Power-starved nation gets jolt

Tanzania, with electric capacity as a medium-sized city in china, works with a Chinese firm to boost power

Name something that is invisible but indispensable to our daily lives.

You may answer air, but few would say electricity. From the light bulb in the living room to the light fixture in the car, to the office computer and the cellphone, almost everything relies on electric power.

But in Tanzania, where only about 20 percent of residents have access to consistent electricity, some have never used a TV or a radio in their entire lives. Factories in the southern parts of the country often deal with power outages by waiting for hours before the power comes back on.

Shanghai Electric Power Co, which provides eastern China with electricity, says it is determined to change this. SEPC has a net asset value of 41.2 billion yuan ($6.7 billion) and an installed capacity of 8.81 million kilowatts.

Several years ago, the company adopted an overseas expansion strategy and received contracts for its services in Equatorial Guinea, Iraq and Turkey. After it sent an inspection team to Tanzania in late 2012, it found major potential for its expertise.

"The country lacks electricity but has huge potential," says Zhang Fu, vice-executive of SEPC. "The installed capacity for the nation is only 1,438 megawatts, equivalent to that of a medium-sized city in China. But they have enough fossil fuels to make electricity."

In Mtwara port, the Tanzanian government hopes to exploit a large inland natural gas field. It now has a plan to tap into the inland field and transport natural gas to Dar es Salaam, the country's largest and richest city, through pipelines.

"Four power plants are being planned near Dar es Salaam and we decided to invest in two of them after seeing the site," Zhang says.

To build the power plants, the company will need to construct infrastructure and roads to save on costs. The first phase of the program to build the plants will cost $500 million.

"The construction of power plants is a huge project - at least 600 workers are needed for the first phase of construction," Zhang says.

Dar es Salaam is situated near the ocean, making it far easier for the company to import materials and large machines needed to install the power plants.

Wang Yundan, chairman of the board at SEPC, signed a memorandum with Tanzania Electric Supply Co Ltd on July 16 and a cooperation contract on Oct 24, thus formally starting what they call the KIII program. SEPC holds 60 percent of the shares in the two power plants while TANESCO holds 40.

The power plants are expected to provide 600 megawatts of power by 2016, which is equivalent to almost half of Tanzania's current electric power supply. That likely will ease the country's thirst for electricity and provide the nation a path to developing other industries.

The planned power plants will be located in Kinyerezi, about 20 km southwest of the city. Zhang says the return rates and risks are high because of the huge market potential and the difficulties in exploiting the gas resources.

Zhang says another obstacle is the Tanzanian government's inability to issue large loans because its banking sector is underdeveloped. To resolve this issue, SEPC worked with several Chinese banks to procure favorable loans.

In recent months, Lyu Youqing, China's ambassador to Tanzania, criticized Chinese enterprises for being shortsighted in their business models for the African country. He says many companies invested in a project, took their profits and left. Many of the infrastructure programs in Tanzania, such as building highways or airports, need constant investment to be successful, but the Tanzanian government is unable to afford a consistent flow of funds, Lyu says.

But SEPC has taken a different approach. It is not only managing every detail of the projects, it is also working with TANESCO to propel them forward. Tanzania follows a state-owned administration system on resources and any commercial program must go through loops of bureaucracy. But TANESCO is directly under the nation's Ministry of Energy and Minerals, which can help simplify approval procedures.

For new investors in Tanzania, Zhang has a few tips. First, coordination requires a lot of patience because the Tanzanian government directly runs many of the industries.

"You need to learn the local rules first," she says, adding that legal documents must be precisely prepared.

Tanzania, a former European colony, is somewhat sensitive to any foreign control. For companies that hire Tanzanian workers, it is important that they feel a sense of equality, she says.

Investors must avoid leaving the impression that they are exploiting the country's natural resources and shipping them somewhere else. Locals might misunderstand when foreigners transport natural gas through pipelines, even if the gas goes to their own cities. Powers of persuasion and diplomacy are key in Tanzania.

zhangzhouxiang@chinadaily.com.cn

(China Daily Africa Weekly 10/24/2014 page21)