Land

Reform schemes for African railway and road networks

02 Oct, 2023

Joan Miquel Vilardell
Mario Espinosa Mateo

Over the past decades, the efficiency of railways across the African continent has been compromised by outdated infrastructure and limited maintenance. While there are exceptions, notably in the Republic of South Africa and Northern Africa, African railways significantly lag behind those in other regions.

The majority of African countries exhibit a low railway network density, averaging only 3 kilometers per 1,000 square kilometers, in contrast to the 8 kilometers in South Africa and a remarkable 400 kilometers in Europe. Freight and passenger transport are heavily concentrated in Northern Africa and the Republic of South Africa, accounting for over 80% of the total.

Regrettably, there is a general deficiency in the adequate maintenance of infrastructure and rolling stock across the continent, resulting in only about 70% of the railway network is fully operational, and leading to remarkably low transported freight volumes, constituting a mere 2% of the global railway traffic.

Moreover, there is a lack of interoperability among countries, characterized by different gauges and regulations across the continent. The majority of the railway infrastructure remains single track and non-electrified. However, recent railway developments in East Africa are advocating for electrification.

The African railway network only represents a 8% of the global length of railway lines, in to the continent's surface area and substantial population, accounting for 23% and 17% respectively of the world's total.

The current situation is a result of multiple challenges faced by African railways, which have not only hindered their commercial opportunities but also discouraged private investors. While rail transport faces similar constraints and challenges in other regions, Africa's railway sector is worsened by adverse economic, technological, and institutional conditions.

Some of the key issues that we have identified include:

The prioritization of road investments while neglecting railway development and maintenance.
Inadequate railway infrastructure for commercial exploitation, due to their deteriorated conditions
Inefficient and outdated rolling stock.
Lack of human resources renovations and updated training.
Political conflicts and other natural disasters, some of them attributable to climate change impacts on existing infrastructure.

As a consequence, the railway sector in Africa requires from substantial restructuring to transform into a competitive transport system throughout the continent. As shown in the following image, the majority of railway lines in Sub-Saharan Africa are in fair to poor condition, with notable exceptions resulting from significant developments in Kenya, Tanzania, Ethiopia, Djibouti, and Nigeria.

African railway network

Nevertheless, Africa holds a strong potential for the development of the railway sector throughout the region. Key factors contributing to this potential encompass:

The growth in transport demand driven by the economic growth in Africa, which will result in increased demands for both freight and passenger transport, as well as for improved infrastructure.
Increased competitiveness in global supply chains, demanding better, more efficient, and integrated logistics chains.
The growing number and size of large metropolitan regions require efficient mass transport systems for new urban areas.
New mining developments with growing production volumes, which will require high-capacity transport infrastructures capable of handling large volumes of mining products.
The presence of sixteen landlocked countries in Africa, each with substantial requirements for access to seaports characterized by elevated levels of capacity, efficiency, and reliability.
The growing awareness of transport externalities, leading to a rising demand for enhanced transport infrastructure with better energy efficiency and reduced emissions.

Main areas suitablefor railway developments

The road transport alternative

Despite the significant potential of the railway industry, the road sector continues to carry approximately 80% of freight and 90% of passenger transportation in Africa. This stands in contrast to Europe, where the road sector accounts for a comparatively smaller proportion, comprising roughly 47% for freight and 84% for passenger transport.

While it holds considerable relevance, the road sector in Africa still faces important issues:

The road density, calculated as kilometers of road per square kilometer of land, stands at approximately one-fifth of the worldwide average.
On average, only 27% of roads in Africa are paved, in contrast to 60% in India and 66% in China. However, these figures exhibit considerable variation among African nations, with Northern Africa nations presenting the greatest share of paved roads. As a result, fewer than half of Africa's rural population has access to a road usable in all seasons (i.e., not affected by roadblocks, floods and adverse climate situations).
Most nations experience issues with truck overloading, leading to premature deterioration of road infrastructure and increasing maintenance expenses.
The majority of roads do not have tolls, and there is an overall insufficient periodic maintenance of the road networks.
Road funds have been established to finance road maintenance activities. However, the diversion of maintenance funds to road development projects and other infrastructure projects has compromised their effectiveness.
Externalities associated to road transport, such as pollution and accidents, are discouraging financing institutions from backing the sector.

Road Funds were introduced in African countries during the 1990s to ensure sustainable, long-term funding for road maintenance. These funds are responsible for collecting revenues and investing them primarily in road maintenance.

The progression of road maintenance funding has varied among nations. Some countries have solely implemented 1st Generation funds, where earmarked road-related taxes (e.g., fuel levies, vehicle license fees, or heavy vehicle fees) are deposited to fund road-related activities. Unfortunately, these funds often suffer from inadequate financial management, misallocation of resources to non-road-related activities, and insufficient oversight.

To tackle these issues, certain countries have established independent Road Agencies tasked with overseeing Road Funds and road maintenance activities. However, funding remains insufficient due to limited revenue collection capabilities and misallocation of resources. These systems, known as 2nd Generation funds, are currently operational in countries like Senegal, Zambia, and Rwanda.

Furthermore, some nations are progressing towards 3rd Generation Road Funds, which exhibit enhanced capabilities in managing road maintenance activities and have the capacity to explore additional funding sources. They are better equipped to mobilize private finance and secure commercial debt to sustain long-term Public-Private Partnerships (PPP) and maintenance contracts supported by stable and secured funds. Countries such as Kenya, Ethiopia, and Ghana are among the most advanced in progressing towards 3rd Generation road funds.

A suitable alternative to secure road maintenance funding could involve the implementation of pay-per-use mechanisms, a strategy currently being adopted by some countries in Europe (i.e., Eurovignette). These mechanisms involve levies directly charged to road users based on their road usage and its impact on the infrastructure. These funds should be earmarked for financing both road maintenance and development. Although certain nations, such as Senegal, Ethiopia, and South Africa, have effectively introduced some forms of pay-per-use systems, primarily through road tolls, there is still considerable progress to be made.

Way forward in advancing the railway sector

In contrast, for the railway sector, there is no single business model that fits all projects, although key fundamentals of railway economics and operations should be considered.

Road and railway are competitive for mid and long distances, but complementary for the first- and last-mile. Railways often present more competitive advantages for distances greater than three hundred (300) kilometers.
Big freight densities are necessary for railway projects to be economically viable.
Both freight and passenger users pay for the utilization of railway infrastructure and services; however, subsidies are necessary for passenger transport.
Railway infrastructure is rigid, with a pre-defined and fixed path, and expensive to develop, operate and maintain.
The performance of the operator is affected by the condition of both the infrastructure and rolling stock.
Railway transport externalities, such as emissions of greenhouse gases and other pollutants, are generally more favorable compared to those of road transport.

In this context, the subsequent policies are suggested to reform of the railway sector in Africa, organized into primary categories:

Related to the identification and selection of projects:

Prioritize projects focused on identified markets generating high volumes, enhancing the commercial viability of railway projects and attracting the private sector.
Prioritize brownfield investments, when possible, with lower investment requirements when compared to greenfield developments.

Related to financing railway projects:

Include railways financing as part of broader sustainable transport policies, as funding railways makes sense when overall economic, social and environmental impacts are considered.
Establish clear and stable commercial agreements for passenger services, which shall be considered as part of national transport policies and will require from subsidies.
Set-up railway maintenance funds by earmarking different revenue sources, which may come from railway user fees as well as from road users, supporting the shift towards railway transport and monetizing the negative externalities of road transport.
Ensure long-term involvement by states to secure larger financial packages, allowing to access greater investments and capacity to attract different financial instruments with longer maturities, such as infrastructure bonds.
Monetize wider economic, social and climate benefits of railway projects through cost-benefit analyses, enhancing the economic case of railway projects.
Leverage on climate benefits of railway projects over other means of transport to access green funding, such as the Green Climate Fund or the Global Environmental Facility.

Related to private financing:

Explore new PPP models including separation of infrastructure and operations, limiting the responsibilities of operators to transporting goods and people.
Explore asset recycling mechanisms to concession recently developed projects and invest the revenues obtained through this mechanism in new railway developments.

Related to the institutional and regulatory framework governing the railway sector:

Promote capacity-building to enhance railway expertise at all levels.
Advocate for the improvement of regulation and monitoring bodies.
Coordinate rolling stock acquisition, maintenance and operations among nations.
Promote larger railway markets through increased cross-border cooperation.
Implement policies to shift freight and passenger transport from road to railway.

Finally, it is important to emphasize the strong potential for reducing transportation-related externalities by shifting land transport towards railways. This shift would reduce the reliance on road transport and subsequently lower the requirements for road maintenance. There are several crucial factors to take into account when advocating for the transition from road to railway, including:

Ensure adequate railway capacity, efficiency and service level prior to implement road-to-rail shifting policies.
Optimize network’s freight and passenger capacity.
Impose pay-per-use levies on road users.
Enhance the logistics chain through multimodal hubs.
Promote railway-based industrial and housing development.
Leverage on electrification to decarbonize freight transport.