November 27, 2013 5:36 pm
Chinese investment triggers new era of east African rail building
A century ago, British and French engineers built vast railways through east Africa to export their coffee and tea to Europe.
More than a hundred years after the heyday of African rail, another era of railway expansion is under way in the region. But this time Chinese – and, to a lesser extent, private equity – investors are financing the building of thousands of kilometres of tracks to profit from booming regional trade, which has tripled over the past decade.
“The demand [for freight transport] is huge . . . Railways are key to increasing regional trade,” says Darlan Fabio de David, chief executive of Rift Valley Railways, a private equity-backed company which is rehabilitating the Mombasa to Kampala line built originally by British rulers between 1896 and 1901.
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The groundbreaking on Thursday of Kenya’s $4bn Mombasa-Nairobi line heralds another wave of rail construction, bringing back memories of bygone days when railways unlocked the highlands of Africa. The track, financed by the Export-Import Bank of China, will run parallel to an existing colonial-era line.
“There is a lot of activity on the railway front in east Africa,” says Roger Nord, deputy director of the African department at the International Monetary Fund in Washington. “From an economic point of view, this is quite beneficial, improving both access to global markets and boosting regional trade,” he says.
Thursday’s ceremony will gather the presidents of Kenya, Uganda, Rwanda and South Sudan, a sign of the potential for further expansion hundreds of kilometres inland as far as Kigali and Juba, the capitals of Rwanda and South Sudan. “The project will define my legacy as president of Kenya,” Uhuru Kenyatta told local media.
The other big project is a line renewing the link between Addis Ababa, the capital of Ethiopia, and the port of Djibouti 756km away at a cost of roughly $3bn. This line, whose building started several months ago, runs parallel to the abandoned Imperial Railway Company of Ethiopia track built between 1894 and 1917. The Export-Import Bank of China is also financing the construction of the line.
The state-owned Ethiopian Railway Corporation says the new railway will reduce travel time to the port at Djibouti by “more than 50 per cent”, cutting costs.
As well as these two rail tracks, private equity groups Citadel Capital of Egypt and Transcentury of Kenya are spending nearly $300m over the next three years to rehabilitate the existing 2,200km Rift Valley Railways line which links Mombasa with Kampala. The owners of the railway concession say their investment is the first big injection of funds into the line in at least three decades.
Critics have complained about the high price tag, particularly for the Chinese-funded project in Kenya, and the fact that Chinese building companies won the contracts in exchange for the finance provided by Beijing.
Chinese companies are carrying out the bulk of the construction of the Mombasa-Nairobi and Addis Ababa-Djibouti railway lines. Beijing will also provide most of the rolling stock, including locomotives worth millions of dollars. The private equity groups behind the Rift Valley Railways are, however, buying US-made locomotives from General Electric.
We need to put freight into railways and empty the roads of trucks
- Michael Kamau, Kenyan transport minister
The building and rehabilitation of railways comes as regional trade surges. Uganda last year became Kenya’s largest trading partner, replacing the UK for the first time since Nairobi won independence from London 50 years ago.
Trade among the members of the East African Community, which includes Kenya and Uganda but excludes Ethiopia, has trebled over the past 12 years, rising from $689m in 2000 to $2.4bn at the end of 2012, according to IMF estimates.
Industry executives and officials say countries including Kenya, Uganda, Ethiopia and Djibouti will benefit the most from the building and rehabilitation of railways. But even those farther inland, such as Rwanda, Burundi, eastern Democratic Republic of Congo and southern Sudan, will benefit as trains will help cut transport costs to areas near their borders.
Gabriel Negatu, director at the African Development Bank in Nairobi, says the railway lines would be a “game changer” for the region.
Critics say the high cost of building the railway may mean the lines will not significantly reduce transport prices, keeping trucks in business and roads jammed.
But supporters maintain the railways will reduce the cost of moving goods. Most freight in east Africa continues to be transported by road. Michael Kamau, Kenyan transport minister, says the railway will help to ease traffic congestion in Kenya caused by more than 3,300 trucks leaving the port of Mombasa every day, one approximately every 30 seconds, towards Nairobi and beyond.
“We need to put freight into railways and empty the roads of trucks,” he says.
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