TANZANIA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE Tanzania would need to invest $2.4 billion in infrastructure annually for a decade to catch up with the rest of the developing world. More than one-third of that total relates to the power sector where 2,046 megawatts of new generation capacity are needed to keep pace with demand. Transport and water and sanitation each account for a quarter of the total spending requirement. Spending at this level would absorb just over 20 percent of the country’s GDP, three-quarters of would go for investment. The economic burden would thus be substantial, but comparable to the exceptionally high levels sustained by China in the mid 2000s.

Existing spending stands at $1.2 billion a year—almost 9 percent of 2006 GDP. The public sector, the largest source of finance for infrastructure in Tanzania, accounts for 56 percent of total spending. Official development assistance and the private sector are also important financiers; they respectively fund 25 and 18 percent of total expenditures. At present, the transport and power sectors each receive nearly one-third of total spending, while the ICT and water sectors each receive a further 18 percent. Per capita infrastructure spending is $30 annually, on par with Uganda and Ethiopia but just one-fifth of what is spent by Kenya and only one-twelfth of what is spent by South Africa.

Tanzania incurs losses to inefficiency of $500 million a year. By far the largest source of inefficiency is the national power utility, which wastes $350 million a year through underpricing of power and losses in distribution. The second largest source of inefficiency is undercollection of the fuel levy for road maintenance, which represents a loss on the order of $100 million a year.

Even if inefficiencies could be fully captured, a funding gap of $0.7 billion a year (or 5 percent of 2006 GDP) would remain. The largest component of the annual funding gap is the $380 million shortfall for meeting the Millennium Development Targets in water and sanitation. Smaller, but nonetheless substantial, funding gaps also exist for power ($200 million a year) and transport ($100 million a year).

The overall funding gap could be reduced to $370 million if lower-cost technologies were adopted in the transport sector and if cross-border finance could be mobilized to support the development of the infrastructure needed to support power exports. If Tanzania could capture the resources currently lost to inefficiency, the country would be able to meet these infrastructure targets over a period of 19 years (as opposed to 10) without mobilizing additional resources. Without increased spending or efficiency gains, it may take 36 years to reach the goals articulated in this report.

# The continental perspective

The Africa Infrastructure Country Diagnostic (AICD) has conducted extensive data collection and analysis of the infrastructure situation in 24 Sub-Saharan countries, including Tanzania, during the period 2001 to 2009. The results have been presented in a variety of continental reports covering different areas of infrastructure—ICT, irrigation, power, transport, water, and sanitation—and different policy areas, including investment needs, fiscal costs, and sector performance.

This report presents the key AICD findings for Tanzania for the period up to 2006, thus allowing the country’s infrastructure situation to be benchmarked against that of its African peers—particularly other low-income, nonfragile countries.

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