Evaluation of Strategic Investments or Projects - We are being sold fried ice cream

sheikh shaaban · 2020-09-23T11:33:05+00:00

If you focus on the SGR project nobody speaks of its economic and financial feasibility. It is just extreme politics; either we know nothing[CHADEMA] or these are strategic projects for the this and next generations of Tanzanians [CCM]. Both positions don't even attempt to address the crux of the matter which is - it is feasible for Tanzania to venture into such a giant project right now? To answer this question we need to project future cash inflows of the completed project over a period of say 15 years and after discounting it to the present value of today compare it against the investment we need to make to complete the project. My view is these numbers are not there and perhaps nobody has thought about them! Kadogosa simply gives rough estimates for only track laying. A rail system is much much more than track laying. It also involves signaling and control systems [which are not cheap]; constructions of stations and other permanent structures; purchase of wagons and locomotives; Investment in Human Resources and their training; and finally provision of initial working capital to keep operations of say the first three months afloat. But more importantly, we still have our legacy rail system built by the Germans, what happens to it? The central rail system will have to be killed as you cant run both systems; one[SGR] will canibalise the other [Old Rail System]. The depreciated cost of the old system if it can be disposed [chuma chakavu] will come in as a positive cash inflow of the SGR but the loss of traffic to the old system will have to be accounted for as a loss too. Intelligent number crunching needed here. Similarly, there will be a trade off with the Road Transport as bulkier goods will be moved to the SGR [positive] and there will be less damage on our roads[also positive and needs to be computed] but there will also be lost revenue from the Road system which needs to be accounted for as a cost of the SGR. Now, where is the revenue stream that will justify investment in the TShs 7 trillion that is attributed to track laying only mentioned by Kadogosa? And of course triple that if you include the other elements of the system not currently being spoken about. Tomatoes from Dodoma to Dar es Salaam will not be bringing in any significant revenue, if we are going to be honest. This revenue must come from the DRC, Rwanda and Uganda. To be successful in attracting that rail traffic there must be efficiency built into not only the rail system but also the Ports. Recall, in the 70s it was Railways and Harbors Corporation! The two are integrated which is what we shall need to do to enhance efficiencies in both systems. I have figures [cant share freely, because I invested my time and energy in the template design and data collection] and my analysis leads me to conclude that the SGR is not a worthwhile project. We were better off refurbishing the old rail system and enhance its capacity to say 80 percent utilization and after some time utilize its cashflows to invest in a new rail system. That is why I state we are being sold fried ice cream! Otherwise, lets challenge the Ministry of Finance to make public the feasibility study of the SGR project [and by extension all other strategic projects], if at all it was done! I suspect it was not done. To make informed decisions this is a step we cannot ignore.

Thread starter sheikh shaaban
Start date Sep 23, 2020
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sheikh shaaban

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Evaluation of Strategic Investments or Projects - We are being sold fried ice cream

sheikh shaaban

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