Executive Summary
Tanzania's FYDP IV ambition of mobilising TZS 170 trillion through PPP over five years is arithmetically impossible unless the government immediately and substantially increases the budget allocated to PPP project preparation.
This research paper develops a scientific, data-driven argument for why the Government of Tanzania must allocate adequate resources to Public-Private Partnership (PPP) project preparation under FYDP IV (2026/27–2030/31). The analysis is grounded in three converging bodies of evidence: the quantitative record of FYDP III PPP performance, the fiscal architecture of FYDP IV as articulated by the PPP Centre (PPPC), and the project finance structural framework developed by TICGL's Economic Research & Advisory Division (TERI).
History is unambiguous — FYDP III set a PPP target of TZS 21 trillion but delivered only TZS 9 trillion (43%) because PPPC was given TZS 5 billion over five years — just TZS 1 billion per year — against a World Bank benchmark preparation cost of TZS 420 billion. Tanzania under-invested in preparation by a factor of 84:1.
If preparation cost is benchmarked at 2% of total project value (World Bank standard), and the FYDP IV PPP target is TZS 170 trillion, then the minimum scientifically-justified preparation budget is TZS 3.4 trillion (≈TZS 680 billion/year). Every shilling withheld from this preparation budget reduces by at least 50 shillings the PPP capital that can be mobilised. The opportunity cost of under-preparing is catastrophically high.
FYDP IV now sets a PPP target eight times larger than FYDP III. Investing TZS 680 billion per year to unlock TZS 34 trillion in annual PPP investment yields a 50:1 return — one of the most defensible public expenditure ratios in any infrastructure financing system anywhere in the world.
1. The FYDP IV Financing Architecture: A Mathematical Framework
1.1 The Numbers at a Glance
The FYDP IV financing framework, as confirmed by PPPC and the Ministry of Finance, is structured around the following primary parameters. These figures are not aspirational — they are the official planning baseline against which PPP delivery must be measured.
These parameters derive from a clear analytical chain: the FYDP IV total programme budget of TZS 477 trillion, of which 70% (TZS 334 trillion) is assigned to the private sector, and 51% of that (using FYDP III trend) is targeted as PPP — giving TZS 170 trillion over five years, or TZS 34 trillion annually.
FYDP IV Budget Composition
Distribution of TZS 477 Trillion total budget by financing source
FYDP III vs FYDP IV — Scale of Ambition
Total budget, private sector share, and PPP target comparison (TZS Trillions)
1.2 The FYDP III Baseline: What Actually Happened
Before projecting forward, it is essential to establish the evidential baseline from FYDP III. The table below synthesises the available data on PPP performance during the previous plan period.
| Indicator | FYDP III Target | FYDP III Actual | Delivery Rate |
|---|---|---|---|
| Total Plan Budget | TZS 114.9T | — | — |
| Private Sector Share | ~TZS 40T (35%) | ~TZS 40T | ~100% |
| PPP Target (51% of private) | TZS 21.0T | TZS 9.0T | 43% |
| PPPC Budget (5 years) | TZS 420B (WB benchmark) | TZS 5B allocated | 1.2% of benchmark |
| PPPC Annual Budget | TZS 84B/year (WB benchmark) | TZS 1B/year (actual) | 1.2% of benchmark |
| PPP Gap (undelivered) | — | TZS 12T undelivered | — |
Source: PPPC Annual Report 2024; TERI/TICGL analysis. WB = World Bank benchmark preparation cost at 2% of project value.
FYDP III PPP: Target vs. Actual Delivery
Illustrating the TZS 12 trillion delivery gap and the catastrophic under-resourcing of PPPC (TZS Billions)
PPPC was given TZS 1 billion per year. The World Bank benchmark for project preparation is 2% of total project value. To prepare TZS 21 trillion in FYDP III PPP projects, PPPC required TZS 420 billion. It received TZS 5 billion. The shortfall is not a management failure — it is a resource starvation that made the PPP target arithmetically unreachable from Day 1.
2. The Scientific Calculation: What FYDP IV PPP Requires
2.1 Applying the World Bank 2% Benchmark
The World Bank's Private Participation in Infrastructure (PPI) research consistently establishes that successful PPP project preparation — encompassing feasibility studies, technical assessments, environmental and social impact studies, legal documentation, procurement support, and financial modelling — requires a minimum of 2% of total project capital value. This benchmark is validated across Africa, Asia, and Latin America and is the standard applied by AfDB, IFC, and JICA in their infrastructure advisory mandates.
| Step / Variable | Calculation | Result |
|---|---|---|
| FYDP IV Total Budget | Given | TZS 477 Trillion |
| Private Sector Share (70%) | 477T × 70% | TZS 334 Trillion |
| PPP Share of Private (51% — FYDP III trend) | 334T × 51% | TZS 170 Trillion |
| Annual PPP Delivery Target | 170T ÷ 5 years | TZS 34 Trillion/year |
| World Bank Preparation Benchmark | Standard | 2% of project value |
| Total Preparation Budget Required (5 years) | 170T × 2% | TZS 3.4 Trillion |
| Annual Preparation Budget Required | 3.4T ÷ 5 years | TZS 680 Billion/year |
| FYDP III: Actual Annual Budget Allocated | Historical | TZS 1 Billion/year |
| FYDP IV Preparation Return Ratio | 34T ÷ 680B | 50:1 per year |
| 5-Year ROI of Preparation Investment | 170T ÷ 3.4T | 50:1 cumulative |
Source: TERI/TICGL calculation applying World Bank PPI 2% benchmark to FYDP IV official parameters.
Annual Preparation Budget: Required vs FYDP III Actual
TZS Billions — the 680× preparation funding gap
50:1 Return — Preparation Investment vs PPP Capital Unlocked
Annual figures (TZS Billions) showing leverage effect
2.2 The Investment Thesis: Why TZS 680 Billion per Year is Not Expensive
The fiscal argument for the TZS 680 billion annual preparation budget is overwhelmingly positive. The analytical logic proceeds as follows:
- To deliver TZS 170 trillion in PPP over five years, Tanzania must deliver TZS 34 trillion every year.
- The World Bank benchmark requires investing 2% of project value in preparation: 2% × TZS 34T = TZS 680 billion per year.
- The preparation investment unlocks TZS 34 trillion in private capital per year.
- The return ratio is 50:1 annually — for every TZS 1 billion in preparation, TZS 50 billion in PPP investment is mobilised.
- Over five years: TZS 3.4 trillion in cumulative preparation expenditure unlocks TZS 170 trillion in private infrastructure investment.
Investing TZS 680 billion/year to unlock TZS 34 trillion/year in PPP capital yields a return ratio of 50:1. Over five years, a TZS 3.4 trillion preparation budget unlocks TZS 170 trillion in private investment. No other category of government expenditure delivers a 50:1 catalytic return. This is not generosity towards PPPC — it is the minimum rational investment to protect the entire FYDP IV private sector mobilisation strategy.
2.3 The Cost of Not Investing: Repeating FYDP III
If the government replicates the FYDP III funding pattern — allocating TZS 1 billion per year to PPPC — the scientific projection of FYDP IV PPP performance is straightforward. Applying the FYDP III delivery ratio of 43% to the FYDP IV target:
FYDP IV PPP Delivery Scenarios: Adequately Funded vs. Status Quo Under-Investment
TZS Trillions — Projected annual PPP delivery under two preparation budget scenarios (2026/27–2030/31)
The 43% delivery rate under FYDP III was not primarily a consequence of investor disinterest or regulatory barriers. As PPPC's own presentation to the April 2026 National Capacity Building Workshop makes clear, the leading structural cause was the inadequate preparation budget that prevented contracting authorities from developing bankable project documentation. The problem is known, diagnosed, and solvable.
3. The Policy Argument: Science-Based Recommendations
3.1 The Structural Root Causes
Tanzania's PPP underperformance during FYDP III is multi-causal, but the dominant structural driver is clear and consistent across PPPC's institutional diagnosis and TICGL's project finance research.
| # | Root Cause | Consequence |
|---|---|---|
| 1 | PPPC budget too small to fund feasibility studies | Projects remain undocumented; no bankable prospectus for investors |
| 2 | Contracting Authorities lack PPP Desks (required by PPP Act) | No institutional champion to develop projects at ministry level |
| 3 | Government funds projects that should be PPP via budget | PPP pipeline dries up; private capital is crowded out |
| 4 | Investors cannot access 10–25 year local currency debt | Even willing investors cannot achieve financial close |
| 5 | TANESCO off-taker risk unresolved | Energy PPPs stall; majority of pipeline remains unbankable |
| 6 | Capital markets too shallow to absorb infrastructure bonds | DSE at 11% GDP vs 20% SSA average; pension funds locked in govt securities |
| 7 | PPP targets set as political aspiration, not costed programming | Resource allocation divorced from delivery mathematics |
Root Cause Impact Assessment
Relative severity of structural PPP delivery barriers in Tanzania (expert assessment, 0–10 scale)
Tanzania Capital Market Depth
DSE market cap, pension fund AUM & infrastructure allocation vs. SSA benchmarks (% of GDP)
3.2 Science-Based Policy Recommendations
The following recommendations are grounded in quantitative evidence, World Bank and AfDB benchmarks, and the institutional analysis provided by PPPC and TICGL. They are presented in order of priority and feasibility.
Allocate TZS 3.4 Trillion to PPP Project Preparation over FYDP IV
The government must allocate a minimum of TZS 680 billion per year — TZS 3.4 trillion over the FYDP IV period — to PPPC and contracting authorities for PPP project preparation. This is not discretionary. It is the scientifically-determined minimum required to produce a pipeline of bankable projects sufficient to meet the TZS 170 trillion target. The budget should be ring-fenced in the Medium-Term Expenditure Framework (MTEF) and protected from across-the-board budget compression.
Establish a Tanzania Infrastructure Viability Gap Fund (TIVF)
For social sector PPPs — education, health, water, food security, rural development — commercial returns are inherently insufficient to attract private capital without government support. The government must establish a TIVF capitalised at a minimum of TZS 5–8 trillion, providing 20–40% capex grants to make social sector PPPs bankable. India's National Infrastructure Pipeline model, which has used Viability Gap Funding to mobilise USD 50+ billion in social infrastructure PPPs, is the most applicable precedent.
Mandate All Contracting Authorities to Establish PPP Desks by FY2026/27
Section 4(3) of the PPP Act (Cap. 103) and the PPP Regulations 2020 already require contracting authorities to establish PPP Desks. Compliance is demonstrably low. The government should condition sector development budget allocations on evidence of a functional PPP Desk — creating a direct fiscal incentive for compliance. PPPC should be mandated to certify PPP Desk functionality before sector ministries can access the TIVF.
Reform SSRA Investment Guidelines — Unlock Pension Fund Capital
Tanzania's pension funds hold TZS 21.4 trillion in AUM. More than 85% is locked in government securities. Amending SSRA investment guidelines to allow 10–15% infrastructure allocation would unlock TZS 2.1–3.2 trillion in long-tenor domestic capital immediately — without any additional sovereign borrowing. Kenya's RBA, South Africa's FSCA, and India's PFRDA have all done this. Tanzania is behind the regional curve on a reform that requires only a statutory instrument, no fiscal expenditure.
Integrate PPP Delivery KPIs into Ministerial Performance Contracts
The government should embed PPP project development and delivery KPIs into the performance contracts of all Permanent Secretaries in ministries with significant infrastructure mandates (Energy, Transport, Water, Education, Health, Agriculture). Annual performance reviews should include a mandatory assessment of PPP pipeline development progress. This aligns PPPC's institutional mandate with individual ministerial accountability — creating a distributed PPP development culture rather than centralising all responsibility in one institution.
Tanzania Pension Fund AUM — Current Allocation vs. Infrastructure Unlock Potential
TZS Trillions — if SSRA guidelines allow 10–15% infrastructure allocation
FYDP III total budget was TZS 114.9 trillion. FYDP IV is TZS 477 trillion — 4.2× larger. The PPP target under FYDP III was TZS 21 trillion. The PPP target under FYDP IV is TZS 170 trillion — 8.1× larger. Tanzania is setting an eight-fold increase in PPP ambition while still operating under the same under-resourced PPPC institutional framework that delivered only 43% of the lower target.