Tanzania to build $6 billion SGR line to transport coal

Saturday July 30 2016

A section of the standard gauge railway in Changamwe, Kenya. PHOTO | FILE

Tanzania is in negotiations with China for $6 billion funding to build a standard gauge railway line that will link major coal fields with Mtwara port and other East African countries.

The 997km line will run from Mtwara to Amelia port and Manda, branching off to Ngaka and Mchuchuma–Katewaka.

The project is part of the Mtwara port expansion plan, which is yet to begin.

The railway, to be completed in 2023, is expected to reduce the cost of transporting coal from southern Tanzania to the rest of the region by 72 per cent.

READ: Tanzania secures $7.6 billion financing deal from Chinese lender to build new railway

It costs $35 to buy a tonne of coal in southern Tanzania and $178 to transport it to Jinja in Uganda due to lack of infrastructure.


Mlingi Mkucha, the managing director of the National Development Corporation (NDC), who together with Reli Assets Holdings are negotiating with China Railway for funding, said the rail–port transport system will open up cross-border trade opportunities.

The project will be supervised by Reli Assets Holdings.

“It is currently cheaper to import coal from South Africa than buying it from Ngaka,” said Mr Mkucha.

The Mchuchuma coal and Liganga iron ore are integrated projects being developed and implemented by Tanzania China International Mineral Resources Ltd (TCIMRL) at a cost of $3 billion.

TCIMRL is a joint venture between Sichuan Hongda Group and NDC.

Mchuchuma and Ngaka are expected to produce 600MW and 400MW respectively of power from coal while the Liganga project will produce 2.9 million tones of iron ore per year.

“Tanzania has an iron demand of 700,000 tonnes but the construction boom is likely to increase the demand to 800,000 tonnes a year. Liganga will produce 500,000 tones in the first phase and another 500,000 tonnes in the second phase,” said Mr Mkucha.


NDC director for Heavy Industry, Ramson Mwilangali told The EastAfrican that the government is expected to save $223 billion within 30 years because the cost of transporting coal was higher than the actual amount of buying coal from Ngaka coalfields.

According to the National Energy Policy of Tanzania of 2015, coal reserves in the country are estimated at 1.9 billions tonnes out of which about 1.2 billion tonnes have been confirmed through drilling exploration at Mchuchuma coalfield (428 million tons), Ngaka coal field (423 million tonnes), Katewaka coal field (81.65 million tonnes), Rukwa coal fields including Namwele (173 million tonnes) and Kiwira coal field (90 million tonnes).

The Mchuchuma, Ngaka and Katewaka coalfields are being developed by NDC and its joint venture partners while the other coalfields are being developed by other companies.

“The railway line will be a game changer while other projects such as the graphite mines along the proposed railway line will also benefit. China Railway has already shown interest to invest in the project,” said Mr Mwilangali.