Issue 9 - What role for the private sector in African railways development?

March 2011

Editorial

By Etienne Viard, Proparco's Chief Executive Officer

“Without the railroad, the Congo is not worth a penny”, declared the famous explorer Henry Morton Stanley at the end of the 19^th century. More than a century later this quote still resonates with the Africa of today. The continent is experiencing strong growth and the role of the rail sector is greater than ever before.

Offering a lower cost alternative to roads, rail networks are also longer lasting and produce a lower carbon footprint. Railways provide an indispensible means of moving mineral wealth and agricultural products to market and are essential for opening up landlocked countries.

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A balance between public and private sector roles: the key to a successful rail concession

Concurrencés par la route, les chemins de fer africains doivent se moderniser. Leur diversité impose des réformes au cas par cas ; la participation privée prend elle aussi de multiples formes : sous-traitance, mandat de gestion, affermage, concession. L’organisation intégrée avec accès de tiers opérateurs reste une solution adéquate en Afrique. En outre, les investisseurs privés sont rarement des compagnies ferroviaires, ou des acteurs locaux ; il s’agit souvent de grands clients. Des financements publics demeurent nécessaires pour les infrastructures des chemins de fer à faible densité de trafic. ► Download Pierre Pozzo di Borgo's paper 

Railway concessions in Africa: difficulties encountered and possible solutions

Although railway lines may offer a great economic interest for certain African States, private players such as Bolloré Group, which manages Sitarail and Camrail under concessions, have to face a whole host of challenges. The investment burden, technical difficulties and fees that have to be paid to the conceding authority all add to companies’ debts. A more balanced partnership and a sustained pace of investments would allow the true potential of railway development in Africa to be exploited. ► Download Edouard de Vergeron's paper 

Developing Africa’s railways using existing infrastructure

Although it may be difficult to make a final assessment of rail concessions in Africa, it is possible to point up the conditions that foster private sector involvement. In order to upgrade infrastructure, it is essential to start with what already exists. State investments and improving productivity remain essential. The diversity of stakeholders is an asset and the presence of investors – albeit small – must be promoted at all costs.  ► Downoad Eric Peiffer's paper 

Improving concession contracts in Sub-Saharan Africa

Thanks to its experience in Africa’s rail sector, the European Investment Bank can determine optimal conditions for implementing a concession. The conceding authority must first and foremost be strong and extremely present. Assets must be accurately assessed and the regulatory conditions stable. The project preparation phase may be crucial, but the presence of international institutions over the long haul can be one of the keys to the success of a public-private partnership. ► Download Matthew Arndt's paper 

The paradox of the Djibouti-Ethiopia railway concession failure

The Djibouti to Ethiopia railway line concession ended in failure despite the fact that the rehabilitation project was considered viable and that it was also fully coherent from a political and economical perspective. Whilst part of the failure can be attributed to lack of initial investments carried out by the respective governments, the companies responding to the tender also bear part of the blame because they did not submit realistic offers. Furthermore, investor inflexibility and lack of monitoring can also be cited as contributing factors to the failure of this project. ► Download Arthur Foch's paper 

African railway concessions, a step forward but not the whole answer

Railway concessions in Africa may present significant difficulties (candidates with limited financial resources, sometimes unrealistic demands from States, etc.), but they do often improve economic results and service quality. If they are to be effective, African concessions must be based on joint investment, enhanced control, real compensation for public service obligations – and maybe stronger road regulations. ► Download Richard Bullock's paper 

Mixed results for private participation

Africa's railways face competition from roads and need to be modernized. Their diversity means that reforms must be conducted on a case-by-case basis; private participation can also take a variety of forms: subcontracting, management contracts, affermage, concessions... An integrated organization that gives access to third-party operators continues to be an appropriate solution in Africa. In addition, private investors are rarely railway companies or local players; they are often major clients. Public financing is still required for infrastructure on low density traffic railway lines. ► Download Olivier Ratheaux's paper

Lessons learned from this issue

By Benjamin Neumann, Editor in Chief

Africa needs efficient and competitive railways. Rail transport, particularly for freight, can play a key role in the continent’s development. It is cheaper than road transport, has a longer lifespan and a better carbon balance. During the 1970s, most sub-Saharan African railways were neglected and lost out to roads. They were seen as vestiges of the past, lacking the capacity to provide mass transport for agricultural raw materials and minerals in good conditions and with competitive prices.