Tanzania is negotiating with Chinese investors to revive stalled multibillion-dollar projects, days after President Samia Suluhu Hassan talked by telephone to her Chinese counterpart Xi Jinping.
Hassan announced at the weekend that the East African nation has resumed talks with China’s largest port operator – China Merchants Holdings International – to finally begin construction of the US$10 billion Bagamoyo mega port and special economic zone.
Work on the zone – aimed at transforming the country into a major trade and transport hub – never began, although there was a ceremony in 2015 to officially mark the start of the project. Four years of disagreement under Hassan’s predecessor John Magufuli followed over what were considered unfavourable terms. He finally suspended the scheme in 2019, and died in March this year.
Xi visited Tanzania in 2013 to sign a port deal to kick off the venture – part of China’s Belt and Road Initiative. Now, more than eight years on, some progress could finally be on the horizon after a telephone conversation between Xi and Hassan last week.
Discussions about other delayed schemes are also now taking place between the two nations, including how to revive the development of the US$3 billion Mchuchuma coal and Liganga iron ore projects.
“We have started talks to revive the Bagamoyo port project as well as the Mchuchuma and Liganga projects,” Hassan said, speaking at the 12th Session of the National Business Council in the commercial capital Dar es Salaam on Saturday.
She said the construction of the mega port, 65km (40 miles) north of Dar es Salaam, was important because it would increase the competitiveness of the port and boost the national economy. However, she said national interest would be a priority.
Former president Magufuli had been concerned that the port’s Chinese investor had demanded generous tax breaks in the proposed special economic zone. He had also opposed halting the development of other maritime facilities such as the Dar es Salaam port while the Bagamoyo project moved ahead and rejected Chinese demands for a 99-year management lease of the mega port. The African nation said it was willing to grant a 33-year lease.
Magufuli described the zone’s terms as “exploitative and awkward” and said the Chinese should not “treat us like schoolchildren and act like our teachers”. He preferred to upgrade the Dar es Salaam port rather than build a new one.
On the coal and iron ore projects, Tanzania signed a US$3 billion deal about 10 years ago with Chinese firm Sichuan Hongda to develop coal and iron ore. The deal involved the construction of the Mchuchuma coal mine, the development of a 600-megawatt (MW) thermal power station and the Liganga iron ore mine.
Sichuan Hongda and Tanzania’s state-run National Development Corporation (NDC) formed a joint venture, Tanzania China International Mineral Resources (TCMR), to build the coal and iron ore mines. The Chinese firm was to have an 80 per cent stake.
However, the projects were held back because of financing hitches and a lack of previously negotiated incentives, including tax holidays.
Since coming to power in March this year after Magufuli’s death, Hassan has moved to revive the projects and improve relations with Tanzania’s neighbours and major economies, including China.
Muhidin Shangwe, a political scientist at the University of Dar es Salaam, said China must be encouraged by the new president’s language and approach. A Chinese business delegation visited Hassan a few weeks after she was sworn in, at which point she assured them of her government’s willingness to work with Chinese investors.
“She told them her government was interested in developing special economic zones, which we know have been of huge interest on the Chinese side. The Bagamoyo port is one of those projects,” Shangwe said.
China had also been pushing to advance talks on the subject and it was now clear this was on the agenda when Xi held talks with Hassan recently, Shangwe said. Xi also held similar talks with Magufuli late last year.
“I think Tanzania-China relations will take a new turn given President Hassan’s approach, especially her economic policies whereby she has clearly stated she is opening up the country to foreign investment,” Shangwe added.
Hassan had taken a more conciliatory approach, he said, almost the opposite of Magufuli’s combative style. He said when appointing Liberata Mulamula as minister of foreign affairs the president made it clear “her role was to go out there and mend our relations with the world”.
David Shinn, a professor at George Washington University’s Elliott School of International Affairs, described Magufuli’s relationship with China as mercurial. He once said the Bagamoyo port deal could “only be accepted by mad people”, Shinn said.
However, Shinn said Hassan seemed to be pursuing a more traditional approach with China. “This is likely to improve Tanzania-China relations,” Shinn added.
Mark Bohlund, a senior analyst at REDD Intelligence, said Hassan was returning to the traditional Chama Cha Mapinduzi (CCM) ruling party policy of engaging with external partners after Magufuli’s shift towards self-reliance.
“The abstinence against Chinese loans during the Magufuli era means that China’s loan exposure to Tanzania is low compared to peer countries,” Bohlund said. This was likely to change in coming years with Chinese capital funding an oil pipeline to Uganda as well as other infrastructure projects, he said.
Bohlund said Tanzania’s mineral endowments were perhaps less vital for China than, for instance, those in the Democratic Republic of Congo but would still be a reason for China to maintain good relations with Hassan and the new administration.
Chinese firms China Civil Engineering Construction Corporation (CCECC) and China Railway Construction have started building a US$1.3 billion railroad in Tanzania, awarded earlier this year during a visit by Chinese Foreign Minister Wang Yi.
The firms will build the fifth phase of Tanzania’s Standard Gauge Railway linking Mwanza – a port city on the shores of Lake Victoria – and the southern town of Isaka, 341km away. The Chinese firms had missed out on contracts during the Magufuli era. - Jevans Nyabiage, South China Morning Post
