TANZANIA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE efficiency gap amounting to 20 percent of the population that could be served if suitable regulatory and institutional reforms allow for greater competition in rural areas. One key issue affecting the mobile sector in Tanzania is the relatively high tax of 28% (18% VAT and 10% special excise tax on mobile airtime), which significantly affect the viability of more marginal rural services. Another issue is the availability of wireless spectrum with demand by operators higher than what has been made available. More efficient spectrum management and allocation can make operator investment in rural areas more viable.

Tanzania has had difficulty privatizing its fixed line telecom incumbent. In 2001, the Government sold part of Tanzania Telecom Co. Ltd. (TTCL) to private investors. The company was later divided into a mobile and fixed line operator in 2007. The fixed line operator was renationalized and a management contract awarded to a Canadian operator was later cancelled. Analysis suggests that the fixed line operator has high levels of employment relative to its size, and that these additional hidden costs amount to as much as 0.3 percent of GDP. Efficiency in TTCL operations is particularly critical given that it has been mandated to manage the national fiber optic backbone, which is priced relatively high by regional standards.

# Financing Tanzania’s infrastructure

To reach its national developmental goals, Tanzania needs to implement an ambitious infrastructure investment agenda (table 9). The targets outlined below are purely illustrative in nature, but they represent a reasonable level of aspiration. They have been developed in a way that is standardized across African countries and thus allows for cross country comparisons of the affordability of meeting the targets. This section of the report estimates the level of funding required to achieve these goals.

**Table 9. Infrastructure targets for the next ten years, 2006-15**

||Economic target|Social target|
|---|---|---|
|ICT|Fiber optic links to neighboring capitals and submarine cable|Universal access to GSM signal and public<br>broadband facilities|
|Power|Develop 2,046 MW of new generation capacity and 266 MW of<br>interconnectors|Raise electrification to 30 percent<br>(63 percent urban and 2 percent rural)|
|Transport|Achieve regional connectivity with good quality two lane paved road<br>Achieve national connectivity with good quality one lane paved road|Provide rural road access to 100 percent of<br>high value agricultural land<br>Urban population within 500m paved road|
|WSS|n.a.|Achieve MDG for water and sanitation|

_Source:_ Mayer and others 2008; Rosnes and Vennemo 2009; Carruthers and others 2009; You and others 2009. n.a. = not applicable.

Meeting Tanzania’s infrastructure needs would cost $2.4 billion per year for ten years. Capital investment accounts for two thirds of this requirement. Close to 40 percent of the total relates to the power sector alone, , which needs 2,046 megawatts of new generation capacity and 266 megawatts in interconnectors to keep pace with demand and participate in regional trade. Achieving regional, national, rural, and urban connectivity in the transport sector accounts for one-quarter of total spending needs, and meeting the Millennium Development Goals for water absorbs a further quarter of the total. ICT spending 24