Tanzania in European fundraising drive to save SGR project as Turkish contractor Yapi Merkezi falters

By John Muchira in Nairobi October 2, 2023

Tanzania’s standard gauge railway (SGR) project is facing further delays, as its main contractor, Turkish firm Yapi Merkezi, is showing signs of financial distress and labour unrest.

The country’s government has embarked on a fundraising drive in hopes of ensuring the completion of the first three phases of the 2,100-km SGR project, The East African reports, in case Yapi Merkezi drops out.

Tanzania’s Finance Minister Mwigulu Nchemba was on a European tour in the second half of September, during which he managed to secure tentative pledges from Spain and Sweden for the project, whose estimated total cost upon completion is $10.4bn.

Saada Mkuya, Finance Minister of the Tanzanian archipelago Zanzibar, is also said to have secured commitments from the African Development Bank (AfDB) to the tune of $3bn for the project.

Yapi Merkezi, meanwhile is embroiled in a tug-of-war with its workers assigned to the project, The East African writes.

The company, in partnership with Portuguese firm Mota-Engil Africa, is implementing Lots 1, 2 and 3 of the projects covering a total of 1,090km.

Tanzanian officials have maintained the project is progressing well, stating that the first two phases being handled by Yapi and Mota-Engil are 98% and 95% complete respectively. The third lot is at 67%.

During his visit to Sweden, Nchemba held talks with representatives of Sweden’s Export Credits Guarantee Board (EKN), which is understood to have acted as guarantor for several banks that sponsored Lots 1 and 2 of Tanzania’s SGR.

The Tanzania minister told EKN officials that the country was seeking funding for Lots 3 and 4, which will cover 501km.

In Spain, Nchemba met the Deputy Minister for Industries, Trade and Tourism Xiana Mendez who pledged support for the SGR project in the form of loans, loan guarantees and insurance for Spanish companies that win tenders for the remaining phases of the railway that have not yet been contracted out.

According to The East African, the AfDB’s pledge of $3bn was made at the Korea-Africa Economic Cooperation conference in Busan, South Korea targeting Lots 6 and 7 of the project, respectively.

The Tanzanian delegation to the Koafec also visited factories in Changwon, South Korea, where locomotives for the SGR are being assembled by Korean firms Hyundai Rotem and Sing Sung Rolling Stock Technology.

Those two firms are under contract with Tanzania to supply 17 SGR locomotive engines, 59 accompanying carriages and 10 Electric Multiple Units before the end of 2023.

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