Minister of Transport and Public Works Jacob Hara has signed a 2 billion euro (about K2.43 trillion) agreement with a Chinese firm, China Railway Signal, for the construction of a railway network across the country.
In an interview yesterday, he confirmed signing the agreement on Wednesday at the on-going Third Road and Belt Forum in Beijing, China.
At the forum, Chinese President Xi Jinping pledged $100 billion for various projects under the Road and Belt initiative.
Hara said the Malawi railway deal is under a build-operate-transfer (BOT) contract, where an investor builds with own resources, operates the project for a certain period to recover resources with profit and afterwards transfer ownership to the host government afterwards.
Said Hara: “The rail projects will be co-financed by the Chinese and a Sovereign Wealth Fund of the United Arab Emirates.
“Together these investors will form a BOT that will operate the lines for not more than 30 years. They will invest and collect as much as they can. After 30 years and/or full repayment—whichever comes earlier—they will hand over the project to the Ministry of Transport and Public Works.”
He further said the agreement has a clause that at the end of 30 years, the Chinese will write off all existing debts to the project.
“Malawi will not be required to pay from the fiscus and that there will be no shortfalls or top ups by the government during construction or operation.”
According to the minister, the Chinese firm will revamp in the first phase the Bangula to Nkaya railway line. While in the second phase, the Nkaya to Mchinji railway line will be rehabilitated and it will traverse through Salima to Kanengo.
In the final phase, the Chinese firm will establish a rail connection between Lilongwe and Mbeya in Tanzania through the Northern Region.
He said the project also encompasses the construction of modern train stations, inland ports, the supply of modern trains and the development of Malawi’s rail signalling, passenger communication, and ticketing systems.
The minister said he met a team from the company, China Railway Signal and Communication Corporation International to seal the deal and they assured him that the firm is already in Malawi to prepare for the projects.
“The Chinese firm’s team is already in the country working on feasibility studies, designs and environmental impacts assessment reports. We expect to see the equipment on the ground by April next year.
Hara said since the rail projects will not require a government loan, it will not reflect on government books and does not require any parliamentary approval.
“All that will be required is for the Public Private Partnership Commission (PPPC) to endorse it.
In an interview yesterday, PPPC chief executive officer Patrick Kabambe said they were yet to get details regarding the signed agreement.
He said: “We anticipate that in the fullness of time, we will receive a submission from the Ministry of Transport and Public Works on the said projects.
“As you are aware, the PPPC is the sole authority under the law for developing and processing BOT arrangements on behalf of government.”
Railway services director Geoffrey Magwede also said although details remain sketchy, the project will help the country save a lot on transport costs.
“The project brings a lot of opportunities for employment and where-ever the rail stops, people come up with markets for their various commodities,” he said.
Malawi Engineering Institute chief executive officer Engineer Arthur Wengawenga hailed the project, saying it will enhance the capacity of local engineers in rail transport,