1. (UIC/SIAFI – September 2007) 1 The railway restructuring and privatization processes in Africa

2. (UIC/SIAFI – September 2007) 2 Profound transformation of the African railway system; 34 railways owned and operated by government bodies in 1990s; 13 state railways have been concessioned to private partners; 12 railways are at various stages of the process Introduction

3. (UIC/SIAFI – September 2007) 3 African economic environment Deterioration of terms of exchange Liberalisation of market conditions Structural adjustment of economies Important debt Significant growth rate Conflicts and deseases Globalisation challenges

4. (UIC/SIAFI – September 2007) 4 Situation of railways African railways were suffering from: Deteriorating services; Growing financial losses; Demoralized staff; Falling traffics (ex.Côte d’Ivoire/Burkina Fasso – traffic fallen 60% for freight and 80% passenger since 1980; in Malawi business had fallen 70% and in Zambia 65%)

5. (UIC/SIAFI – September 2007) 5 Government decisions Concessioning of the operation to private sector operators on an exclusive basis for a period ranging from 15 to 30 years Objectives: Attract significant new investment; Concessionaires tend to provide minimum capital; Improve performance and service; Provide revenue to government through annual concession fees and taxes; Convert unefficient railway organization into efficient organization; Improve service to the market; Earn profits for future investments

6. (UIC/SIAFI – September 2007) 6 Background/Partnership Significant support from the World Bank funding: Technical assistance in preparation and bidding process; Loan to help rehabilitation of infrastructure development; Attractive transition from public control to private operations; Government progressively given management control; Government involvement in regulatory powers; Institutional and legal framework of railway companies revised in order to reflect new structure

7. (UIC/SIAFI – September 2007) 7 Private concessionaires Selection through international bidding process; Significant investment required in: - Infrastructure; - Rehabilitation of track and material; - Improvement of rolling stock turn round: ex-Camrail (Cameroun) 25 mln.USD; Limpopo Railway (Zambia) – 20 mln.USD; infrastrucutre investment largely covered by African governments with assistance of developing partners; Poor contribution of rival investors in infrastructure development

8. (UIC/SIAFI – September 2007) 8 Concessionaires achievements Improvement and assets productivity; Better assets utilization for freight wagons: in Malawi increase of traffic by 30% with 66% of task force; Inprovement of quality services: Zambia customs bonds aimed at reducing waiting time for import traffic; Attract a new market share; Reduce special costs linked to reduction of surplus staff; Regeneration benefit along railway routes in agriculture and mining

9. (UIC/SIAFI – September 2007) 9 Assessment of the process Limited applications; A few concessions operated in uninterrupted manner (ex. in Gabon concession has been cancelled); Concessionaires are reluctant to invest in infrastructure beyond the duration of their convention; Concessionaires are not ready to be involved in African longterm political risks; Concessionaires did not generate enough revenue to cover the cost of infrastructure improvements; African governments are left with the burden of funding Railway Infrastructure development

10. (UIC/SIAFI – September 2007) 10 Contentious issues Passenger traffic usually unprofitable has been a contentious issue; Concessionaires are uninterested and willing to maintain passenger services not subsidized by government authorities: - Transrail – new rolling stock, - Camrail – new passenger ?, - Tanzania – concessionaires accepted to cross subsidize passenger services with freight traffic; Bus services are cheaper than trains for passengers; Linked to demographic growth African railways are involved in unprofitable urban transport; Referential treatment provided to some customers: Gabon? Zambia ?

11. (UIC/SIAFI – September 2007) 11 Contentious issues Contentious with government and short – hand customers; Civil unrest and natural disasters prevailing in Africa have hampered the success of the railway restructuring and rivalisation? process: Examples: -civil war in Côte d’Ivoire disrrupted services between Abidjan(Côte d’Ivoire and Oufa Doufou (Burkina Fasso), -affected transit traffic, -in Malawi collapse of a key bridge made a major railway sector unusable for a long period

12. (UIC/SIAFI – September 2007) 12 Social issues State owned railways operate with high staff level; Political ends; Civil Servant Statuts low performances – NRC 60000 tons in 2004 with 13000 employees; Concessioning led to massive staff cuts; Government and railway staff resistance delayed the process

13. (UIC/SIAFI – September 2007) 13 Other options Some African governments did not seek assistance of the World Bank: Morocco, Algeria, Tunisia, Egypt, South Africa. They decided to improve the railway efficiency through commercialisation. Actions undertaken: 1. Financial environment at the railway was significantly improved; 2. Insititutional and legal framework was revised; 3. Significant financial ressources were provided; 4. Railway companies were given a significant autonomy and adopted new commercial structures and strategies through: a) profit centers; b) traffic with: passengers, ?, general cargo, containers

14. (UIC/SIAFI – September 2007) 14 Types of concessioning Three main options: The state continues to hold property of railway assets, the concessionaire shall operate the railway ? (ex. Sitarail); The private operator shall manage the railway assets to be handed over to the government at the end of the concession (ex.Kenya – Uganda); The concerssionaire shall build and operate the railway and transfer it to the state after a period agreed by the two parties (ex.Beitbridge Bulawayo – Zimbabwe, Gantrain – South Africa)

15. (UIC/SIAFI – September 2007) 15 Conclusions 1. Railway concessions have generally improved the railway performances: - increase of efficiency; - better services (quality); -increase of the freight traffic; -increase of government revenues 2. But some difficulties still remain in: -investment relating to infrastructure development; -passenger traffic issues

16. (UIC/SIAFI – September 2007) 16 Recommendations There is a need to assess again the railway restructuring process; The UAR carried out a study in 2001 and came out with relevant recommendations