Power and the Private Sector in Tanzania: Prospects for the AFDB's High Fives Strategy

A stable, affordable energy supply underpins economic development by enabling infrastructure development and investment, and ultimately increases industrialisation and enhances competitiveness. Ensuring electricity security is therefore vital for all countries. Over the past two decades Tanzania has been struggling to achieve electricity supply security owing to erratic droughts; over-reliance on expensive hydrocarbon generation sources; a lack of ongoing investment in and maintenance of generation, transmission and distribution infrastructure; and significant financial difficulties at the national energy utility. Electricity security is a key development priority not only for countries but also for development partners focusing on developing countries. The African Development Bank’s (AfDB) programmatic and development finance focus is a key example of this concern, highlighted in its ‘High Fives’ initiative focusing on five key themes: ‘Light up and power Africa’, ‘Feed Africa’, ‘Industrialise Africa’, ‘Integrate Africa’ and ‘Improve the quality of life for the people of Africa’. It has also developed the New Deal on Energy for Africa, with the ambitious goal of ensuring universal access to electricity on the continent by 2025. This paper examines this ambition within the context of Tanzania’s electricity environment and prospects for broader coverage. Attracting investors to the energy sector to address its supply gap has been a key objective of Tanzania’s national development policies. However, major challenges remain that are likely to hinder greater participation by investors. These include institutional, regulatory and legal barriers, knowledge and capacity limitations, and economic and financial constraints. The paper explores the complementarity of domestic and AfDB efforts to support greater private sector investment in Tanzania’s electricity sector. Throughout the paper, specific reference is made to the renewable energy sector, an area that has attracted significant private sector and government interest, given its far-reaching socio-economic benefits.