Tanzania awards $12 billion rail projects to Chinese companies

DAR ES SALAAM (REUTERS) - Tanzania has awarded contracts to build new railway lines worth about US$9 billion (S$12.13 billion) to Chinese firms, its transport minister said, expanding Beijing's presence in East Africa's second-biggest economy.

Transport Minister Samuel Sitta told parliament on Saturday a Chinese consortium had been awarded a contract to build a 2,561km standard gauge railway connecting Dar es Salaam port to land-locked neighbours at a cost of US$7.6 billion.

"A consortium of Chinese railway companies led by China Railway Materials (CRM) has been picked to help us build the railway line," he said.

The consortium will provide 10 per cent of the funding for the project while financial adviser Rothschild is finalising procedures for financing of the project through banks, Mr Sitta said.

The minister said construction of the railway line was expected to start in June.

He said Tanzania had signed a framework agreement with another Chinese company, China Railway No.2 Engineering Group, to build a railway line linking coal and iron ore mine projects, also under development by a Chinese group, to the southern port of Mtwara near big offshore natural gas discoveries.

The 1,000km standard gauge railway line is expected to cost at least US$1.4 billion, according to the Tanzanian government estimates.

Tanzania said in March it planned to spend US$14.2 billion to construct a new rail network in the next five years financed with commercial loans, as the country aims to become a regional transport hub.

Tanzania, like its neighbour Kenya, wants to profit from its long coastline and upgrade existing railways and roads to serve growing economies in the land-locked heart of Africa.

Oil discoveries in Kenya and Uganda and gas finds in Tanzania have turned East Africa into an exploration hotspot for oil firms but transport infrastructure in those countries has suffered from decades of under-investment.

Tanzania last year signed an agreement with China Merchant Holding International (CMHI) to build a new mega port and economic zone at Bagamoyo expected to cost at least US$10 billion.

China is also financing a US$1.2 billion, 532km natural gas pipeline in Tanzania.