Financing Infrastructure in Tanzania

TOWARDS INDUSTRIALIZED ECONOMY: THE ROLE OF DFIs IN TANZANIA IN THE IMPLEMENTATION OF THE SECOND FIVE YEAR DEVELOPMENT PLAN. (FYDPII) Charles G Singili Ag. Managing Director TIB Development Bank 6 June 2017 Early Development Arena & the Notion of Development National Development Corporation was established in 1962 i. To catalyze economic development in all sectors of the economy; <ul style="display: flex;"><li style="flex:1">ii. </li><li style="flex:1">NDC became a holding corporation under the Public Corporation Act </li></ul>1969; iii. Had a broad mandate as a development and promotion institution to stimulate industrialization in partnership with private sector. Tanzania Investment Bank was established in 1970- i. To make available long and medium term finance for economic development ii. To provide technical assistance and advice for the purpose of promoting industrial development iii. To administer such funds as may from time to time be placed at the disposal of the Bank iv. To undertake such other activities as may be necessary or advantageous for the purpose of furthering the foregoing objects. Early Development Arena & the Notion of Development Tanzania Agricultural Development Bank was established in 2012 i. apex national-level bank with the key role of being a catalyst for delivery of short, medium and long- term credit facilities for development of agriculture in Tanzania ii. enshrined in the Vision 2025 to achieve food self-sufficiency and food security, economic development and poverty reduction Early Development Arena & the Notion of Development During establishment of the above SOEs “Economic Development” was defined as: i. The development of manufacturing, assembly and processing industries including industries engaged in the processing of products of agriculture, forestry or fishing; ii. The development of the engineering, construction, transport, tourist and mining industries; iii. The development of large-scale corporate agriculture, ranching, forestry and fishing. NOTE: This still holds. The Changed Arena… Up until early 80’s TIB enjoyed high success rate in establishing various industrial, infrastructural and agricultural projects NDCs glory came to an end in 1992 under the Public Corporation Act, 1992 as amended when Parastatal Sector Reform Commission was established (Privatization of SOEs kicked in. The Government privatized 196 entities) The History 9 000 6 000 2 400.00 2 300.00 2 200.00 2 100.00 2 000.00 1 900.00 1 800.00 1 700.00 1 600.00 1 500.00 1 400.00 1 300.00 1 200.00 1 100.00 1 000.00 900.00 3 000 -72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16p (3 000) (6 000) (9 000) (12 000) (15 000) 800.00 700.00 600.00 500.00 400.00 300.00 200.00 100.00 -<ul style="display: flex;"><li style="flex:1">Profit before tax </li><li style="flex:1">USD/TZS rate </li></ul>The Transformation of TIB The Transformation of TIB NUTURING INDUSTRIALIZATION FOR ECONOMIC TRANSFORMATION AND HUMAN DEVELOPMENT 2015/16-2020/21 A SEMI- INDUSTRIALIZED MIDDLE INCOME COUNTRY BY 2025 The New TIB 1. Transformation of Tanzania Investment Bank Limited resulted into a two-tier Group of companies: <ul style="display: flex;"><li style="flex:1">I. </li><li style="flex:1">TIB Development Bank Ltd </li></ul>TIB Corporate Bank Limited TIB Rasilimali Limited II. III. 2. Main focus of TIB Development Bank: i. Long & Medium term finance ii. Special Products: Financial Advisory and Managed Fund TIB, NDC & TADB Strategic Focus 1. Main focus is anchored on Tanzania Development Vision 2025 2. Translated in FYDPII (2015/16-2020/21) 3. Steered by Corporate Strategic Plans of each institution. 10 TIB Strategic Focus i. Infrastructure- Local and National Government; income generating projects ii. Industrialization- specifically in general manufacturing, Agro–processing, and mining iii. Services- Real Estate, Tourism sector iv. Oil and Gas 11 NDC Strategic Focus i. Heavy Industries – Chemical, Power Production, Iron & Steel (metallurgical) ii. Value Addition Industries - Agro Industries, Biological Industries, and Industrial Parks iii. Research and Development 12 TADB-Strategic focus • Promoting financing of entire agriculture value chains, the agro-processing; • Increase availability of raw materials for domestic industries through facilitation of enhanced productivity in the primary production; • Catalyzing banks and other financial institutions to increase their lending to agro-processing and agribusiness Sector through guarantee facilities; • Provision of credit facilities to small and medium scale industries and processing facilities of agricultural produce within the focus value chains; TADB-Strategic focus • Collaborating with the Cereals and Other Produce Board (CPB) and National Food Reserve Agency (NFRA) to construct Strategic modern warehouses with new technologies; • Collaborating with other financial intermediaries to fund the project with large value investments in agriculture in the country; Examples of Projects Financed by TIB Development Bank CATA MINING – GOLD PROCESSING FACILITY ALKO VINTAGE – GRAPE PROCESSING KAGERA SUGAR COMPANY AMIR HAMZA INSTANT COFFEE PROCESSING PLANT TPDC GAS DISTRIBUTION PROJECT 15 Examples of Projects Promoted by NDC MALARIA BIOLARVICIDES PLANT KILIMANJARO MACHINE TOOLS COMPANY NGAKA COAL PROJECT LIGANGA AND MCHUCHUMA IRON ORE 16 Special Products • Fund management(administration of GOVT special funds)  Agriculture financing window: MOF  Small scale mining: Grants (WB), Credits & dev. Scheme (MEM)  Financial Inst. Credit line for energy financing: TEDAP (WB & REA)  Horticulture refinancing & financing structure: MOF & BOT  Dutch and German Gov’t renewable energy fund: SNV Financing FYDP II 18 FYDP II in Context 1. Formulated to rally national efforts towards realization of TDV 2025 2. TDV 2025 goal is to attain a middle income (GDP per capita $ 3,000), semi-industrialized economy status by 2025 with following attributes: i. Self propelling high quality of life ii. Peace, stability and unity iii. Good governance iv. Well educated and learning society v. Competitive economy capable of sustainable and inclusive economic growth <ul style="display: flex;"><li style="flex:1">FYDP II in the Context of TDV 2025 </li><li style="flex:1">Industrialization as a High Growth Factor </li><li style="flex:1">Understanding FYDP II </li></ul>Prioritized projects worth TZS 107 trillion in: 1) Promoting growth and industrialization: Manufacturing, mining, construction, agriculture, trade, natural resources, tourism, technology and innovation 2) Enhancing human development: Education; skills development; health; water supply and sanitation; urban planning, housing, and human settlement; food security and nutrition; social protection; and good governance. 3) Creating an enabling environment for enterprises: Macro-economic stability; infrastructure and services; and ease of doing business. Flagship Projects: projects with high development impacts i. Construction of new central railway line to standard gauge; ii. Revamping the National air Carrier - Air Tanzania Corporation Limited(ATCL); iii. Mining of Coal and Iron ore and Construction of Iron and steel complex in Mchuchuma and Liganga; iv. Establishment of Special Economic Zones; v. Construction of a liquefied Natural Gas Plant(LNG); Flagship Projects: projects with high development impacts vi. Establishment of Kurasini Trade and Logistics centre; vii. Development of Mkulazi Agricultural Farm and Sugar factory viii. Mass training for development of specialized Skills for Industrialization and human development, fostering science, technology and Innovation DFIs Roles Under FYDP II • TIB Development Bank as an Agent for Financial Resources Mobilization through leveraging and syndication(TIB RECAPITALIZATION IS IMPORTANT FOR EFFECTIVE DISCHARGE OF THIS OBLIGATION); • Provide technical assistance for preparation of bankable projects and assist clients on project planning and implementation; • Design and structuring financing programmes(packaging); • Joint project financing with SADC DFIs; • Facilitate Private Participation in Public infrastructure; • Create a data base for pipeline of Bankable projects and solicit syndications. • Enhance Corporate Governance both for the DFI and at Client level. • Support and create linkages between SMEs and large Companies for sustainable industrialization. • Ensure Environmental risks are properly mitigated. • Increase availability of raw materials for domestic industries through facilitation of enhanced productivity in the primary production; • Collaborating with the Cereals and Other Produce Board (CPB) and National Food Reserve Agency (NFRA) to construct Strategic modern warehouses with new technologies; • DFIs to maintain highest level of integrity; • Observe and comply to Prudential Standards, Guidelines and Rating system as adopted by AADFI. Sample Fund Structure - Infrastructure Example Projects that Might fall Under this Programme AMOUNT (USD <ul style="display: flex;"><li style="flex:1">PROJECT NAME </li><li style="flex:1">INST. </li><li style="flex:1">REPAYMENT STRUCTURE </li></ul>BILLIONS) <ul style="display: flex;"><li style="flex:1">1.00 </li><li style="flex:1">Bagamoyo Portside Industrial Zone EPZA </li></ul>Kurasini Logistic Centre Mtwara Freeport Zone Kigoma Special Economic Zone Mwanza Industrial Park Concession Fee Concession Fee Concession Fee Concession Fee Concession Fee EPZA EPZA EPZA EPZA 0.05 0.50 0.02 0.02 Bagamoyo Port Mtwara Port Mwanza Port Kigoma Port TPA TPA TPA TPA 0.70 0.30 0.20 0.15 User Fee / port wharfage User Fee / port wharfage User Fee / port wharfage User Fee / port wharfage Power : Coal Power: Kinyerezi III Power: Urban Elecrification Cities: Gas distribution Cities: Water distribution TANESCO TANESCO TANESCO TPDC 0.10 0.30 0.20 1.50 1.00 User Fee / PPA User Fee / PPA User fee / Connection User fee / Connection <ul style="display: flex;"><li style="flex:1">User fee / Connection </li><li style="flex:1">Water Authorities </li></ul><ul style="display: flex;"><li style="flex:1">Total </li><li style="flex:1">USD 6.04 ~ TZS 14 trillion </li></ul>N.B. Most of projects costs are assumed based on available literature / pre-feasibility TADB– Earmarked Projects • Large scale nucleus farms which support smallholder farmers • Large irrigation schemes which use modern irrigation technologies • Construction of modern warehousing and storage facilities

Financing Infrastructure in Tanzania

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