DFID Business Case

Summary Sheet

Title: Corridors for Growth

Project Purpose: To facilitate increased national and international trade through investment in
public and private infrastructure along Tanzania’s Key Trade Corridor from the port in Dar es
Salaam to the borders of DRC, Uganda and Burundi
Programme Value: £71m Country/ Region: Tanzania
Project Code: 204369 Start Date: 1/6/2016 End Date: 1/6/2021

Overall programme risk High

rating:
Quest Number: 204369

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Table of Contents
Intervention Summary............................................................................................................................... 3
Strategic Case........................................................................................................................................... 5
Appraisal Case........................................................................................................................................ 13
Identifying options which address the need set out in the Strategic Case........................................... 13
Detailed programme description:......................................................................................................... 17
Assessing the strength of evidence for the components...................................................................... 25
What are the costs and benefits of the components?.......................................................................... 27
Appraisal case conclusion – The preferred option............................................................................... 31
Theory of Change for Preferred Option............................................................................................... 32
Commercial Case.................................................................................................................................... 36
Financial Case......................................................................................................................................... 42
Management Case.................................................................................................................................. 44
Risk Assessment Table....................................................................................................................... 48

Annexes:
Tanzania’s Transport Sector – Setting out the Needs………………………………………...………..Annex 1
Responding to the Need – The Integrated Corridor Strategy…………………………………...……..Annex 2
Corridors for Growth Economic Analysis………………………………………………………...………Annex 3
Port of Dar es Salaam: Political Economy, Governance & Poverty Impact …………………….…...Annex 4

Table of Abbreviations
AA – Administration Agreements MAR – Multilateral Aid Review
AFDB – African Development Bank MDB – Multilateral Development Bank
BRN – Big Results Now NAO – National Audit Office
CDS – Corridor Diagnostic Study NEPAD – New Partnership for African Dev.
CDEL – Capital Departmental Expenditure Limits NPV – Net Present Value
COP21 – Conference of the Parties PDCo – Project Development Company
CPRD – Country Poverty Reduction Diagnostic PDF – Policy Development Fund
DPS – Directorate of Procurement and Supply PFI – Private Finance Initiative
DRC – Democratic Republic of the Congo PIDG – Private Infrastructure Development Group
DSMGP – Dar es Salaam Port Maritime Gateway PIT – Project Implementation Team
Project PO RALG – President Office Regional
EAC – East Africa Community Administration and Local Government
EIB – European Investment Bank PPIAF – Public Private Infra. Advisory Facility
EIRR – Economic Internal Rate of Return PPP – Public Private Partnership
ESIA – Environmental Social Impact Assessment PPRA – Public Procurement Regulatory Authority
FCO – Foreign & Commonwealth Office RAHCO – Reli Asset Holding Company
FGM – Female Genital Mutilation RDEL – Resource Departmental Expenditure Limit
GDP – Gross Domestic Product TA – Technical Assistance
GoT – Government of the United Republic of Tanroads – Tanzania National Road Agency
Tanzania TIRP – Tanzania Intermodal Rail Programme
IBRD – International Bank for Reconstruction and TMEA – Trade Mark East Africa
Development ToR – Terms of Reference
ICF – International Climate Fund TPA – Tanzania Ports Authority
IDA – International Development Association TRA – Tanzania Revenue Authority
IFI – International Financial Institution UNODC – UN Office on Drugs and Crime
INDC – Intended Nationally Determined Contrib.
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 JICA – Japan International Cooperation Agency USAID – US Agency for International Development
LGA – Local Government Authority WB – World Bank
LIBOR – London Interbank Offered Rate WEF – World Economic Forum
WTO – World Trade Organization
Intervention Summary

What support will the UK provide?

The UK will invest £71m over 5 years for large publicly funded infrastructure along the central
corridor in Tanzania which extends from the gateway port in Dar es Salaam to the ports in the
western lake zone. It will also build the capacity and resources of the government to implement
public private partnership (PPP) infrastructure projects.

What are the main programme activities?

£20m will be spent on port infrastructure to facilitate a £450m World Bank project to transform of
the port of Dar es Salaam (building on DFID’s existing £39m support to the port through
Trademark East Africa) £30m1 will be spent on flexible project preparation to speed up
investment in, inter alia, the major port access roads, rehabilitation of the Central Line Railway
and Great Lakes ports. A further £20m will kick-start a pipeline of municipal government PPP
infrastructure paving the way for larger PPP’s in the future.

Why is UK support required?

- The Government of Tanzania‘s Big Results Now Presidential Initiative and Five Year
Development Plan identified infrastructure as a key priority, however resources are highly
constrained with development spending slashed in the last budget.
- DIFD’s Country Poverty Diagnostic also identified infrastructure as a top constraint to
economic growth.
- Increasing investment from International Financial Institutions (IFI’s) such as the
World Bank is available but there is a lack capacity and funding for project preparation
needed to bring projects to fruition.
- IFI’s have a limited presence in Tanzania to resource projects with major technical
hurdles and more importantly complex political and organizational issues which require
careful and constant engagement to win trust and push reforms through
- PPPs also offer further options for investment finance but Tanzania’s previous track
record is thin and poor resulting in low capacity to initiate new ones.
- Private investors in Tanzania are often deterred by significant political,
macroeconomic and regulatory risks. Key market failures create a requirement for state
and donor engagement in financing and capacity building.
What are the expected results?
The direct outcome of this project is increased infrastructure which we will support in three
ways:
1) Contributing to port expansion which will double cargo capacity and enable Tanzania’s
entire trade volume to increase by two thirds - driven by high import and export demand;
2) Project preparation for up to six more major public sector infrastructure projects on
Tanzania’s strategic corridors which are expected to catalyse up to £600m of
concessional IFI financing and attract further investment in future.
3) Launching a new approach to PPP infrastructure delivery which will progress 30-40 small
and medium size pilot projects of which 5-10 are expected to reach financial close in the
lifetime of this programme and the remainder in the following years. Sector reforms to

1 Includes costs for Impact Evaluation, management and admin of both Port and Project Preparation activities
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 promote competition and better transport corridor links will enable more of the benefits to
be passed on to consumers.
Investments in the port and surrounding infrastructure will increase volume and reduce the time
and cost of importing and exporting goods. Technical assistance will indirectly develop further
infrastructure to increase connectivity to the central corridor, delivered at lower costs and risks
than otherwise would be the case. In sum, the project is expected to reduce the costs of doing
business in Tanzania, contributing to growth, more jobs and lower poverty.

How does the project fit with the country programme or department’s strategic
objectives set out in the Operational Plan?
DFID’s Tanzania office is expanding its portfolio of economic development programmes and is
committed to supporting the Government’s plans which includes improving the port and central
corridor. DFID’s Country Poverty Reduction Diagnostic (CPRD) and Inclusive Growth
Diagnostic identified a lack of transport infrastructure as a significant constraint to growth. DFID
Tanzania’s CPRD committed 59% of new funding to programmes that support economic
growth, including substantive new programmes in transport together with existing programmes
in regional trade of which the port and corridor are good examples of both. In September 2014
DFID signed a memorandum of understanding with the Government of Tanzania, TPA, the
World Bank and Trademark committing to work together on the port modernisation.

What are the key risks to the success of the programme?

Transport Sector Planning Risk –Improving Dar Port and the central corridor has support at the
highest level of government (including the newly elected president). In the medium term
competition may emerge from a proposed new port planned at Bagamoyo and a new Standard
Gauge central railway line. The benefits and timing of these developments need to be
monitored closely to ensure DFID’s investment in the Integrated Corridor Initiative is not
undermined.

Political and Institutional Risk around PPP’s: Most previous PPP’s in Tanzania have failed due
to a variety of reasons, including mistrust of foreign participation, vested interests, and lack of
investment in the underlying assets. Led by local government, the proposed municipal PPP
programme is taking a new approach: aiming at small to medium size PPPs and building grass
roots capacity. In Tanzania Port Authority (TPA) there is some resistance to further private
sector involvement in operations which is being managed by careful engagement with the TPA
management and other stakeholders.

Environmental and Social Safeguards - Mitigating any negative environmental and social
impacts are a key consideration for the infrastructure projects to be supported under this
programme. World Bank social safeguards will apply to all the projects supported under this
programme and DFID will review and interrogate these. DFID will investigate mechanism for
additional support to workers affected by improved efficiency at the port.

Port Governance and Corruption – The port of Dar es Salaam has been plagued by numerous
corruption scandals over the years. If the governance within the port is not improved, the
impact of the physical infrastructure improvement will not be maximised. The current political
environment is favourable for tackling corruption in the port and DFID will seek the advice of
eminent Tanzanian leaders to guide the programme. The World Bank and TMEA are
supporting TPA to develop an action plan to tackle corruption and the government is taking
determined steps to reduce tax evasion at the port. The FCO and the UN have complementary
programmes to tackle smuggling – a strategic UK interest.

Risk of slow progress on project preparation and mobilising public & private finance and
construction – It is hard to predict how fast projects will progress due to national events,
changing priorities in in government and the private sector. We will work closely with partners
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to identify blockages, drawing in expertise to overcome issues and speed up investment. Large
and complex infrastructure projects often face risks of time and costs overruns. For major
investments in Dar Port we are (i) ensuring there is strong Project Implementation Team (ii)
using a ‘design and build’ procurement approach to ensure that risks are better accounted for
prior to contract signing.

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Strategic Case

Introduction

This business case aims to support increased trade and better infrastructure services by
facilitating public and private investment in infrastructure along Tanzania’s Central Transport
Corridor and in major municipalities. The funding will catalyse and enhance a £1.3bn multi-
donor2 regional transport strategy. Key elements DFID expect to contribute to are a modernised
and expanded port and project preparation to bring new transport and PPP projects to fruition.
It builds on previous programmes to respond to national and regional infrastructure priorities.

Tanzania Context

Political and economic reforms since the 1980s stimulated high rates of growth (7% over last
decade) and investment and made a modest dent in poverty levels. Macroeconomic stability
and high commodity prices have allowed parts of the economy to flourish, notably gold mining.
Construction and more recently financial services, telecoms and tourism have continued this
trend boosted by Foreign Direct Investment, resulting in a small structural shift away from
agriculture. Despite the high rates of growth, there are few formal jobs and most economic
activity is in micro and small enterprises and in agriculture, where women are predominantly
active. A poor business environment including inconsistent tax and trade policies, linked to
vested interests, combined with limited access to finance constrain growth whilst high transport
costs hurt competitiveness.

Whilst agriculture will continue to be the main source of livelihoods for the poor, it is unlikely that
it will be able to absorb the expanding rural labour force; agricultural advances alone might not
be able to meet the rural poverty challenge.3 This places a greater emphasis on urban areas,
currently urban businesses are growing twice as fast compared to rural businesses 4, and are
key markets for rural value chains. However, there are significant challenges: rural urban
linkages are constrained by poor infrastructure and in Dar es Salaam congestion is already a
huge constraint and this is set to worsen under current trends 5; the World Bank found that the
city is 20-40% less productive than Nairobi and Kigali and Government coordination failures in
securing the benefits of agglomeration hamper the competitiveness of Tanzanian firms. 6

Tanzania’s recent strong economic growth rate has been supported by a significant increase in
international trade7. Growth of exports alone contributed more than 20% of the GDP growth
rate over the last 5 years8. This could have been even higher if constraints to national and
international trade were minimised9.

Tanzania is not maximising its advantage of being the gateway to surrounding landlocked
countries due to poor infrastructure and non-tariff barriers. Tanzania ranks a low 122 nd (of 144
2 In Tanzania the three main sub-programmes of the Integrated Corridor Development Strategy are The Dar Es
Salaam Maritime Gateway Programme (£500m incl TMEA funds) plus the associated access roads (£150m), prior
approve WB rail (£200m), and the Lake Victoria and Lake Tanganyika Transport Programmes including the
supporting rail links (£450m). WB and DFID working at Dar Port, WB, EIB, JICA working on central railway.
3 World Bank (2015) Mainland Poverty Assessment
4 World Bank (2014) ‘Tanzania Economic Update’ June 2014.
5 The December 2013 Tanzania Economic Updated estimated that losses due to congestion could amount to
around a third of small businesses income.
6 World Bank Country Economic Memorandum (2014); Competitive Cities Knowledge Base
7 Export values rose six fold between 2000 and 2014 and Import rose eightfold between 2000 and 2013 – DFID
Chief Economists Office Tanzania Country Note March 2016
8 The Government of Tanzania’s Framework of the 2nd Five Year Development Plan exports grew from 16% to
19% of GDP between 2010 and 2015.
9 Tanzanian’s level trade openness at 47.7% in 2013 is well below the regional average of 65.9% According to the
World Bank’s 2015 Tanzania Poverty Assessment.
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countries surveyed) on the WEF’s Global Competiveness Index scale. The development of
Infrastructure is among the worst in the world: Tanzania scores a low 130 th on the global scale -
below most of its neighbours10 including the landlocked countries that rely on Tanzania for
access to the sea. Additionally, the country’s freight markets are characterised by low domestic
and foreign competition where the country is ranked 123rd, making it inefficient.

The Government of Tanzania’s finances are constrained: despite ongoing reforms within the
Tanzania’s Revenue Authority, annual tax revenue is approximately £60 per head of population,
and the entire tax revenue is only one third of that for the port city of Liverpool 11. Development
partner budget support has been significantly reduced and increasing domestic and foreign
borrowing will have to make up the full shortfall in the longer term.

Public Private Partnerships (PPPs) are one of the key tools available to government to help
improve investment and increase own-sourced revenues. The Government of Tanzania is
actively seeking to attract investment funds through Public Private Partnerships however there
remains some scepticism of the private sector and the impact that private funds will have on the
Government’s control. Currently capacity and experience of implementing PPPs is low, but with
support from development partners, including DFID, the policy and regulatory environment is
now more conducive to start implementing PPPs.

Regional Transport Context

Tanzania occupies a strategic location as a gateway to neighboring landlocked countries 12. The
Central Corridor13 and Dar Corridors which go from Dar Port to the interior landlocked countries
are the most important routes, accounting for 37% and 20% respectively of all Tanzania’s
freight transport demand as shown in figures 1 below. Improving the regional transport network
is necessary condition for competitiveness and improved integration into the regional and global
market. A series of major recent studies have concluded that strengthening the international
corridors and in particular the central corridor should be Tanzania’s highest transport priority 14.
The Central Corridor port, road and rail, were also prioritised by the Government of Tanzania
Big Results Now Presidential Initiative. For a more detailed discussion of Tanzania Transport
Sector Context refer to annex 1.

Strengthening the corridors is strongly supported by Tanzania’s newly elected president John
Magufuli. In his opening speech to Parliament the new President of Tanzania, said that
“Improvement of roads and other means of transport to and from Dar es Salaam are very
important because the port of Dar es Salaam is the gateway to business in our country and
neighboring countries.” Reflecting this, the government’s new Five Year Development Plan
proposes to focus on industrialisation and calls for accelerated implementation of Central
Corridor development.

NEPAD15 say improving the port of Dar es Salaam, (the gateway to the central corridor) is one
of the top five infrastructure projects that need investment in Africa 16 The 2014 Transport
Masterplan concluded that in the next 15 years it is expected that transport demand will
10 Burundi 140th; Kenya 90th, Malawi 131st, Rwanda 105th Uganda 129th and Zambia 118th.
11 Tanzania’s total tax revenue was TSh9.3Tr (£3bn) in 2014/15.
12 The central corridor competes somewhat for traffic with the Northern corridor to Mombasa Port in Kenya, but
largely their hinterland areas are independent. Both corridors are forecasting strong growth.
13 The term ‘Transport Corridor’ is helpful concept to group a series of transport links for development focus
14 Key recent studies are:
1) Corridor Diagnostic Study (Nathan Associates, 2011) stated “If capacity is not increased, congestion at
ports and on rail and roads will reach epic levels and constrain economic growth”
2) Tanzania Freight Transport Masterplan (JICA, 2014) – Central Corridor selected as highest priority
3) Integrated Corridor Development Initiative (WB/EAC, 2015) – stated “investment in the regional ports
should be accorded the highest priority”
15 NEPAD is the New Partnership for African Development, a body of the African Union
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quadruple17 with the result that if capacity is not increased, congestion at ports and on rail and
roads will reach epic levels and constrain economic growth. With the recent global slowdown in
commodities demand trade volumes have plateaued over the last year but this is expected to be
temporary effect with current forecasts for growth in East Africa remaining robust 18. The 2015
Dar Port traffic forecast considered a number of regional factors that may disrupt the current
growth trend at Dar Port, such as the proposed Bagamoyo Port, railway construction in Kenya,
the rehabilitation of Nacala corridor rail links and improvements to the Great East Road in
Zambia and concluded that they are unlikely to be a threat.

DFID first started supporting the port of Dar es Salaam in 2011 through Trademark East Africa
(TMEA) who funded a feasibility study of its modernisation. In March 2015 DFID approved a
£39m Dar Port Preparatory Phase Programme of hard and soft efficiency improvements and
project preparation which is delivering early results and providing valuable lesson learning for
the development of this programme. For further information on DFID’s Port Preparatory Phase
programme refer to Annex 2.2.

The Central Corridor – Schematic Diagram

Indian
City of Dar es Ocean
Tanzania Salaam

Lake Victoria and Port Access Roads

Tanganyika Ports Upgraded Dar Port
upgraded – access to Rail links to Improvement
Uganda, Kenya, DRC be rehabilitated
and Burundi
New Southern Bypass

Spanning Tanzania from the port in Dar es Salaam to the lake borders of DRC, Uganda and
Burundi, the central corridor accounts for over a third of Tanzania’s total trade traffic. Major
obstacles for further increasing this trade are the high transport costs, including time,
representing a higher trade barrier than import tariffs and trade restrictions 19. Compared to
other African corridors - Djibouti, Walvis Bay and Durban Corridors - the central corridor does
not perform well, with poor infrastructure, high cost and poor reliability of operations being major
factors.

16 http://www.bloomberg.com/news/articles/2015-01-30/african-union-targets-private-investors-to-repair-
infrastructure
17 Various traffic forecasts have been under-taken, most recently the Dar es Salaam Maritime Gateway Updated
Market Study, Economic and Financial Analysis in April 2015 predicted a rise of port throughput between 2013 and
2033 from 12.5m tonnes to 86.5m tonnes. More conservatively the World Bank transport model in report no.
ACS13131, April 2015, Building a Reform Consensus for Integrated Transport Development in the EAC: Pillar 1
predicted an increase in road traffic from 9.7m tonnes to 42.2m tonnes between 2010 and 2030.
18 The Institute of International Finance, an association of 450 leading financial institutions, forecast 7% growth in Tanzania to
be maintained through 2017 in the March 2016 update. The World Bank’s April 2016 Africa Pulse forecast growth across Sub-
Saharan Africa to be subdued in 2016 at 3.3% before regaining its 2014 high of 4.5% in 2017-18.
19 World Bank/EAC Strategy and Action Plan for Building a Reform Consensus for Integrated Corridor
Development in the East African Community,
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Map of the Central Corridor (Source: CDS)

Ports The port of Dar es Salaam is the gateway to Tanzania and handles two thirds of Tanzania
international trade by volume and ninety percent of its maritime trade 20. Customs revenues
generated at the port comprise of a third of Tanzania’s entire tax revenue 21.Inadequate
investment and rapid growth in volume challenges is placing considerable strain on efficiency. 22
The port is suffering from insufficient capacity, frequent power cuts, high dwell time 23 and
exceptionally high port congestion. Dar es Salaam can only handle vessels up-to a draft of and
9.5m draft (without tide) which excludes larger more efficient ships with drafts up to 14m. The
poor performance of the port acts as an implicit tax on exports and imports and has a negative
impact on both the growth prospects of the Tanzanian economy and the economies of the
landlocked neighbours it serves.

Roads: Rapid growth means Dar es Salaam is becoming a bottleneck for freight leaving the city
and there is a need to alleviate congestions through widening existing access roads and
building new ring roads. The transport costs of moving goods 1500km from inland areas and
landlocked countries to the port are prohibitively high at $140-200 per tonne.

20 About half of Tanzania’s GDP transit through its gates, making it the second most important gateway in East
Africa after Mombasa.
21 EAC 2013 Trade Report 2013 recorded that Customs Revenue was 38% of total tax revenue. TPA report that
Port Customs generate 87% of national customs revenue.
22 Currently the daily freight task at the port of Dar es Salaam is in the region of 34.3 tons/day. It is expected to
grow to about 56.3 thousand tons/day by year 2018, to 90.2 thousand tons/day by year 2023 and to 236.7
thousand tons/day by year 2033.
23 High port dwell time is affected by a number of factors in addition to inadequate infrastructure including customs
clearance and importer behaviour.
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Railways: The rail sector is also in need of considerable improvement. Despite recent
expenditures the condition of the 2700km of active rail infrastructure on the central corridor is
generally poor24 . 99% of cargo leaves by truck even through the central line and Tazara line
(South to Zambia) have terminals in the port. Revitalization of the rail lines is crucial for the
future efficiency and sustainability of the transport system.

Lake transport There is a large population surrounding Lake Victoria and Lake Tanganyika with
huge potential for growing trade, but the physical infrastructure in the lake ports is also
dilapidated and access is a problem due to siltation.

Governance challenges; The transport barriers are not just physical; institutional barriers are
also impeding efficiency. There is a lack of coordination and implementation of transport
policies. Strong vested interests slow the port of Dar es Salaam from moving towards its legal
status as a landlord port with efficient private sector operators. Weak governance and collusion
between port users and officials permits fraud, smuggling and tax evasion. The new
government is providing considerable momentum to tackle corruption nationally and in the port
specifically which gives window of opportunity to drive improvements 25. DFID and a number of
other donors, including UN, USAID and UK FCO, are currently supporting initiatives to reduce
corruption and improve security and improve governance at the port.

Project Preparation Barriers to Increased Public and Private Infrastructure

The causes of inadequate infrastructure service provision are complex. Inadequate finance is
often identified as the primary cause, but underlying this are fundamental challenges related to
the capacity and accountability of state institutions responsible for infrastructure delivery. 26
The lack of a strong pipeline of well-prepared, financially viable projects has been widely
recognized as one of the key constraints to infrastructure development in Africa 27. In countries
with weak governance and poor regulatory regimes project preparation is very time consuming
and can often only be financed by grant funding. Developing country governments and the
large International Financial Institutions (IFI’s) often not geared to provide the staff time or funds
needed to bring many of Africa’s critical infrastructure projects to financial close even though
they are economically viable and loan finance can be raised.

The problem becomes particularly acute when institutional and regulatory change is needed in
order to provide a sustainable operating context for the infrastructure asset. There is often
suspicion of the motives of private investors in many countries in the region, and reluctance to
lose strategic control of assets. The World Bank faces these impediments to implementing the
intermodal corridor strategy with on the ground staff resources and access to project
preparation funds a constraint to implementation. On the Port Project DFID has been a key
player in the project preparation. The Port Authority, World Bank and TMEA value DFID’s role in
balancing the needs of the stakeholders and have requested that we remain fully engaged in
the implementation phase.

24 The WB are investing $300m in rehabilitating Central Line Railway under the Tanzania Intermodal Rail
Programme which covers the section of track from Dar es Salaam to Isaka, however there is a need to also
upgrade the track for heavier loads.
25 It was recently discovered that over 11,000 containers and over 2000 vehicles had illegally been cleared from
the port over the last year without paying their port dues. A number of TPA employees were taken into custody and
the TPA director general was fired. TPA suspended over 200 port clearing companies in Feb 2016 over failure to
pay the back-dated charges.
26 In 2012 DFID funded a major study by Cambridge Economic Policy Associates, into the financing of
infrastructure which found that a shortage of bankable projects is the major constraint on mobilizing private capital
and is more significant than the lack of availability of finance on suitable terms in DFID’s focus countries in SSA.
report can be viewed here: http://www.g20dwg.org/documents/pdf/view/23/
27 Infrastructure Consortium for Africa 2014 Effective Project Preparation for Africa’s Infrastructure Development
1
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Tanzania does not have extensive experience of implementing PPPs. And the experience it
does has not been overly positive. However given the significant projected shortfall in
investment capital, PPPs will need to be part of the solution. Over the last two years the GoT
has, with support from development partners, including DFID, put in place a conducive policy
and regulatory environment to foster successful PPPs. Due to the low capacity and experience,
Tanzania has drawn up a shortlist of relatively small PPPs across a number of municipalities, as
the first wave. These will generate finances to support improved service delivery and will help
overcome a number of infrastructure bottlenecks.

The need for DFID Support

The broad consensus of research literature is that improving economic transport infrastructure
is very likely to result in growth and poverty reduction through both direct and indirect routes28.
Strong growth in developing countries is needed to reduce poverty, and trade is a critical
enabler of growth, opening up opportunities for new and better opportunities for the poor 29.

Investment in regional transport corridors is long overdue and vital to spread growth to interior
regions and avoiding a looming capacity bottleneck. PPP’s are not well established in Tanzania
but have huge potential to bring in the finance and expertise needed to deliver infrastructure
and growth.

Reasons for DFID support are:

- DIFD’s Country Poverty Diagnostic has identified infrastructure as key constraint to
growth. Government resources are highly constrained with development spending slashed
in the last budget.
- Increasing investment from International Financial Institutions (IFI’s) such as the
World Bank is available but there is a lack capacity and funding to complete the project
preparation needed to bring projects to fruition.
- IFI’s have a limited presence in Tanzania to resource projects with major technical
hurdles and more importantly complex political and organizational issues which require
careful and constant engagement to win trust and push reforms through
- PPPs also offer further options for investment finance but Tanzania previous track
record is thin and poor resulting in low capacity to initiate new ones.
- Private investors in Tanzania are often deterred by significant political,
macroeconomic and regulatory risks. Key market failures create a requirement for state
and donor engagement in financing and capacity building.
An integrated approach to the development of the key regional corridors and increased private
investment in infrastructure is seen as having the potential to dramatically change the economic
structure of the region. The three key needs from this strategic case are:
1. Increase throughput capacity and implement reforms at Dar Es Salaam Port in order to
remove a looming barrier to growth
2. To unlock, speed up larger investments in Tanzania’s transport corridors, in response to
rapidly growing transport demand.
3. To support the development of public private partnerships to improve infrastructure in
municipal areas and build capacity for future larger PPP’s

28 Jouanjean, M.A,, M. Gachasson, and D.W. te Velde. (2015). ‘Regional infrastructure for trade facilitation –
impact on growth and poverty reduction’, literature review, Available from:
http://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/9693.pdf
29 World Bank and WTO, 2015, The role of trade in ending poverty
1
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DFID’s Comparative Advantage in Infrastructure

DFID’s response to the needs set out is based on the four key areas of DFID’s current
comparative advantage as set out in the lnfrastructure Policy Framework for Sustainable
Infrastructure:
 Flexible technical assistance (TA) that can be used opportunistically to make projects
happen and influence large-scale funding from others.
 Mobilising private finance with a strong focus on the poorest countries particularly in
supporting private sector participation in infrastructure,
 Regional infrastructure associated with trade: flexible TA that can be used to unlock
funding
 Community-focused infrastructure service delivery - small and medium size capital funding
where there is a strong economic case, but the financial case is too weak for private sector
investment, for instance rural access.
In addition to DFID’s comparative advantage there is complementary strong interest in
infrastructure development from the Foreign and Commonwealth Office and UK Trade and
Industry both of whom have active offices in Tanzania.

Response to the International Development (Gender Equality) Act 2014

In the short term improving infrastructure will not significantly impact gender equality, however
women will still benefit alongside men. Improved infrastructure along transport corridors
increases access to market, enabling agribusinesses grow, a sector in which women dominate
so potentially resulting in more jobs. Better access to market will also result in lower prices for
imported goods, particularly in urban areas. Women can benefit from this where they are in
control of household spending decisions. Improved municipal infrastructure will also bring
benefits such as better local transport, civic amenities, and job opportunities.

Nevertheless, there are many pre-existing factors that can prevent women benefitting from
trade and economic growth as much as much as men, such as skills gaps, lack of time and
discrimination. DFID supports a number of programmes seeking to address these factors. We
aim to get economic assets directly to girls and women through our agriculture programmes and
cash transfers. We support girls schooling through our Education Quality Improvement
Programme. Our support to Tanzanian civil society includes as advocacy for improved
workplace rights, greater child protection, and efforts to end FGM.

In the medium to long-term as improved infrastructure and other barriers to growth are removed
it is expected that women will benefit from wider job opportunities and lower priced goods and
services. For instance across developing countries, exporting firms typically employ a
significantly higher proportion of women than non-exporting firms 30. Studies show that female
employment has grown fastest in manufacturing and services industries and that is correlated
with increasing international trade31.

In the WTO’s 2015 Gender Gap Report Tanzania performed above average for economic
participation and opportunity, ranking 49th out of 145 countries. Female employment in the
labour force is high (ranked 5) but access to professional technical jobs is skewed towards men
(ranked 102).

30 The Role of Trade in Ending Poverty, 2015, World Bank and WTO, For specific examples see: Hallward-
Dreiemeier et al. (2011) Hallward-Driemeier, M., Rijkers, B. and Waxman, A. (2011) Ladies First? Firm-level
Evidence on the Labor Impacts of the East Asian Crisis, World Bank Policy Research Working Paper No. 5789,
Washington, DC: World Bank.
31 World Development Report 2012, Washington DC: World Bank.
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The Government of Tanzania has a Women and Gender Development Policy and gender
impact will be considered in the environmental social impact assessments (ESIA) conducted
before each project. DFID and the World Bank will engage closely with the ESIA’s to ensure
poverty and gender considerations are rigorously analysed leading to an action plan of
mitigating measures where appropriate. An employment study will be funded under the project
preparation fund that will examine what specific measures can be taken to support women as
well as other disadvantaged groups affected by the interventions.

DFID the World Bank and TMEA are committed to identifying gender champions in the transport
sector and training them to raise awareness of gender issues, develop best practice gender-
sensitive policies and disseminate influencing information. During construction projects equal
opportunities for jobs will be mandatory for all companies. This intervention is however, unlikely
to address the main cultural and historic barriers to greater gender equality in infrastructure
operations. But it is certainly possible that with increasing quality of infrastructure, and
mechanisation then historic male dominance and cultural norms will weaken, to the overall
benefit of women competing for jobs with men.

UK Strategic Interests in port, corridor and PPP infrastructure

In addition to DFID the UK has active FCO and UKTI offices in Tanzania with a strong interest
in infrastructure development. Improved transparency and accountability will allow a more level
playing field for beneficial competition to enter the market. International business, including from
the UK, can expect to benefit from better functioning port and corridor infrastructure through
easier access to the Tanzanian market, and when making investments that rely on intermediate
inputs coming through the port. The Prime Minister’s Trade Envoy to Tanzania recently visited
the port to explore opportunities to deepen trade links.

Globally there is a strategic need to improve port procedures in order to reduce illegal activity.
The FCO are hosting three technical advisers from the UK government to support the
Government of Tanzania’s efforts to reduce the trade in narcotics. The UN Office on Drugs and
Crime are implementing a Container Control Programme which provides risk based training for
a multi-agency task force to identify suspicious import and export cargos. The UNDP are part of
the Duke of Cambridge’s United for Wildlife Task Force who have identified Dar Port as a
preferred pilot port to establish a best practice initiative against Illegal Wildlife Trade (IWT),
particularly ivory. In addition DFID is also supporting Tanzania Revenue Authority to procure a
new electronic tax management system. The port improvement programme is complementary
to these initiatives and is coordinating closely with them.

The UK is a world leader in PPP and private finance. Its PF2 programme is widely regarded as
one of the pre-eminent PPP frameworks. The UK also boasts commercial, legal, consulting and
financial markets with the skills and capacity to deliver the PPP appropriate solutions.
A recent visit from the Lord Mayor of London provided a focus on PPP, with a training
programme initiated for PPP with the Law Society of England and Wales.

Impact and outcome that we expect to achieve

By investing in transport corridor and PPP’s we expect the medium to long run impact of the
programme will be increased trade, and associated to that bringing private sector finance and
efficiency into infrastructure service provision. The short-term outcome of the programme will
be to sustainably increase transport and municipal infrastructure to meet rapidly growing
demand for trade and services

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DFID will contribute to a Dar es Salaam Port investment programme with the World Bank that
will increase cargo handling capacity from 14.6m tonnes in 2012/13 up to 28m tonnes in 2023
enabling Tanzania to raise its international trade tonnage by approximately two thirds and lifting
a major constraint to economic development, both nationally and regionally. The net economic
benefit to Tanzania of dredging and strengthening the existing port is expected to be $37m per
annum in 2018, doubling to $79m by 2025. Adding a new multi-purpose berth will have an
annual net economic benefit of $11.4 adding bulk unloaders, $11.8m and constructing the new
container terminal with have an annual economic benefit of over $220m from 2020 32. Sector
reforms to promote competition and better transport corridor links will enable more of the
benefits to be passed on to consumers.
DFID will invest in transport corridors which will stimulate growth, bring down trade and
intermediary costs and strengthen the competitiveness of the entire region. We expect to fund
preparation up to investment stage of six more major corridor projects with a total value of
around £600m

We will support Tanzania’s capacity to implement PPP projects on a small and medium scale
which will help develop the necessary skills required to deliver larger and more transformational
PPPs in the future. 10 small and medium size municipal PPP projects are targeted to reach
investment stage and of them 4 are targeted to reach financial close during the life of the
programme. This will lead to higher investment in infrastructure needed for growing urban
centres supporting job creation and economic growth.

Appraisal Case

Identifying options which address the need set out in the Strategic Case
This business case has been developed over the course of two years and builds on two existing
DFID interventions, the first a £39m programme through Trademark East Africa (TMEA) and the
second a £0.5m programme through the World Bank to support PPP’s.

The strategic case set out the need to address national and international trade constraints from
a number of different perspectives. The three key needs which were identified in the Strategic
Case are:
1. Increase throughput capacity and implement reforms at Dar Es Salaam Port in order to
remove a looming barrier to growth
2. To unlock, speed up larger investments in Tanzania’s transport corridors, in response to
rapidly growing transport demand.
3. To support the development of public private partnerships to improve infrastructure in
municipal areas and build capacity for future larger PPP’s

Over the development of this business case, it has been determined that a portfolio approach to
support increased national and international trade by facilitating public and private investment in
infrastructure, will yield wider results than concentrating all DFID’s resources in one area. DFID
working in consultation with partners in particular the GoT, World Bank and Trademark East
Africa have identified the following components which respond to these needs and are
examined in the appraisal Case.

Component 1: £20m for the Dar es Salaam Port Maritime Gateway Project (DSMGP) in
partnership with at £400m World Bank IBRD33 loan and £40m from Tanzania Port Authority
Component 2: £30m for Tanzania Transport Corridor Project Preparation Fund.

32 Ted Laing and Sheila Farrell, June 2015, Updated market study and economic, financial and credit analysis of
the proposed Dar es Salaam Maritime Gateway Programme. Funded by DFID
33 IBRD is the International Bank for Reconstruction and Development
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Component 3: £20m to support municipal PPP’s across Tanzania by funding feasibility
studies, capacity building and transaction advisers transactions
Component 4: £1m for DFID Implementation support (This is examined in the Management
Case)

The optimum size and combination of the components was determined in an iterative process of
discussion and planning over the course of the business case preparations. The work plans
and costs for each of the components have been prepared in consultation with the World Bank
and Government of Tanzania based on the assessed needs and potential transformative
impact. Reducing the size of the components would therefore reduce the outputs of the
programme and the ultimate benefits.

The options explored in this appraisal case are therefore:

Option 1: Do nothing further to support investment in infrastructure– the counter factual.
Option 2: Support increased investment in infrastructure – through the four components listed
above. (Consideration of the means of delivery for each component is set out in the commercial
case)

Option 1 (Counterfactual) Do nothing further to support investment in

infrastructure
If DFID does not invest in transport and PPP infrastructure efforts to meet the expected four-
fold increase in traffic flows over the next 15 years would be substantially delayed as alternative
sources of funding were sought. The immediate impact would be a delay to the Dar port project
while alternative (probably less concessional) finance is sought. There would be a loss of
confidence in the donor partnership’s proposal and our influence, raising the risk that the entire
project may fail which would be a disaster for Tanzania34. Without new and refurbished deeper
berths the rapid growth in Tanzania’s maritime trade would be choked off and Tanzania will
continue to incur high sea freight rates due to the small ship size that can currently access the
port35. In the worst case, Dar port’s inability to handle the larger ship sizes could cause the big
shipping lines to consolidate their East African stops to Mombasa port only, leaving Dar es
Salaam as minor feeder port.

The next impact would be delays to the port access road improvements and Dar Southern
Bypass which are integral follow on projects and would cause major negative impacts on city
congestion. Delays would impact preparation for the Lake Victoria Transport Programme and
refurbishment of the 250km Central rail line branch from Isaka to Mwanza. These projects are
expected to be World Bank financed through IDA18 but may not be prioritised without dedicated
project preparation. Without DFID proposed funding for municipal PPP’s, those with significant
development impact are unlikely to progress, those that do will not be as well designed resulting
in more failures. Infrastructure services to the public would be less, and government capability
to implement current and future PPP’s would not be strengthened.

Option 2 - Support increased investment in infrastructure –

The component activities have a total cost of £71m. They are listed in brief below and
described more fully in the subsequent Detailed Programme Description section.

Component 1: £20m for the Dar es Salaam Port Maritime Gateway Project (DSMGP) in
partnership with the World Bank and Tanzania Port Authority (TPA): £20m DFID co-
34 Discussed in more detail in Annex 4.1 on the Political Economy Analysis.
35 Dar es Salam’s water depth of 9.1 metres is well below the norm of 13 metres which enables most international
ports to accommodate bulk carriers of at least Panamax size, i.e. 75,000dwt. At present the port in practice only
accommodates ships of up to about 40,000 DWT and 2,000 TEU, while many top international ports have sufficient
depth to accommodate the 14-18,000 TEU ships that now dominate the east-west trunk routes.
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financing with £400m IBRD loan and £40m from TPA. This build’s on DFID’s existing £39m
investment in preparatory activities and is the highest priority component to ensure that the
capacity of the port is successfully doubled by 2023. The major elements which DFID will co-
finance are below.

Deepening and widening entrance channel

Fig 3. Dar es Salaam Port Layout

 Deepening and widening the entrance channel (US$175 million);
 Rehabilitation of berths 1-7 (US$60 million); construction of a new
multipurpose/RoRo36 berth (US$40 million); and procurement of high speed
bulk cargo unloaders (US$30 million);
 Rehabilitation of the sub-structure of berths 8-11 37 (US$40 million);
 Relocating liquid bulk facilities (estimate US$80 m)
 A new container terminal at berths 12-14 (estimate US$200 million 38);
 Institutional Strengthening and Implementation Assistance ($50m)
(NB Areas noted for cruise ships, ferries, dhows and coast ships are not in the scope of works)

Component 2: £30m for Tanzania Transport Corridor Project Preparation Fund. This
component will fund technical assistance and strategic infrastructure in partnership with the
£1.3bn World Bank/EAC intermodal corridor strategy in Tanzania. Project preparation is often
expensive and time consuming constituting a major blockage to accessing much larger
concessional loan finance from IFI’s. This component will take an adaptive approach with initial
approval for the overall plan and early investments followed by a procedure for light touch
approval by DFID of the later ones as they are ready. It will focus on interventions where DFID
has a comparative advantage and can add significant value. The amount of funding has been
selected to ensure a critical mass of projects will progress so that the goal of an integrated
transport corridor can be achieved. To ensure high quality delivery of the programme DFID will
fund a project engineer based in the World Bank who will manage the fund as well as provide
36 RoRo is Roll on Roll off facilities for car transporters
37 Subject to successful contract negotiations with existing concessionaire of berths 8-11
38 Final cost depends on the level of private sector participation and competition from a potential future port at
Bagamoyo which is being assessed by Transaction advisors.
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wider support for the port and corridor programmes. Potential pipeline project preparation
activities are below and are explained in more detail in annex 2.3.
 Port access roads feasibility studies, detailed design, ESIA and resettlement plan (£4m)
 Central Line Railway to Lake Victoria and Lake Tanganyika, rehabilitation feasibility
studies (£2.5m) and possible ESIA & detailed design, (£7m) , including a
communications strategy to raise the impact of the corridor programme.
 Lake Victoria and Lake Tanganyika marine transport programmes, - up to £7m consisting
of surveys, feasibility studies, aids to navigation, institutional strengthening,
 Studies on transport impact on invasive species risk, fisheries, rural roads and
livelihoods.
 Feasibility Studies for truck parking terminals, and missing trunk roads links (up to £2m)
 Skills study and possible support for port workers affected by efficiency improvements.
 An impact evaluation of the transport interventions (£1m)

Component 3 £20m to fund feasibility studies and transaction advisers to support local
government PPP transactions across Tanzania the operation of a Municipal Project
Development Fund and capacity building. The World Bank will add £5m of IDA finance and is
expecting receive further internal funding to complete a total investment of £33m.

Support for PPP project preparation is a separate component to that for project preparation for
public infrastructure. This is because the component requires a different skill set to deliver
investments and will be implemented through a different government partner and a different
World Bank partner. (Three delivery options through the WB Tanzania office, PPIAF and
DevCo are considered in the commercial case)

Support to PPP’s can be organised under three pillars that aim to provide comprehensive
support to enable the government to identify PPPs, attract new finance, deliver VfM and be
manageable by local government:

Funding will support the newly created “Local Government Authority (LGA) PPP Team” in the
Regional Administration and Local Government Department of the President’s Office (PO-
RALG), the PPP Nodes created in each LGA and those projects proposed by the LGA PPP
Team. DFID’s pro-rata contribution to the key activities would be:
 Feasibility studies for 75 municipal and 6 large-scale projects over 5 years £4.4m
 Transaction advisers for 40 municipal and 4 large scale projects £6.8m
 PPP Node support and PPP training program, £3.6m
 Marketing of projects, public relations campaigns, website, £1.5m
 Creation and operation of the PDCo £0.6m
 World Bank staff time, (including 2 full time programme funded advisers), and trust fund
fees £2.3m

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Detailed programme description:
Component 1 Modernisation of the Port of Dar es Salaam

The port is critical to Tanzania’s economy with 64% of Tanzania’s domestic trade volume
passing through it, and volumes increasing annually by 9% over last few years. Approximately
one third of all port traffic is to or from the six neighbouring landlocked countries of the interior,
and that is growing at an even more rapid rate of 16.5% annually 39. With commodity prices now
falling Tanzania needs to prioritise the growth and economic benefits of its non-commodity
economic drivers such as the freight transit trade to land-locked neighbours. The long term
global trend is for increasing ship sizes, requiring significant port capital expenditure and high
operational productivity to ensure quick turnaround, and attract global carriers 40.

Although throughput volumes are increasing, the port remains a bottleneck which is hampering
trade, and raising prices for imported goods, and contributing to a poor investment climate. To
meet trade demand up to 2028, the port capacity needs to double to 28m tonnes requiring
greater efficiency and major infrastructure improvements expected to cost in the region of
£450m. The initial investment provided by this programme will enable considerable further
private investment in port superstructure such as sheds and cranes and secondary investments
in ships, rail and road transport.

The Government of Tanzania (GoT) would prefer to use public finance to modernise the basic
port infrastructure and are willing to concession three of the new berths (12-14) to private sector
operators. In addition transaction advisors have been appointed to prepare the existing TPA
berths 1-7 to be operated as business units and possibly also concessioned - a positive moves
towards the best practice landlord model of ownership in operation at the majority of ports
worldwide. 

The DFID grant will support the port infrastructure and institutional strengthening of which the
largest element is dredging the access channel to enable larger ships to enter the port. This will
have a major economic benefit to the country due lower shipping costs, which should be passed
on to importers/final consumers and exporters via lower freight rates, increasing disposable
income and make exports more competitive. In addition the existing berths will be strengthened
to take modern cranes and one new multi-purpose berth and three container berths will be
constructed. This initial public investment will provide opportunities for further private
investment in port operations and greater capacity.

DFID’s investment in this component will:

a. Demonstrate DFID’s firm commitment to this nationally and internationally
important project, enabling DFID to continue playing a critical brokering role in the
partnership. DFID’s role is vital to help keep the project from stalling and to
maintain the pressure for sound technical and financial decision making.
b. Soften the terms of the loan deal offered to TPA. The IBRD loan is close to the
maximum the World Bank are comfortable to lend. The semi-concessional
interest rate of World Bank loan to TPA means it already has a 10.5% grant
element, DFID support will increase the grant element by 40% to 14.8% 41

DFID’s existing preparatory phase programme at the port has been instrumental in providing
early results, time and good will to develop the World Bank’s DSMGP project and the
39 TPA Dar es Salaam Port Handbook Dec 2013
40 Big Results Now Transport Lab Deep Dive p180
41 From IMF grant element calculator www.imf.org/external/np/pdr/conc/calculator/Default.aspx assuming a fixed
interest rate of 4%, 25 year loan maturity with 5 year grace period.
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complementary DFID Corridors for Growth programme. The provision of quick win
infrastructure such as road upgrades are having an immediate impact on port access and
demonstrated our commitment to the wider project. Technical assistance is speeding up
delivery of the implementation phase through support for the Project Implementation Team,
Provision of transactional advisory services, geotechnical surveys and feasibility studies.

Debt Sustainability

The World Bank normally supports the United Republic of Tanzania with concessionary support
from the International Development Association (IDA), however lending on this scale would be
difficult and considerably reduce the finance available for other major areas of WB support to
GoT programmes such as, health, social safety nets, agriculture, energy and urbanisation.

The port has a strong revenue stream which allows the provision of additional lending from the
International Bank for Reconstruction and Development (IBRD) which would not normally
available to Tanzania and is above the normal IDA allocation. The blending of the IBRD loan
and DFID grant will soften the terms of the loan making it easier for TPA to afford and more
sustainable for Tanzania as a whole. If successful this project would be the first IBRD enclave
loan in Africa for 15 years and the first time an IBRD loan has been given for a transport project
in Africa. Access to semi-concessionary IBRD finance is a welcome progression for a country
with a good record of debt management in recent years.

The loan will be provided to the Government of Tanzania who will bear ultimate responsibility for
its repayment and on-lend it at the same terms to TPA. The World Bank has set in place
safeguards and credit enhancement measures to minimise the risk of default. The World Bank’s
Treasury Department have assessed that the current and future profits the port will make from
increasing traffic will enable it repay the loan without government support and therefore not
adversely affect the sustainability of Tanzania’s national debt . Tanzania is assessed by the
IMF and World Bank to be at low risk of debt distress and capable of managing the proposed
loan. This is discussed in detail in Annex 3.4.

Improving Governance and Combating Corruption at the Port

Issues of corruption at the port have been highlighted regularly in the press and the new
government is taking determined steps to tackle it 42. DFID, the World Bank and TMEA are
supporting TPA to develop an anti-corruption action plan. DFID’s exposure to reputational risk is
minimised by working in partnership with the World Bank and Trademark East Africa.

DFID’s existing Port Preparatory Phase programme is introducing new technology43 and
streamlined procedures designed to increase efficiency and eliminate opportunities for rent
seeking and illegal activities. The UK’s FCO and the UN have complementary programmes to
counter narcotics and anti-smuggling programmes operating at the port. DFID is also investing
in new truck scanners through Trademark East Africa.

DFID the World Bank and TMEA are also playing a less tangible but equally critical role of
supporting the port to implement a more rigorous and transparent approach to investment
planning. The implementation phase programme under this business case will increase
competitive private sector involvement in port operations which will drive efficiency and reduce

42 It was recently discovered that over 11,000 containers and over 2000 vehicles had illegally been cleared from
the port over the last year without paying their port dues. A number of TPA employees were taken into custody and
the TPA director general was fired. TPA suspended over 200 port clearing companies in Feb 2016 over failure to
pay the back-dated charges.
43 For instance an electronic single window and port operating system, which are computer systems that allow the
multiple agencies and private stakeholders to track and clear cargo through a single application made by a clearing
agent. The potential efficiency and transparency gains over the current manual system are significant.
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the scope for rent seeking. In the Tanzania Port Authority there is some resistance to
increasing private sector involvement in operations which will need sensitive engagement by the
TPA management and the development partners. The Political Economy Analysis of the port is
in Annex 4.1.

Direct corruption under this programme will be mitigated by World Bank fund management
under the supervision of a DFID adviser. TPA’s procurement and financial capacity is being
strengthened by technical specialists. Further detail on these governance and anti-corruption
initiatives are in Annex 4.2

Greening the Port and Corridor

It is essential to make current and future infrastructure climate smart in order to build resilience
to climate change risk, transition to lower carbon development pathways, improving stewardship
of the environment. The port’s economic importance requires that it be sustainably managed
and greened. Deepening the channel and berths will accommodate ships double the current
size which will allow significant fuel savings per tonne of cargo 44. In the last few years ships
have typically waited for a berth at outer anchorage for seven days during which the idling
engines consume approximately 5000 litres of fuel per day. With greater port and corridor
capacity the fuel cost and carbon emissions per tonne will reduce considerably contributing to
minimising Tanzania’s CO2 INDC45 as agreed at the recent COP21 climate conference.

On this basis an application to the UK International Climate Fund was approved to fund 15% of
DFID’s funding to the port and corridor components and to allocate up to £8m of additional
funding to make Tanzania’s port’s climate smart through emissions reductions and
environmental improvements46. Trademark East Africa is already implementing a similar
programme at the Kenyan Port of Mombasa. The additional funding will be implemented
separately as a scale up of the Port Preparatory Phase Business case nevertheless the
outcome is relevant and complementary to this business case 47. The funding will support TPA’s
environment unit’s aspiration of achieving ISO14001 environmental standards.

Port Improvement Environmental Impact Assessment

The port project involves large scale construction works and dredging so falls under the World
Bank’s most stringent ‘category A’ for Environmental and Social Impact Assessment (ESIA). An
ESIA was done of the initial port modernisation activities, covering the berth strengthening,
grain conveyors and construction of the new multi-purpose berth. The ESIA concluded that
“given the nature and location of the project, the proposed Phase 1 components of the DSMGP
at Dar es Salaam Port will entail no significant impacts provided that the recommended
mitigation measures are adequately and timely implemented.” The report was reviewed and
accepted by TPA and the donor partners including DFID.

44 Fuel efficiency estimates vary. Documented conversations with an authoritative shipping line source indicates
fuel savings of up to 40% are possible when container ship size doubles, which is reflected at this website
http://www.motorship.com/news101/ships-and-shipyards/the-future-of-the-ultra-large-container-ship. Other
published sources suggest an 11% saving in fuel when moving from a 2500 TEU vessel to a 3500 TEU vessel.
Theo Notteboom, ITMMA 2009, Fuel surcharge practices of container shipping lines: Is it about cost recovery or
revenue-making?
45 INDC is Intended Nationally Determined Contribution – a measure of expected CO 2 emissions agreed at the
COP21 Climate Change Conference.
46 Example actions include solar lighting, improved solid waste management, banning polluting vehicles
47 As Trademark East Africa are implementing a port greening programme at Mombasa and are a key partner at
Dar Port they are well placed handle to handle a similar scaled up programme at Dar Port. As a first step they are
currently funding a port greening study in conjunction with TPA to identify appropriate measures and an action plan.
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For every future sub-project of DSMGP the World Bank will ensure there is: i) an Environmental
and Social Impact Assessment; ii) an Environmental Management Plan and; iii) if necessary a
Resettlement Action Plan. The project must adhere to these policies, even where the
safeguards are more stringent than Tanzanian law.

Social Impact Assessment

To increase port utilisation the unloading of grain needs to be speeded up through

mechanisation which may result in job losses for port workers. The ESIA for the initial
interventions shows that over the last 6 years the average daily workforce unloading grain was
110 people with a range between 22 and 240, of which 60% were typically labourers and
sweepers supplied by labour agencies.  It is not known how many staff will be retained to
operate conveyors and further studies are proposed.  Mitigating activities suggested are that the
retrenched TPA employees are given priority for new TPA jobs and that training is provided to
casual labourers who are at risk.  The survey indicates that there are up to 2000 casual labours
in total but, apart from the grain handlers, the report does not indicate they would be negatively
affected.  Outside the port the report identifies 100-200 food vendors, who they expect will
benefit from increased indirect income generating opportunities due to the increased volume of
goods traded. 

For employees negatively affected by the port improvements formal compensation will be
provided where appropriate under World Bank safeguard procedures. DFID will fund a study
under component 2 of this business case to identify casual and indirectly affect workers, assess
their needs and advise on intervention options. The study will build on the work of the
environmental social impact assessment and identify measures beyond the minimum
safeguards. It will work in conjunction with DFID’s existing programmes of Dar Urban Markets
for the Poor and Urban Resilience and highlight (LINK TO BANK) opportunities in other sectors
for training to communities affected by the port programme.

Improving Port-Landside Connections:

Upgrading the port access roads is a major follow on component of this project which forms the
nexus of the corridor programme. They are part of the wider plan to develop the central corridor
road, rail and inland port links being led by the Bank with support from other financiers including
the EIB, JICA and AfDB. The World Bank and Tanzania’s national roads agency, Tanroads,
have prepared ToR’s for a feasibility study and detailed design to upgrade the main port access
roads to dual carriage ways linking to the future southern bypass. The studies are expected to
be funded by DFID under component 2 of this business case. The railway link inside the port is
being rehabilitated as part of a $300m bank investment in the whole central line. The access
roads and rail are discussed in more detail in Annex 1 and 2.

The port is located near the city centre so the next phase of development includes
improvements to the road access to handle additional traffic. It will also take place alongside
other major improvements to transport in Dar es Salaam and the whole of the Central Corridor
for which the port is the starting point:
 The World Bank is carrying out the feasibility study for the long awaited Kisarawe
freight rail station which will reduce port congestion by transferring transit container
cargo 30km away from the port for processing.
 The World Bank and JICA are preparing work on two fly-overs in the city that will
reduce congestion due to port traffic.

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Component 2: Tanzania Transport Corridor Project Preparation Fund
Where an ambitious and complex pipeline of project preparation needs are identified, such as
the intermodal corridor strategy, there is a strong argument for allocating focussed resources to
build momentum and increase the chances of projects being approved. Project preparation
needs to extend beyond feasibility studies to institutional change, capacity building and where
appropriate strategic preparatory infrastructure. Consistent engagement is needed to maintain
the process as observed on the Dar es Salaam Port Project where Trademark East Africa and
the World Bank have invested human and financial resources over many years to reach a stage
where a financing deal is now in sight.

The Central Corridor roads connect the Port of Dar es Salaam to all of central and north-
western Tanzania, with extensions to Burundi, Rwanda, Uganda and DRC. The rail network is
extensive, 2700km in total, but in a poor state of repair. The railway goes to Mwanza on the
southern shore of Lake Victoria where ferries make an 18 hour connection to Port Bell and
nearby Kampala in Uganda or to Kisumu in Kenya. The railway also connects to Lake
Tanganyika at Kigoma Port, for vessel connections to Bujumbura Port, Burundi and Kalemie
and Uvira Port in DRC. These were previously major multimodal routes and, with better rail and
intermodal connections service, would be important again .

The World Bank in conjunction with the EAC are leading a £1.3bn 48 programme of investments
in the central corridor and are requesting other donors to partner with them 49. In Tanzania the
three main sub-programmes of the Integrated Corridor Development Strategy are The Dar Es
Salaam Maritime Gateway Programme (£500) plus the associated access roads (£170m) and
rail (£200m), and the Lake Victoria and Lake Tanganyika Transport Programmes including the
supporting rail links (£460m).

Project Preparation under component 2 will support the development of corridor roads, rail and
lake infrastructure. It will take an adaptive approach to selecting projects according to national
and regional priorities. It will provide upfront funding necessary to determine the feasibility of
upgrading mainline rail linkages to Lakes Victoria and Tanganyika. It also includes: work to
improve safety of navigation on both lakes; Institutional strengthening to harmonise policies,
laws and regulations for the finance, design, construction, manning and operation of ships.

Attempts in 2007 to revitalise the railways through concessioning to a private operator failed in
large part because the condition of the track was too poor to attract and sustain a high quality
operator50. In 2014 the World Bank launched the Tanzania Intermodal Rail Programme (TIRP)
to rehabilitate the 970km central line between Dar es Salaam and Isaka. The next step in the
plan is to rehabilitate the sections of rail up to the lake ports of Mwanza and Kigoma.

Tanzania is well suited to rail transport due to its vast land area and rapidly growing trade
demand from interior regions and landlocked neighbours. The rise of containerised cargo suits
efficient transfer of cargo from ocean ships to railway and on to lake ships. The neighbouring
countries of Congo, Burundi and Uganda can be effectively served by intermodal rail and lake
transport as a competitive alternative to road transport. In order to realise the gains from
48 Consisting of $750m for Dar es Salaam Maritime Gateway, $300m Tanzania Intermodal Rail Programme
(already financed by WB), $250m Dar Southern Bypass, $700m Lake Transport Programmes. The Intermodal
Corridor Programme was endorsed be EAC heads of state at the Regional Infrastructure Summit in November
2014.
49 DFID and TMEA attended the World Bank intermodal corridor workshop in June 2015 in Paris where other
donors were invited to partner with the programme.
50 Lessons have been learnt from several studies which examine the failure of the central line concessioning: One
of the most important lessons is that the institutional restructuring alone cannot be embraced as the solution for
improving the performance of an ill performing sector and that it must be accompanied by infrastructure
improvements.- The World Bank Group, (2010), Implementation Completion and Results Report of Central
Transport Corridor Project, Washington, DC.
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containerisation and provide a competitive alternative to road transport all the links of the inter-
modal chain need to upgraded. Up to £10m will therefore be provided for railway rehabilitation
studies and detailed design on the central line branches to Kigoma on Lake Tanganyika and
Mwanza on Lake Victoria51.

Up to £4m of immediate funding will be provided for feasibility studies for the Dar es Salaam
Southern bypass (important not only to accommodate increasing freight but also to decongest
Dar es Salaam). A further £10m will be for institutional strengthening and project preparation
for the Lake Victoria and Lake Tanganyika ports. These specific projects are part of the
regional investment programme the World Bank has developed with the EAC. The project
preparation funds will also be open to other strategic projects that are identified during the
design stage.

An impact evaluation will be undertaken of the entire £500m port and corridor programme to
ascertain the short term impact of the programme on trade as a whole its potential to impact the
poor and, where possible, make assertions about the medium and long term impact as well as
recommendation for future programmes. The evaluation will promote learning and corrective
action during the programme’s lifetime and in any future phases or similar interventions.

Further projects may be added as the programme progresses and the funding needs become
clearer. The criteria for funding will be agreed by a steering committee and included in the
operational manual but initially is proposed to be:
 Eligible project preparation activities should support national and regional priority
transport corridor projects in Tanzania with an initial focus on the World Bank/EAC
Intermodal Corridor Strategy.
 The economic, social, environmental merits and risks of the specific project should be
explained
 The activity proposal should demonstrate a sustainable project preparation process and
plausible interest from a financier in the main investment.
 The activity proposal should consider what other sources of project preparation funding
are available and explain the value added from DFID funding the activity.

Component 3: Municipal PPP Project Preparation Fund

Tanzanian cities are growing rapidly; Dar es Salaam is one of the fastest growing cities in
Africa. The Government of Tanzania is actively seeking to generate new investment
opportunities through PPPs. Investing in the identification and preparation for a pipeline of
municipal level PPPs in Tanzania will create demand for technical and financial expertise and in
the medium to longer term will increase the capacity to develop larger PPP projects in
Tanzania. Supporting municipal PPP’s is complementary to investing in Transport Corridors as
the major municipalities all rely on being connected to transport corridors and in turn greater
PPP capacity is urgently needed to enable more efficient transport operations to develop.
Consequently this business case does not offer to support to municipal PPP’s as an
independent option to investment in the corridors.
The Government’s national PPP programme has been through a series of reorganizations
under the leadership of the Prime Minister’s office. A £0.5m DFID funded pilot programme
through the World Bank has helped to guide this iteration and rationalize the institutional
framework and legal/regulatory context. The development of Tanzania’s mainland PPP
framework is now nearing completion, PPP Act and regulations have recently been passed.

51 The Government of Tanzania has made commitments to both upgrade the existing narrow gauge and in the
medium to long-term build a new parallel Standard Gauge Railway (SGR). The cost of building a new SGR is high,
$7-10bn, compared with a cost of rehabilitating the narrow gauge of $2-3bn. The feasibility studies will include an
economic assessment of benefits of both options to support government decision making.
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Tanzania does not have a strong history of PPP, with most previous attempts ending in failure.
The most high profile failure was the concessioning of rail services on the central line which led
to significant deterioration of performance and eventual nationalization despite rapidly growing
transport demand. The only major PPP that has endured is the concession for the container
terminal at the port. The poor performance of PPP’s is attributed to a series of factors, including
a mistrust of foreign investment and management, vested interests opposed to change, and
development partners poor understanding of the obstacles. This programme takes a
significantly different approach, firstly being demand led and secondly aiming at local
government rather than national government. The main differences with previous support for
PPPs are:
 The municipal PPP program is driven by the Tanzanian government. In fact, donor partners
have been kept out of most of the key decisions.
 The DFID supported PPP pilot program has not suffered from central government paralysis
which has characterized national level PPP’s. It is supporting local government’s own efforts
to attract investment and engage with the private sector. While implementation capacity is
even lower in local government than central government, political risk is markedly lower.
 At LGA level the focus is on new opportunities and there is little money to support failing
state owned enterprises, so there is less risk of political pressure to take on commercially
unattractive PPP’s.
They provide opportunities to deliver more and better services, to reach the poor, to create jobs
and generally to support local economic development across urban areas. In other developing
countries, India is the most advanced in their application. Kenya also recently started a
municipal PPP programme which DFID Kenya is planning to support. The proposed projects in
Tanzania cover a number of different services and assets, including public markets, bus and
truck terminals, parking facilities, solid waste management, abattoirs, renewable energy,
tourism, and commercial facilities. Under DFID support since 2013 the municipal level PPP
programme has taken shape and has already achieved significantly more progress than the
national PPP program. The MoF has now been mandated to manage the whole of the national
PPP program which will hopefully accelerate the national program significantly.

The limited size of municipal projects often creates a challenge when considering a PPP due to
the associated transaction costs of project preparation. For this reason and given the
developmental impact and private capital leverage effect, it is proposed that £20m of grant-
funding is provided to the sector over the next 5 years. The World Bank has developed a
detailed work plan for the PPP Project Preparation activities in their supporting concept note.
The funds will be used for feasibility studies and transaction advisers to support LGA PPP
across Tanzania, the operation of an independent project development fund (PDCo) and
capacity building. Funding will support the newly created “LGA PPP Node” in the Regional
Administration and Local Government Department of the President Office (PO-RALG), and in
the PPP Nodes created in each LGA. The programme will coordinate with DFID’s expected
new programme of support local government, Tanzania Regional Economic Opportunities
(TREO) which plans to provide targeted support for selected local administrations.

Support to PPP’s can be organised under three pillars that aim to provide comprehensive
support to enable the government to identify PPPs, attract new finance, deliver VfM and be
manageable by local government as set out in the following diagram:

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 PPP familiarization and innovative concept development – in order to expand
the perspective of sub-sovereign entities,
Project Technical assistance to identify good projects and select those most likely to
Selection provide value for money and represent a good balance of risks

Feasibility studies – to test whether a project should be implemented as PPP

and how
Implementation Transaction advice – to fully prepare the project, competitively procure a
Suport concessionaire and bring the project to financial close,

Training and Institutional capacity building, Creditworthiness enhancement,

Mobilizing long-term local currency finance
Long-term Design and creation of the PDCo - Funding will be sourced from concession
Capacity fees paid by concessionaires under closed PPP transactions.

As part of the technical assistance to be provided to the LGAs, the process of project selection
is of critical importance. Projects in Tanzania have often been chosen on a supply led basis (in
particular where donors, foreign governments or private parties come up with good ideas and
funded solutions which the Government feels unable to refuse). In other cases projects were
chosen for political reasons, without considering financial or even economic viability of the
project. In order to address some of these past weaknesses in the PPP program, the LGA PPP
program is adopting the following strategy:

 Project identified by LGA’s are then reviewed with the help of the PO-RALG PPP Node
supported by technical experts provided by the World Bank and DFID.
 Those deemed prime facie viable are subject to a pre-feasibility study, in the form of a
concept note which follows a standard format to ensure that all key issues are addressed.
 In accordance with the PPP Regulations, the concept notes are submitted to PO-RALG and
the Ministry of Finance formally for approval to move to the next stage of feasibility study.

To date some 62 projects have been submitted to and reviewed through this process and a first
set of 24 projects have been submitted to PO-RALG. Projects submitted are those most likely
to be viable, for example bus terminals, truck terminals, public markets and abattoirs. More
detail on the support provided and typical examples is at the end of Annex 3.3

The costs associated with accessing expensive technical assistance are potentially high. In the
medium term in order to help manage costs on a sustainable basis, the World Bank and PO-
RALG plan to establish a project development fund (PDCo) to deliver feasibility studies and
transaction advisers for LGA PPP transactions that meet requirements. Where projects reach
financial close, the successful bidder will pay a fee into the PDCo that equals the cost of
preparation of the project plus a margin. This PDCo will therefore help turn grant funding
support into a revolving source of support for LGA PPP transactions. It will also provide
opportunities for those donors providing support including reimbursable grants to achieve
greater leverage of private capital into municipal services.

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Component 4 DFID Implementation Support
Even with implementation through the World Bank it will still be necessary for DFID to monitor
the project closely to support good practice and avoid reputation and financial risk. Options for
providing sufficient resource for a project of this scale are:
1. Additional DFID Tanzania Programme funded infrastructure adviser (PFA) with
direct oversight of the project
2. Programme funded DFID staff seconded to TMEA or World Bank, but also
reporting to DFID
3. Programme funded supervision consultant reporting to DFID
After careful consideration the preferred option is a DFID PFA supporting all the parties
reporting to DFID. This will enable DFID to be fully engaged in the programme and most
effectively use UK government presence to help overcome political economy blockages.
Further consideration is in the management case.

Assessing the strength of evidence for the components

For developing countries the historical evidence mostly support the hypothesis of a positive
medium and long term effects of trade infrastructure on poverty reduction. The World Bank’s
2010 Africa Infrastructure Country Diagnostic estimated that Infrastructure has been responsible
for more than half of Africa’s recent improved growth performance 52. In the last ten years
international trade had greatly contributed to the growth performance of Tanzania, at the same
time as there has been a steady reduction in the poverty headcount and the poverty gap in
Tanzania.

Lower transport costs can bring down input prices such as fertilizer, stimulate agricultural
productivity, and enable farmers to reach a global market with more valuable cash crops. The
World Bank’s Integrated Corridor Development study modelled a 10% increase in port access
and found it would result in increased crop production of between 0.5 and 15% depending on
the type of crop.

Transport corridors evolve in unique circumstances and can take decades to develop into trade
corridors and ultimately development corridors so finding applicable ex-post evidence of their
impact is not straightforward. The Maputo Corridor in neighbouring Mozambique is the closest
example. 20 years after the end of the civil war and commencement of the corridor
development initiative, traffic has returned to pre-war levels and there are bright prospects for
future growth. Infrastructure has been substantially improved and large private sector
investments have been realised. A recent study identified key ingredients for its success but
ultimately found that the prevailing conditions in the country were more critical than the ‘recipe’.
The key ingredients they identified match well with those of the Central Corridor:
1) An institutional framework and focus on efficiency – provided by the Big Results Now
initiative and KPIs
2) A strong economic rationale – provided by rapid current and forecast transport demand
3) Public and Private Infrastructure investments – as supported by this programme

The relationship between trade, GDP growth and poverty is difficult to prove although widely
accepted. Two main empirical references for the link between trade and poverty remain the
2001 works by D Dollar and A Kraay53. They conclude that the incomes of the poor have
generally increased in line with GDP growth. More recent evidence was found by the World
Bank’s 2015 Tanzania Mainland Poverty Assessment which also found that a 1 percent

52 Foster, V. and Briceño-Garcia, C. (Eds.) (2010) Africa’s Infrastructure: A Time for Transformation, Washington
D.C.: World Bank
53 2001, D Dollar and A Kraay, Trade, “Growth and Poverty” also “Growth is Good for the Poor”, Washington DC.

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increase in Tanzania’s economic growth reduces poverty headcount by 1 percent. A discussion
of both findings and the conceptual mechanism by which it occurs are in Annex 3.2.

Evidence of positive impact of transport corridors is found in Brazil where a study of 4 major
highways over 30 years found a positive effect of highways improvements on employment rate,
high-qualified occupation rates, service occupation rate, and family per capita income and
concluded that a regional policy based on the development of a highway network that aimed to
link the poorest and richest part of the country has benefited the poor.

A new ODI case study54 on the impact on poverty of specific regional infrastructure for trade
projects, found evidence that they had helped firms in African countries to connect to modern
value chains, had long-lasting effects through productivity of firms and had increased economic
activity around border crossings, including for most informal traders. Their findings pointed to
the need for complementary infrastructure to cover the ’final mile’ and spread the benefits to
poor people. Examples include rural road networks, ICT, health and education infrastructure,
better regulations and support to small businesses.

Similar conclusions were reached by econometric modelling in the port poverty impact study,
discussed below, which confirmed positive but modest impacts on poor people in the short term
due to many other barriers which require complementary action. In the long run there is the
potential that development efforts by many actors will remove those barriers to allow poor
people to benefit more fully from improved infrastructure and trade.

Public Private Partnerships offer many potential benefits by changing infrastructure delivery
culture to service targets and shifting risk onto the parties best able to handle it. They are a
relatively new way of procuring infrastructure so most of the ex-post evidence of the cost and
time certainty benefits of PPP infrastructure comes from developed countries including the UK.
Various NAO reports55 have noted significant deficiencies in the traditional procurement
methodology compared with PPP’s. The 2003 NAO Report on PFI 56 Construction Performance
found that less a quarter of PFI procured projects had exceeded expected cost and time and
most of the cost overruns being due to variations demanded by public sector sponsors. In
contrast, the NAO noted previous surveys show that over 70% of buildings delivered to the
public sector procured conventionally were over budget and delivered late. Against this PPP’s
have been criticised for being inflexible and locking government into long term commitments.
They are not suitable for all projects but if PPP’s can become established as a viable
procurement option in developing countries like Tanzania they should offer considerable
savings that can be passed on to consumers and taxpayers.

The Port Poverty Impact Study

Understanding the likely distribution of the benefits of improved trade infrastructure among
different geographical and socio-economic groups is complex so DFID commissioned a poverty
impact study in line with current guidance57.

The study found that transport costs increase substantially moving away from the port and that
cost reductions are not always fully transmitted to consumers because of a lack of competition
in some sectors. In the short-term the impact on poor households will be modest since the
incidence of international trade in their income and consumption basket is currently very low.  In
54 Marie-Agnès Jouanjean, et al, 2016,Regional infrastructure for trade facilitation: Impact on growth and poverty
reduction
55 refer to the NAO Report on "PFI: Construction Performance", published 5 February 2003
(http://www.nao.org.uk/publications/0203/pfi_construction_performance.aspx)
56 PFI is the Private Finance Initiative, the UK method of implementing PPP’s.
57 Depetris Chauvin 2015 Dar es Salaam Port Poverty Impact Study

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the medium and long term the success of the port and other transportation projects in reducing
poverty in Tanzania will critically depend on their articulation with the development of the
agricultural sector. A better functioning port can reduce poverty if complementary policies
successfully alleviate the many constraints affecting small holders’ access to food and cash
crop export markets. Further detail of the Poverty Impact study is in Annex 4.3

DFID Tanzania is working across a variety of sectors in agriculture, urbanisation, finance and
the business environment to address many of these constraints. Many of those programmes in
turn rely on an improved regional transport network and greater port capacity to maintain
current growth levels:
 DFID Tanzania supports a number of agriculture sub-sectors including rice, tea, maize,
forestry, cotton, and poultry to increase competitiveness, overcome political economy
constraints and catalyse private sector investment.
 A new urban resilience programme will support better planning and preparedness for the
effects of population growth and climate change.
 Access to finance is very low in Tanzania. DFID is supporting the Financial Sector
Deepening Trust to improve access to finance for the SME and rural sector in particular.
 DFID’s existing rural roads programme is connecting people to markets and essential
services. Investments in Tanzania Revenue Authority (TRA) are helping improve import
clearance times. Funding to Trademark East Africa is supporting soft infrastructure to
remove trade barriers as well as well as partnering on the ‘hard’ port infrastructure.
 This Corridor programme will also support a variety of infrastructure interventions in the
public and private sector and across different modes of transport to spread the benefits
of DFID grant funding beyond the capital city to poorer inland areas. Specific funding will
be set aside to identify the direct effect of the interventions on poor people, to optimise
benefits, and devise mitigation measures where appropriate. An impact evaluation is
proposed which will monitor the wider impact of the projects on poor people and learn
lessons for future interventions.

What are the costs and benefits of the components?

Below is a summary economic analysis with a more detailed version in appendix 3.

Quantifiable Costs

The cost to DFID of supporting the intervention is £71m ($100m), split between the three
components as set out in the financial case. The cost to TPA (and by extension the
Government of Tanzania) of the DSMGP is expected to be $60m (£42m) of upfront co-
financing. In addition TPA will bear the repayments and interest on the $600m (£422m) loan
provided by IBRD/World Bank. In the medium term it is expected the project preparation will
catalyse successful public and private infrastructure projects which will result in additional
investment costs being incurred by both the Government of Tanzania, private sector investors
and donors. The additional investment cost of the WB/EAC intermodal corridor strategy in
Tanzania excluding the $750m of the DSMGP is in the order of $1.25bn (£880m). The
Government is likely to seek concessional finance from MDB’s and other donors to provide a
portion of this.

Quantifiable Benefit
A rigorous assessment of the Dar es Salaam Maritime Gateway investments (component 1)
showed that the present value attributable to DFID should exceed the value of DFID’s
investment by over £30m as set out in the table below.

Port Investment Project Undiscounte NPV at DFID cost: NPV of DFID

Component 1 (in US$m) Cost d annual discount Capital contribution
Source: Port Economic Study58 benefits rate 12% contribution
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 Berth 0-7, dredging, conveyors 271 60 233 11.2 10.6
New Container Terminal 292 220 863 12.1 35.6
Other works and TA- tbd 127 tbd tbd 5.2 tbd
Total 690 280 1096 28.5 (£20m) 46.2 (£32m)
Three major studies of the central corridor in recent years have predicted strong traffic growth
and high returns to coordinated infrastructure investments 59. Due to different parameters and
limited information the studies are hard to aggregate. Potential benefits vary depending on
predicted traffic growth but if an average value is calculated the predicted NPV of DFID’s £30m
($42.5m) of project preparation (component 2) will be £60m, provided all projects reach
fruition60. A significant objective of DFID’s project preparation funding is to more accurately
quantify the benefits and thereby catalyse larger investments in future.

For component 3, project preparation supporting municipal PPP infrastructure, the projects have
not been identified in sufficient detail to give ex-ante Net Present Values, but it is anticipated
that economic rates of return will range from 12% on projects in which the municipality has
minimal investment to 25% in the cases where the municipality is contributing more significant.
Even with unknown net returns from component 3 the expected returns from component 1 and
2 are high enough that the overall project should remain strongly positive.

Additional Unquantifiable Costs and Benefits

Investments in infrastructure must consider not only the narrow user benefits individual projects
but the wider macro-economic impact of the whole programme which is often harder to quantify.
Benefits that are not easily quantifiable are increased trade, increased government capacity and
revenue, firm agglomeration and environmental benefits.

(a) Increasing trade

Trade allows countries to specialise production according to their comparative advantage. The
2011 EAC Corridor Diagnostic Study modelled the combined effect of a series of central
corridor investments similar to those proposed in the integrated corridor strategy and found they
would result in a 25% increase in trade above the no project case. The value added of trade is
not certain but even if it was only a small percent of total trade, say 10%, then a 25% increase
in trade would result in large welfare benefits in the order of £200m/year 61.

(b) Improved Government Revenue and Capacity:

Additional taxes and dividends from improved infrastructure such as the port are transferred
from users to the government. Welfare benefits can be realised when the government uses
those revenues more effectively to deliver a public goods for the nation than private individuals.

58 Ted Laing and Sheila Farrell, June 2015, Updated market study and economic, financial and credit analysis of
the proposed Dar es Salaam Maritime Gateway Programme.
59 Key recent studies are:
 Corridor Diagnostic Study (Nathan Associates, 2011) stated “If capacity is not increased, congestion at
ports and on rail and roads will reach epic levels and constrain economic growth”
 Tanzania Freight Transport Masterplan (JICA, 2014) – Central Corridor selected as highest priority
 Integrated Corridor Development Initiative (WB/EAC, 2015) – stated “investment in the regional ports
should be accorded the highest priority”
60 The logframe target for the programme is that 4 out of the 6 major projects identified should reach final approval
during the life of the programme with the expectation that the remainder will also have progressed significantly.
There is also the expectation that new project preparation opportunities may arise that can be supported by the
fund. The expected benefits of DFID funding are calculated from a proportion of the total benefits equal to the
proportion of DFID’s contribution to the total expected costs (typically around 2% see annex 3 for further info).
61 The gross value of trade flow is not equivalent to its welfare value (the value added by trade as opposed to
consumption of home-produced goods) as Tanzania will have to produce the equivalent amount of goods to
stabilise its balance of payments deficit. The evidence from the Corridor Diagnostic Study is discussed in Annex 3.1
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Funding for project preparation is expected to increase government capacity to deliver
infrastructure and services more efficiently. Improved government capacity should lead to
greater interest and competition for domestic and foreign investment in Tanzania. This is
particularly significant for component 3, the municipal PPP programme which seeks to open up
new and innovative forms of infrastructure finance, procurement and operations.

(c) Agglomeration of Industry

Firm clustering is important for increasing firm productivity through knowledge sharing and
supply chain clustering. The 2014 WB/EAC Intermodal corridor study found that a 10%
reduction in transport cost to the port correlated with 23 more firms in any given cluster.

(d) Externalities
Transport externalities can quickly add up to significant expenses for society.
Railways and lake transport can provide significant a reduction in external costs compared with
road transport which are not included in the economic calculations above. In Africa, the main
factor of external costs seems to be the extremely high road-fatalities rate, which rail
transportation may definitely contribute to reducing since railways provide much safe
transportation.

Another aspect is road destruction caused by heavy load trucks. Roads are generally in poor
conditions due to the high number of trucks. Any reduction of long distance haulage by road
would reduce such costs. Furthermore, Railways’ impact on air pollution and climate change is
notably lower than road transport. Air pollution causes health costs, crop losses and building
damages. Even the use of diesel in freight implies significantly lower climate change costs – 3
times less – than road freight62.

Beneficiaries of infrastructure improvements:

The direct benefits of infrastructure improvements arise to users. In addition there are indirect
positive and negative benefits to the wider macro economy discussed above. Project
preparation for future public and private infrastructure is expected to provide similar benefits to
users and the wider macro-economy in the medium term to long-term.

The main beneficiaries from the port improvement will initially be the shipping lines and cargo
handlers; importers, exporters, and, ultimately consumers would gain to the extent these cost
savings are passed on through lower prices. Bulk shipping and logistics providers operate in
highly competitive markets so a high proportion on the cost savings will be passed on to
importers and exporters. Container shipping is dominated by a few large players and freight
rates are determined by ‘what the market can bear’ so only part of the direct benefits may be
passed on to Tanzanian consumers.

TPA will also benefit from increased revenue which will in part be used to make the IBRD loan
repayments and pay dividends to the government. Government agencies, such as TPA, PO-
RALG, Tanroads etc. will benefit from enhanced staff capacity to implement infrastructure which
is crucial for long term sustainability.

Infrastructure construction and maintenance will affect local employment. The port ESIA says
that overall a growing port will need more labour, but the introduction of automated grain
unloading may result in redundancies in the short-term. Over the last 6 years the average daily
62 Various studies support the finding that long distance rail freight is considerably more fuel efficient than long
distance truck freight: for instance, Public Policy Centre, The University of Iowa, Iowa City, 1999, Comparison of
external costs of rail and truck freight transportation, accessed at
http://nexus.umn.edu/Courses/ce8214/papers/Forkenbrock2001.pdf
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workforce unloading grain was 110 workers of which 60% were typically labourers and
sweepers supplied by labour agencies who are most at risk.  It is not known how many staff will
be retained to operate conveyors and further studies are proposed to clarify the impact and
identify mitigating measures. Infrastructure expansion will also create new jobs during
construction and in operational roles which redundant workers will be able to retrain for. In the
short term there are likely to be some negative impacts which will be mitigated by compensation
and re-training where appropriate as discussed in the appraisal case section on Environmental
and Social Impact. We expect that the short term welfare costs are considerably outweighed
by the medium and long-term economic benefits to port users and the wider region of an
expanded and efficient port.

The port poverty impact study (see annex 4.3) found that overall the poor and the vulnerable
are likely to enjoy a modest immediate benefit from the improvements in the port (in due course
improved transport corridor and PPP infrastructure should increase the benefits). Urban
households will benefit more than those in rural areas from cheaper imported food crops and
reduced cost of containerized imports. Subsistence farmers will probably not benefit as their
produce is consumed in the household or traded in local markets. Many poor part-commercial
or larger smallholders could benefit more if improved agricultural practices are in place and
higher value crops can be produced. In the long run, the port poverty study expected a
significant increase in employment coming from indirect and induced effects as transport cost
have an important effect on the total costs of inputs and outputs.

Many empirical studies have pointed out to the strong relationship between access to sea,
percentage of the population living in coastal areas, urbanization and economic growth (Gallup
et al, 1998). Improving road and rail links to the port will help these benefits to spread beyond
Dar es Salaam to the inland areas and neighboring landlocked countries. Of the seven
countries using Dar es Salaam Port six are among the World’s 20 poorest countries, with two,
Malawi and Burundi ranked first and second in terms of per capita income levels. 63 The
additional infrastructure provided or catalyzed by the corridor programme will result in GDP
growth to the eventual benefit of the whole population.

Risks and opportunities to realising the benefits of the feasible option

While the Dar Port Programme and Intermodal Corridor strategy have support at the highest
level of government (including the newly elected president) there are competing interests within
the Government of Tanzania, other governments and the private sector regarding future
transport investments.

With Chinese support, Bagamoyo port, 60km north of Dar may emerge as a major competitor to
Dar Port. The recent Dar port traffic forecast concluded that there is a medium term need for
more port capacity at Bagamoyo but the short term priority is maximising Dar Port’s capacity.
DFID met the Bagamoyo project representatives in December 2014 and again in December
2015 and concluded that there still uncertainty about when the project may start due to
environmental, technical and financial issues. If it emerges quicker than expected the Dar Port
project could be scaled back to dredging and rehabilitating the existing berths which are critical
investments amounting to approximately £250m and will still have strongly positive EIRR’s
justifying DFID support at the current level.

Separately the Government of Tanzania are developing proposals for a new Standard Gauge
Railway which could run alongside the existing central line rail. The scale of the undertaking is

63 World Bank Development Indicators

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so large that it is unlikely to happen in the short term 64. Nevertheless it should be monitored as
in the short term it could divert the government’s interest and finances and in the medium term
reduce the benefits of upgrading the existing narrow gauge line. DFID and the World Bank will
carefully assess government commitment prior to approving and disbursing funds for specific
project preparation activities.

Economic risks of funding PPPs are a) that the projects may not reach successful financial
close and project preparation funds are wasted. b) projects that reach financial close may not
be successful with investors losing money and government potentially forced to bail them out.
The impact of project failure could be high since medium to large sums of public and private
finance may be at risk. This risk is mitigated by the project preparation funding itself which is
provided to help government and investors carry out proper due diligence.

Other risks are considered in the management section of this business case.

Appraisal case conclusion – The preferred option

The implications of the Appraisal case analysis above is: First, the regional port at Dar es
Salaam is amongst the most important bottlenecks and should be accorded the highest priority
in any investment program. Investment not only stimulates economic growth in the agriculture
sector, but also brings down trade and intermediary costs for all other businesses,
strengthening the competitiveness of the entire region. The combination of transformative
regional impact alongside the extensive preparation work by TMEA, and committed support
from the Government of Tanzania, provide strong justification at this time for both DFID and the
World Bank to support TPA on financing the implementation of the proposed substantive
improvements to the port.

Secondly, an integrated approach to the development of the corridors, including not only ports,
but also regional roads, rail and inland water systems, is important to maximize the economic
benefits from investments. Standalone investments tend to have lower rates of return. By
combining connected transport infrastructures into a package of investment, the rate of return is
increased with more economic benefits distributed to more people in the region.

Thirdly, increasing government and private sector capacity to prepare infrastructure, particularly
new and innovative forms of Public Private Partnerships can open the door to more and better
services for the public.

The costs and benefits discussed above are not straightforward to aggregate. The direct
investment in the port is highly likely to generate substantial benefits, as evidenced by the high
expected EIRRs, as will the other investments in the central corridor and in municipalities that
will be supported indirectly through the projection preparation and PPP components.   DFID
support to project preparation and advising on PPPs is expected to raise the likelihood that
these investments will come to fruition more rapidly, with inter-temporal benefits adding to the
user benefits and bringing forward dividends and revenues collected through them. All three
components will have wider macro-economic and external benefits which are harder to quantify.
On balance, the benefits are expected to considerably outweigh DFID’s investment cost. We
therefore recommend DFID approve the investment proposed in this business case.

Theory of Change for Preferred Option

The aim of this programme is twofold: firstly to facilitate trade by helping prepare Tanzania for a
quadrupling of transport demand over the next fifteen years, and secondly to help bring the
64 The cost of a new standard gauge rail line alongside the existing line would be in the order of $10bn which is
twice the national tax revenue. Financial returns to rail investment are unlikely to be high enough to attract major
private sector financing.
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benefits of private sector expertise and capital into infrastructure delivery. The programme will
partner with the World Bank and EAC’s £2bn Integrated Corridor Development Initiative. £20m
will be spent on port infrastructure (building on DFID’s existing £39m support to the port through
Trademark East Africa) £30m will be invested in a flexible project preparation fund which is
expected to catalyse up to £600m of concessional and private infrastructure financing. A further
£20m will kick-start a pipeline of municipal government PPP infrastructure paving the way for
larger PPP’s in the future.

As set out in the strategic case Tanzania is characterised by low competitiveness due to weak
infrastructure, weak institutions and fragmented remote markets. While economic growth rates
have been good, this will need to increase further to reduce poverty which will in turn increase
demand for transport and other infrastructure services, putting greater pressure on the already
strained network.

The need for DFID’s intervention is based on the expectation that it will (i) help reform
institutions and (ii) provide upfront, assistance and direct funding to catalyse additional donor
and private sector investment to deliver infrastructure more effectively and efficiently. Ultimately
it will lead to an increase in ‘sustainable’ trade growth and ‘sustainable’ regional
competitiveness as depicted in the diagram below.

The output is expected be new infrastructure that is transparently procured, well managed and
good value for money leading to the outcome that corridor capacity and effectiveness is
improved and better services are provided to the public. DFID will use its provision of flexible
and politically astute technical and capital assistance to unlock and speed up investment
resulting in a potential transformative step forward in infrastructure capacity. For the output to
be achieved DFID and World Bank funding must be effective, and successfully attract additional
public and private finance. There is strong high level government commitment to tackle
corruption and improve transport capacity. DFID plays a key brokering role as set out in the
political economy analysis in Annex 4.1 to increase World Bank and government resources,
speed up investments, and help them reach fruition. The Port Authority, World Bank and TMEA
value DFID’s role in balancing the needs of the stakeholders and have requested that we
remain fully engaged in the implementation phase.

For the link from output to outcome to be achieved requires a combination of catalysed
infrastructure investments and government of Tanzania commitment to sector reform which will
raise efficiency of public sector operations and increase beneficial private sector involvement.
Assumptions are that DFID funds for project preparation and investment will attract largescale
public and private sector financing and result in better designed and prepared projects that have
a greater chance of success. Barriers are entrenched vested interests who profit from delay
and monopolistic control. Risks to the theory of change are that individuals and institutions
resist reform and the new infrastructure is not operated efficiently and equitably so the benefits
are not realised and rents continue to be captured by elites. It will take the combined efforts of
government, donors and users to successfully advocate for reforms.

For the link from outcome to impact to be achieved the current high economic growth rates must
continue, in turn maintaining high demand for goods and services. Greater infrastructure
capacity and lower cost will then result in higher volumes and revenues, increased purchasing
power and multiplier effects of new employment generated – discussed further in annex 3.2.
Risks to the theory of change are that Tanzania’s high growth rate is not sustained, perhaps
due to internal or external shocks, an over-reliance on services and commodities to the
detriment of broad based manufacturing and agricultural growth.

There is evidence that improved infrastructure does enable more sustainable trade leading to
economic growth which in the medium to long-term will benefit poor people through better
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access to markets and jobs65. Nevertheless, complementary DFID investments such as
improvements to rural roads, agriculture and access to finance must be successful to maximise
transmission of the benefits to the poor. The ultimate aim is to reach a future situation
characterised by high sustainable competitiveness due to good infrastructure, stronger
institutions and larger, better connected markets

What Measures can be used to Assess Value for Money for the Intervention.
This programme has the potential to offer high VfM by alleviating a significant constraint to trade
growth and economic development, and is coupled with efforts to support the inclusive nature of
export oriented growth. The Value for Money of an intervention may be assessed by three
measures: its Economy, Efficiency, and Effectiveness:

Economy measures the cost of implementing the intervention which includes the cost of project
preparation and construction as well as administration fees for the World Bank trust funds. The
majority of activities funded through the programme will be procured competitively either by the
World Bank directly or Government of Tanzania Agencies with bank oversight. Value for money
will be assured by open competitive procurement and measured in the logframe by the
proportion of tenders for which at least four bidders from a range of countries qualify for
financial evaluation. There are medium risk of time and cost over-run on the port construction
activities (see risk table for mitigation measures). The live implementation schedule and a
framework to track and compare cost metrics is being developed by Project Implementation
Team in TPA. World Bank fees for Bank Executed Trust Fund management are 17% on
personnel costs and for Recipient Executed Trust Funds they are 5% of the committed amount.
The fees are competitive and are designed to cover cost of World Bank management time. For
PPP project preparation costs are expected to be partially recovered from the private sector
(ultimately the users) through a revolving fund into which the winning bidder repays a portion of
the project preparation costs at financial close for use on future PPP’s.

Efficiency measures the degree to which DFID inputs are helping to deliver the outputs of
catalysed infrastructure investment. The recipient executed trust fund arrangement that the
bank operates offers a well-tested system to deliver at large scale for low cost and build
recipient ownership. The outputs, eg. number of feasibility studies, are measured through the
Trust Fund results frameworks which are aligned with DFID’s log-frame and reviewed annually.
A potential weakness of the trust fund system is that if the recipient is not competent to follow
bank procedures then disbursal is slowed down reducing efficiency. To mitigate this risk DFID
is funding three World Bank posts to oversee the trust funds and one DFID programme funded
adviser whose role will include engaging proactively with the recipients. Quality of engagement
by programme staff is hard to measure objectively but is crucial to the success of the
programme and achieving value for money. Time taken for approvals will be monitored by the
DFID adviser and feedback provided through the steering committee for each trust fund.

Effectiveness measures the extent to which the outputs achieve the outcomes. Are the right
projects and studies being funded to achieve efficient transport corridors and greater capacity to
implement successful and beneficial PPP’s? Key measures in the logframe are the cargo
capacity of Dar port number of new projects reaching financial close. The impact of improved
infrastructure and the extent of increased trade, its impact on the region, and distribution of
benefits will be measured as far as possible by the planned mid-term and final impact
evaluation.

Cost Effectiveness, measures what is the intervention’s ultimate impact on poverty reduction,
relative to the inputs that DFID has invested. This will be a further consideration of the impact
evaluation which will build on the port poverty impact assessment to do an ex-post cost benefit

65 See section above on Evidence for the Components

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analysis of the intervention and consider the short and long term effect on inequality by seeking
to track ‘winners and losers’ from the intervention.

Summary Value for Money Statement for the Preferred Option.

Based on the analysis of the components and theory of change the proposed programme is
expected to provide good Value for Money.

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Corridors for Growth - Theory of Change
Other inputs
- Private Sector Investment
- Multilateral Investment
- Other Donor Investment
- Government of Tanzania
Investment
- Sector reforms
DFID Inputs:
Current Situation: - Technical Assistance Outputs
and Capital funding for
Rapid Economic Catalysed Infrastructure
port Improvement
growth, high investment & reform:
infrastructure demand - Flexible Project Dar Port Projects
Preparation for Corridor underway, corridor &
Weak infrastructure
and PPP investments PPP preparation
and Institutions
- Implementation complete
support and advocacy
Assumptions:
- Continued Gov.
Support to invest,
reform and tackle
corruption
- Private sector has
capacity and is willing
to invest
Other DFID outcomes:
Complementary pro-poor
programmes are effective:
- Rural roads improved
- Better access to finance
- Agricultural Development
- Higher urban resilience
Outcome
Greater infrastructure Impact
Ultimate Goal
capacity and
Increased sustainable
effectiveness : Dar Port Economic growth
Trade with greater
capacity up to 28m leading to greater
private sector
tonnes, Transport Poverty Reduction
participation
Corridor and PPP
projects commenced
Assumptions: Assumptions:
Vested interests and - Continued strong
barriers to change can economic growth,
be overcome - Incomes of the poor
Improved infrastructure grow in line with GDP
will be well managed by growth
public and private
operators
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 Commercial Case

This business case proposes to fund transport and PPP infrastructure under three different
components, firstly, Dar Port improvement, secondly Central Corridor project preparation and
finally Municipal PPP project preparation.
Why are the proposed funding mechanisms the right one for this intervention, with this
development partner?
Component 1 Delivery Dar es Salaam Port Improvements:

The Dar Port Programme has had a long gestation period starting in 2011 with a DFID/TMEA
support to TPA for a port feasibility study which led to the formation of a partnership between
TMEA, the World Bank and DFID in early 2014 and in September 2014 the signing of an MoU
with the Government of Tanzania66. Other unsolicited private sector bids have been made to
develop and operate Dar Port but TPA and the government rejected these offers in favour of
public investment process followed by a competitive concessioning process 67.

DFID approved the £39m Port Preparatory Phase in March 2015 which is paving the way for the
larger implementation phase under this business case. Through both phases DFID has had a
dual role of strategic brokering and financial support which aligns with our comparative
advantage and that of the other partners. Due to the size and history of the project the only
possible development partner for the main £450m construction phase is the World Bank.
Partnering with the World Bank offers many advantages for DFID. The World Bank has
considerable expertise in financing, monitoring and safeguarding large infrastructure projects
which DFID does not have at this scale. They have a long-term interest in the project
succeeding and a strong relationship with the Government of Tanzania in the event of any
dispute.

The World Bank will in turn finance and oversee TPA’s execution of the activities in the
programme. TPA will have ownership of the programme and lead the procurement and
supervision of projects with support of specialist consultants. TPA’s procurement and
management capacity are considered later in the commercial and management cases.
Under separate funding from DFID’s Dar Port Preparation Phase business case TMEA will also
continue to bring its unique capacities to enhance the port improvement programme. They
have a strong local presence and excellent links with TPA and other government agencies
which enables them to play a crucial facilitation role alongside DFID and the World Bank.

There are two options for how DFID’s funds can co-finance with the World Bank loan to TPA
1) Direct funding to TPA - in parallel with the WB,(no external management fees)
2) Fund flow indirectly to TPA through a World Bank trust fund (5% management fee, which
covers bank core operations to administer recipient executed trust funds)
Option 1 does not have an explicit management fee so it appears cheaper but any savings
would be offset by the additional DFID cost of administering, coordinating and monitoring the
funding. Without the established World Bank systems of oversight that the rest of the
programme will receive DFID’s direct funding of TPA would be too big a fiduciary risk. Option 2
is considered to be the best use of DFID and our partners’ strengths and therefore to offer the
best value for money.

66 In September 2014 MoU was non-binding agreement between DFID, WB, TMEA and the Government of
Tanzania to work together to prepare the Dar es Salaam Maritime Gateway Programme.
67 The main alternatives are sole sourced offers by private sector companies who are understood to be seeking
lucrative concession rights to operate the port. They are discussed in the political economy analysis in Annex 4.1
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In light of the above discussion we conclude that the World Bank is the best partner with the
capacity and track record to be able to undertake this investment and manage DFID funds.

Component 2 delivery -Transport Corridor Project Preparation

Three delivery options were considered for corridor infrastructure project preparation. It was
concluded that support provided directly through the financier is preferable. These options are
set out below.

Financier led Project Preparation (Preferred):

Multilateral Development Banks (MDBs) have a long-term interest in effective project
preparation which leads to good projects with high developmental impact The Integrated
Corridor has been many years in the making. The World Bank and EAC have led two major
studies identifying the integrated corridor strategy which was approved by EAC Heads of State
in 2013. Increased investment for corridor infrastructure is available and the World Bank is
engaged in the early stage project preparation but a shortage of upfront funds is slowing the
process. The World Bank has strong technical capacity and with additional resources will be
able to provide more constant engagement to push reforms through and overcome the technical
hurdles.
The World Bank is coordinating with other financiers who are also supporting corridor
infrastructure68. The African Development Bank has a strong presence in the road sector and
EIB and JICA are planning complementary investments in the central line rail. The World Bank
remains the largest MDB investing in Tanzania and since early 2014 DFID has established a
strong relationship with them in the transport sector through collaboration on the Dar Port
improvement.
Trademark East Africa (Discounted):
TMEA has been instrumental in project preparation for the port programme and have the
advantage that they are not linked to a particular financial institution so could support a broader
range of projects. Nevertheless in this situation there are factors that make it advantageous for
the World Bank to manage the fund directly rather than TMEA:
 The World Bank has greater expertise in managing large infrastructure projects and so is
better placed to prepare Terms of Reference and overseeing the project preparation of
these projects.
 The World Bank is already engaging with the Government of Tanzania on the major
programmes of the integrated corridor strategy so bringing a new interlocutor could add
confusion and additional transaction costs69.

Project Preparation Facilities (Discounted:

There are a number of specialist Project Preparation Facilities (PPF’s) operating in Africa who
could be vehicles for DFID funding to the central corridor. However they tend to be small,
relatively bureaucratic and require high commitment from the recipient country(s) to be
successful. Crucially they cannot provide the active implementation capacity needed to bring a
project to fruition. Other factors that make it advantageous for the World Bank to manage the
fund directly rather than a project preparation facility are
 The fund is linked to a pre-approved programme reducing the administration and due-
diligence burden of approving individual activities.
 The fund is linked to an organisation with a high level of technical competence to
implement the preparation and subsequent investment.
 The fund is linked back to DFID, a donor who can access further funding where

68 In June 2015 the World Bank convened a meeting in Paris of financiers and donors, including DFID, to present
the needs in the Integrated Corridor Strategy and seek additional investment.
69 The WB has agreed terms of reference for the Dar Southern Bypass feasibility study with Tanroads and is
already financing the Tanzania Intermodal Rail Programme.
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 appropriate to increase poverty and environmental impacts.

Having considered the options above the World Bank’s is considered the best delivery partner
for the corridor project preparation.

Component 3 Delivery: Sub-national PPP project preparation fund

Component 3 will provide funding to undertake the necessary design, feasibility assessments,
transaction advice and environmental & social safeguard reviews to bring a pipeline of
municipal level PPPs to fruition. DFID will oversee the delivery of this project as a part of the
steering committee. This will be a 5 year programme and the first set of PPPs will be bought to
market by the end of 2017. The preferred options for delivering this component is through the
World Bank’s Tanzania office, but alternative discounted options of delivery through the existing
World Bank Public Private Infrastructure Advisory Facility (PPIAF) or the PIDG 70 facility DevCo
are considered below.

The World Bank’s Tanzania PPP Team (preferred)

The WB Tanzania office is well placed to manage this component due to the pilot programme
they have implemented with £0.5m of funding from DFID Tanzania’s Policy Development Fund.
Over the last two years the World Bank has worked the government of Tanzania ministry for
local government (PO-RALG)71 to identify 58 potential projects in 8 strategic municipalities. A
first set of 28 have concept notes developed and have been approved by the Permanent
Secretary for further development. The municipalities have been selected in coordination with
the World Bank Urban portfolio to achieve maximum leverage, in particular in area like solid
waste management and renewable energy where World Bank can help provide public funding
where needed. The experience from the pilot programme means the World Bank will be able to
implement further support much quicker than any other partner.

PPIAF: The Public Private Infrastructure Advisory Facility (discounted)

PPIAF is a World Bank body that DFID funds which promotes Public Private Partnerships and
can fund some project preparation for sub-national infrastructure. It is active in Tanzania with a
major programme supporting the central government PPP institutions and legal framework. Its
mandate is around the enabling environment and it has limited resources for project preparation
of individual projects. The proposed municipal PPP preparation fund was developed in
consultation with PPIAF who supported the World Bank’s Tanzania office leading the
intervention.

DevCo (discounted)
DevCo is a PIDG facility managed by the International Finance Corporation. It advises poorer
developing country governments on structuring transactions to facilitate sustainable private
sector participation in infrastructure. While DevCo’s mandate is aligned with supporting
municipal PPP’s they do not have the structure in place or the track record in Tanzania to
implement the range of enabling and preparatory works that the World Bank’s Tanzania office is
capable of.

In view of the options above the World Bank’s Tanzania office is recommended the best
delivery partner for supporting municipal PPP’s under component 3.

What is the Proposed Delivery Mechanism?

70 PIDG is the Private Infrastructure Development Group, a multi donor supported group of facilities that seeks to
mobilise private sector investment to assist developing countries provide infrastructure.
71 PO-RALG President’s Office is for Regional and Local Government, formerly PMO-RALG– following the
November 2015 election the Regional and Local Government function was moved from the Prime Minister’s Office,
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Based on the analysis above the World Bank’s Tanzania office is the preferred delivery partner
for all three components. In each case the executing agency will be a recipient government
partner working under World Bank oversight and being strengthened where necessary with
external assistance. Component 1 (Dar Port) and Component 2 (Corridor Project Preparation)
will be delivered through the Bank’s Global Transport and ICT Practice, and Component 3
(municipal PPPs) through the Bank’s PPP Practice. Both practices are distinct organisations
with different reporting channels so DFID funding is proposed to be split into two new Trust
Funds: the Tanzania Transport Corridors Trust Fund (with £50m) and the Tanzania Sub-
Sovereign PPP Trust Fund (with £20m). Each Parent Trust fund will have further Child Trust
Funds to split Bank Executed and Recipient executed activities. The structure is set out in the
following chart below and the procurement method discussed in the sections below.

DFID Tanzania

World Bank Transport Corridor World Bank Sub-soverign PPP Project

Trust Fund (Parent) Development Trust Fund (Parent)

Bank Executed
Bank Executed Trust Recipient Executed Trust Fund (Child )
Recipient Executed TF
Fund (Child ) for TF (Child) Tanzania for PPP project
(Child) For both Dar
Corridor project Mainland PPPs preparation and
Port and Corridor
preparation Impact executedby PO-RALG Managment
Project Preparation
Evaluation and
executedby TPA
Management

Component 1 - Component 2 Transport

Component 3 Municipal PPP Project
Dar Port (£20m) Corridor Project Preparation
Preparation (£20m)
(£30m)

Fig 6 Proposed Funding Delivery Structure

Strengths and Weakness of World Bank Delivery in Conjunction with Government

Partners

The World Bank has proven capacity, capability and experience of delivering complex
programmes in the transport sector in Tanzania as evidenced from their substantive and well
preforming transport portfolio (over US $2 billion in Tanzania):

 The 2011 and 2013 UK Multilateral Aid Reviews (MARs) on the International Development
Association (IDA) confirms the World Bank’s strong overall capacity to deliver in a range of
sectors and that it can demonstrate good delivery against challenging objectives. According
to the reviews, this is more evidenced in larger country programmes in Africa, such as is the
case of Tanzania.

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 A Project Performance Assessment Report (PPAR) conducted by the Independent
Evaluation Group (IEG) in 2013 found that the performance of World Bank projects in
Tanzania was moderately satisfactory overall, and more so when underpinned by strong
analytical work and close supervision and dialogue with government partners.
 DFID carried out a central due diligence assessment of the World Bank in June 2015 and
concluded the Bank is a low risk partner for DFID. In terms of central systems and
processes, it carries no unacceptable fiduciary or reputational risks. It has also been
extensively reviewed, both internally and externally, in all aspects of its operations.
 DFID Tanzania recently undertook its own internal review of its work with the World Bank to
identify strengths and weakness. It noted the increased collaboration on economic
development and recommended boosting bank’s implementation capacity where possible for
instance through programme funded advisors as allowed for in this business case.

In line with the recommendations of the central due diligence assessment a proportionate
assessment of the two trust funds was undertaken which identified that the main weaknesses
for both funds lay in the downstream partners ability to comply with Bank controls in a timely
manner resulting in disbursement delays. Related weaknesses are that the bank is perceived
to be inflexible at project level with high transaction costs for partners, and that attention to
cross-cutting issues, such as gender can be weak.

To mitigate for these weaknesses, it is proposed that the all three components will: (i) be
overseen by a DFID adviser who will maintain an active relationship with the World Bank, TMEA
and other GoT executing agencies; (ii) both trust funds will be recruit specialist technical
managers, (iii) the work plans will be sufficiently flexible to accommodate new opportunities,
some degree of slippage or reprioritisation of different activities, based on early progress. (ii)
Strong analysis of marginalised groups, including women, children will be a part of the project
preparation activities.

World Bank and Government of Tanzania Procurement capability

Different procurement modalities will be deployed for each of the three planned components.
Engagement with Tanzania government executing agencies and external consultants will be the
responsibility of the World Bank and carried out in accordance with the World Bank’s
Guidelines.

Component 1, the port modernisation, will be client executed by Tanzania Port Authority under
the supervision of the World Bank. The Public Procurement Regulatory Authority (PPRA)
carried out an assessment of the procurement capacity for TPA in 2014 which was repeated in
September 2015 which highlighted a number of concerns. The assessment revealed that the
Directorate of Procurement and Supply (DPS) and user departments were inefficient and lacked
the necessary capacity to support the procurement function. To address problems an
international procurement specialist has been seconded by Trade Mark East Africa (TMEA) for
an initial two year period from May 2015 to assist the officer working on Donor funded Projects.
Two other international port experts have also been provided by TMEA who will participate in
technical appraisals. Funding is included in the World Bank support to extend both these
contracts as necessary. An international construction supervision firm has been appointed to
monitor the construction works. The overall project procurement risk was assessed to be high.
With mitigation measures in place the residual risk is reduced to Moderate. Weaknesses still
remain in procurement management and it will remain the responsibility of the World Bank to be
sure that each procurement is satisfactory before giving a no objection to proceeding.
Component 2 and 3, the transport corridor and PPP project preparation funds, will be a mixture
of World Bank and recipient executed activities. The lead procurement agency for the
Recipient Executed Trust Funds will be Tanzania Port Authority, PPP unit of the President’s
Office – Rural Administration and Local Government (PO-RALG). Both TPA and PO-RALG
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have received technical assistance and capacity building to undertake these roles and the
World Bank will provide additional support provided where necessary 72. Other recipient
organisations such as Tanzania Railways Ltd, Tanroads and local authorities (LGAs), will
participate as stakeholders and supervise implementation but procurement on their behalf will
be handled by TPA and PO-RALG. The World Bank will act as an intermediary and
administrator for the Recipient Executed Trust Funds.

Opportunity for DFID to influence the World Bank

The UK Government is one of the largest contributors to World Bank Trust Funds. According to
UK Multilateral Aid Reviews (MAR), DFID has greater influence, control and oversight of
projects which are set up as single trust funds where it is a financial contributor. In this
programme both the corridor and PPP trust funds will have steering committees consisting of a
representative from WB, DFID and the Government of Tanzania. DFID will have strong
influence through the steering committee and DFID’s own programme funded advisor engaging
on day to day basis. The aim is to maintain the economy, efficiency and effectiveness of the
funding, with a focus on ensuring mitigating measures are in place to reduce any unintended
negative impacts from the developments. DFID monitoring will be formally carried out through
the annual review which is discussed further in the management case.

Other significant influences on the World Bank are:

 Programme design process: The proposed programme has been designed on the basis of
extensive consultations with the World Bank. Throughout the design process, DFID was able
to influence the scope of planned activities of the proposed programme
 Complementing ongoing activities of World Bank-supported programmes: The programme’s
planned activities will be able to influence the World Bank much larger investments in the
port and corridor infrastructure.
 Rigorous oversight through the agreed regular progress and financial reports to DFID,
 Integration of additional evaluation provisions: The proposed programme includes an
evaluation of the entire port and corridor investment that can help ensure lessons are
appropriately captured, shared and used
 Integration of additional social development and gender requirements: DFID’s involvement
has been important in ensuring that there is a strong focus on marginalised groups, including
casual workers, women and girls. The management arrangements will allow DFID to
continue to influence this key priority area for DFID.

Opportunity to negotiate and influence anticipated costs

Through DFID’s engagement with the trust fund steering committees and the programme staff it
will be able to verify that highest value for money is achieved through the selection and
implementation of the activities. For the corridor trust fund a mandatory proposal and approval
process will enable DFID to comment and approve the individual activities. The PPP trust fund
activities are more complex so individual DFID approval is not practical, but day to day
engagement will still enable strong influence over project activities and costs.

There is little scope to negotiate the specific Trust Fund fees: for Bank Executed Trust Fund
management, fees are 17% of staff costs plus reimbursables and for Recipient Executed Trust
Funds they are 5% of the committed amount. In addition the cost of programme funded
specialists to support delivery amounts to a further 3% for the Transport Trust Fund and 6% for
the PPP trust fund. The fees are designed to recover the World Bank costs of administration
and are competitive with other delivery options73.

72 It is envisaged that procurement tasks and monitoring for PO-RALG will be handled by scaling up the existing
DFID/WB funded Urban Resilience project implementation team already housed in PO-RALG.
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Delivery Risk Conclusion

The overall delivery risk to DFID is assessed as Medium which largely stems from the
capacity of the recipient agencies to comply with World Bank procurement regulations in order
to successfully implement the programme. Mitigating measures to address this are technical
assistance in TPA and PO-RALG and programme funded World Bank staff to provide strong
partner engagement. Other risks around the World Bank delivery are considered low.

Financial Case

Funding recipients and costs incurred

The World Bank is the direct recipients of all payments, except DFID implementation support
under component 4. They will be responsible for all payments to Tanzanian government
agencies and other third party specialist technical assistance providers according to a
programme of work agreed with DFID Tanzania

The costs to be incurred by DFID are £71m. All of components 1 and 2 and half of component
3 contribute to capital investments which, when completed, are expected to comprise of not
more that 10% resource expenditure therefore the entire allocation is considered CDEL for
DFID accounting purposes. Half of component 3 supports the PPP enabling environment
therefore is RDEL along with funds allocated to support DFID implementation. In total £60m is
CDEL and £11m is RDEL. There is appropriate provision for this resource in the DFID Tanzania
budgets for 2016/17 through to 2020/21. £7.5m (15%) of components 1 and 2 for the Port and
Corridor is approved to be ICF climate finance; the remaining £63.5m is non-ICF funding.

Third party organisations who will incur costs are Tanzania Port Authority who will co-fund £40m
of the Dar es Salaam Maritime Gateway Programme and bear the £400m IBRD loan for the
same programme. TPA and PO-RALG incur admin costs in kind for administering the client
executed portion of the Trust Funds. Other government agencies such as Tanroads, RAHCO,
Tanzania Railways Ltd may also incur admin costs. All these organisations should eventually
be net beneficiaries through enhanced capacity of staff engaged on these programmes.
Operations and maintenance cost will be incurred for all infrastructure which will be borne by the
public and users through taxes and charges

Financial Aid
This programme provides indirect financial aid to the government of Tanzania through the World
Bank. The World Banks fiduciary assessment and safeguards will apply to all disbursements to
prevent fraud and misuse. For each of the three components the World Bank will develop a
separate project appraisal document as a part of which due diligence checks will be done on
recipient organisations.

Programme Cost Profile

The estimated cost profile is set out in the table below. The World Bank has comprehensive
management oversight and review mechanisms to ensure forecasting remains live and accurate

Profile of Estimated DFID inputs by year

RE = Recipient (TPA or PO-RALG) executed activities under World Bank supervision
BE = Bank executed activities in consultation with recipient government agencies

Cost (GBP) Year 1 Year 2 Year 3 Year 4 Year 5 Activity

73 For instance the EU-Africa Infrastructure Trust Fund has secretariat management fees of 4% plus financier
remuneration fees of 7%, totalling 11%. Trademark East Africa fees are 9% for TMEA core functions plus a further
5% for the programme administration totalling 14%
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 Total
Transport Corridor Trust Fund (100% CDEL)
Dar Port (net) 2.5 5 5 5 2.5 20.0
RE activities (net) 2.5 4.5 5 5 3 20.0
BE activities (net) 1 2 2 1 1 7.0
Impact Evaluation 0.2 0.2 0.2 0.2 0.2 1
Management* 0.2 0.2 0.2 0.2 0.2 1.0
Bank fee (est) 0.2 0.2 0.2 0.2 0.2 1.0

Tanzania Sub-national PPP Project Preparation Fund (50% CDEL 50% RDEL)
RE activities (net) 1.32 1.52 1.52 0.21 0.98 5.55
BE activities (net) 0.30 3.0 3.0 3.35 2.5 12.15
Management* 0.20 0.3 0.3 0.2 0.2 1.2
Bank fee (est) 0.13 0.28 0.28 0.24 0.17 1.1

DFID Implementation support (RDEL)

Prog Funded Adv. 0.2 0.2 0.2 0.2 0.2 1.0

Annual Total 8.75 17.0 18.0 15.9 11.35 GBP 71.00

*Management includes a total of three WB staff members to manage and implement the two trust funds

Financial Risk and Fraud assessment

Delivery Partner Risk

As mentioned in the commercial section DFID did a Central Due Diligence assessment of the
World Bank in 2015 and concluded the Bank is a low risk partner for DFID. In terms of central
systems and processes it carries no unacceptable fiduciary or reputational risks. It has also
been extensively reviewed, both internally and externally, in all aspects of its operations.

1. This business case sets up two new World Bank trust funds for which the fund flow
arrangements are shown in Fig 6 in the commercial case. The operation of individual trust funds
is not covered by the central due diligence assessment so further verification is recommended.
As a part of the business case design a proportionate assessment of the two trust funds was
undertaken which identified that the main weaknesses for both funds lay in the downstream
partners procurement capacity and ability to comply with Bank controls in a timely manner. The
procurement agent for the Corridor Trust Fund (covering both the port and corridor project
preparation) will be Tanzania Port Authority. TPA’s procurement team have been working with
the World Bank over the last year on several large advance procurements for the port
programme through which they have gained experience in complying with WB procedures.
TPA’s Project Implementation Team has been strengthened with a full time procurement
specialist funded by TMEA so the World Bank has assessed procurement risk as moderate.
For the Dar port works independent supervision consultants have also been recruited to ensure
quality of construction works. The World Bank has strong relationship with PO-RALG, and
procurement audit will be carried out. In case it reveals similar procurement shortcomings there
is provision in the programme to provide technical assistance to reduce risk. The World Bank
will also recruit dedicated technical managers to administer each fund and support downstream
partners capacity. There will be prior review by the Bank of particularly large, complex or risky
procurements. The time and cost allowances in the port construction programme have some
contingency to allow for unforeseen events which often affect large infrastructure projects.
Sensitivity analysis done by the World Bank for a range of adverse conditions concluded that all
the port construction components are economically justified and robust. DFID will monitor all
studies produced under component 2 and 3 for sound evidence of financial viability.

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As with all DFID-funded programmes, a zero-tolerance approach is taken to corruption and
fraud. This programme will be subject to regular review as part of DFID’s annual review
process. The Bank will provide DFID with an annual audit report within six months of the Bank’s
fiscal year end. This will include a management statement from the Bank's external auditors
concerning the adequacy of internal control over cash-based financial reporting for the Trust
Fund as a whole. In exceptional circumstances, DFID can ask the Bank to produce a financial
statement audit of the Trust Fund by the Bank’s external auditors.

For recipient-executed activities, financial management arrangements in terms of accounting,

reporting, disbursement, and auditing will be managed and coordinated by the recipient agency
(for instance TPA and PO-RALG) with oversight from the World Bank. Tanzanian government
organisations produce quarterly and annual financial reports and are subject to annual audits by
the Tanzanian National Audit Office. If DFID explicitly requests a copy of these financial
statements and auditor's reports the Bank will provide these.

In summary, World Bank executed activities are considered to be low risk, but recipient
executed activities pose moderate procurement risk. Therefore overall the programme is
assessed to have medium fiduciary and fraud risk.

Corruption and rent seeking direct corruption related to procurement under this programme will
be mitigated by DFID’s funds being managed by the World Bank under the supervision of a
DFID adviser. TPA’s procurement and financial capacity has been assessed by the World Bank
and is being strengthened by technical specialists to prevent any misuse of funds. A more
detailed analysis of construction risk is in annex 4.2

Management Case

Delivery of outputs

For component 1, the Dar Port Programme the World Bank has produced a draft Project
Appraisal Document (PAD) which sets out in detail the proposed activities. For components 2
and 3 draft concept notes are ready. To ensure agreement on objectives and outcomes, the
logframe, as is conventional for DFID programmes, and the Results Framework, as used by the
World Bank, are aligned.

The two Trust Fund arrangements will be formalised via Administration Agreements (AA)
between DFID and the World Bank. The AA’s will specify the functions and responsibilities of
each partner to the agreement. It has been agreed that operating manuals will be jointly
developed and agreed between the World Bank (WB) and DFID which will set out the
governance, monitoring and financial management arrangements e.g. thresholds for staff costs,
this will be a living document that will guide both WB and partner implementation.

In order to ensure high quality delivery of DFID’s investment in the Port the central corridor and
municipal PPP’s, DFID Tanzania will fund three experts based in the World Bank Tanzania
office, funded through the respective trust funds, There will be one for the transport Trust Fund
and two for the PPP trust fund, ()

Component 1 and 2: Dar es Salaam Port and Transport Project Preparation Management

DFID’s funding for the Dar Port and transport corridor project preparation will be managed by
the World Bank’s Transport and ICT practice. The trust fund will have bank executed and

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recipient executed funds with World Bank oversight of all activities, procurement and
expenditure. The World Bank social and environmental safeguards will apply to all Trust Fund
activities and funds will be subject to the same of scrutiny as the rest of the $600m IBRD loan
for the Port and future IDA investments in the sector. Performance of the programme will be
overseen by a DFID team led by the DFID Tanzania Infrastructure Advisor (with portfolio
overview - 20% FTE staff) and with primary engagement by a programme funded infrastructure
adviser (100% FTE staff) supported by a programme manager (40% FTE staff).

The trust fund client for the Dar Port elements (component 1) will be Tanzania Port Authority
who have appointed a Project Implementation Team (PIT) led by TPA deputy DG and Directors
of Finance, Planning, and Engineering. To ensure effective implementation TMEA is providing
technical assistance to the PIT by (a) a procurement specialist (in place since May 2015) and
(b) a firm with project management expertise (in place since October 2015), who provide
experts including contract management, coastal/Port engineering; and other short term
consultants as need arises. The increase in capacity for PIT resulting from this TA has already
significantly bolstered TPA performance and will reduce the risk of construction cost and time
overruns.

The trust fund clients for the Project Preparation elements (component 2) will be the
government of Tanzania agencies responsible for Road, Rail and Port assets. To simplify
procurement oversight TPA will be the procurement agent on behalf of all the other transport
agencies. World Bank proposals to fund specific projects from the pipeline will be approved by
a small DFID panel on a case by case basis in consultation with stakeholders. All procurement
will be overseen directly by the World Bank in close consultation with the clients. The potential
beneficiary agencies are Tanroads, RAHCO, Tanzania Railways Ltd, Lake Victoria and Lake
Tanganyika Basin Commissions and TPA. The World Bank will do due diligence checks on all
recipient agencies before disbursing funds. To provide oversight and implementation the World
Bank will appoint a programme funded engineer based in the Dar es Salaam Office to manage
the fund.

Component 3 PPP Project Preparation Delivery and Management

DFID’s funding for Municipal PPP project preparation will be implemented through a trust fund
managed by the World Bank’s PPP practice. The World Bank in Tanzania has the necessary
specialist skills required to lead this initiative and with DFID pilot funding have worked closely
with the Government of Tanzania and local financiers in developing the initial short list of
projects. The staff in the WB Tanzania office are supported by teams in Singapore and
Washington. IFC teams in Delhi and Singapore provide additional specialist skills where
needed. The fund will be set up with a Parent Account, and two Child Accounts one for Bank
Executed Activities such as technical assistance and advisory activities, and one for Recipient
Executed Activities. The Trust Fund will be managed by a Manager in the PPP practice, who is
responsible for overall supervision of the portfolio financed by the fund and the Trust Fund
administration by an Operations Officer and relevant Task Team Leaders. At the child fund
level, Trust Fund-accredited sector staff will be assigned to be the Task Team Leaders of
respective grants. One programme funded international advisor and one national staff will be
employed by the World Bank to manage the programme

The Government of Tanzania’s PO-RALG will be the executing agency for the recipient
executed activities. They will work closely with selected local government authorities to develop
funding applications which will then be submitted to the bank for approval, oversight and
monitoring as set out in the diagram below. The World Bank will assess and build the local
government capacity to deliver PPP’s as an integral objective of the programme.
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Monitoring, Reporting and Evaluation.
The Trust Fund Managers will submit regular annual progress and financial reports to the
Steering Committees, including against ICF Key Performance Indicators (KPIs) as well as
program-specific KPIs drawn from the Trust Fund results framework. Where possible World
Bank results frameworks are aligned with DFID’s Logframe and will feed into DFID’s annual
reviews. A detailed M&E plan including templates for regular progress and financial reporting
will be finalized in the inception phase of the program. A sustainability plan and exit strategy for
the PPP trust fund will also be developed.

For recipient-executed activities, financial management arrangements in terms of accounting,

reporting, disbursement, and auditing will be managed and coordinated by the recipient
agencies (TPA and PO-RALG) with oversight from the World Bank. Tanzanian government
organisations produce quarterly and annual financial reports and are subject to annual audits by
the Tanzanian National Audit Office. The trust fund manager will submit regular (six-monthly)
progress and financial reports to DFID.

An impact evaluation of component 1 and 2 will be managed by the World Bank in collaboration
with DFID Tanzania and will comprise of three main stages:
 An evaluation framework will be developed during a six-month inception phase
informed by an evaluability assessment, literature reviews and a field visit. The
assessment will advise on the scope to collect primary data from beneficiaries or
alternatively secondary data implanting partners which will dictate the scope of the
evaluation.
 A mid-term evaluation will assess the design and implementation progress and identify
any changes of approach or process that could improve performance over the second
half of the programme.
 A summative evaluation at the end of the DFID programme will assess the impact,
focusing on evidence of programme outcomes and what has been achieved, and
providing fuller understanding of the process of change. Funding will be sought to
continue evaluation until the end of World Bank corridor programme which will be later
than the end of the DFID programme
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Component 4: Programme Implementation Support
All three components will be managed by DFID Tanzania’s Trade and Infrastructure Advisor
supported by a dedicated programme advisor who will oversee both this Corridors for Growth
Programme and its predecessor Port Improvement Programme. For 2016/17 the adviser will be
funded from the Port Improvement Programme, working closely with the World Bank and
TMEA. For future years funding for the post has been allocated from this business case. We
will agree Terms of Reference with WB/TMEA/TPA/DFID which will set out the role of the
adviser and how he/she will support each organisation. Separately , the World Bank will recruit
their own programme funded staff to manage each trust fund. The purpose of the advisers post
is:
 To maintain and strengthen the strategic relationship between the World Bank, TMEA
and DFID to implement the Port Improvement and Corridors for Growth programmes and
use this to continue to build DFID Tanzania’s economic development work.
 To promote a joined-up and coherent approach to infrastructure development between
development partners in Tanzania.
 To accelerate the implementation of pipeline projects by providing focussed in country
capacity dedicated to removing constraints to implementation.
 To contribute to the commitment made by Secretary of State Justine Greening and The
President of the World Bank Jim Kim to work more closely in country. Tanzania is a pilot
country for this initiative.
The post is aligned to DFID’s Infrastructure Position Paper – Connecting People, Creating
Wealth. The advisor will accelerate and strengthen DFID’s regional infrastructure programme,
drawing in other development partners.

UK aid Visibility to Beneficiaries

The improvement of Dar Port is one of the most high profile infrastructure projects in Tanzania
and regularly gets front page newspaper coverage where the donor partners are mentioned. A
port communications strategy is being devised that targets the full range of stakeholders, and
the wider Tanzanian population with surveys, brochures, and press tours aimed at getting more
positive coverage in the national media. The strategy is led by communications specialists from
TPA/World Bank/TMEA team with DFID involvement at a strategic level. Visibility of all the
partners, including DFID, to stakeholders and beneficiaries will be an important aspect of the
strategy. DFID’s support for project preparation is less tangible to the general public due to the
long lead-in time (typically 3-5 years) before projects come to construction. Nevertheless
targeted communications are important to raise awareness among stakeholders and the
general public of the benefits of PPP’s and the UK’s support to the sector. A communications
strategy will be funded under component 2 which may involve contracting a communications
firm or Civil Society Organisation. The UK aid logo will be visible on all communication
material.

What are the risks to the success of the programme and how will they be managed?

The key risks are set out in the table below. Component 1, the port improvement is rated as
high risk, whereas component 2, the corridor and PPP project preparation funds are rated as
medium risk. The aggregate risk of the project is assessed to high due to the large number of
often connected sub-projects which will increase as corridor infrastructure and PPP projects
come on stream (For comparison the Port Improvement Preparatory Phase Programme
implemented by TMEA has over 30 sub-projects)

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Risk Assessment Table
While all risk are important, key risks that programme implementation will focus on are in bold.
Further explanation around political and governance risk is in annex 4.1 and 4.2

OVERALL
RISK
Probabil
Risk Mitigation Impact
ity With
Mitigation

Cross Programme risks

WB standard ESIA done for all new construction. For the
Environmental Port this will be a category A ESIA. Project preparation for
Impact of the corridor programme focuses on reviving and upgrading
Construction activity existing infrastructure will minimise impact on greenfield
sites
Programme
complexity prevents DFID will appoint a dedicated programme funded advisor to
adequate DFID oversee the programme
management
The World Bank’s fiduciary, financial management and
procurement standards will ensure transparent use of
funds. The World Bank will assess the capacity of all
Corruption, organisations handling procurement and provide
irregularity or technical assistance where necessary to strengthen
collusion by internal system. For instance in TPA a full-time
procuring agency procurement expert has been funded by TMEA to
during support the Project Implementation Team to ensure
procurement best practice and raise transparency in contracting. 
The donor partners will consistently send strong
signals to all stakeholders that there is zero tolerance
for corruption and irregularities.
Risk that political
pressure will DFID TMEA and the World Bank will all actively work
distort with Government, local leaders and other stakeholders
Government to explain the benefits of the gains to be realized from
priorities and full implementation of the programme. DFID will
hamper efficient establish an informal eminent person’s advisory group
implementation which will help navigate issues as they arise.

Port Improvement Risks (component 1)

Risk mitigation strategy: (i) Ensuring that the Project
Implementation Team (PIT) in TPA is adequately
supported for which TMEA are funding a firm of
consulting engineers (ii) use formal two-stage bidding,
and a design and build approach, to ensure that risks
Risk of are both understood, and investigated prior to contract
construction cost signing. (iii) for justified cost over-runs additional funds
and time over- can be made available by the World Bank, but the
runs existing cost allowances are generous, and the
expectation is maybe with some reallocation, there will
be sufficient in the programme. Additional time may
also be necessary, but again, the WB programme is
fairly conservative – 7 year project, with a heathy
margin absorb some delay
The FCO and the UNODC have complementary
Risk that programmes to tackle smuggling. DFID and the World
investment Bank support both programmes and may provide funding
inadvertently to the UNODC programme. Trademark East Africa are
benefits smuggling coordinating their investment in truck scanners with
and other illicit UNODC training of Multi Action Task Force to improve
activity. detection rates.

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 OVERALL
RISK
Probabil
Risk Mitigation Impact
ity With
Mitigation
Risk that the Both the Port Improvement Preparatory and
potential of the Implementation Phase programmes are designed to
investment is not increase efficiency and eliminate opportunities for rent
maximised seeking and illegal activities. Increasing competitive
because of legal private sector involvement in port operations will drive
and illegal down costs and reduce the scope for rent seeking. The
payments introduction of new computerised technology and
skimmed off the streamlined processing systems and procedures will
top; reduce illegal activities.

Risk of cost over-runs and disputes is mitigated by the

appointment of an expert firm to provide technical
Insufficient
assistance to the Project Implementation Team in TPA
capacity for
and a separate construction supervision firm. The TA
implementation at
consists of a project manager, finance and procurement
TPA Port leads to
experts, and a maritime engineer. The World Bank also
construction,
has considerable expertise of delivering large
design and
infrastructure projects and will monitor procurement
management Risk:
and implementation to minimise risk.

Risk that directly

and indirectly The ESIA indicates that overall employment should rise due
employed workers to increased throughput. World Bank social safeguards will
will be negatively compensate directly affected employees of TPA. Up to 240
affected by people may be negatively affected by mechanisation of
efficiency grain unloading. A study of impact on casual labours
improvements affected will be carried out and mitigating actions identified.

Risk that vested Donor partners and TPA will use communications strategy
interests gain will inform stakeholders and government of the benefits to
control of port Tanzania of the port improvements. DFID PFA will actively
operations engage and DFID will take support from informal group of
eminent people and make use of HMG support.
Risk that Port
financing through The World Bank Treasury and Legal Departments are
IBRD will not be working with TPA to assess risks and provide suitable credit
agreed or risk of enhancing mechanisms to minimise the risk of dispute or
disputes over loan default. In case a dispute arises DFID and the World Bank
administration and will need to agree the conditions under which disbursements
repayments may continue

Delay to improving
landside ToR’s are ready for the feasibility study for improving the
connections mean port access roads which DFID will fund through the project
port improvements preparation fund. The World Bank is committed financing
are ineffective the future road improvements as integral part of the DSMGP

New government The BRN priorities may be perceived as an initiative of the

may not continue previous head of state so WB/DFID/TMEA will engaging
BRN affecting with the new government to encourage transparent and
project prioritisation rigorous priority setting for future infrastructure investments
Failure of DFID’s
DFID adviser closely monitors TMEA performance. TMEA
Port Preparatory
will engage government and stakeholders from the
Phase Programme
beginning as required under the BRN programme.
to achieve expected
Additional impetus will be provided by World Bank
reforms and
involvement in Port Implementation phase, who will
productivity
negotiate new conditionality clauses with TPA.
improvements.

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 OVERALL
RISK
Probabil
Risk Mitigation Impact
ity With
Mitigation
Resistance to
TMEA and WB will work with TPA to develop a package of
private sector by
support that will help them manage the transformative
workers and other
changes needed to become an effective Landlord, such as a
vested interests and
productivity improvement plan. Buy in of stakeholders, such
low capacity in TPA
as the government, TPA, Dockworkers Union and local
to manage
leaders, will be sought through communications strategy.
necessary
Concessioning of the new berths 13&14 will be a condition
transformation to
of WB financing.
landlord authority.
Lack of sufficient
counterpart funding
Additional revenue from growing traffic flows will enable TPA
from TPA to finance
and other relevant stakeholders must provide adequate
investment and
resources and necessary support to ensure long term
operations
sustainability of the port programme.
threatens long term
sustainability
Possible land use Encourage TPA to involve all stakeholders from the
conflicts and beginning through monthly stakeholder meetings Encourage
objections from TPA to appoint transaction advisor to support TPA negotiate
existing operators with existing concessionaire.
Over-capacity in
Government Plans to develop a new port at Bagamoyo, is
port sector due to
still being discussed as a serious option but the only way of
Bagamoyo Port
solving Tanzania’s current Port capacity shortfall is to
Development, leads
proceed with the improvements planned as part of this
to poor VfM of DFID
Business Case.
investment

Reputational Risk to The government is taking determined steps to reduce tax

DFID of being evasion at the port. DFID, the World Bank and TMEA
associated with a are supporting TPA to develop an action plan to tackle
port that has faced corruption. DFID’s exposure to reputational risk is
many corruption minimised by working in partnership with the World Bank
scandals. and Trademark East Africa.

Corridor Project Preparation

Poor coordination
between
DFID advisor will actively monitor funding proposals
government
and encourage projects to be brought forward. Funds
agencies and slow
will not be released to the Project Preparation Trust
project
fund until need is demonstrated.
preparation makes
fund inefficient
As a part of application for project preparation activities the
Projects selected
WB will be asked to indicate the likelihood of financing being
for preparation do
agreed. Projects which are unlikely to be financed will not be
not lead to financing
prepared.
The intermodal corridor programme is well publicised and
Risk of duplication
approved by EAC Heads of State so identifiable duplication
with the work of
should be straightforward. DFID and the WB will also
other donor
actively engage and inform partners and the government
partners
about activities

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 OVERALL
RISK
Probabil
Risk Mitigation Impact
ity With
Mitigation
Risk that
Standard Gauge Rail is the long term government policy
government focus
goal but in the short-medium term the government has
on Standard Gauge
provided assurance of support for narrow gauge rail in letter
Railway will slow
of sector development policy (TBC) Development partners
Central line narrow
will offer assistance to support the government prioritisation
gauge rehabilitation
planning and monitor the pace of SGR implementation
and reduce its
closely to ascertain its likely impact.
benefits

PPP Project Preparation

Core role of the WB to ensure all funding proposals
Low Capacity in
support viable sustainable implementation plans.
PO-RALG to
Continued support from the WB and other development
implement sound
partners to ensure capacity of government and private
projects
sector is strengthened.
Communications programme will present the benefits of
Negative media PPPs. Clear processes in place to ensure the appropriate
coverage of PPP’s social, environmental and governance safeguards standards
are attained and closely monitored
The WB carried out and initial assessment which indicated
Lack of suitable
the fund size is reasonable first level of support. The
projects for
programme includes capacity building training to reduce
municipal PPP
demand blockages
Lack of WB skills The WB task manager is a PPP specialist with over 20
and Human years’ experience. A full time senior coordinator will be
resources funded by the programme
Project preparation proposals will be examined by a joint
Long term
DFID/WB team to see that investment financing is likely to
sustainability of
be found. Proposed PPP modality includes revolving fund
project preparation
to recover project preparation costs at close of financing
investment
deal for reinvestment in future project preparation.

Political capture Risk mitigated by WB coordinator. Stakeholder influence on

and conflict of support allocation is limited to objection for support which
interest will reduce the influence of political or other interest groups
on funding allocations.
Lack of Private Good project preparation should make PPP offers attractive
Sector finance to to private financiers. DFID funds will be used to support a
participate in PPP’s strong communications strategy to attract private
investments.
Lack of Private
Sector capacity to Good due diligence should weed out weak private partners.
deliver successful Capacity building for local government will enable good
PPP’s delivery oversight.

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