China lobbies to revive Bagamoyo Port construction previously halted by Magufuli

CHINA is lobbying to revive the construction of the Bagamoyo Port, a project that was previous ridiculed and halted by President John Magufuli, SAUTI KUBWA has learnt.

Almost agreed by Magufuli, the revival of the project is a result of laborious diplomatic and economic interventions by the wealth-powered Chinese government.

The construction of the mega-development project stopped after President Magufuli said, in 2019, that it was a scheme tainted with bad terms that would never benefit Tanzania.

But the move was highly criticised, with some observers accusing Magufuli of sabotaging his predecessor Jakaya Kikwete – who had initiated it in his home turf – while at the same time constructing several lucrative projects in Chato, his home town.

Tanzania is now in the final stages of reviving the Bagamoyo Port construction project, which was previously meant to be developed in partnership with China, financed by Oman.

In his typical sense of mockery, President Magufuli discredited the project saying: “only a madman can accept its terms.” But House Speaker Job Ndugai told parliamentarians that whoever had advised the president against it must have been nuts.

Highly-placed sources informed SAUTI KUBWA that the tour of China’s Minister of Foreign Affairs, Wang Yi, is also meant to be part of lobbying mission for the restoration of the Bagamoyo Port project. He arrived yesterday in Chato, Magufuli’s home town.

The project was expected to cost Sh. 23.5 trillion (US $ 10 billion).

Tanzania had an agreement with China Merchants Holding International, which acquired a major loan – sponsored by Tanzania from the State General Reserve of Oman, in the United Arab Emirates. The agreement was officially discussed in 2013 and was signed amicably in Bagamoyo four months before Kikwete retired from office in 2015.

The processes of having a port in Bagamoyo, Coast Region – home town of President Kikwete — began in late 2012 when Tanzania and China technocrats met, and signed a memorandum of understanding (MoU).

A year later, in March 2013, the Framework Agreement was signed. In December 2013, the Implementation Agreement signed, while Tripartite MOU and laying of a foundation stone was done in September 2015.

According to our sources, President Magufuli has now agreed to hold talks with China for the construction of the Bagamoyo Project that was stalled after he took office. It was judged by him as an “exploitative project.”

The arrival of the Chinese leader in Tanzania, who comes for holding talks with President Magufuli at his home in Chato, in Geita region today, is described as a continuation of China’s desire to continue and finally reach an agreement for the project to begin.

“Among other things, there are two major issues to be discussed in Chato between the big shots, one is the construction of Bagamoyo Port and the other is the whole issue of capital funds for some Chinese companies which are held by the government through the BoT (Central Bank of Tanzania) after their bank – Bank of China, here in Dar es Salaam was put under receivership,” said an anonymous senior government official.

Further reports indicate that in addition to the Chinese senior minister, also at the end of January 2021, another Chinese leader, Wu Peng, will arrive for more consultation on further steps in China’s projects that are said to be stuck due to politcal and business reasons. Peng is a diplomat responsible for African affairs, and he is said to be the most respected official by President Xi Jinping.

SAUTI KUBWA has been informed that the Chinese Foreign Minister conveys a message to President Magufuli from President Jinping stating that China is pleased to assist Tanzania – financially and professionally on some of the major strategic projects that have been delayed due to lack of domestic funding.

The Magufuli administration has been pushing for the completion of these mega-projects by using local funding, a situation that now seems to overburden the government following insufficient tax collections.

On 7 June 2019, President Magufuli in his meeting with businessmen held at the State House, in Dar es Salaam, told the invited guests that among the conditions of the contract for the construction of the Bagamoyo port is the prohibition of Tanzania to develop any port along the coast of Tanzania running from Tanga to Mtwara.

“These investors come with strange terms and it is only a madman that can accept them,” said President Magufuli, expressing outrage at the terms, which have never been made public.

He further said that after investing in the port, the investors wanted the government not to collect any revenue from the project, adding that “even the Tanzania Revenue Authority (TRA) is not allowed to step on the Bagamoyo port area when operations begin.”

President Magufuli went on to say that the Chinese wanted government guarantees and that they would not be asked for any shilling within 33 years of investment. He also said the investors wanted to be given a land tenure agreement for more than the 99 years allowed by state law.

In addition to President Magufuli, former Minister of Works, Communications and Transport Isaac Kamwele said part of the Bagamoyo Port agreement required the government to pay the investor for the cost incurred in excavating the port. “These are very strange conditions,” he said.

Kamwele went on to explain that the Chinese investors also opposed the rehabilitation of the Tanga Port which is a vital outlet link to the oil pipeline project from Hoima, in Uganda, to Tanga, in Tanzania. Kamwele is not in President Magufuli’s current cabinet.

The Director General of the Tanzania Ports Authority (TPA), Deusdedith Kakoko, speaking about Bagamoyo Port, said that the Chinese investor had imposed “extraordinary” restrictions related to port construction and its operation, including income tax, institutional tax, value added tax, income tax for individuals, local government levies and property taxes.

He also said that the investor had imposed strict conditions on land levy, workers’ compensation tax, skills development tax, customs tax and value added tax (VAT).

President Magufuli, along with these and other executives, has been “criticizing” the agreement which was the reason for its being set aside.
It is not yet known at this time what will be done as a way forward, but it is likely that, either the investor will abandon some conditions or the government will have to surrender.  

SAUTI KUBWA has contacted the leadership of China Merchants Holding International, headquartered in Hong Kong, and was informed that President Magufuli may have been misled on the construction of the Bagamoyo Port, as many of the terms of the contract are not as reported to the public.

The investors said that one of the conditions of the project played a key role in ensuring the safety of the investor’s money and resources so as not to incur losses, especially due to policy and political changes, especially in the event of leadership changes.

That they proposed to be granted a 42-year warranty so that they could have the opportunity and greater freedom to make a significant investment and that they wanted a specific law to be enacted to protect industries that would be built by them or other partners.

They also called for the establishment of a business council chaired by the President of Tanzania and sectoral members and that all human resource needs would be covered by Tanzanian employees by 70%.

The investors said that, in the contract, they promised to fund the construction of several strategic factories to “feed” the port with enough goods that would be exported outside Tanzania for greater trade.

They also had strategies in place to ensure that once the port and factories were operational, they would be registered on the Dar es Salaam Stock Exchange (DSE) for public ownership, thus being more profitable for the individual and the government as a whole.