Chinese firm to acquire 49pc stake in Air Tanzania

The Tanzania government is quietly holding talks with the Chinese Development Bank with a view to selling its 49 per cent share in the troubled Air Tanzania Company Ltd to a private Chinese firm.

Investigations by The EastAfrican have found that the deal will see Hong Kong-based China Sonangol International Holdings Ltd buy shares in the airline and inject funds in order to buy brand-new aircraft.

Sonangol is also expected to fund the operations of the airline, which is currently struggling to regain its reputation and position in the regional and international market.

Reliable government sources told The EastAfrican that high-level talks were held in Dar es Salaam last week between the bank and senior government officials, with President Jakaya Kikwete being later notified of the discussions.

The sources said that neither the senior management nor the board of directors of Air Tanzania were present during the negotiations, which continue to be cloaked in secrecy.

Investigations by The EastAfrican indicate that the purchase of the government’s 49 per cent share by Sonangol will be funded by the Chinese Development Bank, which will also guarantee loans taken up by the airline to buy more Airbus and Boeing planes.

Hezekiah Chibulunje, Deputy Minister for Infrastructure Development, confirmed to The EastAfrican in Dar es Salaam last week that the process of negotiation of a share sale had commenced at the highest levels of government.

Said the deputy minister: “Until such time that the key terms and conditions thereof have been finalised, any further comment will be premature.”

China Sonangol International Holdings Ltd, which was established in 2004, mainly engages in oil, gas and minerals investment and exploration, crude oil trading and large-scale national reconstruction projects.

Headquartered in Hong Kong, the company also has branch offices in mainland China, Africa and Latin America and operates the oil refinery in Angola as well as chartered airlines in Angola, the US and the UK.

Chen Yuan, governor of the China Development Bank, and his delegation were in Tanzania last week to discuss co-operation in finance, infrastructure, energy, mining and revitalisation of the Tanzania-Zambia Railways (Tazara).

Mr Yuan confirmed that the bank would be funding the Air Tanzania deal and added, “China Sonangol has also entered into agreement with Tanzania to develop Terminal III of Julius Nyerere International Airport.” He said the China Development Bank may also consider extending support in the form of equity.

The three CDB team leaders in Tanzania have already left the country for China to finalise the arrangements for Sonangol International Holdings Ltd to acquire the shares of Air Tanzania.

The team leaders are expected back in Tanzania in two weeks’ time.

China Sonangol also has a 30 per cent shareholding in Angola’s SonAir airline.

In February 2007, China Sonangol ordered three Airbus Corporate Jetliners, becoming the first Chinese customers for the aircraft, in addition to two Legacy Embraer 600 executive jets.

Xia Na, first secretary of economic affairs at the embassy of China in Tanzania, told The EastAfrican in Dar es Salaam last week that while the CDB would finance some projects in the country, the embassy is not aware of plans by the Chinese firm to acquire equity in the airline.

The Tanzania government and South African Airways jointly own Air Tanzania, which was privatised to the South African carrier in 2002 after the latter acquired 49 per cent shares for $20 million.

Eight potential bidders — Aero Asia (Pakistan), Air Consult (Ireland), Comair (South Africa), Gulf Air Falcon (UAE), Kenya Airways, Nationwide (SA), Precision Air (Tanzania), and South African Airways — had competed for shares in the airline.

The government retained the 51 per cent of the shares, with the intention of selling a further 10 per cent to a Tanzania investor later.