Magazine article New African

Stretching Tanzania's Industrial Dimensions

Magazine article New African

Stretching Tanzania's Industrial Dimensions

Article excerpt

If actions speak louder than words, then Tanzania is heading towards an industrial expansion. According to Razia Khan, Standard Chartered Bank's regional head of research in Africa, Tanzania is currently the second largest economy in the region and ninth in the continent with a GDP measuring $23bn, and if the present GDP growth remains the same, Tanzania could well take over Kenya as the region's largest economy by 2030.

From its long association with the continent, Standard Chartered Bank (SCB) can be said to be a sure bet on African affairs. And the bank thinks that if Tanzania's current GDP growth remains the same for the next two decades, it could become East Africa's largest economy by 2030, pushing Kenya into second place.

Far from being unrealistic, SCB's forecast is a plausible possibility. At Tanzania's current growth rate of 7%, SCB also foresees the economy rising to the sixth-largest in Africa by 2030 (from its current ninth place), with an estimated GDP of $23obn by that time.

But overtaking Kenya will not be easy. For Tanzania to do so, it has to focus on three main sectors: agriculture, mining and energy. Energy supply and industrial activities are always interlinked, as continuous power is crucial for operations and manufacturing processes. Tanzania has suffered frequent power cuts and load-shedding for a good part of a decade. And the problem still continues.

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As a result, the cost of doing business has increased. Now that the rainy season is back, the government is pursuing a course of action in the short term to ameliorate the situation, especially since energy demand is forecast to increase by a staggering 58% by as early as 2015.

In the long run, Tanzania will be working with neighbouring countries on the "Kenya-Tanzania-Zambia Interconnection"--a closed-circuit system in which power moves from a surplus to a deficit area through high-voltage cros-border transmission lines. The project will consist of a 400KV line that will be one of the longest when complete in 2015.

In the short term, the government will attempt to exploit Songo Songo Island's natural gas reserves. Although the field is yet to be fully explored, independent engineers estimate that it could contain as much as 830 billion cubic feet of natural gas. Behind the project is Canada's Orca Exploration Group, which owns the license to develop the field. Orca currently supplies Tanzania's grid with 57 million cubic feet of gas per day, but the restrictive pipeline capacity is hindering any additional output to the country.

To resolve these issues, the government signed a loan agreement with China to finance the construction of a 532km gas pipeline from Mnazi Bay in Mtwara, Songo Songo, to the capital Dar es Salaam. The new pipeline will have a capacity of 784 million cubic feet of gas per day, to be used to generate 3,900MW of electricity. Two new gas processing plants will also be financed by the loan. Construction of the pipeline was due to start in November and the whole project is expected to be ready by March 2013.

A series of significant deals has recently been concluded between local and international firms. Brazil's Petrobas entered into a Farm-Out agreement with Shell Deepwater Tanzania, in which the latter acquired 50% of its interest in offshore blocks in Tanzania's Indian Ocean. On the other hand, Bounty Oil & Gas signed a new Production Sharing Agreement (PSA) with the government last month, granting the company and its partners the right to explore oil and gas over 1,690 sq km in the Nyuni area off the Indian Ocean coast. …

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