PRESS RELEASE : £373 million support to put UK exporters at heart of Zanzibar infrastructure upgrades [July 2023]

The press release issued by the Foreign Office on 6 July 2023.

UK exporters are expected to win contracts equivalent to over £100m after UK Export Finance unlocks financing for historic road and airport upgrades across Zanzibar, Tanzania.

• UK Export Finance underwrites €422 million of financing – equivalent to £373 million – for historic upgrades to 103km of Zanzibar’s road network and to Pemba Airport
• UK exporters are expected to win supply contracts equivalent to more than £100 million for these transformational projects
• Infrastructure upgrades set to boost Zanzibar’s island economy, which draws around a quarter of its annual GDP from tourism

UK government backing has enabled a financing package of €422 million – equivalent to £373 million – for transformational infrastructure projects driven by UK exporters across Zanzibar, Tanzania.

The financing was underwritten by UK Export Finance (UKEF), the UK government’s export credit agency, and enables two major projects: a historic upgrade to Pemba Airport – the smaller of two airports on the Zanzibar archipelago – and improvements to 103km of roads which will support connectivity and prosperity across Pemba and Unguja islands.

UKEF worked with Citi to unlock €180 million in loans for the airport upgrade and with Deutsche Bank to enable €242 million in loans for the road improvements. These projects will be completed through strategic joint ventures, with Propav Infraestructuras leading and collaborating with Mecco Ltd.

The terms of UKEF’s backing mean that these major projects are expected to create over £100 million in export opportunities for UK companies. This is a significant achievement in the context of UK exports to the whole of Tanzania, which totaled £275 million last year. This development will be a boost for the UK’s construction sector in particular, supporting this government’s priority of growing the economy.

Nigel Huddleston, Minister for International Trade, said:

Good local infrastructure is key to encouraging businesses to invest and work with local suppliers. This deal will support crucial development across Zanzibar, unlock new opportunities for UK companies in Africa, and grow sectors that will create jobs and boost the economy across our nations.

David Concar, British High Commissioner to Tanzania, said:

I couldn’t be more proud of this partnership. Developing countries need access to affordable infrastructure financing from reliable partners – and that is exactly what this initiative will deliver.

It underscores the UK government’s commitment to working in partnership with Tanzania to support inclusive, sustainable economic development, including on the islands of Zanzibar. Congratulations to UK Export Finance, Tanzania’s Ministry of Finance and Planning, the Government of Zanzibar and all other partners to the project for collaborating with such keen purpose to unlock this opportunity.

The works are a milestone in UK support for Commonwealth country Tanzania, improving land transport across Zanzibar and creating new horizons for trade on the archipelago.

Improvements at Pemba Airport will transform the domestic facility into a hub for international flights, which currently can only land on Unguja. By allowing overseas passengers to reach Pemba Island directly, the new project will unlock the economic potential of the second largest island in the Zanzibar archipelago.

The works are expected to substantially increase passenger capacity by extending the runway, adding new terminal buildings, and introducing other new infrastructure including a control tower. This will create opportunities for major new business and foreign investment in Zanzibar, whose vibrant tourism sector already contributes to around a quarter of the islands’ annual income.

The UK-enabled road upgrades across Unguja and Pemba – the archipelago’s two largest islands – will expand three major roads to four lanes each whilst fitting them with street lighting and additional paving. This is expected to reduce congestion whilst improving connectivity and safety.

Hon. Dr. Mwigulu Lameck Nchemba, Minister of Finance and Planning of the United Republic of Tanzania, said:

I would like to emphasize the significant role that signing the loan agreements holds in financing infrastructure projects. These agreements will enable us to address critical infrastructure needs, boost tourism and improve the quality of life for our citizens.

By securing this financing, we can embark on vital infrastructure development that will lay the foundation for a prosperous and sustainable future.

Hon. Dr. Saada Mkuya Salum, Minister of State, President’s Office Finance and Planning of the Revolutionary Government of Zanzibar, said:

These loan agreements are not just a transaction, but a strategic step towards the realization of our nation’s goals and aspirations. This financial infusion will empower our government, fostering economic growth and enabling innovative ventures through completion of these two crucial projects.

Cristiano Becker Hees, Financial Structuring and Institutional Relations Director of Propav Infraestructuras, said:

We are excited to be part of these two ambitious projects that will have a significant positive impact. The expansion of Pemba Airport will create an international gateway, generating local employment and boosting regional trade.

Simultaneously, the construction of 103km of roads in Zanzibar will enhance mobility and connectivity, driving economic growth. We take great pride in our involvement, working alongside esteemed British companies to ensure the quality of these projects.

The deal also comes following the introduction last month of the UK’s new post-Brexit Developing Countries Trading Scheme (DCTS). The Scheme removes or reduces tariffs on UK trade with 65 countries that are home to over 3.3 billion people, including Tanzania. This allows developing countries greater access to the UK market than was possible under previous, EU-led regulatory frameworks.