My Turn

On planned railway expansion

Does Malawi’s railway network satisfy the   country’s current transportation needs ?

Government plans to extend Malawi’s railway network to the North.

Understanding the significance of this  development, here are my thoughts on how to bridge the gap between railway financing and international appetite for transport infrastructure investment.

(1) New railways are rarely financed solely by the private sector as financial returns are often dwarfed by investment needs.

As such, government investment has to supplement private investment.

When justified by economic returns, the government should invest in realistic roles for the private sector, including funding, building or operating trains.

It is impossible to finance an entire railway with private investment. Investing in systems or rolling stock, instead, can be effective when combined with an operating concession backed by adequate guarantees.

A full project preparation with quality feasibility studies and commercial plans is required for public or  government  investments.

 (2) Consider all forms of finance.

Most of rail project costs are up-front expenses. The sources of funds depend on the mechanisms of delivery and division of responsibilities between the public and private sectors for the various project components.

Therefore, having blended finance, which entails utilising public funds to entice private participation, is an essential technique of raising capital for railway projects.

The goal is to deploy public and concessional funds during the capital-intensive construction phase and risk mitigation measures like guarantees, subsidies and capital contribution over the whole project life cycle to provide an attractive risk-return profile for private finance.

(3) Eye quick wins.

Freight railroads are most profitable when transporting considerable and constant quantities of bulky products over extensive distances.

Even if only a couple of these prerequisites are met, it is possible to construct a railway. As traffic rises, incremental profits will increase.

Long-distance passenger rail in Africa is unlikely to be lucrative and recover its immediate operational expenses.

However, there are 18 cities in Africa with over two million people and most of them lack adequate public transportation.

Despite significant challenges, the private sector will have opportunities to contribute effectively to urban rail construction.

(4) Look beyond national borders.

Africa is filled with national and regional transport and railway master plans, but few have considered railway planning beyond national or regional borders.

This changed in 2019 when the African Union (AU) developed plans for the African Integrated High-Speed Rail Network as one of the 12 flagship projects of AU Agenda 2063.

The union envision the continental rail network connecting regions and nations, starting with the most viable lines until the network is complete.

Some of the rail lines are currently functioning and others are under development.

Now, the nation needs to examine the long-term effects of joining the continental network beyond the immediate benefits. For  a start, study the Mtwara Corridor Development Project.

The nation needs to find appropriate partners, including  international institutions as key sources of technical assistance, grants, loans, equity investments, guarantees and risk management tools.

Another option, albeit often more expensive, is to use Export-Import institutions such as Africa Export-Import Bank. The Exim bodies provide financial assistance to beneficiaries in order to promote their export products and services, including railways.

When it comes to acquiring financial access, having the right industry partners is a critical necessity often overlooked. Mobilising international private financiers’ aid in attracting industrial partners and selecting the right delivery structure ensures their participation.

In short, Malawi does not need railways for the sake of having one.

With the African Free Continental Trade Agreement, Malawi needs a transport industry that can accelerate and expand its involvement in enhancing trade within the continent.

Railways are extremely useful in mass transit systems for both intercity and urban environments compared to other modes of transport.

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