Bond Represents Historic Capital Market Transaction for Tanzania and the Region

The Tanga Urban Water Supply and Sanitation Authority (Tanga UWASA) today issued a 10-year water infrastructure green revenue bond valued at TZS 53.12 billion—a historic capital market transaction in representing a first of its kind Subnational Water Green Bond in Tanzanian and East African’s history.

The issuance of the Tanga water bond is intended to help Tanga UWASA—an autonomous subnational public entity—attract capital to finance improvement of existing and extend new infrastructure investment that would improve the water supply and sanitation services for the city of Tanga as well as nearby townships.

The Honorable Dr. Philip Isdor Mpango, the Vice President of the United Republic of Tanzania thanked UNCDF “for their technical and financial support and coordination role through the entire bond issuance process.”

“UNCDF is leading this transformative journey by showcasing its ability to build both national and local capacities through alternative financing instruments. Through the introduction of innovative financial mechanisms such as revenue bonds and thematic bonds; including green, blue, and social bonds, we are not merely financing infrastructure and development initiatives. Instead, we are setting a global benchmark for sustainable investment vehicles,” said Mr. Zlatan Milisic, UN Resident Coordinator for Tanzania.

“This innovative contract has elements that affect public institutions, it also lays a solid foundation to show the way to Institutions and Local Government Authorities how to get funds to finance projects with the ability to operate themselves, through the capital markets,” Nicodemus Mkama, CEO of Capital Markets and Securities Authority.

“UNCDF congratulates the Government of Tanzania for achieving this milestone of launching the Tanga Water infrastructure Green Bond, a national alternative financing mechanism template that can be used to achieve national development goals and to finance transformative development activities,” said Peter Malika, Chief Technical Advisor for UNCDF in Tanzania, “I acknowledge and appreciate the support, collaboration, and valuable guidance from the National Municipal Taskforce comprised of members from Ministry of Finance, Ministry of Water, Ministry of Local Government (PO-RALG), Capital Market and Securities Authority (CMSA), Dar es Salaam Stock Exchange, Bank of Tanzania, the office of the Treasury Registrar and representatives from Zanzibar.”

Financing garnered through the bond would support the expansion of water production, treatment and distribution capacity from 45,000 cubic meters per day to 60,000 cubic meters per day, which is projected to enhance access to safe and affordable clean water for roughly 6,000 new households or just over 26,000 people. The use of proceeds for the green element will fund environmental conservation activities and protecting the natural water sources of the Zigi river and surrounding villages.

With today’s issuance and the publication of the prospectus, the Tanga water bond is open to international and domestic subscribers. The Tanga water bond will be listed on the Dar es Salaam stock exchange in approximately two to three months’ time.

Link to the Prospectus HERE.

The significance of this transaction to the government of Tanzania and many in Sub-Saharan Africa is to serve as a replicable model for how municipalities, and sub-national government entities can access domestic capital markets to finance income generating local projects and development activities in local currency. This approach does not require the use of sovereign guarantee and hence reduces the pressure of governments on their national debt ceilings.

Local/subnational authorities traditionally face significant challenges accessing capital markets relative to national governments and the private sector. Innovative financial instruments, including green bonds, use appropriate governance structures that reduce investment risks, and A rated 3^rd party guarantee facilities have emerged as a powerful solution in supporting local/subnational authorities acquire capital to deliver on sustainable national development priorities. UN Capital Development Fund together with United Cities and Local Governments lead the Malaga Coalition for a financial ecosystem that works for cities and local governments. The Tanga Bond is a good example of the kind of scalable and systemic change promoted by the Coalition.

The central government of Tanzania has expressed its support for the bond, indicating that it aligns with international standards and the government’s Alternative Project Financing strategy (APF), Five-Year Development Plan slated to end in 2026, Dar es Salaam Stock Exchange Green Bond Listing Rules, and the International Capital Markets Association’s (ICMA) Green Bond Principles 2021 (“GBP”).

The success of this transaction was partly due to the commitment of the Tanzania government at the highest level to achieve this objective including directions from H.E. Samia Suluhu Hassan the President of United Republic of Tanzania and specific clearances by key government ministries and national institutions. The National Municipal Task Force is one example Chaired by the Ministry of Finance and Ministry of Local Governments and participation of key institutions such as the central bank, capital markets regulator, treasury registrar and, Dar es salaam StockStock Exchange.

The Tanga water bond has been approved by all regulatory bodies, including the Ministry of Water as well as the Ministry of Finance and Capital Market and Securities Authority (CMSA).

The UN Capital Development Fund (UNCDF) played a critical role as the lead technical and financial partner to Tanga UWASA in the transaction. With its unique investment mandate, UNCDF offers capital deployment in the form of commercial and concessional capital; guarantee facilities, as well as technical expertise, policy influence, capacity building, sensitization, awareness, investment advisory; to its government partners. It is a demonstration of its capacities to support governments to mobilize resources locally to finance sustainable development in line with their national agendas and international committments such as – Agenda 2023, SDGs – Addis Ababa Action Agenda, Paris Agreement, and Africa 2043.