The Tanzanian government is inviting tenders to manage the general cargo terminal at Dar es Salaam port, following the success of privatizing the container terminal. This could increase trade volumes not only for Tanzania but also for East Africa. The privatization of ports and railways through long-term contracts with private operators is aimed at improving infrastructure and efficiency. The winner of the 20-year contract for the general cargo terminal will be expected to invest in expanding facilities to accommodate larger ships.

1. Tenders invited for Dar general cargo terminal.
The experiment with private-sector management of Dar es Salaam container port has proved so
successful that the Tanzania government is
now inviting management tenders for the port's general cargo terminal. Neil Ford argues that this
could be the first step in
increasing the volume of trade not only for Tanzania but for East Africa
as well.
**********
The Tanzanian government is set to step up its reform of the
transport sector. With little threat to the authority of the ruling
Chama Cha Mapinduzi party (CCM), the main debate in the country over
privatisation seems to have been won by the reformers. Although there
have been some problems with specific privatisations, such as that of
Dar es Salaam Water Supply Authority (Dawasa), the overall trend seems
to be in favour of increasing the role of the private sector.
[GRAPHIC OMITTED]

2. Although the term 'privatisation' is generally used
within Tanzania, it is somewhat inaccurate to describe the port and rail
reforms as privatisations. The government does want to transfer the
management of transport infrastructure to the private sector but private
sector investors would only be prepared to commit themselves if they can
be sure to recoup their investments in the long term. Tanzania has
therefore opted for the landlord model, whereby private companies take
control of assets, from strategic planning down to day-to-day
operations, but the actual physical infrastructure remains the property
of the state and the contracts are overseen by state owned authorities.
[ILLUSTRATION OMITTED]
Hong Kong-based Hutchinson Port Holdings (HPH) has managed Dar es
Salaam container terminal since 2000. Despite current problems with
delays, the company has greatly improved efficiency at the terminal by
introducing IT based cargo processing systems and investing heavily in
cargo handling equipment. Turnaround times--the time taken to unload and
then reload vessels--have greatly improved and Dar es Salaam has begun
to seriously challenge Mombasa as East Africa's main port.
The Tanzanian government has been so impressed with the performance
of HPH that it has decided to offer a similar contract to manage Dar es
Salaam's general cargo terminal. However, the original tender
process was subject to a series of delays before being cancelled in
August 2006.

3. Under Tanzanian law, state owned authorities are not permitted to
make capital investment in order to make state owned assets more
attractive for sale or tender. However, according to Ephraim Mgawe, the
chief executive of the Tanzania Ports Authority (TPA), the government
has been able to take advantage of the cancellation to strengthen the
financial position of the TPA, to make it more attractive to likely
investors. The tender has now been relaunched and the new operator is
scheduled to be in place by the middle of this year.
This seems to be an ambitious timetable in the extreme,
particularly given the delays that have afflicted other tender processes
in Tanzania and elsewhere in East Africa. Yet by setting such a short
time frame for the tender, the government is setting out its stall that
the tender will go ahead and that the contract will be awarded. While
HPH was awarded just a 10-year contract, the winning general cargo
terminal operator will receive a 20-year contract, presumably because it
is felt that investors will require more time, both to turn around the
terminal's fortunes and to justify large scale investment.
At present, the general cargo terminal offers services to bulk and
break bulk customers at seven berths. Reports in the East African press
have suggested that private operators will be required to develop
additional berths and while this is likely to be a long term goal, it
seems far more important to improve terminal efficiency, deepening all
channels and the depth alongside to ensure that larger vessels can enter
the port. At present, the berths have a draught alongside of between

4. nine and 12 metres, but greater than 12 metres is required for larger
vessels.
This could persuade a larger number of the world's major
shipping lines to include Dar es Salaam on more of the scheduled routes,
providing East African traders with direct links to East Asia, South
Asia and Latin America.
One of the reasons why many sub-Saharan African countries continue
to rely on historic trading links with Western Europe and North America is because of the lack of
shipping links with other developing regions.
It is more expensive and much more time consuming to ship goods to
Western Europe and then on to Brazil, than to transport goods direct.
Private sector participation in the Tanzanian port sector is
unlikely to be restricted to the two Dar es Salaam terminals. Contracts
to manage Tanzania's other main ports, Mtwara and Tanga, are likely
to be offered at the same time, although Dar es Salaam is by far the
country's most important port, handling about 75% of all cargo. The
government has also revealed that it is keen to give a variety of
private sector companies the opportunity to become involved in the port
sector, probably through the award of ancillary contracts.
Further expansion of the container terminal is also likely. Dar es
Salaam port manager Jason Rugaihuruza told journalists in Sudan in
December that the terminal was built to provide a draft alongside of 10
metres and to handle vessels with up to 2,500 20-foot equivalent units

5. (TEUs), which are the standard size of container. Many container ships
now carry up to 10,000 TEUs, so the TPA will now invest in widening and
deepening the harbour entrance channel.
The volume of cargo handled by the container terminal is set to
increase to 260,000 TEUs during financial year 2006-07; 280,000 TEUs in
2007-08; and 320,000 TEUs by 2009-10.
Rugaihuruza said: "The development will also increase
efficiency, productivity, security and safety, provide a better outlet
to foreign markets for landlocked countries and enable human resource
capacity building. Shipping and terminal operators will be more involved
in ports developments that include development of dry ports and inland
container depots to improve supply chain performance."
The key to securing steep improvements in the Tanzanian transport
sector will be ensuring the integration of the port and rail networks.
If containers, bulk cargo and break bulk cargo can all be moved rapidly
and reliably from around Tanzania and the rest of eastern Africa to the
port and on to vessels bound for markets around the world, it would go a
long way to boosting economic growth in the country.
While the tender for the contract to manage the Tanzania Railways
Corporation (TRC) operations has also been subject to delays, a
consortium led by Rites of India seems likely to take up its 25-year
concession. With Chinese interests also likely to take over the

6. management of the Tanzania Zambia Railway (Tazara), the Tanzanian
freight sector is about to enter a new era.
RELATED ARTICLE: Zanzibar
Pemba wants more
While real progress has been made in strengthening the economy of
mainland Tanzania over the past decade, the region's historical
economic powerhouse, Zanzibar, has languished in the shadows. Its
relative economic decline has helped to pour fire on the flames of the
archipelago's political woes, while increasing general discontent
with the union.
[ILLUSTRATION OMITTED]
The crux of the Zanzibari problem has been the continued reliance
on wildly fluctuating revenues from spice exports, coupled with
uncertain tourist income.
Some spices are not harvested on an even rota each year, leading to
a cycle of boom and bust. Fluctuations in the international price of
cloves also have an impact.
The latest economic figures for the final months of 2006 indicate
that the revenue from clove exports fell from $9.1m in October to $8.1m

7. in November, yet still accounted for a massive 89% of export earnings.
Total export earnings for the year to November stood at $89.7m, balanced
out only by receipts from the tourist sector.
While relying on the export of a single commodity is rarely
healthy, Zanzibar's dependence on two such vulnerable industries is
almost as insecure. The number of tourist visitors has varied in recent
years in line with international worries over terrorism and instability
on the islands them-selves, but there seem few ideas on how to diversify
the territory's economic base.
Current economic thinking seems to focus on improving the security
and political situations on the islands. According to reports in the
local press, Zanzibar's President Aman Abeid Karume wants more
politicians and civil servants to move their operations to Pemba.
Although many people think only of the island of Unguja, with its
capital Zanzibar Town, the northern island of Pemba is almost as heavily
populated. Discontent at its relative exclusion has promoted periodic
unrest on Pemba, where the opposition Civic United Front is the dominant
political force.
Pressure for some form of greater self determination or even
independence has divided political opinion on Zanzibar in recent years
but Zanzibar Attorney General Idd Pandu Hassan has dismissed claims that
the archipelago could join the East African Community as an independent

8. country.
Pleas for independence could subside if the improved financial
performance continues. The current account for the year ending October
2006 saw a $l2.6m surplus, a great improvement on the previous
year's $16.5m deficit. Coupled with increased foreign investment, a
more deep-seated improvement could finally be in sight.
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