Does The Focus Of Tanzania's Multi-Billion Dollar SGR Project On Neighboring Countries Make Economic Sense?

Tanzania is currently engaged in the construction of a multi-billion dollar electrified standard gauge railway (SGR) network that is mainly aimed at connecting the country, and particularly the port of Dar es Salaam, with its two neighboring countries of Rwanda and Burundi. When completed the network is expected to stretch over 1500 kilometres at a cost of well above $10 billion. So far, phases 1 and 2 of the project, that span about 550 kilometres from Dar es Salaam to Dodoma/Makutopora, have been completed and are now operational.

Image: EMU Train At Dar es Salaam SGR Station

The SGR network project is said to be undertaken under an East and Central Africa transport sector strategy called Central Corridor that entails development of roads, railways, and inland waterways. One of the main arguments advanced for rationalizing the economic viability of the SGR project is said to be that Tanzania's SGR link with Rwanda and Burundi will lead to significant revenues to Tanzania, when the network becomes operational, as the two neighboring countries use the railway to export and import goods through the port of Dar es Salaam. But then, the argument may be misleading and could be debated. We will elaborate this as thus.

The GDPs (nominal) of Rwanda and Burundi are $14.098 billion and $2.642 billion respectively, as of 2023 by the World Bank. These are therefore small economies given that the GDP of Dar es Salaam region alone is estimated at $10.9 billion as of 2020 by Statista. The sizes of the economies of the two countries will have crucial implications for their contribution to revenues that completed Tanzania SGR network will generate when operational. More specifically, because the economies of Rwanda and Burundi are rather small, they will be unable to generate volumes of exports, and exert demand for volumes of imports, that will require levels of use of the SGR network that will imply substantial revenues to the owner of the railway, i.e., Tanzania.

From the foregoing, it is very likely that given the tiny GDPs of Rwanda and Burundi, the revenues that Tanzania will get from the two countries after the SGR project is completed will not be considerable as currently envisaged, especially when compared to the total cost of construction of the ultra modern railway network. As such, if Tanzania would be able to get revenues for recouping its investment in the mega infrastructural project, then most of the revenues would be generated locally. If that is the case, then why is Tanzania focusing on neighboring countries instead of all the regions of the country, in its ambitious endeavour to introduce modern electrified SGR railway lines? In other words, what is the economic sense of building SGR railway lines to Rwanda and Burundi given what was observed above, while ignoring some of its regions like, for instance, Kilimanjaro and Arusha that have incredible proven potential for demand for modern railway services hence ability to pay for such services given that these are also renowned global tourist attraction regions?

More generally, because Tanzania's SGR project is a massive multi-billion dollar national development project financed by taxpayers nationwide, it is imperative the project covers the whole country. In other words, the main goal of the project should be to replace the existing dilapidated 1 m gauge railway system in the whole country with a new electrified SGR system and even extend the latter to parts of the country that have had no railway lines before. Otherwise, taxpayers of parts of the country left out in the ambitious project may begin wondering why their tax money is been used for the benefit of other parts of the country while their parts are marginalized. Political arguments like some parts of the country are more developed than others and should therefore wait, may be seen as remarkably insensitive and unacceptable by citizens in the marginalized parts, as long as they are paying taxes as the rest of the country's population. Also important, extension of the project to any neighbouring country should be based solely on economics in order to avoid Tanzanian taxpayers' money been used for the benefit of other countries.

Lets us debate this now.

Image: View Of Mt. Kilimanjaro From Moshi City

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