Opportunities in the Tanzanian energy sector

Tanzania is gifted with diverse energy sources most of which are untapped. Examples are biomass, hydro and uranium. Currently, only 18.4 percent of the population has access to electricity. This low percentage is due the challenges Tanzania faces regarding low energy security, unreliable energy supplies, poor quality of supply and high electricity losses. Furthermore, the electricity infrastructure in Tanzania is inadequate. However, there might be a solution to improve the Tanzanian energy infrastructure. Recently, firms like Statoil, BG, Ophir and Exxonmobile have found large gas fields in front of the Tanzanian coast. Does this development provide large business opportunities in Tanzania?

Numerous Dutch firms already shared their knowledge with regards to the development and specific skills needed to derive gas from the fields.

To distract the gas out of the fields large investments are needed. In other words, everything related to extracting gas has to be built from scratch. This is due to an inefficient infrastructure and lack of appropriate machines for the gas extraction. Numerous Dutch firms already shared their knowledge with regards to the development and specific skills needed to derive gas from the fields. These firms include Fugro, Mammoet, Heerema & Jumbo.

Building all these facilitations from scratch is part of greenfield investments. These investments include parent companies starting in foreign countries by opening new facilities all over again. Once firms are familiar with doing business in an international and stable environment, it is common for these firms to start making greenfield investments.

Companies such as Shell have gained a foothold in Africa by means of greenfield investments.

The advantage of these greenfield investments is the high level of control the parent company can exercise. Also, these investments imply that firms create long-term jobs. Therefore, countries may offer financial incentives for firms such as tax breaks and subsidies. Companies such as Shell have gained a foothold in Africa by means of greenfield investments.

In conclusion, opportunities to invest in the Tanzanian energy sector are huge. Still, the investments that have to be made are large and the expected return may take a while. However, years after all investments have been made, the gas fields provide huge returns for firms. The best strategy a firm can implement is to rely on the following quote: “If you want to go fast, go alone; if you want to go far, go together.”

Link 1 Link 2
Lem, M., Tulder, R. J. M., & Geleynse, K. (2013). Doing Business in Africa: A Strategic Guide for Entrepreneurs. Berenschot.