Tanzania last week licensed a second Chinese commercial bank as President John Magufuli’s administration looks East for funds for mega infrastructure projects.
The licensing of the China Dasheng Bank Ltd, and its subsequent injection of $40 million capital, heralded changing fortunes for the Chinese in Tanzania, amid growing apathy among Dar’s traditional lenders.
Speaking in South Africa last week, the World Bank President Jim Yong Kim said he was perturbed by the recent happenings in Tanzania, giving the clearest signal that all was not well.
“Let me just be very blunt, we are very upset about what's happening in Tanzania,” Mr Kim said at a lecture at Wits University in Johannesburg.
“There are some things that are happening that we are upset with, and we have made ourselves clear, that we cannot tolerate that,” he added.
Mr Kim’s statement seems to throw a cloud of doubt around funding for Tanzanian projects.
Twenty months ago, the World Bank announced a $1.15 billion four-year facility comprising loans and grants.
The projects under this programme are in the transport sector (railways, roads), water, education and energy sectors.
The funding included $425 million for the second and third phases of the Dar es Salaam Bus Rapid Transit, $305 million for expansion of the port of Dar es Salaam, $60 million for the Ubungo interchange and $100 million for Dar es Salaam water supply upgrade.
At the time, Tanzania President John Magufuli had shunned China, and cancelled their $7.6 billion funding offer for his country’s standard gauge railway citing “ethical irregularities” that had been “conveniently ignored.”
Now, President Magufuli has changed tune, praising China’s financing role of his country’s infrastructure modernisation drive, and the subsequent announcement of China Dasheng Bank Ltd’s entry, which is raising the stakes as Tanzania weighs its financing options.
“We prefer assistance from China, as Beijing imposes fewer conditions,” President Magufuli said last week, after facing threats in recent weeks from Western donors to cut off aid in response to human rights concerns.
“The thing that makes you happy about their aid is that it is not tied to any conditions. When they decide to give you assistance, they just give you. As it is, my government will continue to develop and cultivate its good relationship with China. They have helped us in a lot of other areas of development.”
Tanzania is a significant beneficiary of EU development co-operation, mainly financed by the European Development Fund, with the current cycle of 2014/2020 budget for $709.38 million, for Dar’s energy, agriculture, health, governance and security sectors now at stake.
The licensing of China Dasheng Bank Ltd makes it the second Chinese Bank to operate out of Dar es Salaam.
Earlier this month, Denmark froze funding to Tanzania, announced it was withholding $10 million worth of aid money over concerns about policies that threaten gay people.
The European Union on the other hand has also launched a comprehensive review of its policies towards Tanzania over concerns about rights abuses.
It announced that Dar government pressure had led to the “forced departure” of its ambassador.
The World Bank, on the other hand, put a planned $300 million loan for an education project on hold, later announcing that a cautious agreement had been reached to get the loan process back on track after Tanzania agreed to reconsider the legislation, which prohibits criticism of official statistics. Statistics Acts, which was passed by parliament in September, imposes heavy fines on people who challenge the accuracy of official data released by the government. The World Bank argued that the law was counterproductive.
China Dasheng Bank Ltd entry is now seen as Dar attempt to lure more capital from Beijing and also make it easy for funding and Foreign Direct Investment from China as the new bank seeks to become a big player in Renmbi clearance.