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Arcane Customs systems and
an infrastructure unable to cope
with today's demands exist in numerous
African countries and
combine to cause significant delays,
cargo damage and increased
delivery costs. These eradicate the
benefits of competition on the sea
leg and burden consumers with
higher retail prices they can ill afford
to pay.
Whether the final links in the
delivery chain require only a local
delivery or transit to a landlocked
country, both are seriously
affected if there has not been sufficient
investment in infrastructure.
Equally, improving this infrastructure
will have only diluted benefit
if Customs procedures at the
port or cross border posts continue
to cause delays.
The TransAfrica 21 conference,
held 8-10 May 2001 in London,
addressed these issues and
covered business and investment
opportunities in African transportation.
An impressive line up of
African government ministers and
heads of African parastatals from
eight countries detailed their policies
and business plans for the restructuring,
commercialisation,
privatisation and expansion of
their national rail and port sectors.
Attracting capital
Private investment in Africa's
transport sector is still in its early
stages, delegates heard, but the
demand for Public Private Partnerships
(PPPs) has been clearly
identified. Rail in particular requires
huge investments with no
foreseeable returns.
Despite poor efficiency records
and chronic under investment in
publicly run railways and ports in
many African countries, government
control is generally seen as
essential for economic, social or
military reasons. Inviting the private
sector to finance and manage
rail and port infrastructure in
Africa, therefore, requires a rethink
of PPPs in a region perceived as
being vulnerable to political risks.
But despite the drawbacks,
there has been significant progress
in the privatisation of railways,
ports and other transport infrastructure
in Africa. Peter Kieran
of CPCS Transcom told delegates
that many companies are planning
for private investment in infrastructure
but the process is taking
up to five years to complete.
The railways have perhaps witnessed
the most progress to date.
In East Africa, notable examples
of private sector involvement include
the lines between Kampala,
Uganda, and Mombasa, Kenya;
Mwanza and Kigoma to Dar es
Salaam in Tanzania; and Dar es
Salaam through Zambia connecting
to South Africa's Spoornet.
In West Africa, Bolloré and
Maersk have brought improvements
to the railways that separately
link the ports of Dakar and Abidjan
to Bamako and Ouagadougou,
cities in the landlocked countries
of Mali and Burkina Faso.
It was also noted that in the
1980s/90s, the two Ghanaian
ports of Tema and Takoradi managed
to attract an investment of
US$109 mill, a significant sum for
one of the smaller African countries
with a population at that
time of less than 15 mill people.
The two ports and surrounding
environments enjoyed economic
growth as a consequence, but today
more investment is required
to ensure further increases in their
capacity.
Problem areas
It is easy to forget that until the
demolition of the Berlin wall, a
number of countries in Africa had
centralist governments. It has
taken some years for them to recover
from the burden this caused
before they were able to move
towards a market economy. Elsewhere,
turbulent politics have
meant that there has not been a
consistent strategy to allow the
privatisation process to develop.
One of the most common
fears is that concerning loss of employment
said Kieran. It quickly
becomes a political issue especially
in sectors where work is seen as a
job for life. Furthermore, there are
fears that the privatisation process
may be corrupt and that it will
bring tariff increases. Concerns are
also often expressed relating to
monopolies or safety issues.
Governments may also believe
there is a danger of foreign control
of strategic assets and that the
real value of the property may not
be realised.
Legitimate concerns
It is essential to recognise that
these concerns are legitimate and
to ensure they are dealt with for
the privatisation process to make
progress, delegates heard. Acknowledge
the implied jobs for
life and negotiate a settlement or,
even better, encourage retraining
packages for those affected.
And if tariffs have been subsidised
in the past, the structure
must take this into account. Governments
should not be allowed
to lump privatisation and the
elimination of subsidies together.
Provision of subsidies for mandatory
non-commercial services
should be ensured.
Furthermore, the abuse of monopolistic
power may make consultative
mechanisms weak so
there is no place for affected parties
to voice their concerns properly.
Inviting customers to participate
in the process is very important.
Regulatory mechanisms must
be well conceived. A tariff ceiling
may be applicable. Generally customers
are willing to pay a higher
tariff for a better service.
The issue of safety is often ignored
as it has always been left to
the rail operators in the past, delegates
were told. Private operators
are likely to provide a safer environment
and better records. However,
accidents do happen so a system
and process should be put in
place to deal with them.
Getting a fair price for the assets
also needs to be understood.
There should be an impartial valuation
of the assets and the bidding
process needs to be fair and quick
to encourage real competition
It was repeated many times
during TransAfrica 21 that without
investment in transport infrastructure,
a country's economy is
unable to perform. Infrastructure
is essential for growth as well as
well being said Richard Carborn,
the then UK Minister for Trade.
Transport and infrastructure
congestion modelling tools do
exist and put a price on congestion.
Companies like Scott Wilson,
a leading international consultancy,
regularly use such modelling
tools. If these could be applied
to the complete transport
structure of developing countries,
the conclusions would focus the
minds of all those involved.
Government views
The theme from the government
representatives at TransAfrica 21
was more or less the same: come
on in, we are a stable country with
good investment opportunities.
Interestingly, Nigerian Transport
Minister Chief Maduekwe, said
that the measure of success would
be when it is easier to hold seminars
on African transport issues
in Africa rather than Europe.
He continued that transparency is the
key to success if time is to be made up for
lost opportunities. He noted that a cross-border
rail link between Lagos, Nigeria,
and Accra, Ghana, was finally being discussed,
with the possibility of an extension
to Conakry and Dakar in Senegal.
Whilst he recognised that putting into
practice the concept of a railway that
crosses eight or more borders is a major
challenge in any continent, Chief
Maduekwe said there can be no doubt
about the huge economic and social benefits
it would bring.
South Africa lead
In South Africa, it is recognised that there
is a need to create transport regulators that
are independent and outside of government.
Speakers said that increasing the
efficiency of ports is key for South Africa's
competitiveness and both rail and
ports need to be improved. Growth is still
considered too slow and lower input costs
are needed throughout the economy via
a managed liberalisation process.
Whilst this may result in lower charges
in some areas such as wharfage, however,
it might also mean an increase in cargo
handling tariffs. Cargo handling is to be
separated from the national port administration
in South Africa and port operating
concessions will be open to private
operators. The provision of cargo handling
services will also be opened to the private
sector.
Behind these recent developments in
South Africa, arrangements for infrastructure
investment funding have been in
place for some time. The South Africa
Infrastructure Fund (SAIF), for example,
is aimed at achieving medium to long-term
returns through private sector investment
in infrastructure projects
throughout Southern Africa
Established in mid-1996, the SAIF has
more than R800 mill in commitments
from investors. Approximately R300 mill
of the fund's investor commitments has
been applied in making various infrastructure
investments. The fund is managed by
Southern African Infrastructure Fund
Managers (Pty) Ltd, a joint venture between
Old Mutual Asset Managers and
Macquarie Bank of Australia.
African model?
If South Africa, with all its resources and
investment funding, sees that further
growth requires the need to offer port
operation concessions and to open cargo
handling services to the private sector
then, a similar logic should apply to the
other African countries, delegates heard
Perhaps it is necessary for a country
to aspire to a particular growth rate for
there to be sufficient urgency to bring
about privatisation, or perhaps a government
needs to achieve a certain level of
confidence in its ability to govern before
it is prepared to relinquish control of certain
areas of its transport systems.
Whatever the required combination
is, South Africa is leading the way and
elsewhere in Africa the momentum is
building. Proof of the success of privatisation
and its benefits is essential. It will
provide the stimulation and confidence
to those less advanced African countries
to finally take the plunge.
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SATI sets the pace
A good example of the way that
private investment is being used
to upgrade transport infrastructure
in Africa can be found in
newly-formed SATI Container
Services (Pty) Ltd, a subsidiary
of SATI (Southern Africa Transport
Investments (Pty) Ltd),
which recently opened a specialist
reefer container logistics, storage
and maintenance depot near
Cape Town. The new facility is
claimed to be the first of its type
in South Africa.
SATI itself was formed in
August 2000 by Safmarine (Pty)
Ltd, Maersk South Africa (Pty)
Ltd and their parent company,
the Danish AP Moller Group.
The new company will be the
vehicle used to seek further strategic
investment opportunities
in landside transport infrastructure
in southern Africa, including
the owning and operating of
container terminals, the development
of coastal depots and
inland terminals and investment
in stevedoring and logistics.
Developed in partnership
with the Industrial Development
Corporation (IDC) at a
cost of R40 mill (US$5 mill), the
new Cape Town depot offers a
full range of repair and maintenance
services for reefer and
general purpose containers, storage
facilities for all container types
and pre-inspection of empty
containers prior to delivery to
shippers for the packing of export
cargoes.
Equipped with a railhead
with modern sidings and a two
spur rail track, the facility covers
6.5 hectares, with a further
6.5 hectares available for development
over the next few years
in response to anticipated demand.
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Tanzania - a
case study
Railway development in Tanzania has
major external advantages compared
with many other African countries,
delegates at TransAfrica 21 heard.
There is a background of political and
economic stability and Tanzania is investor
friendly and mineral rich.
The main general external weaknesses
are that, as a young democracy,
not all institutions are fully mature,
there is significant unemployment, the
general state of infrastructure is poor
and the work ethic leaves something
to be desired.
Tanzania's road transport system
suffers from many weaknesses common
to other African countries. Roads
are inaccessible and, due to axle weight
limitations, cannot carry heavy vehicles.
Many parts of the country are isolated,
particularly in the rainy season,
and roads are poorly maintained.
Water transport has its own problems.
Dar es Salaam and Mombasa
ports are congested and suffer badly
from Customs delays; maritime and
lake ferries are unreliable; and, of
course, water transport is limited in
its extent.
This leaves rail with significant
modal advantages. It is the only mode
able to reach remote areas and it is
comparatively reliable even during the
rainy season when roads are waterlogged.
Effective rail transport is,
therefore, essential for the country's
future economic growth.
Simon Fourie, general manager of
Trans Africa Railway Corporation in
Dar es Salaam, discussed the challenges
his company faced in the Central
East African rail corridor, running
from Mwanza and Kigoma to Dar es
Salaam. The other links competing to
serve the landlocked countries of
Rwanda and Burundi are the Northern
corridor from Kampala to Mombasa,
and the Southern Corridor from
Dar es Salaam south west through
Zambia and connecting to Spoornet
in South Africa.
The Central corridor rail system
is dependent on the efficiency (or lack
of it) of Dar es Salaam and Mombasa
ports. The railway also has its own
problems, however. Fourie identified
major weaknesses in infrastructure,
rolling stock, communication systems
and labour attitudes and behaviour.
Rail trackage is limited to an axle
load of less than 14 tons on many sections
and the impact of El Nino is
still visible on bridges, limiting their
use. Train accidents caused by poor
track conditions are frighteningly
common - there were 71 in 1999 -and
track maintenance is not carried
out or is of low quality .
Locomotives are old, so that overall
loco availability is just 68 per cent,
with shunting loco availability at 53
per cent. In 1999, locomotive reliability
dropped to 9902 km per unit. Low
availability is the result of loco failure
due to lack of spares and the fact that
locos are out of spec due to their age.
Diesel consumption on mainline locos
is very high at 7.67 litres per km
due to theft as well as age and poor
maintenance.
There is also an acute shortage of
wagons, due both to excess demand
and poor maintenance scheduling. The
M&R backlog has caused wagon availability
to drop to about 75 per cent,
The lack of a modern work culture
combined with locational problems
and lack of investment make the
railway difficult, but not impossible,
to modernise, Fourie said. Rail does
have major advantages in that there is
demand and it can capitalise on economic
growth because of its competitive
edge over other transport modes.
Fourie concluded that improving
staff morale depends on speeding up
the privatisation process and, whatever
the difficulties of the location,
rail companies should never compromise
on service levels
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