Tanzania has secured a US$250mn seven-year loan from a consortium of banks led by Stanbic Bank Tanzania and its parent bank Standard Bank, to finance a variety of infrastructure developments such as power and road projects.

The deal consists of funding from local and international commercial banks, as well as underwriting from multilateral financial institutions and commercial insurers.

It marks the first time Tanzania has sought commercial financing for long-term projects, and the deal may herald a change of attitude among African governments on how to meet their financing needs.

The Tanzanian minister for finance Mustafa Mkulo comments: “This transaction arranged by Stanbic Bank Tanzania is a testament of how a good partnership between the government and the private sector can benefit the nation. With this loan we aim to invest in infrastructure development especially in the areas of power and roads.”

Traditionally governments would opt to issue bonds to raise debt.

They would also rely on donor funding.

But with economic uncertainty in donor countries and a rapidly increasing need for high levels of infrastructure investment, African countries are set to turn to the commercial debt financing markets.

Donor aid reached its highest level in 2010, hitting US$128.7bn, a 6.5% increase over 2009.

However, there still remains a gap in what has been pledged and what has been received. African has only received US$11bn of the US$25bn promised in 2005 at the G8 summit in Gleneagles.

Commenting on the deal, Helmut Engelbrecht, Standard Bank Group’s head of investment banking in Africa, says: “Standard Bank Group was able to source, originate and sign up the deal because of our geographic footprint, established in-country presence and localised experience, and our relationships with the government and multilateral institutions. We are providing very favourable rates to the Tanzanian government in comparison to what other capital markets have to offer.”

Engelbrecht adds that the bank has indications that a number of African governments are looking to borrow commercially, which will “help to accelerate investment in development projects and infrastructure across the continent”.

One of the insurers selected to cover a US$50mn segment of the larger facility was the African Trade Insurance agency (ATI).

“Our unique structure – we are the only multilateral insurer with a Pan African focus – has helped us attract global financial and insurance partners who, in many instances would only invest in or insure a project with ATI’s participation,” comments George Otieno, ATI’s chief executive officer.