Tanzania has suspended the construction of the $10-billion Bagamoyo port project. The project, which broke ground in 2015, would have been the largest gateway in East Africa and was a key component in China’s $900-billion Belt and Road Initiative, an ambitious transnational infrastructure building program.

Tanzanian President John Magufuli accused the Chinese project backers of presenting “exploitative and awkward” terms in exchange for financing. Chinese financiers set “tough conditions that can only be accepted by mad people,” Magufuli told local media.

“They told us once they build the port, there should be no other port to be built all the way from Tanga to Mtwara south,” Magufuli told a delegation of business people at State House in Dar es Salaam on June 14.

“They want us to give them a guarantee of 33 years and a lease of 99 years, and we should not question whoever comes to invest there once the port is operational. They want to take the land as their own but we have to compensate them for drilling construction of that port,” he said.

Magufuli also argued the construction of Bagamoyo port, whose foundation stone was laid by his predecessor Jakaya Kikwete, would undermine the ongoing $522-million expansion of Dar es Salaam port that would enable it triple its current capacity when complete by the end of 2019.

In addition, Magufuli said the $50-million given out to compensate those displaced by the new port project “did not reach the beneficiaries in Bagamoyo but was diverted to benefit few individuals in Dar es Salaam.”

Tanzania Ports Authority Director General Deusdedit Kakoko told a media briefing in mid-June the Chinese had also asked Tanzanian government to guarantee compensation for any loses during the project implementation and several tax waivers including lands tax, workers’ compensation tax, skills development levy and customs duty and Value Added Tax.

“Tax calculations and audits were set to be undertaken in China and this would have been possible because they would be controlling all cargo, port and logistics,” said Kakoko.

An initial project brief indicated the port was planned to occupy 800 hectare and set aside another 1,700 hectare for a Portside Industrial Zone, which would be developed under tripartite agreement of Government of Tanzania, China Merchants Holdings International from China and State Government Reserve Fund from Oman.

The new Bagamayo port would have handled nearly 20 times more cargo than the Dar es Salaam Port, with the first phase initially slated for completion in 2017.

China Merchants Holding International Co. Ltd of China was to provide the funding for the new port with an initial agreement signed in March 2013 during the visit of the Chinese President Xi Jinping as part of the $556-million infrastructure package deals. The agreement provided that at least $500 million of the package be set aside in 2013 to kick-start the project.

Former World Bank lead transport specialist Anil Bhandari previously said in an interview with this writer the new Bagamoyo port project is not sustainable under its current structure and can only attract business if developed as a regional maritime initiative.

“Bagamoyo port is too big for Tanzania and is too close to Dar es Salaam but because of the deep natural harbor at Mbegani site, the port can still make sense if it is developed as a regional port to be owned by the East Africa Community members of Kenya, Tanzania, Uganda, Rwanda and Burundi through an authority or agency,” said Bhandari.

“Kenya is currently modernizing Mombasa port and constructing a 32-berth Lamu Port at Manda bay as part of the Lamu Port Southern Sudan-Ethiopia Transport while Tanzania is upgrading Dar es Salaam, expanding Mtwara port and now planning a new one at Bagamoyo yet both countries are targeting same markets of Uganda, Rwanda, Burundi and parts of Democratic Republic of Congo. The strategy is to divide traffic into and out of these markets which in my view is not viable in the long term,” said Bhandari.

China is yet to issue a statement on the suspension of the multibillion-dollar port project.