TECH SHOW

Tanzania 2014 | ENERGY | VIP INTERVIEW

TBY talks to Sospeter M. Muhongo, Minister of Energy & Minerals, on managing the country's resources, restructuring TANESCO, and the role of science and technology.

How do you plan to ensure that Tanzania's energy opportunities and resources become a blessing and not a curse?

When many people discuss natural resources they are thinking about a personal fortune, but in Tanzania we try to make sure that our natural resources are for the prosperity of all the people in the country. Energy is the engine of an economy everywhere in the world. For development, it is about the amount of energy per capita that a country is using. Our economy is small; at the moment our GDP is about $28 billion and our GDP per capita is about $600. As a nation we have resolved to do away with poverty and we have a road map to eradicate it. We have a development vision for 2025, which is to become a middle-income country. At the moment, our installed capacity of electricity is 1,438.24 MW. Electricity is essential for growth, and our intention as a ministry and a government is that by 2015, we will double our installed capacity to 2,780 MW. Honestly, we want to have a minimum of 3,000 MW in the next three years. We have changed our energy needs; we used to depend very heavily on hydropower, but climate change has taught us a very big lesson. The government now has an energy mix, which is as follows: for the next five, 10, or even 20 years, our electricity will be generated first by natural gas, second by coal, third by hydro, and fourth by renewable energies. For the renewable energies, we will generate our electricity from wind, solar, geothermal, and bioenergy. Luckily, Tanzania has abundant resources for generation. We have come up with that energy mix for economic reasons. Our economic growth at the moment is oscillating between 6% and 7%. Our intention is that in the next two years, our growth should be a minimum of 8%. Economically, that actually reduces poverty, but it is not enough to eradicate poverty. If we want to eradicate poverty, we have to go into the double digits. It should be beyond 10%, preferably 12%, and it must stay at that level for a long period of time because we have to move from the current GDP of about $28 billion to beyond $100 billion by the year 2025. To do that, we need to have a reliable power supply to move the economy forward. What we are doing right now is constructing a pipeline that will help us produce much more power from natural gas. We are also starting plans to build new gas-fired power plants. We have learned over time that the government alone, which was the concept for many years, does not have the financial muscle to satisfy the energy demands of the nation. Our current approach involves both public and private sector investments. There will be three scenarios: public, private, and public-private. What we have at the moment is an enormous amount of energy. It is almost equivalent to 8 billion barrels of oil, which is considerable. Our small economy cannot stomach all the natural reserves that we have. They are both for local consumption and for export. We will use natural gas to propel the economy within the country. For power generation, we will use natural gas for our industries. We will use the natural gas for domestic cooking and other things. We will use it in our vehicles and also as a raw material for fertilizer and other petrochemical industries. However, we are going to export it as well. At the moment, we are discussing where to place the LNG facilities. We have already begun to invite the private sector into this process. If an investor comes and is interested in investing in the energy sector, we are willing to accommodate them. There are others that would want to go into partnership with the government, and they are also invited. We are very open; there is no rigid approach or constraining legal framework. This is a very flexible and open approach. The most important issue here is the negotiations with investors.

How will the restructuring of TANESCO increase the availability of electricity to all Tanzanians?

Restructuring TANESCO is obligatory. There are technical reasons for that. The predecessors of TANESCO were there during colonial times. In 1931, two companies based in Dar es Salaam came together and formed one single power utility company. This was during the British period. The contemporary TANESCO was established in 1964. You do not need to be a high-level professional to understand what it means when from 1931 until today, only 21% of the country's population has access to electricity. We gained independence in 1964 and still only 21% of the population has access to electricity. This invokes the argument that the structure of this national power utility is not appropriate to speed up the processes of making sure that many citizens have access to electricity; that is number one. The second point is that TANESCO has accumulated a lot of debt. If we are not careful, it will continue accumulating. We have to sort this out. Since 100% of the equity of TANESCO goes to the government, this means that all those huge debts are debts of the government and the people. We have decided as the government to clear these debts. We have to change our current style; we cannot clear the debt and then after one week go back to the same style of operations that led us to where we are today. The third reason is that if our intention is to be a middle-income country, we must have an adequate, reliable, and predictable supply of power. If from 1964 up to today, TANESCO can only generate 1,438 MW, we don't see that TANESCO can take us much further toward being a middle-income country; we have to restructure it. There are economic, technical, and socioeconomic reasons that compel us to restructure TANESCO, and we are going to do that. We have requested that TANESCO itself comes up with a proposition to have a very efficient, quality-driven type of organization. The second document will be submitted by others in the ministry on their own vision. For the third one, we are going to use a consultant who will be paid by the African Development Bank, which will also deliver a proposition. There is no excuse; we have to transform and make sure the power is there. The transmission systems are old and obsolete, distribution is very poor, and so is energy efficiency. At the moment, they have grid losses of more than 20%. We have to bring this down. We cannot do that with the current structure of TANESCO. I do not know what the offspring will look like, but it is likely that we will have more than one.

“Energy is the engine of an economy everywhere in the world."

How does science and technology accelerate the growth of the energy and mining sectors and help you achieve the 2025 goals?

I am a geologist by profession, and I strongly believe that science has the solutions to the problems of global society. I recently told Parliament and the people of Tanzania that economic prosperity for the 21st century, and the subsequent century, has a very simple solution when you put it on paper. However, it is very hard to interpret and implement that equation. Our contemporary economic prosperity equals science plus technology, plus innovation, plus financial capital, plus human capital. These are the five obligatory ingredients for any country to become prosperous in our times, today and in the future. Whatever you touch is science. The country that becomes the most prosperous is the one that generates knowledge. A country that becomes prosperous in modern times is the country that is capable of absorbing new knowledge. It is knowledge that generates technologies. It is the combination of science and technologies that bring about innovations. Those three are very important and they have to be supported by resources, finances, and humans.

© The Business Year - November 2013