UNCDF: Tanga UWASA Issues a Historic Green Bond for Water Infrastructure

The bond represents an important capital market transaction for the city of Tanga — and the whole of Tanzania,.

The Tanga Urban Water Supply and Sanitation Authority (Tanga UWASA) has issued a 10-year water infrastructure green revenue bond valued at TZS53.12bn ($19.6bn). 

The bond will raise funding to expand water production, treatment, and distribution capacity from 45,000 cubic meters per day to 60,000, improving access to clean water for some 6,000 households. The proceeds will fund environmental conservation activities and protect the Zigi river and surrounds.

The Subnational Water Green Bond transaction is the first of its kind in East Africa, and aims to assist Tanga UWASA, an autonomous subnational public entity, to attract capital for infrastructure improvements and new investments.

Philip Isdor Mpango, the vice-president of the United Republic of Tanzania, thanked UNCDF for its technical and financial support.

“We’re not merely financing infrastructure and development initiatives,” said Zlatan Milisic, UN Resident Coordinator for Tanzania, “…(but) setting a global benchmark for sustainable investment vehicles.

Nicodemus Mkama, CEO of the Capital Markets and Securities Authority, said:”This innovative contract has elements that affect public institutions; it also lays a solid foundation to show how institutions and local government authorities can get project funding to finance projects with the ability to operate themselves through the capital markets.”

Peter Malika, chief technical advisor for UNCDF in Tanzania, acknowledged the support, collaboration, and guidance from the National Municipal Taskforce, comprised of members from the 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.

With the prospectus issuance and publication, the Tanga water bond is open to international and domestic investors. The Dar es Salaam stock exchange lists the Tanga water bond.

This transaction serves as a replicable model for municipalities and sub-national government entities to follow to gain access domestic capital markets and finance income-generating local projects. This avoids the need for sovereign guarantees, and reduces the national debt pressure on governments.

Financial tools like green bonds lower investment risks. A-rated third-party guarantee facilities help local and regional governments get the money they need for sustainable national development priorities. The UN Capital Development Fund, together with United Cities and Local Governments, leads the Malaga Coalition to create a financial ecosystem. The Tanga Bond is a positive example of the kind.

The Tanzanian government says the bond aligns with international standards, the government’s Alternative Project Financing Strategy (APF), the Five-Year Development Plan slated to end in 2026, the Dar es Salaam Stock Exchange Green Bond Listing Rules, and the International Capital Markets Association’s (ICMA) Green Bond Principles 2021 (GBP).

The government is committed to achieving this objective, including directions from President Samia Suluhu Hassan. The National Municipal Task Force is one example. The Ministry of Finance and Ministry of Local Governments chair the task force, which includes key institutions such as the central bank, capital markets regulator, Treasury registrar, and Dar es Salaam Stock Exchange.

All regulatory bodies, including the Ministry of Water, the Ministry of Finance, and the Capital Market and Securities Authority (CMSA), have approved the Tanga water bond.

In the transaction, the UN Capital Development Fund (UNCDF) played a critical role as the lead technical and financial partner to Tanga UWASA. UNCDF, with its unique investment mandate, provides capital deployment in the form of commercial and concessional capital, guarantee facilities, technical expertise, policy influence, capacity building, sensitization, awareness, and investment advisory to its government partners.

It is a demonstration of its capacities to support governments to mobilise local resources to finance sustainable development in line with national agenda and international commitments, including Agenda 2023, SDGs — Addis Ababa Action Agenda, Paris Agreement, and Africa 2043.

More information: https://www.uncdf.org/article/8664/tanga-uwasa-issues-historic-water-infrastructure-green-bond-valued-at-tzs-5312-billion