BMI View: Tanzania's construction and infrastructure sector outlook is buoyant over our 10-year forecast period to 2024, although we expect 2015 to present a number of challenges to investment and have dropped our real growth forecasts accordingly - from 9.9% to 7.9%. Broad investor sentiment will be boosted by USD500mn in foreign budget support - withheld following a power sector scandal in late 2014. In the long-term, regional transport development and power sector projects will be key growth drivers.
There are number of key developments, which underpin our upbeat medium-term forecast scenario:
The Tanzanian government plans to float a USD1bn eurobond for FY15/16. The proceeds will be used to finance the country's mega infrastructure projects. According to Finance and Economic Affairs Minister Saada Mkuyu, the government is fully prepared to float the Eurobond by March 2016 and will outline the main projects to be financed by the bond in the next Budget. Tanzania's successful issuance of the Eurobond will help the country in its quest to become East Africa's economic hub. Some of the projects initiated by the country include Bagamoyo port construction, expected to start operating in July.
Our view over the proliferation of intermodal and urban rail projects across Sub-Saharan Africa (SSA) continues to play out. We have seen persistent efforts by governments - nationally and internationally - to boost interconnectivity and address the chronic congestion in cities across the continent. Structural changes in economic patterns in the region are driving the development of the project pipeline. While rail projects for the export of commodities will continue to be a source of opportunity, particularly in Southern African coal producing markets, lower commodity prices will see a gradual shift of rail demand drivers towards the transportation of people and goods. Rapid urbanisation, rising incomes and a small, but growing middle class, will support further investment in passenger rail and require greater logistics capacity for the trade of goods, while frontier mines will be seeing less investment to facilitate the export of commodities.
The Tanzanian government plans to invest TZS4.39trn (USD2bn) in constructing new roads and a bus rapid transit system in Dar es Salaam. Works will include the construction of flyovers and bridges, using funds allocated under the budget for FY15/16, ending June 30 2016, according to Minister of Works John Magufuli.
In July, the Kenyan and Tanzanian governments invited bids to set up a high voltage power line connecting the two countries. The project will involve 510km of 400kV power lines and several substations to allow the countries to trade in power. The project will be funded by the African Development Fund and the Japan International Cooperation Agency and bids have to be submitted by September 9. Kenya aims to upgrade its installed capacity to nearly 6,700MW by 2017 from the current capacity of nearly 2,500MW, while also targeting to slash bills from about USD0.17/kWh to USD0.18/kWh in three to four years. Tanzania intends to double its generation capacity to 3,000MW by 2016.
Strong growth forecasts for Tanzania's construction industry continue to drive top scores for Rewards but the size of the market remains small even by regional standards, which limits the country's performance in our Risk/Reward Index (RRI). Corruption hinders the transparency of the tendering process and Chinese firms hold a dominant position in the major project market. In BMI's Sub-Saharan Africa infrastructure RRI, Tanzania scores 43.1 out of 100, placing the market in eighth position out of 16 countries.