The scale of the investment required to rehabilitate the Tanzania-Zambia Railway (Tazara) has become clear.
New managing director Bruno Ching’andu has calculated how much money will be required to stabilise the operating company, aside from efforts to upgrade the line. It has debts of $700m and needs another $200m for new rolling stock and track improvements.
Tazara was built in the 1970s by the Chinese government, with Chinese finance and workers. It was developed to give Zambia a means of exporting its copper, via the Port of Dar es Salaam, without moving it through Apartheid-era South Africa. It still carries Zambian copper but a lack of investment over many years has restricted revenue. The signalling and telecommunication systems, which have been vandalised over the years, are described by the company as “currently non-existent”.
Ching’andu said: “The debts which the authority acquired in the past have negatively affected the operations of the authority. But, if these debts could be cancelled, the institution can to get back to its normal operations.”
The Tazara Authority cannot raise the finance for the rolling stock and infrastructural improvements while it is so far in debt. The Zambian and Tanzanian governments paid several years’ worth of outstanding fuel bills in the first part of last year, in addition to millions of dollars in employee salary arrears.
In September, the Zambian government said that Tazara needed investment of $1.2bn over the next five years to turn it into a profitable commercial enterprise. Extra capacity is needed to reduce unit transport costs on the line, which currently has haulage capacity of 600,000 tonnes a year but which could carry 2m tonnes a year with the hoped-for investment.
The Authority expected to carry 381,000 tonnes of freight and 2,280,000 passengers, both interstate and commuter, in financial year 2016-17, generating revenue of $44.10m. Given China’s role in the project, Beijing has been mooted as the most likely investor in the railway. Talks on Chinese investment have been held in recent years but no agreement on large scale finance has been reached, although Beijing did provide $40m at the start of 2016 to provide some working capital.
When the new management team took control they signed a performance-based contract with clear targets and a mission to run the railway on more commercial lines. Tazara Authority is interested in securing private sector investment in public private partnerships (PPPs), particularly on its Dar es Salaam commuter services, where demand is rising quickly.
Over the past few months, Tazara has concluded agreements with several companies to carry 180,000 tonnes of extra copper a year from Zambia to Dar Es Salaam. New copper carrying wagons are being rehabilitated to serve the contracts. Last May, the Tazara Authority had just 704 operational wagons out of a fleet of 1,094 but from June it began to upgrade 20 wagons a months at its Mpika workshop.
Ching’andu said: “The new orders confirm that we are moving in the right direction as far as restoration of confidence is concerned. The market is happy and that is encouraging. It is exciting that there is so much interest and desire to use the railways.” The World Food Programme uses Tazara to carry food to Malawi via Zambia, while the Tanzania Fertiliser Company exports its products to Zambia using the railway.
Another step forward was made on 1 March when the Authority reached a deal with the trade unions representing its workers following a week of industrial action. Salaries are negotiated in US dollars but paid in local currencies. Currency depreciation has meant that wages have been significantly lower than workers expected. Tazara public relations manager Conrad Simuchile said: “The Authority will adjust the exchange rates upon which the salaries are based upwards, to achieve parity of remuneration between the workers in Tanzania and Zambia.”
Aside from new investment, a recovery in copper prices would increase demand from the Zambian Copper Belt. However, Tazara could face competition from an alternative copper export route in the near future. The railway from the Copper Belt through Democratic Republic of Congo (DRC) and Angola to the Port of Lobito is being rebuilt. South Africa offers another alternative, either via rail or road.
from African Business Magazine http://ift.tt/2mWJFzZ