Closed Compact Report: Tanzania Compact | November 2015

Energy Sector Project

  • $206,471,000Original Compact Project Amount
  • $199,461,627Total 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 26.3 percent 1,564,498 $574,400,000

Estimated benefits corresponds to $198.2 million of project funds, where cost-benefit analysis was conducted.

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.

Evaluation Findings

MCC contracted Mathematica Policy Research to conductan impact evaluation of the Mainland Distribution System Rehabilitation and Extension Activity. The evaluation sought to assess the of impact of increased access to electricity on energy consumption and expenditures, household income and business activity, and health and education outcomes. Final results were released in 2017.  Mathematica also conducted a performance evaluation of the Kigoma Solar Power Activity. The Kigoma Solar Evaluation looked at the  changes in energy consumption and business operations. In addition, the evaluation attempted to measure effects on incomes of the  businesses or households that received or purchased solar energy systems through the activity. . Final results were released in 2017.

Finally, the performance evaluation for the Zanzibar Interconnector Activity, released in 2015, sought to assess the benefits of the undersea electricity cable on power quality and business operations experienced among hotels on Zanzibar.

Key performance indicators and outputs at compact end date

Key performance indicators and outputs at compact end date
Activity/Outcome Key Performance Indicator Baseline End of Compact Target Quarter 1 through Quarter 20 Actuals (as of Dec 2013) Percent Compact Target Satisfied (as of Dec 2013)
Distribution Systems Rehabilitation and Extension Activity Cost recovery ratio 73.43 95 79.69 29%
Current power customers (all six project regions in mainland)

  • These monitoring indicators may be influenced by factors beyond the MCC projects. Therefore, any change over baseline data may not represent the impact of the MCC Investment alone.
214,958 331,070 333,034 102%
Kilometers of 33/11 KV lines constructed 0 1,334 1,391 104%
Kilometers of LV lines constructed 0 1,851.88 1,317.55 71%
Technical and Non Technical losses (all six project regions in mainland and Kigoma) 25 18 12.65 (Q17 – Q20) 176%
Transmission and distribution substations capacity (MVA) (all six project regions in mainland) 473 768 769 101%
Kigoma Distribution Activity Capacity of PV systems installed (kWp)

  • This indicator focuses solely on non-commercial installations at health centers (plus vaccine refrigeration systems), dispensaries, schools, village markets, and beach management units.
0 241 242 100%
Number of current power Customers

  • These monitoring indicators may be influenced by factors beyond the MCC projects. Therefore, any change over baseline data may not represent the impact of the MCC Investment alone.
8,277 16,015 17,151 115%
Zanzibar Interconnector Activity Grid substation capacity (mWp) 60 180 180 100%
Kilometers of 132 KV lines constructed 0 65 77.8 120%
Number of Current Power Customers

  • These monitoring indicators may be influenced by factors beyond the MCC projects. Therefore, any change over baseline data may not represent the impact of the MCC Investment alone.
69,211 98,870 87,629 62%
Technical and non-technical losses (Zanzibar) (%) 26 20 28.07 (Q17 – Q20) -34%
Transmission and distribution substations capacity (mWp) 60 180 180 100%

As noted above, MCC successfully financed the design, construction and supervision activities for a 37 kilometer cable from mainland to Zanzibar expected to:

  • increase the number of domestic, commercial and industrial customers;
  • improve the quality of service delivered as measured by reductions in duration and frequency of power outages;
  • increase the quantity of electricity sold and reduce the consumption of other energy sources, such as kerosene and diesel.

Although the investment was not intended to directly affect technical and non-technical losses, MCC monitored this as a link between the outputs produced and the expected improvements in outcomes and objective indicators.  Technical losses include power dissipation within the components of the electrical system, while non-technical losses are due to external factors such as theft or record-keeping errors. The indicator measuring progress on reducing the percentage of losses appears negative in part influenced by the utility not instituting a more cost-reflective tariff until the last year of the compact, which shortened the time allowed to measure effects of the increase prior to compact end, as well as other factors beyond the control of the MCC projects. The construction of the interconnector between Zanzibar and the mainland, however, did address one of the reasons for technical and non-technical losses on the island.