Unprecedented investments in Africa


On_bumpy_roads_and_railsOn bumpy roads and rails

Unprecedented investments in Africa?s ground transportation are hardly enough

By Nirit Ben-Ari

The Democratic Republic of the Congo (DRC), which sprawls over 905,000 square miles, is the second largest country in Africa. Fifty four years after independence, the DRC has no roads connecting one end of the country to the other. In fact, the only way to travel between two distant points is by air. Many Congolese cannot afford air travel, and most feel as if their country is made up of different countries.


But imagine multi-lane tarred roads linking Kinshasa in western DRC to Goma in the east, or roads and railway lines from Cape Town in South Africa to Cairo in Egypt, and from Dakar in Senegal to Nairobi in Kenya. Just imagine the endless possibilities that would bring.


Improving road and rail systems in Africa will boost the transportation of goods and raw materials, facilitate transactions and negotiations, especially when it requires face-to-face meetings, boost tourism and positively impact ordinary lives in diverse ways such as ensuring that people get to the hospital quickly during emergencies, for example. Countless other activities depend on reliable roads and rails.


Most of Africa?s railway lines and roads are in bad condition and need huge investments, according to the Africa Development Bank (AfDB). The proportion of paved roads on the continent today is five times less than those in developed countries, notes the Bank. As a result, transport costs alone are 63% higher in Africa than in developed countries, hampering its competitiveness in the international and local markets.

The AfDB further points out that transport costs represent between 30% and 50% of total export value in Africa. These costs are even higher in 16 landlocked countries, including Zimbabwe, South Sudan, Mali, and Niger, and constitute up to three quarters of their total export value.


Poor roads and railways also have a negative impact on intra-African trade, which is currently just 11% of total trade. Development experts believe this figure might have been higher with better roads and railway lines. Trade among Southeast Asia?s 10 countries, at 37%, is much higher than in Africa, for example.


Railway lines in most African countries were built during colonial times to connect mines and other natural resources to ports. In fact, most of the lines were constructed by mining companies. Even now, passenger services account for no more than 20% of rail traffic, says the AfDB. Over the years, passenger business has been shrinking steadily, viable only when road networks are inadequate or non-existent, it says. According to the bank, the costs of maintaining rail tracks and signalling systems, and the level of spending needed to reach passenger speeds, run into millions of dollars and, if not subsidized, passengers would be unable to afford to pay for operating costs alone.


Programme for Infrastructure Development in Africa

With Africa?s economy growing at 5% a year on average, African leaders worry that without a good road and rail network, such impressive economic growth may not translate into real socioeconomic development for Africans. In order to turn the situation around, they established the Programme for Infrastructure Development in Africa (PIDA) in July 2010. An initiative of the AfDB, New Partnership for Africa?s Development (NEPAD), and the African Union, PIDA is an ambitious effort to boost African infrastructure, including rails and roads.


Ibrahim Mayaki, the chief executive officer of NEPAD, says PIDA was designed to transform Africa and bridge its massive infrastructure gap. ?At the moment,? he noted, ?Africa is the least integrated continent in the world, with low levels of intra-regional economic exchange and the smallest share of global trade.?


One of PIDA?s remarkable projects is the construction of the 4,500 km Algiers-Lagos highway. Also known as the Trans-Sahara highway, the project is already 85% finished and the remainder is expected to be completed this year, according to PIDA. Upon completion, the Lagos-Algiers highway will create a corridor through the desert that will facilitate trade between North Africa and sub-Saharan Africa. This means countries such as Nigeria, Algeria and Niger will be able to facilitate trade by road transport easily. Historically, the Sahara Desert has hindered trade between the two sub-regions.


Many other rail and road construction projects are underway across Africa. In Kenya, a $25-billion infrastructure development plan, including a road construction that links Kenya to South Sudan and Ethiopia, was recently launched by the governments of the three countries. In addition, the AfDB is financing several roads projects in Central Africa.


State of rail transport

Today, only South Africa has a fairly good railway system, according to the World Bank. Before the FIFA World Cup in 2010, South Africa revamped its railway system, including the new underground commuter train between Pretoria and Johannesburg. Some mining companies in Africa also have dedicated railway lines for transporting their goods. For example, African Minerals, a company mining iron ore in Tonkolili Province in northern Sierra Leone, has invested up to $2 billion in mining and rail infrastructure, according to Africa Review, a Kenyan publication.


Most rail networks in Africa are as old as 100 years and have not been upgraded since they were first constructed in colonial days due to lack of funds. These networks cannot meet the demands of modern times, says the AfDB, ?Most lines are low-speed, small-scale, undercapitalized networks carrying low axle loads.?


Big projects and China

China is throwing a lifeline for Africa?s railway infrastructure. Some 2,000 Chinese companies are in Africa and many of them are heavily involved in roads and rail construction, reports Der Spiegel, a German newspaper. A study by PricewaterhouseCoopers (PwC), a global finance company, says that China?s goal is to take advantage of the increasing growth of African markets. In the DRC, two Chinese construction companies and a copper company, all state-owned, have signed a $9 billion contract for the construction of a rail and road network, which is more than the DRC?s entire national budget.


Rail infrastructure in Angola, one of China?s top oil suppliers, is rapidly expanding as part of an ?infrastructure-for-oil? trade agreement between the two countries. Kenya recently signed a $5-billion deal with China to construct a 952-km rail link from the city port of Mombasa to Malaba, a town near its border with Uganda. This is expected to be extended to Rwanda, Uganda and Tanzania and by 2018. And that is not all. In September 2012, the China Railway Construction Corp. (CRC) signed a $1.5-billion contract to rehabilitate a railway system in Nigeria. The CRC has ongoing projects in Djibouti, Ethiopia and Nigeria worth about $1.5 billion in total.


China South Locomotive and Rolling Stock Corporation, a major train manufacturer in China, is bringing $400 million worth of locomotives to South Africa. And China?s Export-Import Bank is financing the Mombasa-Nairobi railroad line with $4 billion while the Addis Ababa-Djibouti line is being rehabilitated at a cost of $3 billion.


Investing in infrastructure

Raising enough finance for infrastructure development is one of the key challenges facing Africa’s expanding economies. Although most state-owned railroads have been privatized in recent times, and many conceded to programmes funded by international financial institutions, leading to increased traffic volumes, only a few railway systems are able to generate sufficient revenues to fund significant track maintenance. The AfDB recently announced plans to launch a pan-African infrastructure bond totalling about $22 billion. Part of this money will be ploughed into rail and roads projects, most of them in East and Central Africa.
There have been suggestions that governments and the private sector could develop infrastructure in partnership. Examples of successful public-private partnerships are the Citadel Capital of Egypt, the largest investment company in Africa, and the Transcentury of Kenya, a company that is involved in infrastructure projects. These efforts are supported by African banks, which are coming up with innovative products, such as syndicated loans, that provide the necessary financial support. The banks are also bringing on board development finance institutions such as the German Investment Corporation, Netherland Development Finance Company, Industrial Development Corporation of South Africa, as well as trans-national finance institutions such as European Investment Bank, International Finance Corporation, and the AfDB.


Ongoing rail and road projects will help accelerate Africa?s industrialization efforts, says Mr. Mayaki. Experts add that there has to be a transfer of knowledge to local managers, local experts, and local workers. This means that when the expatriates leave, locals can continue to maintain the infrastructure. The urgent task now is to commit more resources to improving Africa?s rail and roads networks. Without good roads and railways, industrialization is impossible.

Source Africa Renewal


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