Exploring Intermodal Solutions, Rail Infrastructure, and Public-Private Partnerships – Insights from the African Development Bank Forum
The African Development Bank Transport Forum 2024, held in Abidjan from 18 to 20 September, gathered African transport ministers, experts, and stakeholders to discuss strategies for enhancing transport efficiency through intermodal solutions. Key topics included seamless multimodal systems, balancing road and rail infrastructure, and private sector participation. Speakers included Stephen Wakasenza (Uganda Railways Corporation), Hulisani Makhuvha (DBSA), Ronnie Ntuli (Thelo), Fatima Lasiri (ONCF Morocco), Simplice Essoh (SITARAIL), and Johny Smith (Grindrod Rail).
Increasing Railway Coverage in African Countries: Input from SITARAIL
Simplice Essoh, General Manager of SITARAIL, highlighted the operations of SITARAIL, operated by the AGL Group under a concession agreement with the governments of Burkina Faso and Côte d’Ivoire. SITARAIL manages the Abidjan-Ouagadougou railway, a historic line built in 1904 and still functioning today under the 1995 concession.
He noted that railways must prioritise functionality and efficiency rather than focusing on debates about gauge standards. According to Essoh, railways should first meet freight and passenger demands with existing infrastructure before moving to faster trains or standard gauge.
Essoh stressed the need for a phased approach to railway development, ensuring railways operate at full capacity before considering future upgrades. He noted that Burkina Faso, a landlocked country, relies on multiple corridors for freight, including Côte d’Ivoire (two million tonnes), Ghana (two million tonnes), Lomé (2.5 million tonnes), and Cotonou (1.5 million tonnes), transporting millions of tonnes annually – cautioning that building railways for limited cargo volumes wouldn’t generate enough revenue to cover investment costs.
He advocated for a public-private partnership model, where governments invest in infrastructure while private operators manage rolling stock, client acquisition and economic zone development. He also pointed out that no private bank would fund a 50-year railway project without government backing.
Intermodal Transport and the Moroccan Experience
Fatima Lasiri, Advisor at ONCF Morocco, pointed out the critical role of rail as the backbone of transport but stressed that it must adapt to economic activities. While rail is essential, it must also be economically viable. Another key factor in choosing mobility solutions is the location of economic hubs and the type of transport needed. For instance, transporting people requires a separate strategy based on urban or intercity travel, with different approaches for long distances (600 km) compared to shorter distances (200 km).
For freight, the mode of transport is dictated by the country’s economic activity and the flow of goods. Minerals, in particular, benefit from rail’s profitability, while smaller freight volumes are often better suited for road transport. If the flow is directed toward ports or inland, and depending on the critical volume, running isolated wagons isn’t profitable. Lasiri explained that in Morocco, tailored strategies were developed for intercity, urban and freight mobility based on the flow of people and goods. She noted that Morocco’s rail system, which faced financial struggles in the 1980s, is now profitable due to this strategic approach.
Lasiri reiterated the importance of adapting mobility strategies to the specific needs of each country and its economic hubs. She concluded that economic activity and a well-performing local network are vital for the success of transport systems, ensuring they align with national public policy goals.
Phased Approach to Rehabilitation and Development of Rail Infrastructure Financing: Lessons from Uganda
Stephen Wakasenza, Acting Managing Director of Uganda Railways Corporation, opened the discussion by outlining Uganda’s dual focus on rehabilitating its metre gauge railway (MGR) while planning for the future implementation of a standard gauge railway (SGR).
Wakasenza highlighted Uganda’s existing 1,622 km MGR network, of which 260 km are operational, and 375 km are currently undergoing rehabilitation. With support from the African Development Bank (AfDB), Uganda has secured $301 million to fund this rehabilitation, but only 80% of this budget will go towards track improvements. The remaining funds will be allocated to broader infrastructure initiatives such as establishing a railway training school and upskilling the workforce, ensuring that Uganda’s rail system remains functional as it transitions to SGR.
The phased approach adopted by Uganda allows for gradual upgrades, ensuring that the existing network can continue to meet the needs of customers, such as large industrial players, while also preparing for the future integration of the SGR. Wakasenza noted that this will cost approximately 2.8 to 3.2 billion US dollars for only 272 km.
Early Involvement of Funding Partners Essential, Says Development Bank of Southern Africa
Hulisani Makhuvha, Senior Deal Originator at the Development Bank of Southern Africa (DBSA), provided a regional perspective on rail financing challenges and opportunities. He pointed out the importance of strong partnerships across Africa to close the infrastructure gap.
The DBSA is involved in approximately 13 rail projects across Africa, mainly within the Southern African Development Community (SADC), 11 of which are actively being developed. Makhuvha noted that projects backed by government guarantees are the easiest to finance. However, for public-private partnerships (PPPs), particularly those requiring long-term customer commitments, like take-off agreements, challenges such as trust and historical non-delivery often arise. He stressed the need for early involvement of financial institutions in the project planning process, where banks can assist in engaging customers, ensuring volumes and ultimately guaranteeing bankability and smooth execution.
The DBSA has invested in large-scale projects, including a $200 million investment in the Lobito Corridor in Angola, a prime example of successful PPP and private sector engagement.
Enhancing Rail Efficiency in Africa Through Strategic Private Sector Involvement
Ronnie Ntuli, Chairman of Thelo, reiterated the necessity for Africa to build transportation and logistics infrastructure to drive industrialisation. He noted that governments have largely insisted on hoarding the railway sector, leading to a trust deficit in the capacity of national railway operators to execute effectively.
He highlighted that railways are both capital- and skills-intensive and that the world has advanced beyond traditional railway corridors. To achieve operational efficiencies, which are crucial for both freight owners and passengers, the involvement of the private sector is inevitable. This includes supporting the mobilisation of capital and expertise in skills.
Ntuli stressed that operational efficiency is critical. There is a need to migrate towards efficient management of infrastructure and efficient management of train operations. Additionally, building the capacity to regulate and oversee the railway sector is essential.
Ntuli also criticised financial institutions, noting that they are burdening governments with debt without clear repayment strategies. He highlighted the risks of countries accumulating large debts with no plans for making their railways profitable. He concluded by stating that building tracks and acquiring equipment is not railways. Railways is beyond building track and acquiring equipment.
Intermodal Solutions: Bridging the Gap
Johny Smith, representing Grindrod Rail, addressed the issue of intermodal transport solutions. He highlighted that while 95% of freight in Africa is moved by road, there is significant potential for shifting a substantial portion of that freight to rail. However, achieving this shift requires reforms in how railways are managed and operated, with a focus on long-term contracts to ensure the financial viability for private sector participation.
Grindrod Rail has successfully implemented projects that combine road and rail transport solutions, cutting down road usage by 40% for certain freight. Smith emphasised that private sector players are ready and eager to invest in rail projects, provided they receive the necessary long-term commitments from governments.
Collaborative Efforts for a Sustainable Future
The overall message from the panel discussion is that collaboration between governments, the private sector, and financial institutions is essential for the success of Africa’s transport infrastructure projects. Efficient rail systems are key to the continent’s economic growth, requiring modernisation, improved operational efficiencies, and robust public-private partnerships. The African Development Bank’s support for financing rail projects and fostering intermodal solutions is crucial in bridging the infrastructure gap, ensuring sustainable and viable transport solutions across Africa for the future.
