership between Tanesco and Kanona Power Limited is expected to set a benchmark for future electricity exports to other neighbouring countries, reinforcing Tanzania’s position in the regional energy market.

“If well handled, this deal can see Tanzania recouping its investments in the JNHPP within a maximum of five years,” said a source privy to the topic.

Independent economic analyst Oscar Mkude noted that Tanzania is part of the Eastern Africa Power Pool (EAPP) and the Southern African Power Pool (SAPP), which promote regional electricity trade.

“This deal provides a great opportunity. Most African countries depend on hydroelectricity, and with proper infrastructure, Tanzania can benefit from power trade while cutting its reliance on expensive diesel-generated electricity,” he said.

Mr Mkude added that energy exports would provide foreign exchange earnings, strengthening Tanzania’s economy and purchasing power. The revenue generated will also help Tanesco reinvest in infrastructure development, further stabilising the national grid and ensuring more affordable electricity for domestic consumers.

Dr Lutengano Mwinuka of the University of Dodoma said electricity should be treated as a commodity.

“Exporting power will generate direct sales and tax revenues. Increased foreign exchange inflows will also boost economic stability,” he noted.

Dr Mwinuka said that by establishing itself as a key electricity supplier in the region, Tanzania could enhance its economic standing and attract additional investments in energy projects, ensuring long-term benefits for the country.

Dr Daudi Ndaki of Mzumbe University said cross-border electricity trade strengthens diplomatic ties and enhances economic integration.

“This agreement helps Tanzania optimise its energy infrastructure, reduce transmission losses, and lower investment costs through economies of scale,” he said.

The trade deal is also expected to attract Foreign Direct Investment (FDI) in Tanzania’s renewable energy sector, making the country a competitive energy hub.

“This will encourage industrial growth due to reliable electricity supply and lower operational costs,” Dr Ndaki said, adding that the electricity trade would also encourage knowledge exchange between Tanzania and its trading partners, enabling improvements in efficiency and energy management.

Tanesco confirmed that negotiations with Kanona Power Limited are at a preliminary stage, with expectations of setting a premium export rate higher than Tanzania’s electricity import costs from Ethiopia.

Pending regulatory approvals, analysts predict the deal could recoup JNHPP investment costs within four years, significantly improving Tanzania’s financial position. The additional revenue could also support the expansion of renewable energy projects, reducing the country’s dependency on hydro and gas.

Tanesco business development manager Magoti Mtani expressed optimism, saying, “This trade will increase revenue and ensure efficient operations.”

Currently, Tanzania generates 3,431 megawatts (MW) of electricity, with 58 per cent from hydro, 35 per cent from gas, and 7 per cent from other renewable sources. By 2030, the government aims to expand capacity by 2,463 MW, tapping into solar, wind, and geothermal energy.

Mr Mtani commended President Samia Suluhu Hassan’s administration for prioritising energy investments, which have positioned Tanzania as a regional power exporter. He emphasised that the continued focus on energy development will create more job opportunities and boost local industries reliant on stable electricity.

Meanwhile, Ms Nsofwa Sikanika, Head of Business at Kanona Electric Company, said the agreement will soon be finalised.

“This trade will strengthen electricity access and drive economic growth in Africa,” she said, adding that the success of this agreement will encourage further intergovernmental cooperation in energy trade across the region.

As Tanzania continues to expand its electricity generation capacity, such strategic exports are expected to play a crucial role in sustaining long-term economic growth and ensuring that national energy investments yield substantial returns.

Sources privy to the ongoing talks say the trick was ensuring that Tanzanians understand that electricity is a business and that like all businesses, costs must be reduced while maximising profits.