Tanzania has secured a $1.2 billion (TSh 3.17 trillion) commercial loan to build the 411km Tabora-Kigoma section of its standard gauge railway (SGR), Mwananchi reported. The African Development Bank (AfDB) arranged the deal, which involves nine banks. The loan is part of a wider $2.3 billion package for the section.
In a statement on Wednesday, the AfDB said it was providing an $800 million partial credit guarantee. According to the bank, the guarantee unlocked funding from commercial lenders. It covers the principal of the guaranteed portion plus two years of interest. Separately, credit insurance arranged by broker Texel spreads $405.5 million of risk across international insurers, including syndicates in the Lloyd's market.
Deutsche Bank and Société Générale led the group of lenders. HSBC, Commerzbank, Nedbank, Stanbic Bank Tanzania, First Abu Dhabi Bank, FirstBank UK and Bank of Africa United Kingdom also took part. Their funding splits into $720 million in guaranteed loans and $480 million lent on the strength of Tanzania's sovereign credit.
Benny Mwaipaja, communications director at the Finance Ministry, confirmed the deal but gave no further details. Transport Permanent Secretary Prof Godius Kahyarara said Tanzania is now assured of linking Tabora, Kigoma and Burundi. The link will run through the sixth section of the line, which starts in Tabora. AfDB senior director Max Ndiaye said the deal shows how development lenders, commercial banks and insurers can work together to fund large infrastructure projects.
The electric line is expected to carry farm produce, minerals and other goods from western Tanzania to local markets and the port of Dar es Salaam. The AfDB said the project should create jobs during construction and operation. The bank also expects it to draw investment in farming, mining and industry along the route. Mike Salawou, the bank's infrastructure director, said the railway's economic value will depend on how well it connects producing areas with industrial centres and markets.
The line's impact reaches beyond Tanzania. Through Kigoma port and Kalemie port across Lake Tanganyika, it is expected to ease trade with DR Congo. It is also meant to improve transport links with Burundi.
The $1.2 billion is only part of the funding. The rest of the $2.3 billion package includes export credit agency financing and money from a co-guarantor. Tanzania had earlier asked the AfDB to arrange up to $3.2 billion for its railway development programme.