Kenya Faces Business Loss as Tanzania Advances $1.2 Billion Railway Project
Kenya Ports Authority (KPA) faces the prospect of losing business as Tanzania moves ahead with plans to construct a $1.2 billion railway line linking Dar es Salaam with landlocked countries in East Africa, a region that heavily relies on Kenya’s Mombasa port for goods.
The new rail project, part of Tanzania’s standard gauge railway (SGR) network, is expected to deepen competition between the Port of Dar es Salaam, connected to the Central Corridor, and Kenya’s Port of Mombasa, which serves the Northern Corridor.
The project is expected to connect Dar es Salaam on the Indian Ocean to Mwanza on Lake Victoria, and further to Rwanda, Burundi, the Democratic Republic of Congo, and Uganda, enhancing regional trade and transport links.
The African Development Bank (AfDB) has signed a coordination letter with Deutsche Bank and Société Générale to mobilise up to $1.2 billion for Tanzania’s ambitious railway initiative.
The agreement was formalised during the African Investment Forum’s 2024 Market Days in Rabat, Morocco, according to an AfDB statement.
Tanzania’s Ministry of Finance aims to raise funds from international debt capital markets to construct a 411-kilometre railway line between Tabora and Kigoma.
“This is a transformative project for Tanzania and the region,” said Max Ndiaye, Senior Director for Syndications, Cofinancing and the Africa Investment Forum at the AfDB, who signed the coordination letter alongside Myriam Ouazzani, Managing Director for Africa at Deutsche Bank, and Randolph Fotso, Head of DFI Solutions at Société Générale.
The financing will be organised in two tranches. The AfDB will coordinate the second tranche with contributions from development finance institutions, export credit agencies, bilateral lenders, and multilateral development banks, the statement added.
The project highlights the growing rivalry between East Africa’s two leading ports. While Mombasa has traditionally served as the gateway for imports and exports to Uganda, Rwanda, and beyond, Tanzania’s investments in its rail and port infrastructure aim to shift trade flows in its favour.
Industry experts warn that KPA must innovate and improve efficiencies at Mombasa port to maintain its competitive edge.
Tanzania’s integrated transport network, combining rail and port infrastructure, offers an alternative that could divert significant cargo volumes.
While the Great Lakes countries have historically favoured the Northern Corridor via the Port of Mombasa, there has been a shift with some landlocked neighbors now routing their cargo through the Central Corridor and Dar es Salaam.
The Central Corridor, spanning 1,300 km, begins at the Port of Dar es Salaam and serves Tanzania, Zambia, Rwanda, Burundi, Uganda, and Eastern DRC.
In contrast, the Northern Corridor, stretching 1,700 km, starts from the Port of Mombasa and serves Kenya, Uganda, Rwanda, Burundi, and Eastern DRC.
ligadwah@businessdayaafrica.org