Cut down conditions for using Liganga, Mchuchuma resources

He urged the government to finish interminable talks with prospective investors so that the resources start being out to use in earnest, which is precisely what President Samia Suluhu Hassan directed top level appointees upon taking office. Yet bureaucracy appears to be stuck as usual.

There was a time that higher state authorities had to intervene in a dispute on using the resources, between notable southern circuit investor Aliko Dangote and the state electricity firm, TANESCO. The key issue was that holding corporations which oversee these sectors, like the National Development Corporation and the State Mining Corporation, apart from TANESCO or other, have a set frame of reference as to costing and terms of use, which investors don’t consider to be inviting. The result is that investors seek other options while perennially the holding organizations expect to contract a resource user on their terms.

For once, there is a contention of priorities – apart from prices – on how potential power generation from the Liganga site should be directed, by individual users for their own power stations for factories, or in a larger programme for connection with the national grid. Obviously if it is TANESCO that is investing in the programme it would privilege the latter, but it has so much on its hands at the moment it isn’t easy to see it generating 600MW all of a sudden from the site. And it always had more urgent things to do in the past, for instance contracting heavy fuel power generators for emergency use as Liganga talks stalled.

The total power generation potential for Liganga coalfields stands at around 600MW, and then one takes note of the fact that a series of 100MMW contracting using heavy fuel and lengthy capacity use contracts were constructed during the quarter century up to this moment. It is easy to see the massive opportunity loss as the site represents six such contracts put together, and there is no need even to remind ourselves what the projects were. But the same habits are still there, and the fields may remain unused for years.

One helpful way out is to change the terms of using the resources, from holding corporations to land allocation and local levies for use of resources, investment incentives and the rest is determined by the market. Parastatal strategic projects (like producing 600MW of power for the national grid, instead of say 50MW for own industrial use) must be put aside, so that investors chip in to use the resources. Similarly the iron has substantial local and global market outlets but only when structural incentives apply, hence our holding entities be removed for minimal taxes to apply in working the fields.  Without incentives, the resources lie idle as investors balk at the conditions.