Economists and policy experts have raised concerns that
Tanzania’s current budget allocation for preparing Public–Private Partnership
(PPP) projects is too small to support the scale of investments the country
plans to mobilise under its national development agenda.
The concern centres on the amount of
public funds set aside for project preparation a critical stage that
determines whether infrastructure proposals can become viable investments
capable of attracting private capital.
The issue emerged during a recent
PPP stakeholders’ conference in Dar es Salaam that brought together government
officials, economists, academics, development partners and private sector
representatives to assess Tanzania’s readiness to expand PPP financing.
Participants warned that while
Tanzania is increasingly relying on PPPs to finance infrastructure development,
the current level of funding allocated for preparing such projects could limit
the country’s ability to attract investors.
Small
budget for a critical stage
PPP project preparation involves a
series of complex technical processes including feasibility studies, financial
modelling, legal structuring, environmental assessments and risk allocation
analysis.
These steps transform development
ideas into “bankable” projects that investors can evaluate and finance.
Dr Bravious Kahyoza, a PPP
specialist and coordinator of the conference, said Tanzania currently allocates
around TZS2 billion for
PPP project preparation.
He said the amount is extremely
small compared to the value of projects the government expects to implement
through partnerships with private investors.
“Project preparation is the
foundation of successful PPPs,” Dr Kahyoza said. “If we do not invest enough
resources at this stage, many projects will never reach the level where
investors can finance them.”
According to him, international best
practice generally recommends allocating about two percent of the expected investment value for project
preparation to ensure projects are technically sound and financially viable.
Gap
between policy ambition and funding
Applying that benchmark to
Tanzania’s Third Five-Year Development
Plan (FYDP III) highlights the scale of the gap.
The plan had an estimated investment
value of about TZS21 trillion,
meaning approximately TZS420 billion
would have been required for PPP project preparation under the two percent
guideline.
However, the actual allocation has
remained only a small fraction of that amount.
Experts say the gap between
recommended preparation funding and actual allocations raises concerns about
whether Tanzania can build a strong pipeline of viable PPP projects.
Without adequate preparation
funding, potential projects may struggle to reach financial closure or attract
credible investors.
Bigger
challenge under FYDP IV
The issue becomes even more
significant under Tanzania’s Fourth
Five-Year Development Plan (FYDP IV), which will run from 2026 to 2031.
Government planning estimates
indicate that implementing the plan will cost about TZS477 trillion.
Of this amount, roughly 70 percent — equivalent to TZS334 trillion —
is expected to come from the private sector.
PPP projects are projected to
mobilise more than TZS170 trillion
of that investment during the five-year period.
If the two percent international
benchmark is applied, analysts estimate that Tanzania would need around TZS3.4 trillion to properly prepare
PPP projects linked to the plan.
“This shows the scale of the
challenge,” Dr Kahyoza said. “If we want PPPs to mobilise trillions of
shillings in investment, the country must also invest significantly in
preparing those projects.”
Why
preparation matters
Investment specialists say project
preparation determines whether PPP projects become financially viable.
Joseph Simbakalia, an experienced
investment negotiator, said thorough preparation also strengthens the
government’s bargaining power during negotiations with private investors.
“When a project is properly
prepared, the government understands the risks, expected returns and long-term
financial implications,” he said.
“That allows the country to
negotiate agreements from a position of strength while protecting national
interests.”
Former Controller and Auditor
General Ludovick S. L. Utoh has cautioned that public–private partnerships
(PPPs) should not be viewed as an easy financing option for governments.
“PPP is not a free lunch,” he said,
noting that while such arrangements can mobilise private capital for
infrastructure and public services, they also carry financial obligations and
risks that must be carefully managed.
Utoh said governments must ensure
that laws and policies are supportive of key productive sectors, including the
alcohol-based industrial economy, to stimulate investment and economic growth.
He also stressed the need for
stronger transparency and accountability in PPP projects. He suggested closer
collaboration between the Public Private Partnership Centre and the National
Board of Accountants and Auditors to promote a robust system for reporting
audit findings related to PPP projects.
He further emphasised the importance
of a disciplined and skilled workforce to ensure effective implementation of
development policies and projects.
Investor
confidence at stake
Private sector representatives say
insufficient project preparation can also undermine investor confidence.
Mwanahamisi Hussein, director of
policy and research at the Tanzania Private Sector Foundation (TPSF), said
investors are more likely to participate when governments present projects
supported by reliable technical studies.
“Well-prepared projects reduce
uncertainty and investment risk,” she said.
“If feasibility studies and
technical groundwork are incomplete, investors may hesitate because they cannot
properly evaluate the risks involved.”
Government
perspective
Planning and Investment Minister Prof. Kitila Mkumbo says Tanzania is
increasingly turning to PPPs as a strategy to bridge the gap between growing
infrastructure needs and limited public development budgets.
“For many years, developing
countries including Tanzania have faced limited development budgets while
infrastructure demands continue to increase due to economic growth and
population expansion,” Prof Mkumbo said.
He noted that the country’s
expanding population and urbanisation are increasing demand for transport
networks, energy systems, water supply and social infrastructure.
PPP arrangements, he said, offer a
way to mobilise private capital to complement public resources in financing
such investments.
Tanzania introduced its PPP
framework through the National PPP
Policy of 2009, followed by the Public–Private
Partnership Act, which established the legal and institutional framework
governing partnerships between the government and private investors.
Government data shows that 101 PPP projects are currently at
different stages of development across mainland Tanzania, ranging from concept
development to implementation.
Capacity
improving, but funding gap remains
Government officials say efforts are
underway to strengthen institutional capacity for managing PPP projects.
David Kafulila, a senior government
official involved in PPP coordination, said projects worth about TZS8.5 trillion have reached agreement
or financial closure in the past two years.
He also noted that the number of
trained PPP specialists within government institutions has increased
significantly.
“In the past we had only a few
experts working on PPPs,” Kafulila said. “Today we have around 45 trained professionals supporting
project preparation, evaluation and negotiations.”
However, analysts say that while
institutional capacity is improving, the limited financial resources allocated
to project preparation remain a key constraint.
Turning
plans into bankable projects
As Tanzania prepares to implement
FYDP IV, experts say the success of PPP financing will depend heavily on the
government’s willingness to increase funding for early-stage project
development.
Without stronger investment in
project preparation, many proposed infrastructure projects may fail to reach
the level of technical and financial readiness required by investors.
For a country planning to mobilise
more than TZS170 trillion
through PPPs, analysts say strengthening the budget for project preparation
could be one of the most critical steps toward turning development plans into
real infrastructure on the ground.
