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Driving Private Sector Inclusion in Tanzania’s Diverse Energy Industry

Driving Private Sector Inclusion in
Tanzania’s Diverse Energy Industry

Across East Africa, Tanzania is well placed to become the region’s energy hub. With its strategic location and diverse energy resources, there are opportunities to significantly drive growth, further industrialize the country and draw earnings from the rest of the power pools. Recent developments in the energy industry have also given rise to new business opportunities and the next phase in Tanzania’s energy sector is expected to focus on promoting investment. In this case, private sector leaders are a crucial element, as there is reliance on their strategic input and participation to unlock the country’s budding potential. 

The CEO Roundtable of Tanzania (CEOrt) holds monthly member engagements to facilitate dialogue on issues critical to Tanzania’s sustainable development. Representing the Private Sector, membership within the CEOrt includes CEOs from over 180 leading companies in Tanzania, cutting across multiple sectors of the economy to enhance impact in leadership and the country’s growth. During the August meeting, Tanzania’s Energy Minister, Hon. January Makamba, engaged with business leaders on “Driving Private Sector Participation within the Energy Sector.” Sharing priority areas of focus for the ministry, Hon. Makamba emphasized the possibilities of transformational growth that the energy sector can yield.

As outlined by Hon. Makamba during the engagement with members of the CEOrt, the Energy Ministry’s priorities include the completion of strategic projects, such as the EACOP pipeline, LNG plant, and the Julius Nyerere Hydropower Station, all of which are directly linked to the provision of affordable and reliable power. Through ongoing projects, generation of power in Tanzania would triple our current capacity in the next four years. The ministry intends to also double the distribution network in that time, enhancing rural electrification and national consumption. Responding to a question from Charles Asiedu – Managing Director at Ecobank Tanzania, on how Tanzania will utilize the seemingly excess power generation targets, Hon. Makamba assured the audience of the increasing demand the country will face in the coming years, coupled with the opportunity to fulfill demand in the Eastern and Southern Africa power pools that Tanzania belongs to. 

As far as general oil and gas is concerned, which is the third of the energy ministry’s five priority areas, Hon. Makamba reiterated the commitment to get exploration activities going again. There have been recent reports of the Government of Tanzania preparing to amend the Model Production Sharing Agreements (MPSAs) of 2013 to improve conditions in the oil and gas sector in a bid to attract investors. Having only explored 30% of current oil and gas reserves, there is plenty of room for additional investments in this important sub-sector, presenting yet another avenue for the Private Sector to get involved in.

Lately, increased  engagement between Government and the Private Sector has boosted overall investor confidence. With the projected energy demand growth of 7% per annum, both parties have expectations – the Government will be leveraging the Private Sector to meet this demand, while the business community anticipates friendlier regulations to motivate their participation. Although the efforts the Private Sector has put in so far in the energy industry are acknowledged, the Government still has high expectations and is open to continued dialogue with partners to expand production. Furthermore, Hon. Makamba addressed remarks from Abdi Mohamed – Managing Director at Absa Bank, by mentioning the Government’s plans to streamline how current assets and liabilities are recorded, so prospective investors are able to get a more accurate picture of where their funds would be channeled. The energy sector certainly calls for big ticket investments, and this move would make it easier to mobilize capital in an environment that is risk-free for all stakeholders. 

The fourth area of focus for the Ministry of Energy is fuel, with the objective of seeing Tanzania become a trading hub for petroleum after fixing our fuel import infrastructure. Service delivery was the fifth priority highlighted, to ensure the various government organizations involved in the industry are able to work better and deliver services as expected. As pointed out by Kevin Wingfield – Chief Executive Stanbic Bank Tanzania, skills and capacity building will play a big role in achieving goals across the five priority areas, which is something the ministry is said to already be working on.

A key factor that has long been a consideration for players in the energy sector, and has become increasingly important in recent years, is sustainability. In light of the climate crisis, there have been ongoing global debates around fossil fuels and their impact on climate change. As bold champions of sustainable development, the CEOrt is firmly committed to  supporting the Government’s Climate Action agenda including H.E. President Samia Suluhu Hassan’s commitment during the COP26 conference to a 30% reduction in  carbon emissions by 2030. However, companies that have started the journey and committed to a lower carbon energy footprint recognize that significant investment will  be required to adapt to new business models. To address these challenges particularly in the energy sector, Hon. Makamba outlined a number of ongoing initiatives, including a robust renewable energy strategy in development, to be the vehicle that drives stakeholders towards a sustainable energy future; the development of the Biomass Energy Strategy (BEST) to promote access to alternative energy sources where appropriate and affordable; and encouraging the roll out of more renewables in the power mix. Ultimately, the underlying goal is to get to a point where renewable energy sources stand on their own business sense without being tied to the climate agenda.

While the global energy transition presents a number of opportunities to be harnessed, Hon. Makamba cautioned about the need to be realistic about Tanzania’s current involvement in the green economy. Tanzania’s CO2 emissions per capita stand at 0.18 tons. We are a part of humanity and as such have obligations to meet with regards to our carbon footprint, but we must chart a path that makes sense for us – taking into account our level of development and resource availability. That said, the Government remains highly committed to climate action. When Scania Tanzania Ltd Managing Director Johanna Lind cited the example of investing in infrastructure and using compressed natural gas (CNG) in transportation, Hon. Makamba shared some of the plans the Government is working on, to be the first movers in consumption of CNG. For instance, the Dar es Salaam Rapid Transit (DART) Agency is bringing in 300 new buses, and conversations are ongoing to have them use CNG as opposed to diesel. The Government is also taking the lead by looking into sourcing CNG cars for ministries and other public institutions. The Private Sector can also play a vital supporting role here – should companies that operate with big fleets choose to adopt CNG, it will make a substantial leap forward. 

Tanzania’s energy sector is booming, and the respective ministry’s priority areas and regulations reflect that. The Oil and Gas Revenues Management Act 2015 also provides the framework for fiscal rules and management of oil and gas revenues. A forward-looking perspective guides the industry, and the Government appears keen on developing the sector as it is in the country’s best interest to see these businesses grow. Continued cross-sector dialogue and collaboration is what will steer the country towards a sustainable and prosperous energy future.