A long-term Egyptian recovery in place since currency devaluation in 2016 can resume after the war between Russia and Ukraine ends, Mathias Althoff, ... partner at Swedish frontier markets investor Tundra Fonder, tells The Africa Report.
Years ago, the governments of Addis Ababa, Nairobi and Dodoma pitched Beijing about rail corridors to tie together the region’s economies with new standard gauge railways (SGRs). But after the profitability of the Kenyan line raised questions about the viability of connections farther inland, governments are working on other ways to raise the share of freight transported over rail, which has dropped from 70%-80% in the 1970s to 5% in 2019.
Since the 1970s, infrastructure maintenance challenges and poor institutional frameworks almost drove rail transport into obsolescence. Following the 2009 East Africa Rail Sector Master Plan and a continued economic boom in the region, upgrades and restorations of various lines, new financing mechanisms and evolving regional trade are to a railway renaissance in the region.
The state of play
Rail transport is the second most important mode of freight transport in the region. As of 2021, four main countries shared important axes:
- Tanzania’s network totals 3,676km of operational railway lines. The Tanzania Railways Corp. oversees internal lines and together the Tanzania-Zambia Railways Authority and Zambia Railways Limited manage the Zambia-Tanzania line, connecting Dar es Salaam to Kapiri Mposhi.
- Kenya comes in second with 2,778km, with a line connecting Mombasa port to Malaba in Uganda. The network is managed by the Kenya Railways Corporation. The government would like to see the network connect to South Sudan, DRC, northern Tanzania, Rwanda and Burundi.
- Ethiopia has 756km of operational railway, connecting Addis Ababa to Djibouti. It is managed by the Ethiopian Railway Corporation.
- Uganda’s operating lines total 265km, an extra 985km need rehabilitation. The network is managed by the Uganda Railways Corporation.
Given continued and significant investments, the value of railway projects in East Africa amounted to $12.1bn in 2019. They have mainly been geared towards building new SGRs that can carry heavier loads by high speed, with an emphasis on electrification.
It is well known that rail transport is much cheaper, reduces travel time, is safer and supports job creation while reducing carbon emissions vis a vis alternative road transport.
“The Mombasa-Nairobi SGR rail line’s efficiency has steadily increased over time as most cargo has slowly moved on to the SGR line, with last-mile logistics improvement in Nairobi. The Addis Ababa-Djibouti line is also improving, with growing utilisation and improved revenue,” Admassu Tadesse, president of the Trade and Development Bank tells The Africa Report.
Pre-existing lines date back to the mid-20th century and are metre-gauge lines (MGR), “restricting freight and passenger haulage capacity”, according to a report by the East African Community.
“It is well known that rail transport is much cheaper, reduces travel time, is safer and supports job creation while reducing carbon emissions vis a vis alternative road transport. Part of the additional efforts will be addressing last-mile and other gaps along the network and better pricing strategies,” Tadesse adds.
Despite the emphasis on SGR lines, financial constraints have modified governments’ plans. “The evolution of Kenya’s transport corridor connecting Mombasa with Nairobi (opened in 2017) and Uganda has been shaped by the construction of the SGR, as well as the government’s move to rehabilitate existing MGR connections between Naivasha and Malaba after Chinese lenders refused financial support for the construction of the SGR’s phases 2b and 2c, which has caused the SGR to terminate at Naivasha,” Tim Kerckhoff, an infrastructure analyst at Fitch Solutions tells The Africa Report.
As of January, Kenya managed to link its SGR and MGR lines, hoping for “seamless transportation of cargo from the Port of Mombasa to Malaba and onward to the East African region in a safe, reliable and cost-effective way” said Philip Mainga, the managing director of Kenya Railways.
In a similar move, Uganda announced plans to invest $205m to restore the Kampala-Malaba MGR line in 2019.
Funding and management
Foreign investment has played a significant role in East African rail development over the past decade, with China funding a significant portion: 25% in 2019. Governments’ contributions represented 15.5%, comparable to other direct foreign investment at 19.7%, followed by African development finance institutions at 16.9%.
Turkey’s Yapi Merkezi is among those making an entry in the sector, with a $1.9bn deal to extend Tanzania’s infrastructure from Dar es Salaam to Mwanza, which is close to Kenya’s and Uganda’s borders. African cooperation is also emerging with Kenya planning on working with South Africa’s Transnet Engineering to refurbish its existing network.
The 535 km linking Dar es Salaam to Morogoro and on to Makutupora is underway, as well as plans to extend the SGR by 676km to Tabora-Isaka-Mwanza with links to Burundi, Rwanda and eastern DRC.
Uganda plans to borrow $362m from the African Development Fund, the African Development Bank and Spain’s Corporate Internalisation Fund to improve its lines.
The development of rail networks are along two main trade axes in the region:
- The Northern Corridor: connecting Mombasa/Lamu, going through Kenya, on to Uganda, South Sudan, Rwanda, Burundi, eastern DRC and southern Ethiopia
- The Central Corridor: linking Dar es Salaam, going through Tanzania, on to Rwanda, Burundi and eastern DRC.
Notable improvements linked to the Northern Corridor include “the 545 km of SGR between Naivasha and Mombasa and plans to upgrade the Kassese-Kampala lines. In addition to main roads: Nairobi-Nakuru-Mau Summit, Entebbe- Kampala and Kampala-Jinja. Toll roads are also emerging as financing mechanisms” explains Tadesse.
As for the Central Corridor, he adds: “The 535 km linking Dar es Salaam to Morogoro and on to Makutupora is underway, as well as plans to extend the SGR by 676km to Tabora-Isaka-Mwanza with links to Burundi, Rwanda and eastern DRC”.
Countries with port access are seeking to draw in land-locked states. “Efficiency in handling of cargo as well as the cost will be a key factor in enhancing the competitiveness of the Kenya and Tanzania hubs,” Tadesse says. “Both countries are doing well in enhancing regional trade, given the expanded Jomo Kenyatta and Julius Nyerere Airports as well as other Kenyan airports in Eldoret, Kisumu and Mombasa”.
Fitch’s Kerckhoff says: “[Kenya] counts the most port projects currently under construction in sub-Saharan Africa (SSA) and is tied with Ghana. The country has the third-largest container port throughput in SSA and outperforms its East African neighbours in terms of liner shipping connectivity, indicating that the country will continue to attract port infrastructure investment.”
He adds that “[despite] the Kenyan government’s plans to expand smaller ports along the coast, we expect that larger opportunities to construct and finance projects will remain focused on Mombasa. Other port projects along the coast will likely underperform due to a lack of supporting infrastructure and demand.”
Another focal point is Lake Victoria, with Kenya, Tanzania and Uganda “working on various rehabilitation and expansion projects. According to some projections, there is potential for up to $6bn worth of trade to be unlocked from trading across the Lake; currently, only $6bn is being realised,” says Tadesse.
Ethiopia, though a landlocked country, is also driving competition “shaped by attempts to diversify trade gateways and reduce Ethiopia’s reliance on Djibouti Port, which currently handles the majority of Ethiopian trade […] On the basis of proximity and expected infrastructure quality considerations, we expect that the Ethiopian government will continue to prioritise Berbera port as a prime alternative to Djibouti, over other competing ports in the region including Port Sudan, Eritrea’s ports in Massawa and Assab, and Kenya’s Mombasa and Lamu ports,” says Kerckhoff.
More tools needed
According to Tadesse, “Transit transport corridors [linking] hard infrastructure (e.g. roads, rails, waterways, ports, border posts, and other facilities) and soft infrastructure (institutional, legal and regulatory framework, documents, standards, operational and logistics services, and ICT/technology) which allow for the development of good physical infrastructure and harmonised and simple procedures along a corridor between countries and transit countries [are needed]. Recent efforts include one-stop border posts in Malaba (Kenya) and Namanga (Tanzania).”
Added to the logistics and financing constraints are institutional challenges. Kerckhoff says: “Regional cooperation, particularly in regards to trade within East Africa, would benefit significantly from a reduction of trade barriers between the region’s markets. However, the nature of protectionism in the East African Community (EAC) is highly political, and will be difficult to resolve.”
He explains: “Political rivalry and suspicion of neighbouring leaderships and pressure to protect domestic businesses from foreign competition will remain a key obstacle to intra-EAC trade. On the upside, the EAC Council of Ministers has recently approved the admission of the DRC into the regional bloc. The approval follows negotiations held between the EAC and the DRC in January 2022 in Nairobi”.
A shift from the initial East African Railway Master Plan towards more bilateral and unilateral plans are expected, as Kerchoff explains. Furthermore, the necessity to have comprehensive infrastructures and also focus on passenger transport while implementing various regional and continental trade agreements seem to pave the way for efficient railway networks in the region.
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