Tanesco to be unbundled in bid to bolster efficiency, spur investment

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    After months of false starts, one of Africa’s most inefficient power utilities is finally about to start restructuring.

    State-owned Tanzania Electricity Supply Company (Tanesco), which is blamed for the problems facing Tanzania’s energy sector, is to be unbundled into separate entities responsible for power generation, transmission and distribution.

    Tanzania’s Minister of Energy and Minerals, Professor Sospeter Muhongo, says the move is aimed at creating efficiency and spurring investments in the power sector, in line with the country’s growth blueprint, Vision 2025.

    Government, through Tanesco, has, since independence, been generating and supplying electricity in the country but we have managed to reach only 21% of the population. This figure is too low,” he says.

    The World Bank and the African Development Bank (AfDB) have committed to financing the unbundling process, which is expected to cost $500-million. “We have procured a $300-million loan from the World Bank that will be released in three phases and negotiations are ongoing for a $200-million loan from the AfDB.”

    The restructuring process will see the nigh-50-year-old Tanesco, which is responsible for electricity generation, transmission, distribution and sale to the Tanzanian mainland, as well as bulk power supply to the island of Zanzibar, separated into three autonomous entities.

    Under the new release, Tanesco will be responsible for electricity distribution only, while two new companies will be established for generation and transmission.

    The move, which is akin to the reforms neighbouring Kenya implemented in the 1990s, is seen as the only solution to Tanzania’s ailing power sector, which has failed to attract private investment and is a major impediment to economic growth.

    Although Tanesco has been in existence since 1964, only just over a fifth of Tanzanians have access to electricity. Only 7% of the rural population, which consists of about 80% of the country’s 46-million people, have access to electricity. Tanzania’s installed generation capacity stands at 1 430 MW.

    In recent times, mismanagement, inefficiencies and political interference have sunk the giant parastatal into a deep financial quagmire, and this has resulted in Tanzania experiencing serious power shortages, which, in turn, have impacted on economic growth.

    “Tanesco is overburdened and cannot solve the electricity problems facing the country now,” says Muhongo.

    He adds that the East African nation intends to encourage private investment into the energy sector.

    A report by research firm Frost & Sullivan, in 2012, showed that tight State control of the power sector through Tanesco, coupled with low tariff levels, had largely contributed to discouraging foreign companies from investing in Tanzania.

    To maintain the current economic growth rate of about 6.5% a year, Tanzania is investing in generation infrastructure to double installed capacity to 3 000 MW by 2015.

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