Should the Zambian Government
Invest in Railways?
Alan Whitworth
ZIPAR
Railways played a key role in
Zambian history
• ZR / RSZ line from Copper Belt – Lusaka
– Victoria Falls – Joburg – Durban built
early 1900s to transport minerals
• Lusaka was originally a rail junction
• TAZARA to Dar es Salaam built in 1970s
following UDI in S. Rhodesia
• All copper and most trade transported by
rail until 1990s
Zambia International and Regional Trade
Estimated Freight Transport Flows 2005/2006 (million tonnes pa)
Rail Economics fundamentally
transformed since 1970s
• Decline of the railways
• Competition from trucks
• Rail is no longer competitive
Rail’s vicious circle of decline
• Collapse in CU exports following nationalisation
(from 712,000 MT in 1976 to 255,000 MT in
1998) slashed revenue
• Excess capacity once Zim border / Durban route
re-opened
• Lack of maintenance & investment led to
deterioration in speed & reliability
• Privatisation of mines ended rail transport
monopoly
• With low volumes, tariffs needed to cover fixed
costs (x 2) increased sharply
Competitive trucking industry
developed from scratch
• End of apartheid opened up trade between
RSA and Zambia (& region) from 1990s
• Zambian trunk roads rehabilitated under
RoadSIP from 2000, lowering times / costs
• Increased RSA exports to Zambia (eg
Shoprite) transported by truck
• Trucks allowed to compete for CU traffic &
able to offer low ‘backhaul’ rates
RSA – Zambia truck rates among lowest in Africa,
because they are full in both directions and
economies of scale
Rail is no longer competitive
• With low volumes, minimum tariffs needed to
cover costs are much higher than trucking rates
• Speed, reliability & security are all inferior to
trucks (& deteriorating)
• Rebound in CU production to 850,000 MT has
not benefited rail
• CU exported as cathode (3 times value / 1/3
volume of concentrate)
• Mines do not need rail to export
GRZ plans investment in both
existing & new rail lines
- but where is economic appraisal?
•
•
•
•
•
•
•
•
Rehabilitate TAZARA
Rehabilitate RSZ
Chingola – Solwezi
Solwezi – Namibia
Solwezi - Benguela
TAZARA – Petauke – Chipata (- Nacala)
TAZARA - Mpulungu
Kafue – Lions Den
How can rail compete?
• Substantial investment needed to improve
speed & reliability on RSZ & (particularly)
TAZARA
• Need for return on investment (profit)
means tariffs must rise – unless traffic
volumes increase sharply
• With trucks already cheaper than rail, why
would mines switch back to rail?
Increasing road traffic means increased
maintenance, congestion &
environmental costs.
Should GRZ force mines to use rail?
• Mines are privately owned and free to decide
• Kansanshi & Lumwana > 200 km from nearest
rail
• Costs should be recovered from taxes & road
user charges (RUCs)
• Are congestion costs significant?
• No estimates of environmental costs
Do trucks pay for road damage?
• RDA does not know cost of CU truck damage
• RDA claims weighbridges have nearly
eliminated over-loading, reducing damage
• International transit fee of $10 / 100 km ($117 for
DRC – Chirundu return)
• Fuel taxes for DRC – Chirundu return in 2009
were $95 (Fuel Levy $24), but easily avoided by
refuelling outside Zambia (blame Indeni!)
• Unclear whether trucks cover costs
RSZ & TAZARA Traffic Trends
(‘000 tpa)
RSZ
TAZARA
(Cap: 6 mn tpa)
Total Traffic
o/w CU
(Cap: 5 mn tpa)
Total Traffic
o/w CU
2007
863
161
538
152
2008
892
238
528
148
2009
691
188
383
107
2010
754
114
523
202
RSZ Prospects
• 20 year concession with NLPI of RSA
signed in 2003
• NLPI to invest $14.7 million
• GRZ relieved of financial losses
• Modest recovery in traffic (sugar, maize,
fuel, coal)
• Can probably survive
TAZARA Prospects
• Jointly owned and managed by Zambian &
Tanzanian governments
• Massive maintenance requirements
• In financial crisis (‘TAZARA requires an
investment of US$ 208.999 million to
sustain its operations’ - annual income
$37 million)
• Dar es Salaam harbour congested
• Cut losses now?
DRC to the rescue?
• In 2009 DRC exported 437,000 MT of CU
through Zambia, almost entirely by road
• Much of DRC exports is CU concentrate, not
cathode
• Production to double by 2012
• Equivalent of up to 100 extra trucks daily
• What about Benguela line?
• Studies, long term contracts & intergovernmental agreements needed to justify
investing in Zambian rail
Conclusions 1
•
•
•
•
Support for rail based on faith, not facts
Rail cannot compete with low truck rates
Low trucking rates should be welcomed
Costs of road maintenance, etc can be
covered through smarter taxes, RUCs
• Estimate actual costs imposed by trucks
• Room for more than one rail system?
• TAZARA beyond rescue?
Conclusions 2
• Can not assume railways are viable
• Vital to undertake sound economic
appraisal before investing in rail
• Encourage private sector investment
• Do not pour good money after bad!