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Tanzania

Governmental framework

The Ministry of Energy and Minerals (MEM)

The Ministry of Energy and Minerals is responsible for the national energy policy and coordination of the activities in the sector. Its task is to create an attractive framework so that all stakeholders can operate successfully. MEM has responsibility for creating and reviewing policies and strategies as set out in the National Energy Policy and the National Energy Strategy through issuances and guidelines.

https://mem.go.tz

The Energy and Water Utilities Regulatory Authority (EWURA)

The Energy and Water Utilities Regulatory Authority is an autonomous multi-sectoral regulatory authority established by the Energy and Water Utilities Regulatory Authority Act in 2001. It is responsible for technical and economic regulation of the electricity, petroleum, natural gas and water sectors.

The functions of EWURA include licensing, tariff review, monitoring performance and standard-setting with regards to quality, safety, health and environment. EWURA is also responsible for promoting effective competition and economic efficiency, protecting the interests of consumers and promoting the availability of regulated services to all consumers including low income, rural and disadvantaged consumers in the regulated sectors.

http://www.ewura.go.tz/

Tanzania Electric Supply Company Limited (TANESCO)

Tanzania Electric Supply Company Limited is a public organization under the Ministry of Energy and Minerals. The company generates, transmits, distributes and sells electricity to the Tanzania Mainland and sells bulk power to the Zanzibar Electricity Corporation (ZECO). TANESCO in the year ending June 2016 was responsible for 60.72% of the electricity generated in the country[i], also being responsible for all the centralized transmitting and distributing facilities in Tanzania Mainland. The Government of Tanzania removed TANESCO’s monopoly as the sole power generating and distributing company in 2008 after setting first steps towards market liberalization in 1992. The Company is currently facing significant challenges underpinned by issues on its financial performance.

http://www.tanesco.co.tz/

Rural Energy Agency (REA)

REA is an autonomous body under the Ministry of Energy and Minerals. Its main role is to promote and facilitate improved access to modern energy services in rural areas. Deriving its power from the Rural Energy Act no.8 of 2005, the agency became operational in October 2007. The agency actively works with the private sector, non-governmental organizations, community-based organizations and government agencies.

http://www.rea.go.tz/

Tanzania Investment Center (TIC)

The Tanzania Investment Centre (TIC) was established in 1997 by the Tanzania Investment Act to be the Primary Agency of the Government to coordinate, encourage, promote and facilitate investment in Tanzania and to advise the Government on investment policy and related matters. The agency deals with all enterprises whose minimum capital investment is not less than US $ 500,000 if foreign owned or US $ 100,000 if locally owned. The agency assists all investors to obtain permits, authorization etc. required by other laws to set up and operate investments in Tanzania.

http://www.tic.co.tz/

Tanzania Revenue Authority

The Tanzania Revenue Authority (TRA) was established by Act of Parliament No. 11 of 1995, and started its operations on 1st July 1996.  In carrying out its statutory functions , TRA is regulated by law, and is responsible for administering impartially various taxes of the Central Government.

http://www.tra.go.tz/index.php/corporation-tax

TIB Development Bank

TIB Development Bank Limited was established in November 1970 under a Parliamentary Act. The Government re-designated TIB as a Development Finance Institution (DFI) in 2005 with engagement now focused primarily on infrastructure, industrialization (agro-processing, mining, and general manufacturing) oil and gas and services sector.

http://www.tib.co.tz/tibdfi/

Independent Power Producers

The Tanzanian government differentiates between Independent Power Producers, Small Power Producers and Emergency Power Producers. They currently contribute 40% to the installed capacity. Nine large power plants using gas, heavy fuel oil and diesel are run by private companies (IPPs). Two Emergency Power Producers, Aggreko and Symbion LLC, were hired by TANESCO to temporarily produce power in order to decrease the need for load shedding. Independent Power Producers are all private companies running power plants larger than 10 MW under a Purchase Power Agreement. A number of Small Power Producers (SPPs) develop smaller projects (< 10 MW) under a specific SPP framework and sell their produced electricity to TANESCO or to consumers such as agricultural businesses that produce sugar, tea, sisal or tannin.  Their supply is usually based on renewable energy technologies – particularly biogas and solar PV.

 

Strategies, Policies, Acts, and Regulations Governing Renewable Energy

Tanzania’s Development Vision (TDV) 2025

The development vision aspires for Tanzania to have been transformed into a middle income and semi industrialized nation by 2025, characterized by (i) high quality and sustainable livelihoods; (ii) peace, stability and unity; (iii) good governance and the rule of law; (iv) an educated and learning society; and (v) a strong and competitive economy.

National Strategy for Growth and Reduction of Poverty (NSGRP II)

The National Strategy for Growth and Reduction of Poverty (NSGRP II or MKUKUTA II) is an organizing framework to rally national efforts in accelerating poverty-reducing growth. It is a second in series of results-based national strategies. Like its predecessor – MKUKUTA I, the strategy puts emphasis on the role of governance and growth for poverty reduction. The Strategy is divided into three main clusters, cluster one on Growth and Reduction of Income Poverty with affordable and reliable energy as one key sub area.

National Five Year Development Plan – 2016/17 – 2020/21

The Second Five Year Development Plan (FYDP II) has integrated frameworks of the merged FYDP I (2011/2012-2015/2016) and the NSGRP/MKUKUTA II, with a designated theme of nurturing an Industrial Economy. Energy sector challenges are highlighted as low access, and high costs of power production, distribution and transmission. A situation outlined as being caused by a 40-year Government monopoly that has stifled development in the sector, an overreliance on hydropower and inefficiencies of the power utility, TANESCO. Swift reform is placed at the centre of development in this critical sector under the FYDP II, including a separation of powers in the following key functions: determining power purchasing tariffs, management of the power master plan, and power transmission.

National Energy Policy 1992 /Revised 2003

The National Energy Policy has undergone a review process, which was prompted by social and economic changes taking place in all sectors of the economy. The revised Policy was launched in 2003. It focuses on market mechanisms as a means to achieve the creation of an efficient energy sector. The policy takes in to consideration the needs to:

  • Supply affordable and accessible energy countrywide;
  • Reform the energy service market;
  • Form an institutional framework which facilitates investment, expansion of services, efficient pricing mechanisms and other financial incentives;
  • Adequately take into account environmental considerations for all energy activities;
  • Promote energy efficiency and conservation in all sectors;
  • Increase energy education and build gender-balanced capacity in energy planning, implementation and monitoring.

The main elements of the policy address the development of efficient domestic energy resources, ensuring market-determining energy prices, improving the reliability and security of electricity as well as commercializing and privatizing the energy sector.

Rural Energy Act (2005)

The Act establishes a Rural Electrification Board, Agency and Fund and describes in considerable detail the functions and relationships of these different entities. The Tanzanian law also provides more detail on sources of financing for the fund. The Act is intended to promote improved access to modern energy services in rural areas of mainland Tanzania and providing grants to developers of rural energy projects and to TANESCO for rural grid distribution investments.

Electricity Act (2008)

The Act liberalised the production and distribution of electricity in Tanzania, which was previously reserved for TANESCO. The Act provides for the facilitation and regulation of the generation, transmission, transformation, distribution, supply and use of electric energy, cross-border trade in electricity, and the planning and regulation of rural electricity in Tanzania.

Feed in Tariff (FIT)

Tanzania introduced a feed-in tariff scheme for small power producers (100 kW to 10 MW) in 2008 with the framework being reviewed in 2015. In the Second Generation SPP (Small Power Producer) framework, EWURA applies two approaches depending on the technology: Renewable Energy Feed-In Tariffs are applied for small hydro and biomass projects whereas a bidding approach is applied for solar and wind projects. The Second Generation SPP framework is based on guiding principles that include SPPs receiving a fixed tariff for the duration of the Small Power Purchase Agreement (SPPA).

Standardised Power Purchase Agreement (SPPA)

In August 2015, the Ministry issued Model Power Purchase Agreements for seven energy technologies to be used as guidance for projects larger than 10 MW. These include the technologies hydro, natural gas, oil, coal, geothermal, solar and wind. The Model PPAs were issued for the use in negotiations between project developers and the power off-taker.

Power System Master Plan (PSMP)

Short and medium term projects have been identified in the Ministry’s Power System Master Plan 2007-2035 to replace short-term emergency generation plants. Proposed projects include the processing of a number of PPAs relating to interconnections with neighboring countries and IPPs, the construction of new generation facilities (including 100 MW at Ubungo, 60MW at Nyakato – Mwanza, and 222 MW at the Rumakali Hydropower Project), the expansion of the high-voltage transmission network and further studies into wind energy projects. In total the PSMP, as updated in 2012, foresees the development of 3,564 MW of renewable energy capacity from hydro, wind, solar and biomass plants.

 

Investment Considerations

Laws and Regulations Governing Foreign Direct Investment

The Government of Tanzania (GOT) has historically been successful in attracting FDI, with recent years being focused on the productive and extractive sectors. The aforementioned Tanzania Investment Center (TIC), sits at the heart of the efforts to attract FDI through promoting and facilitating investments in the country. TIC approved projects along with those in Zanzibar through the Zanzibar Investment Promotion Authority (ZIPA) receive certificates of incentives which include VAT and import duty exemptions and 100% repatriation of profits, dividends, and capital after tax. Sectors of focus under the investment institutions include energy in addition to amongst others agriculture, tourism and transportation. Registering with the TIC offers incentives for joint ventures with Tanzanian and wholly owned foreign projects investing a minimum of $500,000.

In 2014 the amended version of the Public-Private Partnership (PPP) Policy with the PPP Act and PPP Regulations came into law, covering many areas of foreign investment including power generation and transmission.

The Tanzanian government established a Local Content Policy (LCP), originally for the oil and gas industry, in May 2015. This was then expanded to cover all economic sectors including in energy with an objective of placing local products, produced by local industries/organization and businesses in an enhanced position for accessing opportunities from foreign direct investments.

Renewable Energy Investment Incentives

Rural Energy Fund (REF)

The Rural Energy Fund (REF) is an instrument administered by the Rural Energy Agency (REA) to promote programmes designed to increase energy access in rural Tanzania by subsidizing rural energy projects via grants towards capital costs of project implemented by public and private organisation as well as cooperatives and community groups. The fund is capitalised through government budget allocations, interests or return on investment, specific taxes on petroleum products and electricity, and development agencies. One specific example under this framework is the Result Based Finance (RBF) grants programme for mini and micro-grids as supported by SIDA and DFID that had its first call for proposals at the end of 2016.

Development Agency Engagement

Numerous development agencies and partners active in Tanzania cover energy within their areas of focus. These include but are not limited to the EU, UK Department for International Development (DFID), Swedish International Development Cooperation Agency (SIDA), International Development Association (IDA) and Norwegian Agency for Development Cooperation (NORAD).

IDA amongst other initiatives has supported developments through the Rural Energy Agency and the Ministry of Water on using Solar Energy to power water supply in the country. Current plans aspire for all new rural water projects in Tanzania to utilise solar power. SIDA aims to directly support access to electricity for 300,000 Tanzanians with sustainable energy promotion through an improved regulatory framework and private sector engagement being the focus. One such example, as highlighted above, being the green mini-grid RBF programme jointly developed with DFID. NORAD reports investing over EUR 9.5million in Tanzania in 2015 in the environment and energy sectors. Over the years this work has included supporting the supply of power to Zanzibar through an undersea cable and additional follow up support to the Zanzibar Electricity Company (ZECO). Further support has included funding pilot studies for a regional power line between Tanzania and neighbouring Kenya and on grid development plans with TANESCO. More recently Norway has funded the drawing up of a now adopted 10-year investment plan for village electrification that could see the country further fund grid expansion and private investment in isolated networks, as well as to distributed systems in partnership with Lighting Africa Tanzania.

 

Key figures

Available statistics:
Capital
Dodoma
Official languages
Kiswahili, English
Population (2016 projection)
50,142,938
Population growth (2016 est.), %
2.77
Median age (2016 est.), years
17.6
Urbanization rate (2010 - 2015), % p.a.
5.36
Urban population (2015), % of total
32
Rural population (2015), % of total
68
Population density (2015), per km2
60
HDI (2014)
151 of 188
National Currency
Tanzanian Shilling (TZS)
Exchange rate (March 2017), USD
1 USD = 2,237 TZS
GDP (2015), USD billion current
45.63
GDP growth (2015), %
7.0
GDP annual growth rate forecast (2020), %
6.64
GNI per capita (2015), current int’l USD
2,630
Inflation (2016), %
5.0
Inflation Rate Forecast (2020), %
6.0
Foreign Direct Investment, net inflows (2015), BOP current USD billion
1.961
Net official development assistance (2014), current USD billon
2.648
Budget deficit (2016 est,), % of GDP
-3.90
Ease of Doing Business (2017), rank of 190
135
TI Corruption Index (2016), rank of 168
117
Installed Generation Capacity (MW, 2016)
1,357.69
Installed Fossil Fuel Capacity (2016), % of total installed capacity
57.5
Hydro Capacity (2016), % of total installed capacity
41.7
Other RE Capacity (2016), % of total installed capacity
0.77
Renewable electricity output as % of total electricity output excl. hydro (2016)
0.6
Avg. distribution and transmission losses as % of output (2016)
16.4
Net electricity imports (2016), GWh
85.77
Electrification rate, total (2014) %
30
Electrification rate, urban (2014) %
57
Electrification rate, rural (2014) %
18
Peak demand (2016), MW
1026
Per capita electricity consumption (2016), kWh
137
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