Why Nyerere hydropower project delay is unsettling
Nyerere dam project
What you need to know:
- The project, which was to start operations in June 2022, will now start in 2024 “at the earliest”. The curiously long and open-ended extension of the project is bad news in more ways than many people realise. It is therefore important to review the issue and connect the dots.
The decision to postpone the opening of the Julius Nyerere Hydropower Project (JNHPP) has been a casual matter in Tanzania. Hardly was a voice of disagreement raised. It is as if the nation is awash with billion-dollars projects for people to care.
The project, which was to start operations in June 2022, will now start in 2024 “at the earliest”. The curiously long and open-ended extension of the project is bad news in more ways than many people realise. It is therefore important to review the issue and connect the dots.
When Tanzania’s former political overlord, John Pombe Magufuli, came to power, he found two power generation projects ripe for implementation – Kinyerezi II and Kinyerezi III. Construction of Kinyerezi II started in 2016 and was completed in 2018. The project has served the nation well. At 248MW capacity, it is the biggest power plant in Tanzania today.
But then Magufuli suspended the much bigger and more strategic 600MW Kinyerezi III in one of the strangest decisions he made during his reign. For a man so fixated on big infrastructure projects, it did not fit his profile to overlook such open, direct, low-hanging fruits.
So, baffled by that problem, I asked someone in the know to provide some insight. According to him, it came down to the cost of power generation in Tanzania.
Magufuli inherited highly questionable energy deals. Tanesco was forced to pay through the nose, sometimes by purchasing a unit of electricity at two to four times its own selling price. As a result, Tanesco could hardly manage its OPEX and CAPEX. This made it impossible for Tanesco to operate without government subsidy.
In 2016, knowing the challenges Tanesco was facing, the then DG, Felchesmi Mramba, asked the regulator to increase tariffs by 16 percent. The request was quite sensible – and the industry regulator Ewura approved it (in part). However, in one of the most inexplicable presidential decisions ever, Mramba was unceremoniously shown the door by Magufuli.
Then Magufuli provided a fourfold response to the Tanesco challenge.
Firstly, he terminated some of the deals that were hurting Tanesco. Unfortunately, the decision to terminate Symbion Power’s deal has led to an out-of-court settlement of $153 million in favour of Symbion. Tanzanians cannot catch a break.
Secondly, he terminated the proposed implementation of Kinyerezi III. Considering the dire energy situation in the nation, the decision was very courageous. However, Magufuli judged that the proposed cost per KWh was too high, and he put the project on hold.
Thirdly, he switched off the expensive HFO power plant in Mwanza. The plant was serving two purposes. One, to provide reliable power supply and, two, to stabilise the national grid. While the decision saved Tanesco a lot of money, but it came at the cost of poor quality of service.
Finally, he decided to implement the much-publicised Julius Nyerere Hydropower Project (JNHPP), otherwise known as the Stiegler’s Gorge project. At 2,115MW, its capacity is higher than national peak capacity today. The intention was to lower the average power generation cost by injecting huge amounts of power into the grid at a highly reduced cost. Tanesco’s further losses could be significantly reduced.
This is the context in which JNHPP was conceived, and it followed then that JNHPP had to be implemented rapidly. And that is what Magufuli attempted to do, including, as some have argued, by using dated project feasibility and environmental impact analysis reports. But Magufuli was Magufuli. The project proceeded, and there is no doubt that Tanzania will pay the price for all the corners he cut. Nonetheless, on its own, this is not a sufficient reason for such an inordinate long delay.
There is a lot that is at stake here.
On the one side, the cost of implementation will skyrocket. While the initial estimate was $2.9 billion, some experts project that the final cost could go beyond $7 billion. The delay is the window that contractors, sub-contractors, and those who pull the strings, could use to effect that.
On the other side, the government should soldier on without any much ado because when JNHPP is operational it will close, at least temporarily, the loopholes which unscrupulous individuals have often used to make Tanesco enter into dubious energy deals.
Traditionally, the degree of corruption in Tanzania’s energy sector is shocking. It is remarkable to see how a few individuals have successfully conspired to keep the nation energy-poor so as to keep milking it dry. The financial and economic costs have been immense. At this point, solving the electricity problem is tantamount to solving the development problem in Tanzania.
Unfortunately, old practices have started to creep back in. The high OPEX generator in Mwanza is now switched on. Less than optimal – read weather dependent – projects have been approved. And certain shadowy figures are emerging from the abyss...
The smart money will be on the dramatic resurgence of high capacity charges and high-cost projects. And two years provides big enough a window for that to be accomplished.
Despite being far from a Magufuli fan, I try to understand him. I think the man was trying to achieve something commendable here. Indeed, the fast-tracking of JNHPP was based on solid reasons. So, any development in an opposite direction should make Tanzanians afraid, very afraid.
Personally, I am already trembling.
