Transport of goods and minerals across the continent is costly and dangerous. When private groups and foreign states invest in rail, there are surprisingly good development benefits.
Africa’s costly missing rail links
CAPE TOWN // Transporters moving goods across Africa put up with a lot: bandits armed with AK-47s, elephants using a fender to ease an itch and thieves who run alongside slow moving vehicles to siphon diesel out of the tank into Coca Cola bottles.
Then there are border posts, police checkpoints and various other forms of bureaucracy that can hold up lorries for days. Often, bribes and spurious fines also need to be paid before cargo can move.
It is hardly surprising that according to the African Development Bank it costs twice as much to transport goods across many countries on the continent than it does anywhere else in the developing world.
Transport is a perpetual problem in Africa. Potholed roads and missing rail links get in the way of economic growth. Intra-regional trade accounts for just 13 per cent of total commerce, compared with 53 per cent in emerging Asia, according to The Economist.
Landlocked countries suffer the most. Transport costs can make up 50 to 75 per cent of the retail price of goods in Malawi, Rwanda and Uganda.
Shipping a car from China to Tanzania on the Indian Ocean coast costs US$4,000, but getting it from there to nearby Uganda can cost another $5,000.
The China-led surge in demand for commodities gave hope that Africa’s infrastructure deficit would be eroded.
Now, with the cost of minerals and other commodities on the floor, it is unclear whether the enthusiasm to build, build and build will continue. Especially hard hit are locations dependent on mining, which is in even worse shape than the oil and gas industry.
“Many good mineral deposits are in remote locations and getting them to market requires rail and port infrastructure – this can cost up to $3.5 billion alone to build, just for one operation,” says Haaris Zafar, the principal mining adviser for Africa at Johannesburg’s Nedbank. “I can’t see this happening in the current commodity climate.”
One example is a giant iron ore mine planned by the Australian company Sundance Resources. The project straddles the border of Cameroon and the Republic of Congo in Central Africa in a remote, inland jungle area. The mine would be an enormous lift to the economies of both countries – if it is ever built.
Two years ago, Sundance announced a partnership with China Gezhouba Group to finance and construct a 510-kilometre railway and a dedicated mineral export terminal.
The project had the backing of the Chinese premier, Xi Jinping, following a state visit to Ghana last year. But this January, Gezhouba said it would put the project on hold indefinitely after the collapse in the iron ore price.
The project had seemed a good prospect when iron ore reached the giddy heights of nearly $188 a tonne in 2011, and the almost $4bn price tag for transport infrastructure seemed justified. Today, iron ore struggles along at $40 a tonne and the port and railway line are unlikely to be laid down anytime soon. As China slows, project finance will be harder to come by.
“The emergence of an Africa-wide railway network is a dream that will be difficult to fulfil,” John Welborn, the chief executive of Resolute Mining, said this month in Cape Town at the annual African Mining Indaba, the world’s largest mining investment platform.
Mr Welborn has been active in rail developments in west Africa, a region that could potentially rival Australia’s iron-rich Pilbara area in potential for iron ore. He said that the cost of developing rail and port facilities from scratch, however, made it unlikely this would happen soon.
Even if funds were to be found, laying down railway lines that cross multiple borders is a formidable undertaking. At the same time, mining companies are reluctant to share lines with other users, fearing it could harm ore shipping schedules.
In Australia, where iron miners are king, rival producers have built their own tracks running parallel to each other to carry ore from up to 1,300 kilometres inland to coastal ports.
“Two companies in the Pilbara have two railways running side by side, and third wanting to get in had to build its own,” Mr Welborn says.
African countries have naturally fought this idea and insist that lines must be multi-use, not reserved exclusively for individual mining companies. Where governments have stood their ground, cooperation has worked.
An example is the Nacala Corridor railway line in southern Africa, which links mining areas of Moatize Mozambique’s western province of Tete with the east coast port of Nacala 1,200km away.
The line goes through Malawi, which in a quirk of colonial map-making, cleaves through Mozambique, almost splitting the country’s south in two. The railway has now become the centrepiece of a development corridor that has had agriculture as well as other mining projects appearing in Malawi – one of the world’s poorest nations – and Mozambique, now one of Africa’s fastest-growing economies.
“The Nacala Corridor has ended up going through two different countries carrying several commodities, and that makes it bankable,” says Sujoy Bose, the director and global head of infrastructure and natural resources at the International Finance Corporation in Washington DC. “The idea of one country, one railway line and one resource is not practical.”
While Nacala was largely financed by the Brazilian mining group Vale, which is developing vast coal mines in the east, other rail projects will need to look elsewhere to find funding. One that still enjoys China’s support is the Tazara railway that connects landlocked Zambia with the port of Dar es Salaam in Tanzania.
Tazara was built in the 1970s as part of the late chairman Mao Zedong’s desire to spread China’s own brand of socialism.
The line helped Zambia export its copper, giving it an alternative to the sea other than using routes though white-ruled South Africa and Rhodesia.
In a post-Cold War world the line fell into disrepair, but in 2014 the Chinese government decided to help revitalise the 1,800km route.
New locomotives and coaches were delivered last year and the line is now becoming increasingly popular with tourists, who can watch wildlife from the comfort of their cabins as the train winds its way through reserves.
The Chinese have also committed to helping develop a network of lines that will eventually connect Kenya’s north with Ethiopia and South Sudan. The network, known as the Silk Corridor in local media, will eventually connect some of the most remote parts of the continent with eastern coastal cities.
Even South Africa, which has more railway capacity than the rest of the continent combined, is looking to expand its existing network. The country’s state-owned operator Transnet plans to build new lines to the north, crossing into Botswana.
Follow The National’s Business section on Twitter