Will Obama`s $7bn deal shake China in Dar?

In the morning of July 1, this year, when five million residents of Dar es Salaam woke up to a life-time shock and couldn’t believe their eyes weren’t cheating. Some thought they had been caught by the wrong hop.

Richard Mgamba, Guardian on Sunday (Tanzania)  7 July 2013

Suddenly, their dirty and dusty neighbourhoods had all been spruced up, and in a rare show of resolve, someone had actually seen it to use clean water to ‘bathe’ the streets; it was a rare treat indeed — never seen here before in decades.

Hundreds of those streets and walkways famous for the ubiquitous beggars underwent ‘state-of-art surgery’ as beggar after another were temporarily bundled out from the heart of Dar es Salaam; it was all part of a spirited clean-up to make Tanzania’s commercial capital a respectable, albeit temporary, home to the world’s most powerful President, Barack Obama , for a single night’s sleep and two fractions of business days.

Driving along Dar’s major roads, one could have easily thought that ‘there was an election campaign to elect’ Obama in Tanzania because of the billboards sporting his face … Obama, Obama …everywhere, only that there wasn’t a single voting booth in sight – the man had literally conquered the city’s prime district.

But, it wasn’t a campaign period, just a special moment to welcome a man who came waving a $7 billion energy package in his hands, and a message of partnership in his heart.

Dar es Salaam, home to about five million people has hosted many prominent world leaders, such as Chinese President Xi Jiping, who was in the country in March, this year, but this time around, the preparations came as a complete shock to many locals here.

Earlier this year, just ten days after taking office, Chinese President Xi made Tanzania his first stop on a three-nation Africa tour during which he signed 16 trade, cultural and diplomatic accords worth about $12 billion in Tanzania alone. There are approximately 8,000 businesses run by his native Chinese compatriots across Tanzania, ranging from large-scale construction projects to small shops and downtown market kiosks.

But only few people took a second look when the Chinese leader arrived in Dar, a stark contrast to Obama’s, thanks to media hype which clouded the country leaving behind legacy of Obama-mania in a country rich in arable land, natural gas aplenty (estimated value: $350 billion) and other minerals underneath.

“I never imagined that the government has all the resources to make this city clean … now I know…our city has changed in the past two weeks and looks very clean, ” James, a 48-year-old taxi driver, told me.

As Tanzanians welcomed President Obama this month the question that exercised the minds of economist and trade experts was whether the US would outsmart its rival, China, which has so far gained a stronghold in Dar es Salaam in terms of investments, loans and grants; many were amused why the sudden interest — with President Kikwete hosting two US presidents within a period of five years.

In 2008, President George W. Bush visited Tanzania and spent four days here, the longest time an American leader has ever spent in Africa.

Located strategically on the coast of Indian Ocean, Tanzania has become an important partner on security and development to United States over the recent years, raising concern among locals here. The country is also a gateway for many landlocked neighbours and a jump-off point for companies looking to expand commercial opportunities, but still hampered by corruption, lack of reliable energy and bureaucracy.

Yet by the look of things, US firms seem determined – and ready — to defy these odds in order to grab a slice of the trade and investment opportunities, especially in the energy sector, which needs about $8 billion to give Tanzania reliable electricity. Tanzania plans to have at least 10,000MW by the 2025, when the country expects to achieve its 25-year vision launched in 2000.

Currently, the country’s national grid has the capacity to generate only 1,400MW, which includes electricity produced by independent power producers, which means there are huge opportunities for private investors to shore up the 8,600MW deficit. With the discovery of natural gas, Tanzania plans to abandon the use of expensive heavy furnace oil in June 2014, when the Chinese-funded 524km gas pipeline from Mtwara to Dar is completed.

This is precisely why President Obama chose electricity as his main agenda during his visit in Tanzania, pledging to end the power crisis that has rocked the country over the past five years.

Tanzania stands to benefit immensely from President Obama’s ambitious programme to double access to electricity in sub-Saharan Africa, investing $7 billion in financial support for an initiative dubbed “Power Africa” and , Tanzania is one of the initial six participating countries – under which the government hopes to add 10,000MW of generation capacity to reach at least 20 million households that lack electricity right now.

Symbion Power Corporation is already becoming the darling of the Tanzanian government following endorsement of its business last year by former Secretary of State, Hillary Clinton, who visited the company’s 110MW power plants in the heart of Dar es Salaam. Obama also visited the company’s power plant, a vindication of US race to capture the untapped Tanzania energy sector.

Symbion has already teamed up with General Electric to build another 400MW plants in Tanzania’s gas-rich region of Mtwara.

According to reliable government sources, the two US companies, Symbion Power and General Electric, would be the biggest independent power producers by the end of 2017, thanks to the $7 billion Africa energy fund pledged by President Obama.

Alarmed by inefficiency and failure that has marred the energy sector over the past five decades, the Tanzanian government in June announced that it was opening up the sector to private power companies in order to enable the country to have reliable power within the next few years. With the discovery of natural gas, Tanzania has the potential to generate about 5000MW by 2017, with almost half of this coming from private producers like Symbion, from United States of America.

However, Tanzanians are divided. Some see President Obama’s visit as a well-planned strategy to counter the growing Chinese influence in the gas-rich nation. In August, 2011, Washington was shocked by a loan from Beijing loan to Dar es Salaam amounting to $1.3 billion at an interest rate of only three percent to finance the gas pipeline construction.

“Why are they shocked by China’s aggressive overtures to Tanzania … it seems there’s more than meets the eyes,” a senior US diplomat told me in September, 2011.

Though President Obama denies that his trip was, among other things, aimed at countering the growing Chinese influence in Tanzania as well as the rest of the continent, his words speak louder than his denial.

Instead, Obama responded to these claims by urging Africans to ask more questions about the lop-sided deals they seal with some of their foreign partners (investors), even as he dismissed talk of a Chinese and US scramble for influence on the continent.

“I actually welcome the attention that Africa is receiving from countries like China and Brazil and India and Turkey,” he said, when he fielded questions to a news conference in South Africa. But he urged African nations to make sure trade was not a one-way street. “When we look at what other countries are doing in Africa, I think our only advice is … make sure it’s a good deal for Africa.

“Somebody says they want to come build something here: Are they hiring African workers? Somebody says that we want to help you develop your natural resources: How much of the money is staying in Africa?

“I do think that it’s important for Africans to make sure that these interactions are good for Africa.

“There has been a long history of extracting resources from Africa, you take raw materials, you send them to some place else where they get used processed, sometimes sold back to Africa.

“The profits stay there the jobs stay there and not much stays in Africa.”

Obama offered up the United States as a more equitable partner which wanted African economies to grow into consumer powerhouses.

Strong economies would mean the United States would get “somebody to trade with, to sell iPods to, airplanes, all kinds of good stuff.”

Obama’s visit comes just three months since the Chinese President Xi Jiping visited Tanzania in March, this year, in which about 19 deals were signed between Beijing and Dar es Salaam, including the multi-billion dollar modern port project to be constructed in Bagamoyo to service the Great Lakes region.

Scheduled for completion by 2017, the port at Bagamoyo — northwest of Dar es Salaam — will be able to handle 20 million containers a year or twenty times more cargo than the Dar es Salaam port, which can handle a maximum of 800,000 containers.

The port construction project will include the building of a new 34-kilometre road joining Bagamoyo to Mlandizi and 65 kilometres of railway connecting Bagamoyo to the Tanzania-Zambia Railway (TAZARA) and Central Railway line. The bilateral deals call for China to commit Sh 800 billion ($500 million) in 2013 for starting the port construction.

The new port also would transform Bagamoyo into an East African hub for Indian Ocean shipments to and from six of Tanzania’s mostly landlocked neighbours, ease congestion at the Dar es Salaam port and make Tanzania’s import-export sector more efficient, said Vincent Nyerere, a parliamentarian and businessman.

The neighbouring countries of Malawi, Zambia, Democratic Republic of Congo, Burundi, Rwanda and Uganda would like to export and import products via Tanzania, the shortest and most viable route to the Indian Ocean. But for now, these countries must do with the Kenyan port of Mombasa and the South African port of Durban, which are more distant and costly routes.

During Xi’s visit, Kikwete thanked Beijing for its decision to help Dar es Salaam improve its infrastructure and provide access to interest-free or low-interest loans, as long as the bilateral relationship serves “the interests of Tanzania”.

Just two years ago, Beijing arranged a $1.3 billion loan to the Tanzanian government at an interest rates of just three percent to finance the construction of 524km Mtwara-Dar es Salaam gas pipeline. Traditionally, China has been a strong partner of Tanzania, dating back to the eras of Julius Nyerere and Mao Tse Tung. Between 2000 and 2012 China financed a number of Projects in Tanzania such as: New Ultra Modern Stadium in Dar es Salaam; Construction of Mwalimu Nyerere Modern Conference Centre; Rehabilitation of Amani Stadium in Zanzibar; Dodoma Urban Water Rehabilitation and Chalinze Water Supply Projects; Construction of Dakawa Agricultural Technology Demonstration Center; Defense Cooperation; ICT Backbone Infrastructure Optic Fiber Project and many other Projects.

And Beijing is still determined to expand its wings through trade, loans, grants and investments in Tanzania, thanks to the recent discovery of natural gas as well as the available of coal in southern region.

While US relations with African countries comes with a string of conditions, such as human rights, democracy, good governance and many more, China’s approach is directly linked to trade and investment — and doesn’t include any political conditions.

In terms of trade and investment, the United States has performed abysmally in Tanzania during the past decade, compared to what Beijing has traded with Dar es Salaam over the same period. For instance, according to data obtained by The Guardian on Sunday, Tanzania is currently ranked 136th trading partner with the US, valued at a paltry $316 million in total (two-way) goods trade during 2011. But during the same period, Tanzanian’s imports from China was estimated at over $1 billion.

Below is a glimpse of Tanzania-US trade:

Exports

Tanzania was ranked 121st among the largest exporter of goods to the United States in 2011. US export goods to Tanzania in 2011 were valued at $258 million, up 57.7 percent ($94 million) from 2010, and up 474.7 percent from 2000. The top export categories (2-digit HS) in 2011 were: Machinery ($61 million), Cereals (wheat) ($53 million), Miscellaneous Textile Articles ($25 million), Rubber ($15 million), and Electrical Machinery ($13 million). US exports of agricultural products to Tanzania totaled $67 million in 2011. Leading category is: Wheat ($53 million).

Imports

Tanzania was ranked 136th among the largest suppliers of commodity imports in 2011. US imports to Tanzania totaled $58 million in 2011, up 36 percent ($15 million) from 2010, and up 73.1percent from 2000. The five largest import categories in 2011 were: Spices, Coffee, and Tea (coffee) ($29 million), Precious Stones (gemstones) ($9 million), Knit Apparel ($5 million), Lac and Vegetable Saps (pectates) ($5 million), and Edible Fruit and Nuts (cashew nuts) ($2 million). US imports of agricultural products from Tanzania totaled $38 million in 2011. Leading category: Coffee (unroasted) ($28 million).

Trade Balance

The US good trade surplus with Tanzania was valued at $200 million in 2011, a 65.4 percent increase ($79 million) over 2010. Apart from aid channeled though Millennium Challenge Account, which amount to over $700 million, Tanzania-US trade and investment remained very low compared to China’s.

SOURCE:  GUARDIAN ON SUNDAY

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s