1. © Simmons & Simmons LLP 2011. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. Juliet Reingold 19 July 2013 AFRICA G20 INFRASTRUCTURE INVESTMENT CONFERENCE Transport and Logistics Infrastructure

2. 2 / Doc ID: L_LIVE_EMEA1: 17650231v1 © Simmons & Simmons LLP 2011. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. Introduction Efficient transport and logistics channels are key for commodity-based economies to grow Logistics are a very significant part of the overall cost Often can be a bottleneck that caps investment returns and revenues Multi-stakeholder environments add to complexity Expectation is for a growth in demand and changes to the current transport environment This will require: – coordinated regional approach – shared regional transport infrastructure –Governments need to encourage private-sector/PPP engagement for greenfield transport logistics infrastructure

3. 3 / Doc ID: L_LIVE_EMEA1: 17650231v1 © Simmons & Simmons LLP 2011. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. RAIL MAP OF AFRICA

4. 4 / Doc ID: L_LIVE_EMEA1: 17650231v1 © Simmons & Simmons LLP 2011. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. Railway concessions awarded in Africa from 1990 to 2009

5. 5 / Doc ID: L_LIVE_EMEA1: 17650231v1 © Simmons & Simmons LLP 2011. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. Current Railway Transport Landscape 47 railways in 32 African countries Railway concessions since 1990 Some specialist mineral lines – West and Southern Africa Total network size: –70,000 km –55,000 km in operation –single track and little electrification Railway standards are from when railways were built over 100 years ago: –low axle loads and low speeds –under capitalised –ill suited to modern requirements –limited upgrading –track deterioration –signalling systems rely on manual networks

6. 6 / Doc ID: L_LIVE_EMEA1: 17650231v1 © Simmons & Simmons LLP 2011. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. Current African Institutional Railways Structure Trend is to unbundle core infrastructure from transport services –Uganda, Kenya, Ghana (SOE) –Zambia/Tanzania (privately operated until recent concession cancellations) Vertical integration models involving SOE’s: –South Africa (TRANSNET) –Botswana –Nigeria –Namibia No independent railway regulatory authority Self regulation by SOE Railway Company or Ministry Except Tanzania – multi-sector regulator for rail, roads, ports - SUMMATRA

7. 7 / Doc ID: L_LIVE_EMEA1: 17650231v1 © Simmons & Simmons LLP 2011. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. Current Constraints Big volumes, big distances No transcontinental motorway system Road tariffs are high Transport interchanges are complex and create blockages 15 land-locked countries Burdensome trade regulations Customs agencies – viewed as logistics unfriendly Railway: –transit times are slow –services are infrequent –absence of reliable cross-border interconnection services –track infrastructure –freight car imbalance

8. 8 / Doc ID: L_LIVE_EMEA1: 17650231v1 © Simmons & Simmons LLP 2011. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. TRANS-AFRICAN HIGHWAY AND MAJOR PORTS

9. 9 / Doc ID: L_LIVE_EMEA1: 17650231v1 © Simmons & Simmons LLP 2011. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. Source: Transport Prices and Cost, AICD 2008 ROAD FREIGHT PRICES IN AFRICA

10. 10 / Doc ID: L_LIVE_EMEA1: 17650231v1 © Simmons & Simmons LLP 2011. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. Current Constraints Big volumes, big distances No transcontinental motorway system Road tariffs are high Transport interchanges are complex and create blockages 15 land-locked countries Burdensome trade regulations Customs agencies – viewed as logistics unfriendly Railway: –transit times are slow –services are infrequent –absence of reliable cross-border interconnection services –track infrastructure –freight car imbalance

11. 11 / Doc ID: L_LIVE_EMEA1: 17650231v1 © Simmons & Simmons LLP 2011. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. Key Structural Legal Issues Clear legislation and enforcement of law Regional harmonisation of laws Legal framework for PPP’s Dispute resolution through international arbitration Transparency and accountability Physical and contractual inter-dependencies between host countries Robust and legally binding concession contracts

12. 12 / Doc ID: L_LIVE_EMEA1: 17650231v1 © Simmons & Simmons LLP 2011. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. Multi-stakeholder environment Rail operator Mine 2 Mine 1 Mine 3 Factory Power station Pipeline operator Stakeholders Mines: One or several mines, competing mining houses, different commodities Rail operator: Multiple freight customers, sometimes passenger traffic Port operator / end customer: Export terminal or end customer Utilities provider: Power and water supply for mining operations Country interests: One or more countries with economic interests, regulations and political debates Potential ownership structures: Single private owner, JV, state owned, or PPP

13. 13 / Doc ID: L_LIVE_EMEA1: 17650231v1 © Simmons & Simmons LLP 2011. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. Multi-stakeholder: commercial models Historic ownership model  Rail and ports Government-owned Increasing complexity, rapid  Substantial deficiencies within mineral industry expansion, emergence transport supply chain / competing and of new stakeholders complimentary interests Solutions beyond Government  Private ownership / PPP funding essential Use existing infrastructure  State owned / commercially-owned / concession Private ownership  Mining company preference for vertical integration?  Competition issues for smaller miners / third party access  Significant costs of dedicated infrastructure

14. 14 / Doc ID: L_LIVE_EMEA1: 17650231v1 © Simmons & Simmons LLP 2011. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. Key Contractual PPP Issues in Transport Projects Location – minor boundary adjustments create difficulties Securing tenure – slow, subject to legal challenge, gaps in tenure Access Regime: –who controls access to the track? –is there shared use? –capacity allocation –management of incidents and responsibility for delays and incidents –access charges/pricing mechanisms Safety, environment Co-use arrangements Crossing other infrastructure: –corridor not to become barrier to adjacent development –unfettered rights to cross not unwittingly granted –highly-regulated environment – risks of compensation imposed –continued existence of agricultural communities

15. 15 / Doc ID: L_LIVE_EMEA1: 17650231v1 © Simmons & Simmons LLP 2011. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. simmons-simmons.com elexica.com