Tanzania’s Tanga Water Supply Authority is East Africa’s first public water utility to issue green bonds to support expansion of water services and infrastructure. The initiative forms part of Tanzania’s US$15.02bn water investment programme, which supports the Africa Union’s AIP goal to leverage an additional US$30bn towards water security and sustainable sanitation in Africa.
The Tanzania Water Investment Programme was announced by Vice-President Hon. Philip Mpango on 13 September 2023 during the Mind Gap Campaign launch at the 78th United Nations General Assembly (UNGA).
“The Government of Tanzania commits to direct domestic resources up to 43% of the total budget or US$6.45bn to strengthen governance, capacity and climate resilience. We call upon the international community to partner with us to mobilise the remaining 57% of the budget and close the investment gap,” said Hon. Philip Mpango.
“This significant initiative aims to address water security and climate resilience through diverse and innovative financing mechanisms,” said Hon. Jumaa Aweso, Tanzania’s Minister for Water, represented by Dr. George Lugomela, Director of Water Resources during the Special Session on Mobilizing Political Commitment for Accelerating Climate Resilient Water Investments in Africa, at the 10th World Water Forum in Bali, Indonesia.
Pioneering green bonds and investor confidence
The Tanzania Water Investment Programme will include innovative finance from domestic sources such as the first of its kind Green Water Bond issued by the Tanga Water Supply Authority. The Green Water Bond’s groundbreaking issuance was oversubscribed by 103%. Launched on 22 February 2024, and listed on the Dar es Salaam Stock Exchange on 15 May 2024, the bond raised TZS53.12 billion (about US$20.3 million), with 65% of the funds coming from local investors and 35% from international investors.
“This is a clear indication of the growing interest in sustainable investment and confidence of international investors in the Tanzanian market and the Tanzanian water sector,” Dr. Lugomela remarked.
“Innovative financing mechanisms such as green bonds will be at the centre of the AIP’s approach to transforming the investment outlook for water in Africa,” said Mr. Alex Simalabwi, AIP CEO and Executive Secretary of Global Water Partnership – Africa Coordination.
“The AIP will be working with other African governments to replicate the example set by Tanzania through partnerships with the United Nations Capital Development Fund (UNCDF), local commercial banks, and others.”
“In collaboration with UNCDF and AIP partners, we hope to support countries increase access to finance. Domestic finance and innovative finance approaches are central to AIP,” added Mr. Simalabwi.
Developing bankable water projects
Emphasizing the importance of climate financing, Dr. Lugomela discussed efforts to prepare bankable water projects.
“The Ministry is enhancing and improving the area of developing ready-to-finance bankable projects to solicit climate funds,” he explained.
These projects span water supply, water resources management, disaster management, and transboundary water management, with several proposals already submitted to the African Development Bank’s Climate Window.
Private sector engagement and partnerships
The AIP International High-Level Panel on Water Investments for Africa and African Union’s landmark 2023 report, Africa’s Rising Investment Tide, found that water security in Africa will increasingly rely on private finance, given the insufficiency of public funds and the private sector’s contribution in driving water business efficiency.
It is estimated that if Africa’s own pension funds could be mobilised as well as other institutional investors, an additional US$10 billion per year could be mobilised for water security. International investors have considerable appetite for African infrastructure projects, having as much as US$550 billion in assets under management. However, water often loses out when infrastructure projects are proposed due to a weak investment case and inadequate investment-ready projects.
Dr. Lugomela confirmed the critical role of the private sector in financing water-related projects.
“Sensitization to the Tanzania private sector such as national commercial banks has resulted in a positive outcome. These examples, which are investment-focused, are milestones in implementing the Tanzania Water Investment Programme,” said Dr. Lugomela.
A recent consultative meeting with stakeholders – including commercial banks, the Tanzania Private Sector Foundation, NGOs, and Civil Society Organizations – showcased the private sector’s positive response.
Additionally, the Mbeya Water Utility secured TZS5.6 billion (about US$2 million) from the Tanzania Investment Bank, combining loan and grant components to implement a water project.
Enhancing the National Water Fund
To further bolster water financing, Tanzania is enhancing its National Water Fund by establishing a loan window for Water Utilities with favourable interest rates.
“Some water utilities have already secured loans from the fund for project implementation,” said Dr. Lugomela. The National Water Fund is also in the process of seeking accreditation from the Adaptation Fund, aiming to increase its liquidity.
Political commitment and leadership
“Tanzania is showing political will and leadership under President Dr. Samia Suluhu Hassan in addressing the water financing gap through innovative financing,” he affirmed.
“Indeed, it is high time to invest in water and close the investment gap.”