At the forefront of Tanzania’s economic outlook for 2024 lies a compelling narrative of growth fueled by the concerted government efforts to cultivate and foster a conducive business environment. According to the United Nations World Economic Situation and Prospects 2024, Tanzania is poised for an upward economic trajectory with a projected GDP growth rate of 5.5%. However, within this narrative, a critical factor demands attention: realising the projected growth target is contingent upon energy security.
The International Energy Agency (IEA) describes energy security as the uninterrupted availability of energy sources at an affordable price, coupled with timely investments in the energy sector to support economic development and adaptability to supply-demand fluctuations. With its rapidly growing population, industrialisation agenda, climate change impacts, and inadequate infrastructure, Tanzania faces significant electricity production gaps, resulting in recurrent energy crises. Despite TANESCO’s best efforts, the issue persists, taking a toll on economic activities nationwide as the nation currently grapples with a 400-megawatt deficit. However, amid these challenges, the upcoming commissioning of the Julius Nyerere Hydroelectric Power Plant (JNHPP) project, with a projected capacity of 2,115 megawatts, holds promise for substantially reducing the country’s electricity deficit. Currently, the plant, though not fully operational, generates 370 MW of electricity, which has already contributed to mitigating power rationing. This highlights the significance of strategic interventions and investments in Tanzania’s energy sector to bolster energy security.
Discussions with private sector leaders regarding energy security challenges while assessing the nation’s economic outlook for 2024 have revealed that whilst public investments have been instrumental in narrowing Tanzania’s energy production gap, there is increased consensus that sustained advancements in the industry requires strong partnerships between the public and private sectors underpinned with a vision for enhanced creativity, dynamism, innovation, and efficiency towards ensuring efficiency in the energy sector.
The question: How can investors be effectively engaged as part of a strategic shift to tackle the challenges in the energy sector? During a recent monthly members meeting of the CEO Roundtable of Tanzania (CEOrt), stakeholders proposed various measures to enhance private sector investment in the energy sector. These include accelerating the implementation of existing policies, establishing a practical tax administration framework, undertaking institutional reforms, streamlining bureaucratic processes, and enhancing regulatory frameworks. Furthermore, there was unanimous agreement that demonstrating successful public-private partnerships, emphasising transparency and accountability in these collaborations, will strengthen investor confidence and drive sectoral development.
Tanzania can draw valuable lessons from countries that have successfully addressed energy challenges through privatisation and innovative energy security measures. Chile and Brazil have implemented robust privatisation programs focused on transparent regulatory frameworks and competitive markets in the energy sectors. This approach attracted substantial investments and facilitated reforms that enabled the establishment of independent power transmission (IPT) projects, which led to significant advancements in energy access, affordability, and reliability. Over the past two decades, Brazil has successfully completed 350 IPT projects, resulting in unprecedented competition in its electricity sector. Meanwhile, Chile overcame an energy supply crisis in 2007/08, when it lost most of its gas imports from its sole supplier, Argentina. These examples highlight the importance of proactive measures and strategic planning in addressing energy challenges, offering Tanzania valuable insights as it navigates the ever-evolving energy landscape.
Moreover, Rwanda and Kenya have prioritised renewable energy development to enhance energy security and sustainability. By leveraging their renewable resources, including solar, wind, and hydroelectric power, these nations have diversified their energy mix, reduced dependence on fossil fuels, and mitigated climate change risks. Similarly, Tanzania can emulate their success by incentivising private sector investments in renewable energy projects and promoting technological innovation.
Parallel with the efforts to enhance private sector investment in Tanzania’s energy sector, TANESCO must undertake immediate measures to bolster revenue collection for reinvestment and grid infrastructure improvements. Eng Gilman Kasiga, Country Manager for Tanzania at General Electric Vernova International LLC, while sharing insights on the energy sector during a panel discussion on “Tanzania’s 2024 Market Outlook: Investment, Infrastructure & Energy’ reiterated the need for reassessment and adjustment of electricity tariffs, which have remained stagnant since the publication of the Tanzania Electric Supply Company Limited (“TANESCO”) Tariff Adjustment Order, 2016, to reflect current market dynamics and operational costs.
Energy security serves as a catalyst towards transformative development. By embracing privatisation, fostering innovation, and prioritising renewable energy sources, Tanzania can address the “trilemma” that encompasses energy security, economic development, and environmental protection and shift towards a positive trajectory of inclusive and transformative socio-economic growth.