The Tanzania Electric Supply Company Limited (TANESCO) was established in 1964 and has since remained a vertically integrated monopoly responsible for the generation, transmission and distribution of electricity. While this model was suitable during the early phases of electrification, it is increasingly ill-suited to meet the country’s growing energy demands, technological advancements, and investment needs. Unbundling TANESCO into separate entities for generation, transmission, and distribution presents a compelling pathway towards improving efficiency, attracting private sector investment, and enhancing service delivery across the energy value chain.
One of the strongest arguments for unbundling TANESCO is the need to attract private investment, particularly in power generation. As a single, state-owned utility, TANESCO has limited capacity to finance the extensive infrastructure upgrades required to meet the rising demand for electricity.
Unbundling would create an independent generation sector, enabling Independent Power Producers (IPPs) to enter the market more freely. Clear separation would also eliminate potential conflicts of interest in power purchasing and encourage competition, which can ultimately lead to lower costs and improved reliability.
Secondly, efficiency and performance improvements are more achievable in an unbundled system. Specialised companies focusing on generation, transmission or distribution can develop targeted competencies and greater accountability. In the current centralised model, inefficiencies in one segment ripple across the entire supply chain. For example, technical losses in distribution or underinvestment in transmission can constrain new generation capacity, regardless of demand. Unbundling would allow each segment to be managed according to its specific technical and commercial requirements, leading to better oversight, performance benchmarking, and transparency.
Moreover, regulatory clarity and market transparency are enhanced when responsibilities are clearly delineated. With a vertically integrated utility, it is difficult for regulators and stakeholders to assess the cost structures and performance of each component of the energy supply chain. By separating the functions, the Energy and Water Utilities Regulatory Authority (EWURA) would be better positioned to set cost-reflective tariffs, monitor service delivery, and hold individual entities accountable.
Another major advantage is the facilitation of regional power trade. As Tanzania aims to become a power hub in East Africa and expand its interconnections with countries such as Kenya, Rwanda, Zambia, and Uganda, an independent transmission company would be better placed to serve as a neutral market operator. It would ensure open, non-discriminatory access to the grid for both domestic and foreign power producers, enabling Tanzania to maximise the benefits of regional integration.
Critics may argue that unbundling could increase coordination costs and pose risks if not carefully managed. However, international experience—such as in Kenya, Nigeria, and South Africa—demonstrates that, with an empowered regulatory body (EWURA) and phased implementation, unbundling can lead to long-term sectoral gains.
In conclusion, unbundling TANESCO is a necessary reform to modernise Tanzania’s power sector. It can unlock new investments, improve reliability, and prepare the country for a more dynamic, decentralised, and sustainable energy future. The time to act is now—through bold, deliberate, and transparent reform.
Elly Manjale is an economic, business and management consultant based in Arusha who writes on economic, business, social and political issues
Email: emanjale@gmail.com
