Prime
The case for accelerating the unbundling of Tanesco
For decades, Tanzania’s energy sector has been trapped in a cycle of bold promises and timid execution. Power plants, transmission lines and distribution networks have all remained under the umbrella of a single, loss making parastatal, Tanesco, even as the rest of the world embraces private participation and competition. The recent Cabinet approval of private sector participation in electricity transmission is a welcome step—but it is not enough. The truth is stark: without urgent, structural unbundling of Tanesco, Tanzania will forfeit its economic future.
In the early 2000s, visionaries projected over 25GW of installed capacity by 2025. Today, we hover around 3GW – thanks to JNHPP. Even the government’s modest 2020 Power Master Plan targets 20GW by 2044—yet at our current trajectory, I doubt if we’ll scrape even 10GW. The math is brutal: $50 billion is needed over 25 years, including $28 billion for generation alone. Where will this come from? Since 2020, only JNHPP has moved the needle, while legacy plants like the 200MW Songas facility are decommissioned. Tanesco’s balance sheet can hardly bear this burden.
A decade ago, Tanesco’s own 2015 Strategic Plan laid out a transformative five-year roadmap to transform the power sector from stagnation. The plan called for full unbundling of the sector: envisioning IPPs dominating generation to harness private capital and scale capacity; PPPs modernising transmission infrastructure and expanding grid resilience; and competitive distribution through zonal utilities (Tanesco East and West companies) to drive efficiency, customer service, and revenue growth.
None of that has materialised. Instead, we have a fragmented grid—patches of lines on the map—and a state monopoly struggling to keep lights on. Imagine the alternative: IPPs funding half the $28 billion generation gap, transmission firms competing to expand the 400kV backbone, and regional distributors racing to connect customers. This isn’t theory—it’s the proven template for powering emerging economies.
We now provide five data-driven imperatives for unbundling sooner rather than later:
One, slashing Tanesco’s debilitating 15 percent technical losses —which drain over around Sh700 billion annually—demands unbundling’s surgical precision. While outperforming Kenya and Rwanda, Tanzania’s losses are still 1.5 times the world’s best practice – 10 percent. Unbundling empowers focused solutions: distribution companies can deploy smart metering and anti-theft technologies, while transmission operators can reinforce grids to cut technical losses. Just a 5 percent reduction would recover Sh250 billion yearly—funding a new 100MW power plant annually.
Two, closing Tanzania’s $12.9 billion grid funding gap (by 2030) demands unbundling to mobilise private capital. Bundled monopolies repel investors through opaque cross-subsidies—evident in IPPs contributing just 12 percent (189MW) of Tanzania’s 3,092MW capacity versus Ghana’s 45 percent of 5,000MW. Unbundling enables commercial discipline: Morocco drew $5.6 billion for transmission via independent operator ONEE and Brazil unlocked tens of billions of dollars through post-unbundling auctions. Ring-fenced entities are imperative to de-risk projects.
Three, unbundling is the only way to establish precision tariffs and regulatory certainty. Bundled utilities blur cost allocation, inviting political interference and perpetuating massive subsidies ($1.3 billion/year in 2017). By contrast, unbundling empowers EWURA to set cost-reflective, segment-specific tariffs and penalise underperformers without systemic collapse. The results speak for themselves: Colombia slashed subsidies by 40 percent post-reform.
Four, unlocking East Africa’s power pool potential, Tanzania must establish an independent Transmission System Operator (TSO)—its 1,245 km of 400 kV lines and 939 km of 220 kV links to Zambia, Kenya, Rwanda, and Burundi remain constrained under a public monopoly. Without a TSO, third-party access is restricted and transparent wheeling charges are hindered. An independent operator would enable clear open-access rules, firm transfer capacities, and competitive trading, unleashing surplus power to flow regionally.
Five, unbundled markets worldwide consistently demonstrate higher rates of renewable energy penetration. Competitive bidding by generation companies for feed-in tariffs, paired with an independent TSO guaranteeing non-discriminatory grid access, will attract utility-scale solar, wind, and geothermal projects. This fosters innovation in smart-grid technologies, energy storage, and demand-side management—critical to achieving Tanzania’s 75 percent renewables target by 2030. This is how South Africa added up to 10GW of renewables via the unbundling of the power generation.
Tanzania cannot afford another year of delay—the bleeding is catastrophic. Each 12-month postponement costs: $150 million in preventable losses, 500MW of unrealised renewable capacity, and $200 million in missed export revenue. This is the brutal arithmetic of inaction—a tripartite haemorrhage suffocating our energy future.
To move forward, we need to legislate full unbundling, creating independent transmission and distribution entities. We need to launch competitive tenders for 400kV and 220kv corridors to showcase PPP viability. Finally, we need to empower EWURA with enforcement teeth and cost-reflective tariff models.
Taken together, we observe that evidence demonstrates that unbundling is not merely an administrative tweak but a foundational, transformative reform. It realigns incentives across the sector, unlocks crucial private capital, strengthens regulatory oversight, and unleashes innovation from end to end. The cabinet’s transmission move is a start—but only full unbundling will unleash Tanzania’s energy revolution.
The fact is that Tanesco’s monopoly is suffocating Tanzania’s growth. Unbundling Tanesco isn’t technical tinkering – it’s the master key to industrialisation.
