Railways

  • The economic significance of Africa’s railroads has declined markedly during the last 30 years following liberalization of rail transport and improvements in highway infrastructure.
  • Restoring Africa’s aging rail networks to good operating condition would require a one-time rehabilitation effort of US$3 billion.
  • Widespread concessioning of railways has generally improved service and boosted revenues, but concessioning alone probably cannot provide sufficient financing to rehabilitate Africa’s railways.
  • Long-distance passenger rail services are in decline and have become a significant financial burden to several rail concessions.

Following economic liberalization and major improvements to the road network, most of the continent’s railways (except for those in South Africa) lost their economic edge. Few still play an integral role in the economy, except to link mining sites to ports. As a result of declining traffic, few railways are able to generate significant revenues to fund investments, the remaining passenger lines fail to recover costs, and freight service tariffs are constrained by road competition. The standard policy response has been to concession many of Africa’s railways. But while concessions have led to significant service improvements and helped to reverse traffic decline, they have not proved capable of generating enough revenue to finance much-needed track rehabilitation.

Spending needs

The question of how much investment is economically justified must be asked. Lines that have been superseded by road developments and those with low traffic levels will rarely merit reconstruction and investment, and funds should instead be directed to those parts of the network with long-term value.

Long-term maintenance neglect has caused a huge backlog investment of up to US$3 billion for Africa’s railways. This one-time expenditure needed to eliminate the rehabilitation backlog could be spread over a 10-year period at an annual rate of US$300 million.

After the network is restored to good condition, the annual bill would fall substantially to cover only what was needed for ongoing track rehabilitation and renewal. The ongoing annual cost of track reconstruction would average approximately US$100 million a year. Sustaining an adequate fleet of rolling stock would cost an additional US$80 million a year, plus and additional US$20 million for facilities, maintenance, equipment and other costs. This amounts to a combined annual programme of about US$500 million for 10 years, after which investment would drop to a ‘steady state’ level of around US$200 million.

The amounts needed to overcome these problems are large, equal to the annual revenues of some of the railways and well beyond their capacity to self-finance. The only option in most cases is to seek large concessional loans or grants from third parties.

In addition to reinvestment in the current network, investment in new projects is a possibility. However, this is unlikely to be financially or economically viable, given the comparative cost of road construction and competition with existing rail and road routes.

(Source: AICD)

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