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Should the Zambian Government Invest in Railways?. Alan Whitworth ZIPAR. Railways played a key role in Zambian history. ZR / RSZ line from Copper Belt – Lusaka – Victoria Falls – Joburg – Durban built early 1900s to transport minerals Lusaka was originally a rail junction

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railways played a key role in zambian history
Railways played a key role in Zambian history
  • ZR / RSZ line from Copper Belt – Lusaka – Victoria Falls – Joburg – Durban built early 1900s to transport minerals
  • Lusaka was originally a rail junction
  • TAZARA to Dar es Salaam built in 1970s following UDI in S. Rhodesia
  • All copper and most trade transported by rail until 1990s
slide3
Zambia International and Regional Trade Estimated Freight Transport Flows 2005/2006 (million tonnes pa)
rail economics fundamentally transformed since 1970s
Rail Economics fundamentally transformed since 1970s
  • Decline of the railways
  • Competition from trucks
  • Rail is no longer competitive
rail s vicious circle of decline
Rail’s vicious circle of decline
  • Collapse in CU exports following nationalisation (from 712,000 MT in 1976 to 255,000 MT in 1998) slashed revenue
  • Excess capacity once Zim border / Durban route re-opened
  • Lack of maintenance & investment led to deterioration in speed & reliability
  • Privatisation of mines ended rail transport monopoly
  • With low volumes, tariffs needed to cover fixed costs (x 2) increased sharply
competitive trucking industry developed from scratch
Competitive trucking industry developed from scratch
  • End of apartheid opened up trade between RSA and Zambia (& region) from 1990s
  • Zambian trunk roads rehabilitated under RoadSIP from 2000, lowering times / costs
  • Increased RSA exports to Zambia (eg Shoprite) transported by truck
  • Trucks allowed to compete for CU traffic & able to offer low ‘backhaul’ rates
slide7
RSA – Zambia truck rates among lowest in Africa, because they are full in both directions and economies of scale
rail is no longer competitive
Rail is no longer competitive
  • With low volumes, minimum tariffs needed to cover costs are much higher than trucking rates
  • Speed, reliability & security are all inferior to trucks (& deteriorating)
  • Rebound in CU production to 850,000 MT has not benefited rail
  • CU exported as cathode (3 times value / 1/3 volume of concentrate)
  • Mines do not need rail to export
grz plans investment in both existing new rail lines but where is economic appraisal
GRZ plans investment in both existing & new rail lines- but where is economic appraisal?
  • Rehabilitate TAZARA
  • Rehabilitate RSZ
  • Chingola – Solwezi
  • Solwezi – Namibia
  • Solwezi - Benguela
  • TAZARA – Petauke – Chipata (- Nacala)
  • TAZARA - Mpulungu
  • Kafue – Lions Den
how can rail compete
How can rail compete?
  • Substantial investment needed to improve speed & reliability on RSZ & (particularly) TAZARA
  • Need for return on investment (profit) means tariffs must rise – unless traffic volumes increase sharply
  • With trucks already cheaper than rail, why would mines switch back to rail?
slide11
Increasing road traffic means increased maintenance, congestion & environmental costs. Should GRZ force mines to use rail?
  • Mines are privately owned and free to decide
  • Kansanshi & Lumwana > 200 km from nearest rail
  • Costs should be recovered from taxes & road user charges (RUCs)
  • Are congestion costs significant?
  • No estimates of environmental costs
do trucks pay for road damage
Do trucks pay for road damage?
  • RDA does not know cost of CU truck damage
  • RDA claims weighbridges have nearly eliminated over-loading, reducing damage
  • International transit fee of $10 / 100 km ($117 for DRC – Chirundu return)
  • Fuel taxes for DRC – Chirundu return in 2009 were $95 (Fuel Levy $24), but easily avoided by refuelling outside Zambia (blame Indeni!)
  • Unclear whether trucks cover costs
rsz tazara traffic trends 000 tpa
RSZ & TAZARA Traffic Trends (‘000 tpa)

RSZTAZARA

(Cap: 6 mn tpa) (Cap: 5 mn tpa)

Total Traffic o/w CU Total Traffic o/w CU

2007 863 161 538 152

2008 892 238 528 148

2009 691 188 383 107

2010 754 114 523 202

rsz prospects
RSZ Prospects
  • 20 year concession with NLPI of RSA signed in 2003
  • NLPI to invest $14.7 million
  • GRZ relieved of financial losses
  • Modest recovery in traffic (sugar, maize, fuel, coal)
  • Can probably survive
tazara prospects
TAZARA Prospects
  • Jointly owned and managed by Zambian & Tanzanian governments
  • Massive maintenance requirements
  • In financial crisis (‘TAZARA requires an investment of US$ 208.999 millionto sustain its operations’ - annual income $37 million)
  • Dar es Salaam harbour congested
  • Cut losses now?
drc to the rescue
DRC to the rescue?
  • In 2009 DRC exported 437,000 MT of CU through Zambia, almost entirely by road
  • Much of DRC exports is CU concentrate, not cathode
  • Production to double by 2012
  • Equivalent of up to 100 extra trucks daily
  • What about Benguela line?
  • Studies, long term contracts & inter-governmental agreements needed to justify investing in Zambian rail
conclusions 1
Conclusions 1
  • Support for rail based on faith, not facts
  • Rail cannot compete with low truck rates
  • Low trucking rates should be welcomed
  • Costs of road maintenance, etc can be covered through smarter taxes, RUCs
  • Estimate actual costs imposed by trucks
  • Room for more than one rail system?
  • TAZARA beyond rescue?
conclusions 2
Conclusions 2
  • Can not assume railways are viable
  • Vital to undertake sound economic appraisal before investing in rail
  • Encourage private sector investment
  • Do not pour good money after bad!