African Trade Insurance Agency (ATI) has insisted that there is a need to improve electric power provision in the country due to the fact that the item has been a growing concern for the economic development of Tanzania contributing up to 10 percent of the GDP.
ATI’s resident underwriter – Tanzania Albert Rweyemamu said in an exclusive interview that in 2011 Tanzania’s manufacturing sector has fallen behind by 1 percent due to power outages.
Rweyemamu added that ATI has played an integral role in working with the government to improve electric power generation and to help the country move away from hydro-based power to more sustainable alternatives.
“In the past two years, ATI helped bring an additional 400 MW of electricity to the country. This was a significant contribution in light of the current generation capacity estimated by the Emergency Power Plan drafted in late 2011, to be 1855 MW,” he said.
He added: “The energy sector in particular is predicted to be a source of business opportunity for many years to come as the government plans to boost power generation to 2780 MW by 2015, which will most certainly require private sector participation”.
However, he named another challenge facing local companies as securing working capital/credit from banks. Tanzania is ranked fourth in the East African Community in reference to getting credit for business (World Bank, 2013 report).
In comparison to world economies, the country is graded 129. Kenya, Rwanda, Uganda and Burundi are ranked 12, 23, 40 and 167, respectively.
“….between 2011 -2013, ATI’s non-payment cover, taken mainly by banks, has helped Tanzania secure credit worth over 20bn/-. In one instance, an African bank obtained cover to protect its loan against non-cover payment from a local business person in the retail industry who was importing home appliances to Tanzania from Turkey…,” he said.
He commended: “Any political risk losses caused by a member of ATI are fully recoverable from their government. This position, which acts as a shield against losses, has been one of ATI’s most important assets helping it attract governments, international banks and investors to the continent and ultimately providing over $7.5bn worth of support to trade and investments in Africa over the past decade.”
He said that Tanzania has proven to be a model of stellar economic performance in East Africa with a GDP annual growth rate averaging 7 percent since 2005, and ranked as the second fastest growing in East Africa by the World Bank.
“The economy grew by more than 6 percent in 2012 and it is expected to hit 6.8 percent this year. In its 2012/13 budget, the government prioritised expenditures in economic infrastructure with an emphasis on increased access to financial services and credit to the private sector increased in addition to transport and electricity generation,” he said.
Mandated to attract investments and increase trade within Africa, the African Trade Insurance Agency - ATI has played a key role in supporting the Tanzanian economy achieve its Vision 2025, he insisted.
He clarified that the African Development Bank recently issued a warning of cuts in donor funding. Innovative financial solutions have seen bond issuances in African economies to raise capital for infrastructural needs.
Tanzania has been one of the leading economies in a recent public–private model to finance infrastructure needs estimated at 145trn/- to boost the economy.
In 2011, the government took a seven year-loan worth 397bn/- , arranged by a syndicate of local and global financiers. ATI backed this facility based on its key strengths such as strong capitalisation and a preferred creditor status, which act as a deterrent against governments causing claims in any ATI-backed deal.
Tanzania is a founding member and shareholder of ATI, the multilateral insurer that provides insurance/guarantees to protect projects, contracts, investments and other business transactions against non-payment risks and risks that may be caused by government – known as political risks.
In the past five years, there has been improvement in the growth and performance of the transport sector.
The government’s efforts and private sector’s investment in road rehabilitation, port modernisation and improvement in marine and air transport infrastructure has seen the sector’s efficiency improve by approximately 6.7 percent.
Investors are seeing opportunities in this arena and in one instance, ATI was able to support the expansion of the country’s regional carrier of which re-insurance was provided to a European investor on the purchase of an aircraft.
In addition, ATI also supported imports from countries such as Italy, France, Germany, Japan, Norway and Turkey valued at over 301bn/-.