Turkey Wins Bid to Finance, Build U.S.$1.9 Billion Second Phase of Tanzania Railway

Turkey Wins Bid to Finance, Build U.S.$1.9 Billion Second Phase of Tanzania Railway

In January, Turkish President Recep Tayyip Erdogan was in Dar es Salaam on a state visit.

A month later, Turkish firm Yapi Merkezi, through a joint venture with Portuguese company Mota Engil, won the first contract under the Tanzanian railway modernisation programme, worth $1.2 billion.

The Chinese had been the favourites, complete with a $7.9 billion funding promise from Beijing.

Now the Turkish firm is back in the news after being awarded a second project to build a 422-kilometre high-speed electric standard gauge railway line. This is the longest section of the project, which has been divided into four phases.

In the January meeting, Tanzanian President John Magufuli asked for funding from President Erdogan. Last week, the project was awarded to the Turks, beating 15 competitors.

“We sought financing from Turkey. I am confident that we will secure the loan as President Erdogan said that’s a ‘small’ matter to him. We have also received a bid from a Turkish company that is keen on executing the project,” President Magufuli said.

First 205-km phase

Yapi Merkezi, which has already embarked on the first 205-km phase between Dar es Salaam and Morogoro, will now construct the second phase between Morogoro and Makutupora. The contract is worth $1.92 billion.

“After assessment of the bids, Yapi Merkezi met the technical and financial requirements. It will now design and construct the railway line,” said Tanzanian state-owned railway infrastructure authority Reli Assets Holding Company Ltd in a statement.

The deal is understood to have been pegged on Tanzania’s April request to the Turkish state-owned Export Credit Bank of Turkey (Eximbank) to help finance the 400-km stretch of the new railway.

Erdem Arioglu, the vice president of Yapi Merkezi, said the agreement is the largest ever signed by a single Turkish firm abroad.

“We will single handedly build this project, complete with accompanying technology and infrastructure. We will deliver within the agreed timelines,” Mr Arioglu said.

Chinese contractors are modernising Kenya’s and Uganda’s railway infrastructure.

The East African understands that in both phases of Tanzania’s project, the Chinese submitted their bids. Although the first contract had been awarded to them, it was cancelled over “ethical concerns”.

“In the first contract, out of the 39 firms that bid for the Dar to Morogoro 205-km line, there were seven Chinese firms. In this second one, out of the 15 firms that placed their bids, we had four Chinese firms. They still have strong interest and we expect to see them in the other bids,” a government official told The EastAfrican.

Four parts

Tanzania divided construction of its railway into four parts, and put out separate tenders to design it. The three remaining sections are Makutupora to Tabora (294 km), Tabora to Isaka (133 km) and Isaka to Mwanza (248 km).

Tanzanian state-run railway firm Railway Assets Holding Company is expected to award at least one more contract before the end of the year, with the others slated for early next year.

The country plans to spend $14.2 billion over the next five years to build the 2,561-km standard gauge railway connecting its main port of Dar es Salaam to land-locked neighbours, including the Democratic Republic of Congo, Zambia, Rwanda and Uganda.

Securing soft loans

“As a country, we have already set aside $500 million dollars for the project. We are now expecting to secure soft loans from development partners and financial institutions for implementation of the plan,” said Makame Mbarawa, the Works, Transport and Communication Minister.

The new developments leave in question the role that China will play in the project.

In July 2016, China, through its Exim Bank, agreed to advance Tanzania $7.9 million for the railway project, despite its key contracting firms having been blacklisted by President Magufuli’s administration over malpractices in the tendering process.

In addition to Tanzania, the Turkish firm has shown interest in running the 751-km Chinese-built Ethiopia-Djibouti railway line. In February last year, Yapi Merkezi bid for the project jointly with Turkish State Railways TCDD.

The project also attracted Chinese companies; the consortium of China Civil Engineering Construction Corporation and China Railway Engineering Corporation won the bid for management of the line for six years.

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