High interest rates hinder local bidders, favoring foreign investors

Tanzanian companies are increasingly losing out on significant public tenders to foreign investors, especially those from China, primarily due to a stark difference in borrowing costs. This disparity in capital expenses is hindering local businesses and impacting the nation's economic development goals.

David Kafulila, Executive Director of the Public-Private Partnership Center (PPPC), highlighted the issue at a recent conference at Mzumbe University's Mbeya Campus. He explained that while Chinese companies can obtain loans at an interest rate of 1%, Tanzanian firms are forced to borrow from local banks at rates as high as 18%. This makes it difficult for local companies to compete when submitting bids for government projects.

"If a Chinese company submits a bid of Sh10 billion and a Tanzanian company submits one for Sh14 billion, the government has no choice but to select the lower bid to protect taxpayer money," Kafulila stated. He emphasized that while foreign investment is crucial, a more equitable playing field is needed for local businesses to thrive and contribute effectively to the nation's vision of becoming a $1 trillion economy by 2050.

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If a Chinese company submits a bid of Sh10 billion and a Tanzanian company submits one for Sh14 billion, the government has no choice but to select the lower bid to protect taxpayer money.

Kafulila stressed that achieving this ambitious economic target requires substantial growth from the current GDP of approximately $94 billion. He noted that reaching $1 trillion by 2050 necessitates an annual production of goods and services equivalent to that amount, nearly matching the total output of the past 25 years. This journey will require an estimated $3.7 trillion in investment, making public-private partnerships (PPPs) essential, as tax revenues and loans alone will not suffice.

He pointed to the Dar es Salaam Port as an example of successful PPP, where cargo volume has tripled after private operators were involved. "This is not selling the country, but bringing expertise and systems that work," he asserted. Beyond financial challenges, Kafulila also mentioned a shortage of skilled labor as another obstacle facing Tanzania.

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This is not selling the country, but bringing expertise and systems that work.