Rail: Private Investment Backs New Lines

Rail: Private Investment Backs New Lines

Over the past 10 weeks, South African transport utility Transnet has taken three long-awaited decisions on major rail projects. Firstly, it plans to construct a new railway from Mpumalanga Province to KwaZulu-Natal through Swaziland, in order to increase rail capacity to both Matola Coal Terminal near Maputo in Mozambique and Richards Bay Coal Terminal (RBCT). The 165km line is due for completion by 2016 and will provide improved transport capacity for Swaziland, as well as South Africa and Mozambique.

Rather than directly providing additional coal carrying capacity, the new line can be used to transport the 15m tonnes a year of non-coal freight that is currently taking up capacity on the existing line to RBCT. At present, the biggest coal terminal in Africa has handling capacity of 91m tonnes a year but Transnet is struggling to supply 65m a year to the port. A combination of public and private sector money is expected to be used to finance the project.

Secondly, Transnet has decided to proceed with the construction of a new 464km railway from the Waterberg Basin to the existing RBCT line with handling capacity of 80m tonnes a year. Most South African coal production is located in Mpumalanga Province further south, but mines here are gradually being depleted, while the Waterberg reserves have remained largely undeveloped because of the lack of transport infrastructure.

In October, however, the chief executive of Transnet Freight Rail, Siyabonga Gama, said: “For all intents and purposes, that project is going ahead. The idea is that the Waterberg line will be a heavy haul line.” Responding to doubts over the company’s ability to provide sufficient transport capacity, he said: “We intend to go to 97m tonnes, and studies indicate we could even go to about 120m tonnes of coal being handled on that line.”

Finally, the state transport utility has announced that it has decided to export manganese from the new port of Ngqura in the Eastern Cape rather than the established iron ore port of Saldanha in the Northern Cape. Existing railway infrastructure to Ngqura will be upgraded but it was felt that rapidly rising iron ore exports from the Sishen mines would consume all planned capacity on the Sishen-Saldanha line.

Privately owned iron ore mining firms are helping to fund rail investment in the west but public-private partnerships have yet to emerge in the coal mining east of the country.

Rehabilitation on track

Private sector investment is already making more impression in the rest of Africa. Previously troubled Rift Valley Railways (RVR) has secured new funding in an effort to improve services on the Mombasa-Nairobi-Kampala line. Egyptian Citadel Capital Corporation now controls the consortium with a 51% stake, alongside partners TransCentury of Kenya (34%) and Uganda’s Bomi Holdings (15%). RVR has attracted $164m in funding from a wide range of sources, including the African Development Bank (AfDB), Kreditanstalt für Wiederaufbau (KfW) Entwicklungsbank and the International Finance Corporation. The company will speed up its track rehabilitation programme and purchase new rolling stock.

The company’s chairman Brown Ondego said: “This is indeed a significant start to RVR’s turnaround process. Throughout 2010, Citadel Capital and RVR worked closely to implement a sustainable business and investment plan that includes a $28m five-year capital expenditure programme to rehabilitate RVR’s infrastructure and rolling stock.

The rehabilitation of the rail network in East Africa is vital to long-term economic growth prospects in the region and the loan will advance the upgrading of vital railway infrastructure, expedite the transition from road to rail in terms of regional goods transportation and allow RVR to improve on its passenger rail offerings.” The company recently announced a profit, albeit a small one of $674,000, for the first time.

Nigeria’s rail development programme could soon be back on track. Abuja insists that it is committed to the development of an east-west railway from Lagos to Calabar.

After a meeting with officials from China Civil Engineering Construction Corporation (CCECC), Vice-President Alhaji Namadi Sambo said: “One of the sectors that is militating against our growth is the issue of a proper transportation system and the railway system, we believe, if properly achieved will contribute immensely towards our development. That is why we are putting serious efforts to see that we achieve our objective.”

CCECC is expected to develop rail line and road projects. Transport infrastructure is need to reduce reliance on the oil industry.

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Written by African Business Magazine

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