Rail funders demand guaranteed volumes

Rail operators across southern Africa will struggle to secure funding for infrastructure upgrades unless cargo owners commit freight volumes through long-term contracts, according to the Southern African Railways Association (SARA). Speaking during a road and rail discussion at the Zambia Land-Linked Conference recently, Raymond Shoniwa, SARA executive director, said financiers were increasingly requiring rail projects to demonstrate guaranteed cargo volumes before funding would be approved. “The funding models that are available today demand that any project brought to financiers is tied to specific cargo,” he said. “Without participation from cargo owners, it becomes difficult for rail operators to unlock the funding that is out there.” He said the industry could also no longer afford delays in shifting bulk freight from road to rail. “The quantities can still be determined, but without contracts being signed, we are not going to generate revenue and attract further investment.” Shoniwa said in an ideal bulk freight environment, rail should carry around 70% of volumes, with road transport accounting for the remaining 30%. “In the short term, road will continue to play an important role, particularly in first- and last-mile operations, but we are behind where we should be as a region when it comes to rail.” Road remains the predominant mode of transport across the region. Cuthbert Malindi, managing director of Zambia Railways, said southern Africa could significantly increase the share of freight moved by rail within the next two to three years, provided greater investment was directed towards rail infrastructure and freight operations. “It is important to understand the facts and demonstrate them through figures,” he said. “Right now, 98% of cargo is transported by road and only 2% by rail. Developed countries all use rail extensively. There is no country with a strong industrial economy that does not have a functioning rail system.” According to Malindi, the debate should no longer be about whether road or rail is more important, but rather about accelerating investment in rail infrastructure. “We are still debating road versus rail when we should be putting money into rail,” he said. Shoniwa agreed, saying rail was not a threat to road operations. “No matter where we go in southern Africa, road will always play a role in the resuscitation of rail,” he said. However, he urged governments, mining companies and logistics stakeholders to accelerate the shift of suitable bulk cargoes onto rail networks. “There has been a tendency to delay. We cannot keep stopping and waiting. The question now is: where is our 30%? We want to see that transition happening.” LV