The government is seeking ways to recapitalise Tanzania Railways Ltd and inject more than $39.3 million to revamp the ailing Tanzania-Zambia Railway Authority.

Tanzania Railways was leased to Rail India Technical and Economic Services (Rites) Ltd, an India government enterprise, for 25 years, with the latter taking a 51 per cent share in the operations of the railway. The concession is now being scrutinised by the government with a possible view to shortening the lease period.

In 2008, the investor failed to pay the more than $6 million (Tsh8 billion) concession fee to the government for leasing the giant transport utility.

The government has said it is reviewing the concession agreement with Rites after realising anomalies on its own part in the leasing agreement.

In the contract, the Railway Assets Holding Company (Rahco) is said to have misled Rites officials, at the signing ceremony in October last year, to the effect that there were 92 working locomotives available when in fact there were only 55.

According to Rites officials, this has resulted in the company failing to acquire a loan of $20 million from the International Finance Corporation to be used for purchasing new locomotives and for office expenses.

Dr Shukuru Kwambwa, Minister for Infrastructure Development, told The East-African that the government, in collaboration with Rites, is seeking to recapitalise the railway to improve its performance in the long run.

Dr Kawambwa said Rahco would continue to maintain the railway line and infrastructure, as well as rehabilitation and purchasing of locomotives and wagons.

“Due diligence of Tanzania Railways Ltd started in January 2009 after the government received financial assistance from the United States Trade and Development Agency,” he said.

USTDA gave $653,600 to the government while Burlinton Northern Santa Fe (BNSF) Railway contributed $289,500 for upgrading the railway line from one-metre to the 1.435 metre standard gauge, with conversion scheduled to be completed next month.

The government has released $3.6 million (Tsh3.6 billion) as a loan to Tanzania Railways Ltd to enable the firm pay its employees while it awaits the IFC loan. The investor had asked for a loan from the World Bank, but the request was rejected after the Bank discovered that the information it was given about the locomotives was wrong.

The government said it has secured some $33 million (Tsh33 billion) for a major rehabilitation and modernisation of the central railway line, reviving hopes that the railway line will be revamped.

The privatisation of services at the railway has been blamed for the deterioration of services coupled with breakdowns of sections of the railway and frequent locomotive failures.

Dr Kawambwa said the government was also injecting $39.3 million into the ailing Tanzania and Zambia Railways Authority after securing a loan from the Chinese government in the 2009/2010 budget season.

According to the minister, the funding will be used for purchasing locomotives and wagons and providing training to workers as a transition to concessioning the line to a Chinese investor.

“The two countries, Tanzania and Zambia, have, after lengthy discussions on the fate of Tazara, agreed to concession it to a Chinese firm with the capacity to run the 1,860-kilometre railway profitably; the firm will be identified by the Chinese government,” said Dr Kawambwa.

Tanzania and Zambia recently agreed to give priority to a Chinese firm after taking into account China’s role in building the railway line and sustaining it over the decades.

Tazara has in the recent past been beset by declining profits triggered by technical problems. In the 2005/2006 financial year, the government set aside $100,000 for the repair of the railway and purchase of new engines, spare parts and new wagons, among other things.

China, on the other hand, ploughed in millions of dollars for its maintenance under a technical co-operation protocol that was signed in 1976. The Chinese government recently disbursed a $10.8 million interest-free loan for upgrading of the railway line.