June 7 (Bloomberg) -- Tanzania is in talks with Chinese, Indian and Israeli companies to provide water services in partnership with the government after a previous attempt at privatization failed, the Water Ministry said.
China Machinery Engineering Corp. signed a memorandum of understanding with the state for water-supply and sewage projects worth about $500 million in the commercial capital, Dar es Salaam, and the northern city of Arusha, said Yohana Monjesa, director of urban water supply. Discussions have also been held with Wapcos Ltd. and Overseas Infrastructure Alliance Ltd. of India and other companies, he said.
The ministry has been in talks since March with Kadima, Israel-based IDE Technologies Ltd., one of the world’s three largest manufacturers of desalination plants, about a potential project in Dar es Salaam, Monjesa said. A pilot program is planned, though there are no estimates on the costs, he said.
“The Ministry of Water is currently not working with the private sector on providing water but these projects could change that,” Monjesa said in an interview in Dar es Salaam on June 5. “We are trying to promote public-private partnerships because we haven’t seen much interest from the private sector.”
Tanzania, about a third of which is either arid or semi-arid, provides water to 86 percent of its urban population and 57 percent of its rural residents, according to the ministry.
The East African nation plans to increase the provision in rural areas to 90 percent by 2025, according to a plan announced by President Jakaya Kikwete on May 24. More than half the illnesses contracted by Tanzanians are from water-borne diseases, according to the government.
The main challenges the country faces in providing water include the scarcity of the resource, which has been diminishing with climate change, and providing water to regions of the country that don’t have access to surface groundwater or where water is unfit for human consumption, Monjesa said.
The government has no plans to privatize water supply in the near future, he said, following a dispute in 2005 with a British company over a contract to run Dar es Salaam’s water utility.
City Water Services, a joint venture led by Dorking, England-based Biwater Plc and a group of investors, was awarded a 10-year management deal to run the system in 2003. Tanzania terminated the deal two years later, saying City Water failed to address water shortages, expand the distribution network, or increase revenue collection as agreed in the contract.
The International Centre for the Settlement of Investment Disputes in 2008 dismissed Biwater’s request for $20 million from Tanzania. The company said at the time that the tribunal found the country violated some aspects of a bilateral investment treaty with the U.K., which meant the company deserved compensation.
“It is currently the obligation of the country to invest in its water supply,” Monjesa said. “In my opinion, it is not appropriate to privatize the water supply at this time.”
Tanzania will receive 71.3 million euros ($95 million) in funding from the European Union and German for sewage and water projects in the country, the EU said in December.
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