Tanzania Seeks $1bn Infrastructure Upgrade Via Eurobonds

 Editor Economic Development & Policies, Investing, Real Estate, Stocks & Bonds

VENTURES AFRICA – Never relenting in its quest to become a full-fledged regional hub for burgeoning businesses, Tanzania is launching new efforts to acquire capital needed to build the most reliable and efficient network of infrastructure in East Africa. These efforts included the Big Results Now (BRN) initiative where the government showcased significant projects valued at over $10 billion to large scale financial institutions; and now, a plan to raise $1 billion by floating the Eurobond for long term infrastructure investments has emerged.
Central to the aim of these upgrades is a desire to unlock and connect critical but remote key production areas and markets to the more urbanized and accessible areas of the eastern African country. Implementing these initiatives in an effective fashion will see the birthing of improved railways, road networks, ports and power projects. The state is also partnering with the private sector in generating funds via multiple public-private partnerships (PPPs) as opposed to just “going it alone.”
Some of the mega-projects showcased at the BRN last month included a $3.4 billion project to upgrade the 1,236km long Salaam-Kigoma railway line to standard
gauge status, a $500 million project aimed at deepening the Dar es Salaam port berths 1-7, the construction of the Dar es Salaam-Chalinze Expressway valued at $519 million and two power generation plant projects collectively worth $778 million.
Needless to say, poor and unreliable infrastructure networks increase the cost of doing business in a rather unpleasant way, and this erodes business profitability and ultimately discourages investors.
Ms Saada Mkuya Salum, Tanzanian Finance and Economics Affairs Minister, was definite in her justification of the Eurobonds issuance. In her words; “the responsibility for meeting the enormous demand for new and better infrastructures remains to be of paramount importance owing to increased population and fast growing economic activities. We expect all the processes needed in floating the Eurobond to be ready by March, next year before the next budget session. We needed to put our house in order before floating the Eurobond to avoid mistakes done by other Sub-Saharan countries.”
She also revealed that the government had engaged three international sovereign rating agencies – Fitch, Standard & Poors and Moodys. Key issues to be considered in the credit rating process, which is very important for determining credit worthiness and computing borrower’s credit risk, include economic growth rate, control of financial markets, inflation and balance of payment.
Analysts believe the Eurobond, whose process began in 2008 but was suspended in the wake of the global financial crisis, would help close the gaps created by decreasing donor support of the development budget. As attractive financing tools, Eurobonds give the issuers the flexibility to choose countries to offer their bonds vis-a-vis regulatory constraints in both issuing and receiving countries. A Eurobond is usually issued by an international syndicate and categorized according to the currency in which it is denominated.
Other African countries that have successfully issued Eurobonds include Ghana, Rwanda and Kenya.