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Tanzania Compact

The United Republic of Tanzania, comprised of the mainland and Zanzibar, is located in East Africa and borders the Indian Ocean and eight nations. Tanzania plays an important role in the region as an economic trade partner, and stands out as a proponent of peace and stability. However, nearly 36 percent of the mainland population and 49 percent of the Zanzibari population live below the national poverty line. An inadequate transportation network and an insufficient and unreliable supply of energy are key constraints to economic growth and private investment in Tanzania. The water service sector faces clear challenges as well. The Millennium Challenge Corporation and the Government of Tanzania signed a five-year, $698.1 million compact in February 2008, designed to benefit more than five million people by promoting economic growth and reducing poverty through investments in the country in three project areas:

  • the transport sector;
  • the energy sector; and
  • the water sector.
Selection of these project areas, jointly identified by Tanzania and MCC, aligned with the government’s multi-year development strategies. Thee projects were developed through collaboration with key stakeholders, including representatives from local government, members of parliament, the private sector, and nongovernmental organizations. The compact was designed to address regional imbalances in the provision of infrastructure by targeting investments for “pro-poor growth.”

More than 99 percent of the anticipated compact funds were expended by the end of the compact in September 2013 to improve market linkages and increase investment, economic output and household productivity throughout the country. Tanzania demonstrated its commitment to the compact partnership by contributing approximately $132 million to complete projects where costs exceeded the anticipated project budgets, especially in the transport sector.

  • Original Amount at Compact Signing:
  • Amount spent:
  • Signed:
    February 17, 2008
  • Entry Into Force:
    September 17, 2008
  • Closed:
    September 17, 2013

Project Results

Transport Sector Project

  • $372,776,000
    Original Compact Project Amount
  • $405,402,512.32
    Total Disbursed

Estimated Benefits

Estimated Benefits for the Transport Sector Project
Time Estimated Economic Rate of Return (ERR) over 20 years Estimated beneficiaries over 20 years Estimated net benefits over 20 years
At the time of signing 1,624,551 $187,800,000

Project Description

In Tanzania, poor transport infrastructure constrains the development of agriculture, industry and commerce, and hinders access to essential social services. At the time of compact signature, less than seven percent of Tanzania’s road network was paved; the other routes were made of gravel or earth. The Transport Sector Project addressed necessary improvements to Tanzania’s road network, which serves a widely dispersed population, by investing in infrastructure to reduce transport costs, increase cash crop revenue and facilitate access to social services. Rehabilitation of road infrastructure was intended to expand connectivity across Tanzania and improve market and other linkages both domestically and with neighboring Kenya and Zambia. The project also upgraded the Mafia Island Airport to allow for easier, more efficient and safer access to the island. At compact end, MCC financed the completion of 150 kilometers of roads, which includes the installation of drainage measures and accompanying signage, as well as designs and feasibility studies for the original target of 433 kilometers. All 433 kilometers were completed by January 2015 using funding from the government to complete sections that were not finished at compact end.  On Mafia Island, 1.6 kilometers of runway and taxiways were refurbished.

Water Sector Project

  • $66,336,000
    Original Compact Project Amount
  • $54,568,652
    Total Disbursed

Estimated Benefits

Estimated Benefits for the Water Sector Project
Time Estimated Economic Rate of Return (ERR) over 20 years Estimated beneficiaries over 20 years Estimated net benefits over 20 years
At the time of signing 2,801,856 $2,902,240

Project Description

Tanzania continues to face a serious shortage of access to potable water because of an aged and dilapidated water supply infrastructure. The inadequate water supply and quality contributes to a high incidence of water-related diseases, decreased workforce productivity and constrained business growth. The Water Sector Project focused on improving water production and treatment infrastructure in the cities of Dar es Salaam and Morogoro in order to increase the supply of treated water in the system.

Residents of Dar es Salaam are expected to benefit from a 90 million liter per day expansion to the Lower Ruvu Water Treatment Plant—the main source of treated water in the country’s capital. In order to convey this water to the city, the project funded designs for a 55-kilometer water main that was constructed with government funds. As a result of construction delays and fluctuations in seasonal water volumes, the Lower Ruvu Water Treatment Plant and Transmission Main works were not completed by the end of the compact.  In March 2014 the government committed to funding and completing the water works post-compact.  In March of 2016, the government completed and commissioned the Lower Ruvu transmission main.

In Morogoro, the project funded the rehabilitation of both the Mambogo and Mafiga Water Treatment Plants to improve quality and quantity of water, improve major components of the distribution network to include a 1.9-kilometer main, and provide 10,000 customer meters and more reliable customer collection and management tools and training.  Due to construction delays the water treatment plants were completed after the compact by the Tanzanians, impacting the percentage of operations and maintenance costs recovered and the volume of water produced by the two plants at compact end.

Finally, MCC funded the development of a rate case to achieve cost recovery of operations.  These rate case applications were prepared, submitted and received approval from the regulator.

Energy Sector Project

  • $206,471,000
    Original Compact Project Amount
  • $199,461,627
    Total Disbursed

Estimated Benefits

Estimated Benefits for the Energy Sector Project
Time Estimated Economic Rate of Return (ERR) over 20 years Estimated beneficiaries over 20 years Estimated net benefits over 20 years
At the time of signing 1,564,498 $574,400,000

Project Description

The lack of reliable electricity supply was identified as one of the most severe constraints to economic growth in Tanzania. Agricultural and industrial businesses, small-scale entrepreneurs and service providers often suffered from the lack of access to reliable, affordable and modern energy services. In the areas where electricity was already available, industry, businesses and households suffered from unreliable service and recurring blackouts. In part due to inadequate investment in the sector, the country experienced severe power interruptions. The World Bank estimated in 2006 that the cost of electricity interruptions to the economy was in the range of $300-$600 million, or between 2 and 5 percent of estimated GDP. The Energy Sector Project aimed to improve electricity service and coverage in Tanzania by:

  • increasing power transmission capacity to help sustain economic growth and rural electrification efforts in Zanzibar;
  • increasing electricity access and distribution capacity in regions where a lack of infrastructure had depressed the development of economic activities and household access;
  • improving the reliability and efficiency of power distribution systems in regions prioritized by the government for their potential economic impact; and
  • improving the institutional capacity of Tanzania Electric Company and the Zanzibar Electric Company.

The project funded the following activities by compact end and the government funded completion of unfinished transmission and distribution line works post-compact:

  • installation of a new 37 kilometer, 100-megawatt submarine transmission cable connecting Zanzibar to the mainland’s electrical grid,
  • the construction of approximately 2,700 kilometers of transmission and distribution lines in seven of the country’s regions,
  • the upgrade of three electrical substations, and
  • the installation of photovoltaic systems in health centers, schools and markets in the town of Kigoma and Kasulu district.

As of Fri Aug 09 2019 00:00:00 GMT-0400 (Eastern Daylight Time)