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Jun 21, 2012

Rail investments to help lower transportation costs in Africa

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Rail infrastructure development in Africa can play a crucial role in the formation of trade corridors, as rail routes are developed to link major cities, providing companies with access to large markets.

Frost & Sullivan environment and building technology group analyst James Milne said that such links would provide for cheaper passenger and freight transportation.

He added that urbanisation and the development of megacities would also drive the need for light urban railways.

“Road transport is heavily burdened in almost all countries in Africa, and the development of rail infrastructure is a viable option for reducing freight and passenger transportation costs going forward,” he said.

There were a number of key high profile rail infrastructure projects in Africa, both ongoing and planned, to the value of $48.12-billion. Countries of particular interest in terms of infrastructure expenditure included Morocco, Nigeria, Ghana and Tanzania.

Milne said that the development of rail infrastructure would also promote intraregional trade on the continent, which would boost economic growth. “In Africa, [intraregional trade] is currently very low. Only 7.6% of trade recorded by large trade zones in Africa in 2010 was intraregional.

“The implication is that, with the development of rail infrastructure linking a number of regions, intraregional trade would be vastly improved, particularly once policy suggestions, such as a unified African free trade zone, are put into action,” he added.

“The development of quality regional rail networks would also allow various forms of processing to take place in beneficiation hubs across the continent,” he said.

Milne also highlighted the number of challenges facing the continent in the development of infrastructure, including funding, skills shortage and poorly developed infrastructure, driving up the costs of projects.

“Cash-strapped governments are often reliant on multinational development partners and banks to provide a majority of the funds. This problem is compounded by the fact that significant funding shortages already exist for the rehabilitation of almost all rail networks in Africa.”

Further, he noted that, because multinational construction companies often carried out some of the largest infrastructure projects, a skills and knowledge transfer gap emerged upon completion of the work. Skills shortages were a widespread problem. Skilled workers often leave Africa for better wages abroad.

Milne said that future challenges included the political unrests that the continent is facing. “Africa is notorious for volatile political conditions. Although the political climate has been relatively stable in recent years, there is still significant risk of unexpected changes in countries’ political climate.”

 

Edited by: Mariaan Webb
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