TanzaniaInvest spoke with Mr.
Haruna Masebu, Director General of the Energy and Water Regulatory
Authority (EWURA). TanzaniaInvest and Mr. Masebu discussed the current
state of electrification and water supply in Tanzania, electricity
rates, solar energy, water supply and the role of private investment in
the sector.
TI:
Tanzania has experienced shortages of electricity for years, which has
affected investment in the industrial sector. What is the current
situation? How far are we from providing 100% of electrical needs and
can we keep up with the continuous need for more electricity?
HM: For years we were reaching about
14% of demand, and now we are at about 21% and the government of
Tanzania estimates we will reach 30% by 2016.
Supply has been low because Tanzania
is a vast country with high population density around the boarders, but
low density in the center. You have to go great distances to bring
electricity to the dense areas. Other countries in East Africa are much
smaller and it's therefore easier to distribute electricity.
Also, we have just recently been
venturing into gas and cheaper forms of electricity. We've used hydro in
the past, but have also suffered from droughts. With all of the new gas
discoveries, chances are we will be able to roll out more
electrification.
For
years we were reaching about 14% of demand, and now we are at about 21%
and the government of Tanzania estimates we will reach 30% by 2016.
For
years we were reaching about 14% of demand, and now we are at about 21%
and the government of Tanzania estimates we will reach 30% by 2016.
The
population of Tanzania without access to electricity is immense. The
demand is immense. Even those who have electricity have issues with
reliability, but it's more reliable now than it was even two years ago.
We used to only have one electricity
producer, the Tanzania Electric Supply Company Limited – TANESCO -, but
now there are many private electricity producers who are happy with the
investment environment here.
TI: It is estimated that it
will take seven to ten years for gas from recent discoveries to be
available in Tanzania, so how will the gap be filled between now and
then?
HM: The gas that will be extracted
over the next two years is enough to jump electrification up to 50%. The
gas that will take a long time to reach us is that which has been
discovered offshore. But the onshore gas we are discovering is able to
jump electricity for quite some time- we won't have to wait many years
Now there is a move towards building
power plants and transmission systems, and to link Tanzania to the north
so we can get electricity from others countries such as Ethiopia or any
other countries with a surplus. We also want to link the south to Congo
for electricity.
I am confident that within the next
five years we will be able to meet the growing demand; not 100% but
enough to meet the needs of many more people.
The gas that will be extracted over the next two years is enough to jump electrification up to 50%.
The gas that will be extracted over the next two years is enough to jump electrification up to 50%.
TI: EWURA regulates the price of
electricity, which is always a topic up for discussion. TANESCO is
expected to further increase electricity tariffs for 2014. If we
consider this from a global perspective, is the cost of electricity in
Tanzania adequate for the population as well as investors looking to get
involved in this sector?
HM: The law says we should make a cost
reflective tariff that compensates investors for their returns. Our
goal is to come up with a tariff that meets that objective.
Currently the rate is about 14 cents
USD per kilowatt-hour, which compares favorably to rates in other
countries. It's about 20 cents USD in Rwanda and Uganda, and 18 in
Kenya.
Also we don't use cheap sources of
electricity like coal, which is used in South Africa or hydro in
Ethiopia. We don't use coal because it's only cheap when found in
abundance. If you have to ship it, then it's not cheap anymore.
Out electricity rates may be higher than those of the Southern African Countries, but in East Africa we are the cheapest.
Affordability of electricity is
relative. Compared to income that many people have, it is expensive but
it's still cheaper for an individual or family than alternative energy
sources like charcoal.
If you look at the proportion of money
a person spends on electricity in relation to total income, it's still
within acceptable levels of 4% to 10% of the income of a normal
middle-income person. Also, people won't just stop using electricity
because the alternatives are too expensive.
Tanzania is a place where the rates
are low enough for the population to purchase the electricity and high
enough for investors to make money. The current tariff is good for
investors, but not punitive to the client.
TI: What sort of role can solar power play in electrifying Tanzania?
HM: Solar power cost is about 28 cents
USD per kilowatt-hour. This is the rate at which investors will see a
return on their investment.
Solar power is expensive, but the
rates are going down. Ten years ago it was 40 cents USD so over time
solar will be a viable commodity in the mix. There are no subsidies on
solar in Tanzania though, so that's why the contribution of solar to
renewable energy is small.
At some stage it would be good to
subsidize solar, but currently there is no real interest from the
government. However it could be that they are reviewing policies that
were put in place in countries like Germany or South Africa where solar
subsidies make solar electricity very cheap.
TI: In additional to
electricity, EWURA also oversees water supply. A recent World Bank
Report estimates that by 2050 Tanzania could be the 5th most populated
country on earth. All of these people will need access to clean water.
What is the expected role of private investors?
HM: There is a need for private sector
involvement, but the public sector has been doing a good job supplying
to urban areas. The private sector contributes to water supplies at the
household level in rural areas, but in urban areas it's really the
public sector that supplies water.
88% of the urban population has access
to water, and in some towns like Moshi, Arusha, Tanga and Mwanza access
to water meets the highest of standards and is available for most of
the day and it is billed correctly. These are towns where the government
used a lot of donor finances, which is what they will soon do for Dar
es Salaam.
Over the next two years we should see
Dar es Salaam having more clean water. Previously, the water sector in
Dar es Salaam was privatized into City Water by foreign investors. City
Water lasted for two years but didn't accomplish anything so the sector
went public again. In that example, the private sector failed, but there
is still room for private participation.
Currently there are special interest
investors from Israel who want to do desalination in Dar es Salaam.
Negotiations are still in the early stages, but this will allow
companies to come, invest and sell water to utilities companies.
TI: What are the most pressing issues for which Tanzania needs investors?
HM: Apart from electricity and water,
which I've already discussed, I believe we need investments in a
pipeline and infrastructure to better connect us other East African
nations and the Congo so we can transport fuel.
These countries will likely rely on us
for fuel. So if we can develop a good pipeline to transfer oil and gas,
it will be a moneymaker.
If
you look at the proportion of money a person spends on electricity in
relation to total income, it's still within acceptable levels of 4% to
10% of the income of a normal middle-income person. Also, people won't
just stop using electricity because the alternatives are too expensive.
If you look at the proportion of money
a person spends on electricity in relation to total income, it's still
within acceptable levels of 4% to 10% of the income of a normal
middle-income person. Also, people won't just stop using electricity
because the alternatives are too expensive.
Reserves and storage facilities would
also be moneymakers because Tanzania as well as other countries could
utilize them for storing petroleum.
TI: If you had to explain in few words to a foreigner what Tanzania is all about, what would you say?
HM: Tanzania is emerging in Africa.
Each continent has had its time. Asia has developed so fast that most of
the countries are at the same level as the rest of the developed world.
Now it's Africa's time and Tanzania is the place to be at, as we
continue with our high growth potential. |
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