AfDB Seeks Investors for $7.6-Billion Tanzanian Railway Line

DAR ES SALAAM, Capital Markets in Africa: The African Development Bank will hold an investors’ roadshow to attract as much as $7.6 billion in financing for a railway line linking Tanzania’s port in Dar es Salaam with neighboring landlocked countries.

The Abidjan, Ivory Coast-based lender is teaming up with the World Economic Forum to help attract investors to bankroll the 2,200-kilometer (1,370-mile) line, according to Gabriel Negatu, AfDB’s regional director for East Africa.

“We are convening a meeting of would-be investors to see how best to finance the line,” Negatu said in a Sept. 23 interview in Kenya’s capital, Nairobi. “Everyone who can come up with financing, we will recommend them to the Tanzania government.”

The planned standard gauge line is “credit positive” and once operational may cement Tanzania’s position as a logistics hub for Eastern Africa, Moody’s Investors Service said Sept. 15. While President John Magufuli’s government says it will become a major trade artery between Tanzania and its landlocked neighbors, research firms such as NKC African Economics say there’s uncertainty about whether regional demand will justify both Kenya and Tanzania operating similar rail networks.

The Tanzania line will run from Dar es Salaam port to Rwanda’s capital, Kigali. Two other lines will branch off to Musongati in Burundi and to Mwanza port on the shores of Lake Victoria to service Uganda shippers. The line to Kigali is expected to ultimately connect to the eastern Democratic Republic of Congo.

Chinese Investors
Export-Import Bank China may lend Tanzania $7.6 billion to finance the railway, the government said in July. Chinese investors will be among those invited to the AfDB financing roadshow, Negatu said.

“If they finance it completely, no one will be more happier than us,” he said. “If China comes up with that money, I will kiss their hands.”

AfDB wants to co-finance the project, with a strategy to “catalyze financing” and encourage other investors to come on board, he said.

Tanzania is East Africa’s largest economy after Kenya. It’s the continent’s fifth-biggest gold producer and has estimated reserves of 58 trillion cubic feet of natural gas being developed for export by companies including Statoil ASAand BG Group Plc.

AfDB holds no “short-term financing view” on the railway line, although most investors would prefer debt repayment periods of as long as 15 years, according to Negatu. The line “can be amortized over 100 years,” he said. “It will be profitable — this is a project for the next century.”

Two Questionable
Kenya is building a similar railway that seeks to connect landlocked countries to Mombasa, its main port. Given that such economies “are not particularly large,” it’s “questionable whether the region requires two standard-gauge railway networks connected to two of sub-Saharan Africa’s largest ports,”Jacques Nel, an analyst at Paarl, South Africa-based NKC African Economics, said in an e-mailed response to questions.

The first phase of the Kenyan link, measuring 609 kilometers (378 miles) and costing $3.2 billion, is scheduled for completion by June 2017. Construction of a second 120-kilometer leg begins by the end of this year, according to the government.

Tanzania is also planning a liquefied natural gas plant that could cost as much as $30 billion and a $10 billion port at Bagamoyo. It has also agreed to host a $3.6-billion pipeline to transport Ugandan crude to its Indian Ocean port at Tanga.

Source: Bloomberg Business News