- From ports to railways, Tanzania’s investment in infrastructure is on the rise post-pandemic.
- Tanzania is constructing a $1.9 billion railway which is part of 1,219-kilometer railway network.
- Shelter Afrique reports that Tanzania’s housing needs is at an estimated 200,000 units per year.
With a market value estimated at over $27.1 billion and an estimated annual growth in excess of 6 per cent, a construction boom is taking shape in Tanzania.
Granted these figures have dropped since the Covid-19 global economic slump but nonetheless, recovery is well underway. During the Covid-19 slowdown, data from the Bank of Tanzania shows that credit to the construction sector declined by 11.9 per cent. In 2021 loans to businesses and agriculture declined by 10.3 per cent and 8.1 per cent, respectively.
However, given the fact that Tanzania has placed public works among its top priorities, the sector is recovering rapidly. Annual investment in building infrastructure has increased post-pandemic, and more infrastructure projects are being built all around the country.
Tanzania’s fiscal spending in the construction sector was $15.7 billion, most of which was internal revenue. The government received only 8 percent was from donors. Policymakers estimate Tanzania will post annual economic growth of 6.3 percent this year.
Tanzania eyeing middle class status by 2030
Notably, Tanzania became a low-middle-income country as of July 2020, and now the government has its eyes on reaching middle-income status by 2030. To achieve this goal, it is no wonder that the government is placing emphasis on infrastructure, energy, and agriculture to grow its economy through the construction sector which facilitates the development of all other sectors.
Read also: Long-term funding provision to grow Tanzania’s mortgage market
Tanzania’s construction sector is lucrative, so much that major globally recognized investors in the construction industry have taken interest. To this end, we must also acknowledge efforts by the government that through favourable policies, has managed to attract these external investors.
Here we have the likes of India’s giant Adani Group (APSEZ) which focuses in port development showing interest. Following on its heels, this time from the United Arab Emirates (UAE) you also have Abu Dhabi Ports, a company more commonly known as the AD Ports which has also inked a pact to support Tanzania’s strategic. The joint venture development priority areas.
Both companies, India’s Adani Group and UAE’s AD Ports will provide Tanzania with end-to-end logistics infrastructure for rail, ports, maritime services, digital services, and construction of industrial zones.
Construction of transport infrastructure
When we speak of the construction sector, we are referring to the building of structures and the related installation, maintenance, and repair of buildings and other structures it also includes the construction of transport infrastructure like roadways, rails, ports, Energy and Utilities etc.
For example, Tanzania is currently constructing a $1.9 billion railway which is part of the larger 1,219-kilometer railway network. The railway works offer great construction opportunities all along the length of the track and serves to connect the Dar es Salaam port with the inland producing areas as well as join with neighbours’ tracks connecting landlocked countries to the port.
The track connects major resource producers like the DRC to the port and in view of the projected increase in trade large financial institutions like Tanzania’s CRDB Bank, the largest bank in terms of assets, already have opened subsidiaries in DRC’s commercial city of Lubumbashi.
For these reasons alone, tenders in Tanzania’s construction sector are hotcake, no international construction company can afford not to have Tanzania in its portfolio. That was a snip bit of the major infrastructure works, roads, rails, ports etc now let us look at another key segment of the construction industry, housing; commercial and residential.
Read also: SOLD: Growing Tanzania’s Mortgage Industry
To Let: Housing sector in Tanzania
When we move from major infrastructure works, we see similar investment in the housing sector further adding to the growth of the construction industry in Tanzania. Shelter Afrique, a pan-African finance institution reports that Tanzania’s housing needs is at an estimated 200,000 units per year.
To support the development of the housing sector the government set up the Tanzania Mortgage Refinance Company (TMRC) to finance the industry.
Working with the Tanzania Housing Finance Project, TMRC offers mid and long-term funding to mortgage lenders. With this access to funding, the lenders then have the ability to turn around and write affordable loans thus empowering Tanzanians to buy new homes and/or improve their current homes.
“Mortgage repayment terms were increased from five years to 25 years, interest rates were lowered from over 21 per cent to 15 per cent annually,” reports
It worked, more people took mortgages, in other words, more Tanzanians than ever before were able to own homes. By the second quarter of last year, the TMRC reports that the value of mortgage loans increased by 1.24 per cent.
That was not it, Tanzania also enabled yet another financing mechanism to boost the housing sector, the Housing Microfinance Fund (HMFF). This program operates under the Housing Finance Project (HFP) and offers long-term loans to low-income earners who otherwise lack the needed financing for the construction of a home or to improve their current ones.
Further still, through TMRC, Tanzania has opened its doors to international organs that support access to housing as the basic need to improve welfare. For instance, TMRC works with Habitat for Humanity International to expand mortgage loans to the microfinance sector in an effort to grow Tanzania’s mortgage market.
For Sale: Why are Tanzanians still renting?
It must be pointed out however, despite these very commendable efforts, Tanzania still fails in awareness programs to inform the general public of these available options and as a result the few, the knowledgeable and those with some form of capital access to start with, these are the ones who benefit and they turn around and build for rent.
The end result is that, while the mortgage market is growing, it is growing among the few rich and informed individuals who are building more and more houses and renting them out to the less informed public. As the report shows, 70 per cent of Tanzanians still opt for self-building, a slow and very costly process.
As a reflection of, Tanzanian’s ability to buy versus to rent, Tanzania’s National Housing Corporation (NHC) has opted to increase the number of properties it builds for rent versus those it builds for sale; the ratio has gone up drastically from 30:70 to 80:20.
“The NHC intends to achieve this target by expanding its building material manufacturing capacity to facilitate quality construction in the self-build sector and lower the cost of crucial materials for its low-cost house construction,” reads the report.
