The government of Tanzania has secured a $1.2 billion financing boost for its standard gauge railway (SGR) project. This development paves the way for the construction of the 411-kilometre Tabora–Kigoma section. The project aims to strengthen transport links with the country’s western regions and neighbouring markets. The financing facility was arranged by the African Development Bank (AfDB) and involves nine banks.
The AfDB-arranged commercial financing facility includes an $800 million partial credit guarantee from the bank. This guarantee has enabled the mobilisation of commercial lenders to support the strategic infrastructure investment. The nine-bank syndicate comprises Deutsche Bank, Société Générale, HSBC, Commerzbank, Nedbank, Stanbic Bank Tanzania, First Abu Dhabi Bank, FirstBank UK, and Bank of Africa United Kingdom. Their commitments comprise $720 million in guaranteed lending and $480 million in lending extended on the strength of Tanzania’s sovereign credit.
The 411-kilometre electrified railway line is expected to ease the transportation of agricultural produce, minerals, and other goods from western Tanzania to domestic markets and the Port of Dar es Salaam. The connection could provide an alternative means of transporting bulky goods over long distances, potentially lowering logistics costs and improving access to markets. This project is also expected to create employment during construction and operation.
The Ministry of Transport Permanent Secretary, Prof Godius Kahyarara, confirmed the development, saying the project will connect Tabora, Kigoma, and Burundi through Lot 6, which starts in Tabora. The project’s regional significance extends beyond Tanzania, as it is expected to facilitate trade with the Democratic Republic of Congo (DRC) through Kigoma and Kalemie ports across Lake Tanganyika.
The wider railway development programme also seeks to improve connections with Burundi and eastern DRC. The financing structure combines development finance, commercial lending, and insurance to attract different categories of investors while managing risks associated with large infrastructure projects. Under the arrangement, the bank’s $800 million partial credit guarantee covers the principal of the guaranteed tranche and two years of interest.
AfDB Senior Director Max Ndiaye said the transaction demonstrated how development finance institutions could work with commercial lenders and insurers to mobilise capital for major infrastructure investments. The bank’s Director of Infrastructure and Urban Development, Mike Salawou, said the railway’s economic value would depend on its ability to connect agricultural and mineral production areas with industrial centres and markets.
However, the $1.2 billion facility is only part of the overall financing arrangement. The wider $2.3 billion package also includes an export credit agency tranche and another financing component to be mobilised in collaboration with a co-guarantor. Tanzania had mandated AfDB to structure and mobilise up to $3.2 billion for its regional railway development programme.
Key points
- The project aims to strengthen transport links with the country’s western regions and neighbouring markets.
- The financing facility was arranged by the African Development Bank (AfDB) and involves nine banks.
- The project’s regional significance extends beyond Tanzania, as it is expected to facilitate trade with the Democratic Republic of Congo (DRC).
