Three days following the adoption of the 2030 Agenda for Sustainable Development by United Nations (UN) Member States in New York on September 25, 2015, the UN, in conjunction with the Tanzanian government, officially unveiled 17 Sustainable Development Goals (SDGs) with 169 associated targets in Dar es Salaam.
The SDGs, which came into effect in January 2016, will continue to guide development policy and funding for the next fifteen years.
Building on the Millennium Development Goals (MDGs), the new Agenda and the SDGs – hailed as the “new universal agenda” for humanity – call for efforts by all countries to end poverty, protect the planet and ensure peace and prosperity. This reverberates nicely in the mind; after all, which country wouldn’t want to “end poverty”, for instance?
The UN has approximated the cost of attaining the SDGs by 2030 at US$3.9trn a year. But, where is this tremendous amount of money going to come from? Finance ministers from all over the world met at the UN’s Third Financing for Development Conference held in Addis Ababa in July 2015 to deliberate on this key issue.
Whatever the increase in government revenue, it will not suffice to fund all the 17 SDGs and 169 targets. A different way of thinking or even a major shift is, therefore, vital for any country serious about funding the UN SDG Agenda.
Industry, innovation and infrastructure (SDG 9), which underpins SDG 6 on clean water and sanitation and SDG 7 on affordable and clean energy, is central to the whole Agenda. Tanzania would need circa US$3bn every year for the next decade to catch up with the African champion, Mauritius, in terms of infrastructure.
Yet, according to some reports, current spending stands at US$1.2bn a year, which – though represents a considerable effort – is still not enough for the massive infrastructure investment needed to meet the country's future demand. This impedes prospects for development and growth.
At the moment, given the weakening commodity prices, soaring national debt and a slowdown in Chinese outbound investments, one may well be pardoned for espousing the view that infrastructure sector players in Tanzania are deferring their investment plans, notwithstanding the pronounced need. Auspiciously, this does not appear to be the case.
With the current thinking and attitude of the Tanzanian government exemplified by the newly endorsed TZS107-trn 2nd Five-Year Development Plan (FYDP II, 2016/17-2021/22) that considers new ways to make economic transformation a reality, the ongoing extensive crackdown on corruption and wastage of public funds, and the optimistic plan to deploy 40 per cent of the national budget on key development projects, there has never been a more opportune moment to invest in Tanzanian infrastructure.
If investors take the option to invest today for the long-term, there are significant possible gains to be made; although this is without challenges. One of the most preponderant and critical challenges concerns access to funds for infrastructure investment, especially under the prevailing economic conditions.
In view of the increasing size and sophistication of mega infrastructure projects, the importance of the private sector partnering with the UN and the Tanzanian government in implementing infrastructure projects through a variety of mechanisms, such as, where applicable, the highly touted public-private partnerships (PPPs, P3 or 3P) is very ostensible.
Here smart and commercially-aware local legal counsel can collaborate closely with other private sector organizations, including global investors, lenders, financiers and deal lawyers in London, New York, Singapore, and other financial hubs to advise the Tanzanian government on emerging market financing by putting into practice SDG 17 which aims to revitalize partnerships for sustainable development in infrastructure and other sectors.
The construction of the Standard Gauge Railway (SGR) line and all its branches may offer a valuable illustration. Once built and operational, this US$7.6bn SGR line, for which the government has allocated US$460m towards the Dar es Salaam-Isaka/Kigali/Keza-Musongati (DIKKM) section of the line with additional funds expected to come from development partners, and which will link Dar es Salaam and neighbouring Rwanda, Burundi and DRC Congo, will help transform Tanzania’s infrastructure.
The SGR project was conceived in a tough economic climate as we are still experiencing in Tanzania, and across the world. However, in their joint press conference in Dar es Salaam in 2016, Tanzanian President John Magufuli and his Rwandan counterpart, President Paul Kagame, confirmed implementation of the SGR project which may attract foreign and domestic private sector co-investment.
Due to rising economic, geopolitical and policy-related uncertainties, progressive governments are pushing for closer diplomatic relations, trade and economic ties. Indeed, the recent visit to Dar es Salaam by Indian Prime Minister, Narendra Modi, fortifies this.
Even so, experience shows that development financial institutions (DFIs), export credit agencies (ECAs) and sovereign wealth funds (SWFs) are becoming increasingly involved in the project finance market for huge, complex infrastructure projects that bring positive economic, social and environmental impacts.
Therefore, the funds are, without doubt, available; yet the challenge of how to convince the DFIs, ECAs, SWFs and others of the viability benefits of the project remains.
Original backers should be alacritous about using their own money to engage the finest legal counsel, engineers, technologists, accountants, architects, surveyors, and consultants in conducting feasibility studies and environmental and community impact assessments of the highest caliber.
This would help to formulate attractive propositions that would enable the government to embrace the project – ultimately leading to greater engagement and excitement among stakeholders and to a rise in the number of project backers.
In the case of the SGR project, which forms part of the Central Transport Corridor, measured and validated financial and social benefits should help to keep the project on course regardless of the tough economic conditions we face nowadays.
While the SGR project is an example drawn from the transportation sub-sector, comparable opportunities exist throughout Tanzania. The multibillion-dollar Muchuchuma Coal energy project is one of such opportunities, however, numerous others have yet to be planned.
The recent decline in investor sentiment towards emerging markets will unquestionably have more or less undesirable ramifications for achieving the SDGs ad interim. However, investors eyeing infrastructure investment opportunities in Tanzania would do well to stick to their plans to invest in the country.
Brave, tactical and creative thinking – together with an appreciation of exactly how to utilize the goodwill of the Tanzanian government, influential business leaders and legal counsel as well as the community at large – can bring the projects buffeting Tanzania’s infrastructure platform to fruition.