Our dual key investment series features stories of our investments from our investments.

Most of the rural areas of Tanzania are endowed with varieties of natural resources and good climatic conditions which offers good platform for local economic growth on different frontiers. Kilolo district in the southern highlands of Tanzania is one of these areas with year-long streams of water, forestry and stable rainfall for decades. These features offer reliable and predictable conditions for production of food and commercial crops like maize, beans, fruits and vegetables, dairy milk, tea and timber.

Lack of Electricity for Productive and Consumptive Use

Despite of these favorable conditions there are inverse relationship with low social and economic development in the areas. Most of their agriculture produces are sold in raw forms at very low prices or wasted because of limited value additions and shelve-life. Over their lifetimes, lack of electricity has been at the centre of these challenges. Among the resultant effects are lack of industrialization activities, poor access to health facilities unsafe drinking water, poor education and maternity health and income poverty and unemployment.

Faith Based Entity as a Transformative Agent - “Bread, Water, Health, Education and Job”
Iringa Catholic Diocese leaders are quoted insisting; “encouraging people to be good God-Fearing and good citizens without addressing other complementary needs (Bread, Water, Health, Education and Job) is less effective and short lived. Lack of appropriate infrastructure and social amenities stemming from lack of productive power i.e. electricity is a reflection of similar challenges in several areas in the southern highlands of Tanzania.

Stemming from the above, in 1997 the tCatholic Diocese of Iringa initiated the construction of Maguta small hydro Power Project (SHEPP) to address these challenges around Maguta Ward at Kilolo district in Iringa Region. Other than own equity the project received financial and technical assistance from Italian based NGO, M/s Solidarity and Cooperation without Frontier (SCWF), UNCDF and Rural Energy Agency (REA). This NGO through its network in Italy identified, engaged and commissioned a detailed topographical survey of the site and hydrological studies. Based on the outcomes, the SCWF developed detailed engineering design (civil) and equipment specifications. The combination of the two confirmed the Project’s technical feasibility and commercial viability.

Project Status
The project is about to be completed and commissioned. The Project is designed as a reservoir system small hydropower project and therefore utilizes a storage reservoir (dam). The surface mounted (above ground) hydropower plant has been completed entailing the construction and completion of the dam, civil works, penstock and main inlet valves for two units. The civil works for installation of one turbine-generator, with an installed capacity of 1.2 MW is done. The second turbine will be installed during the second phase.

• What made you enthusiastic about this investment?

Revealing the unlocking of local economic development challenges and barriers requires (ii) sequential and connected thinking and actioning; (ii) prioritization and addressing the first thing first; (iii) committed transformative changers; (iv) appropriate finance and technology and (v) effective use and utilization of local resources. Towards delivering this project there is a huge lesson that some community challenges or barriers are not real on its entirety, but upshot i.e. stem from other underlying problems which were left unaddressed or solved at an appropriate time. Some of the challenges complements and reinforce each and over time they end up building a pyramid of other problems which requires unique efforts and costs to unpack. Either because of its circular-knitting nature the communities fail to distinguish between what they want Vs what they need! This leads to superficial and expensive short-lived solutions. Drawing from this project, there is also a learning that in most cases the real transformative changes take long time and requires perseverance. In some extremes it requires resource trade-off and sacrificing of immediate and intermediate objectives for long term goals and objectives. Once the core challenge is identified and addressed the other perceived problems turns out to be the opportunities.

The investment officer in charge of the deal, Imanuel Muro, has agreed to answer questions about this project:

• What were the challenges faced by this project?
The construction of hydro-electric generation requires compliances and adherences to the global standards. The civil construction must be preceded by technical feasibility which permits the execution of detailed engineering. There are long and costly statutory requirements which involves Environment and Social Impact Assessment (ESIA) and resettlement action plan (RAP) if desired, (ii) neighboring community financial compensation as a condition for land title; (iii) access to water rights; (iv) access to building permits; (v) securing engineering, procurement and construction company (EPC Contractors) etc. All these are prima facie before embarking into sourcing of finance and other costs which inform the preparation of business plan and technical drawings. Due to implementation endurance, there are always the challenge of costs variation and overruns. Like any other hydro site, these kind of projects are constructed in hard-to reach areas especially the natural barriers like valley, hills etc. The climate condition for these kinds of sites is heavy and long rainfall which inhibit material delivery to the sites and construction has to take place only in some months of the year i.e. dry spell. This cause unnecessary delays and skyrocketing of implementation costs. The other extreme is the right color of finance. The construction can take 18-24 months and many commercial banks do not prefers structuring long-term financing beyond 3 to 5 years. Having investment banking is critical!

• What are the lessons learned from this example?
The transformative changer is not necessarily the mainstream or local government. The approach by the Catholic Diocese of Iringa of repackaging the faith-based teachings with “bread, water, health, education and job” thinking is unique innovation which worth replications in other communities. The other lesson is need for inculcating the enterprising tendencies within the social institutions and communities. This project which upon completion will costs about USD 5.0 million is not the result of having adequate money or finance alone but rather the strong drive and determination, creativity and risk taking. Some of the finance haves been unlocked from grants and subsidized sources because they have seen tangible contribution from the owners. This implies the community own the problem and they are the ones with a key for solution. The community has managed to unlock several challenges by identifying the key cause of other queueing challenges.

About the Author:

Mr. Imanuel Muro combines practical expertise as a financial and investment advisor and BDS trainer with extensive experience on development finance, project finance, private equity, and debt transacting. He has over 27 years’ experience working in both the private and public sectors and has experience of working with Local Governments in Zanzibar, Lesotho, The Gambia and Uganda.

Mr Muro is a Certified Public Accountant (CPA). He also holds master’s degree in Enterprise and Entrepreneurship Development (MEED) from Business School, University of Dar-es salaam. He formerly graduated in Bcom from the same University.

for more information please contact him :imanuel.muro@uncdf.org