Why Private Sector Shuns Power Projects

The Citizen (Dar es Salaam)

27 June 2011

Dar es Salaam — The government should prepare regulations to guide investors in the power sector, businesses appeal.Their plea comes at a time when the country is grappling with a power crisis as the water level at the Mtera dam has fallen abysmally low. The government has acknowledged that the power outage is a national disaster, but the business community says all this is happening because there are no regulations to guide investments in the sector.

Only recently the ministry of Energy and Minerals said the regulations were being prepared.

But prospective investors say the process is long overdue taking into account the fact that the Tanzania Electric Supply Company (Tanesco) has been rationing power frequently.

They cite the Tanzania Electricity Act, 2008 whose regulations have not yet been prepared, making it extremely difficult for businesses to generate, transmit and distribute electricity.

“Members of the business community have been waiting for regulations to be prepared and the situation has made it extremely difficult for them to generate, transmit and distribute electricity,” said a policy and advocacy officer with Tanzania Private Sector Foundation (TPSF), Mr Edward Furaha.

TPSF chairperson Esther Mkwizu cautioned that it was difficult for the private sector to take part in power generation, transmission and distribution without having the regulations. “We have not invested in the energy sector because there is nothing to protect our investments,” she told The Citizen in Dodoma recently.

The Energy and Minerals minister, Mr William Ngeleja, was not aware about the stage reached in preparing the regulations to govern the 2008 Tanzania Electricity Act and instead directed our reporters to contact either the ministry’s permanent secretary, Mr David Jairo, or the Tanesco managing director, William Mhando, for details.

Mr Jairo The Citizen in Dodoma on Sunday that the regulations had just been finalised and gazetted. “We are through with them and they are now ready for use,” he said.

“If regulations to govern certain laws take less than six months, why should those for governing such an important piece of legislation take three years. There is a clear lack of seriousness,” said a Dar es Salaam-based businessperson.

Going by the country’s power master plan, the demand for electric power supply in 2009 was 769MW. However, by August 2009, the average production reached 697MW, below the estimated demand by 72MW.

As the situation is worsening, Tanesco started a 12-hour-countrywide power rationing, except in certain areas.

The Energy and Water Utilities Regulatory Authority (Ewura) director-general, Mr Haruna Masebu, once said Tanesco needed Sh691billion to carry out its day-to-day operations. Analysts say the situation calls for the involvement of the private sector in electricity generation, transmission and distribution.

A recent report by the Confederation of Tanzania Industries noted that the country was losing an average of Sh7.28 billion a year due to the impact of unreliable electricity on the industrial sector.

The report showed that Sh2.18 billion in corporation tax was lost due erratic power supply while the cost of generating emergency electricity a year had risen to Sh214.66 billion.

At least 1,857 jobs are lost in the formal manufacturing firms which have employment capacity of 10 workers and above.

Critical of problems in policy coordination, which hinder investors in the energy sector investments and competition with Tanesco, the paper titled ‘Assured Electricity Supply to Manufacturers’ proposed that the government increase its commitment in making the 2008 Electricity Act operational.

“If the private sector is encouraged to play its role fully in the energy industry, there is a possibility of redressing the power problem to a large extent,” the paper said.

It called on the government to give incentives to the private sector to attract more investments in the power sector including renewable energy sources.

Reported by Samuel Kamndaya in Dar and Damas Kanyabwoya in Dodoma.

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