Zambia operators en route to rehabilitating ailing old rail lines

Zambia operators en route to rehabilitating ailing old rail lines : GRAHAM Soko, a shopkeeper whose business straddles the railway line south of Lusaka Station in Zambia’s capital, says he is hoping to reap profits from the government’s plans to rejuvenate the dilapidated railway system.

“We need a well-developed, modern one,” he said as a radio played in his shop, named All Types of Groceries. “People will be using the facility so I expect our business to improve as we start seeing more people coming to buy items.”

Railway operators in landlocked Zambia, the southern African nation that is the continent’s biggest copper producer, plan to invest as much as $1.5bn over the next five years to upgrade the 1,200km system that President Michael Sata in November said had “deteriorated beyond description”.

The nation plans to boost rail volumes almost tenfold by 2016, cutting costs for companies including Glencore Xstrata and Vedanta Resources as they increase output.

The government in September cancelled an operating concession with a South African company for Zambia Railways, appointed new management for the state-owned operator and gave it $120m of the $750m raised in the country’s debut Eurobond. The company started running intermine trains for the first time since 2008 last month. Vedanta’s local unit, Konkola Copper Mines, said the cost savings will be “huge”.

“Rehabilitating the old rail lines between Zambia-Angola-Namibia and Zambia-Tanzania could help ease costs for copper miners like First Quantum and Vedanta, given significant transportation costs to get copper from mines in Zambia to port,” Patrick Jones, a London-based analyst with Nomura International said on May 3.

Zambia’s efforts are part of a continent-wide push to improve infrastructure. Kenya is moving to spend $25bn on a second port, a crude pipeline and roads, while Nigeria is spending more than $3bn to build about 300km of rail lines in the next three years. In West Africa, an iron-ore boom is motivating miners including Rio Tinto to spend $25bn on railways and ports, according to JPMorgan Chase.

Even if Zambia Railways succeeds in offering a competitive and reliable alternative to road transport, there are bottlenecks within and beyond its borders.

Tanzania-Zambia Railway Authority, owned by the two governments, operates a 1,860km line and has suffered from poor management and maintenance since it was built using Chinese aid in the 1970s.

The authority is “limping” and is “a child in the hospital in a terrible state — almost like terminal illness”, Zambia Railways acting CEO Muyenga Atanga said last Thursday.

There are also capacity issues with a Zimbabwean operator that Zambia Railways uses to move its freight to Durban in SA. The company has approached the government to take up the matter with counterparts in Zimbabwe, he said.

Last month, Mr Sata suspended Zambia Railways CEO Clive Chirwa following graft accusations. The suspension had “no impact whatsoever” on the company’s plans, Mr Atanga said.

“Without substantial investment and improved management it is hard to envisage the railways ever again being competitive with trucks,” a 2011 report by the Zambia Institute for Policy Analysis and Research, known as Zipar, says.

Copper, used for pipes, wires and cables, accounts for more than 70% of Zambia’s export earnings. Output is expected to climb 34% to 1.1-million metric tons annually by 2015 from now, Mines Minister Yamfwa Mukanga said last month.

Less than 30% of the metal is moved by train, Zipar said. The rest is moved by truck, which uses more energy. The government has agreed to lend Zambia Railways an extra $50m for its projects, Mr Atanga said.

Yields on the country’s dollar debt due in September 2022 have climbed 53 basis points since being sold eight months ago, to 5.70% on Tuesday. The rates have risen on concern that the debut bond in the US currency has paved the way for record issuance that risks overstretching government borrowing, Ricardo da Camara, an analyst at NKC Independent Economists, said.

The nation’s rail volumes plummeted to 690,000 tons in 2009 from more than 6-million tons in 1975 as production declined, Zipar said in the October 2011 report. Copper output fell to 257,000 tons in 2000 from 750,000 tons in 1973 after the government nationalised the southern African country’s mines in the 1970s, according to the Chamber of Mines.

Zambia Railways has more than doubled the trains it dispatches every month to about 68 and plans to increase rail volumes by two thirds this year to 1.1-million tons, said Mr Atanga, who also serves as permanent secretary in the Ministry of Transport, Works, Supply and Communication.

“In three years we can look at getting 4-million to 6-million tons,” he said.

Mopani Copper Mines, 73.1% owned by Glencore Xstrata, is working with Zambia Railways to return to using rail for some of its copper exports, Charles Watenphul, a spokesman for Switzerland-based Glencore Xstrata, said on Friday.

Vedanta’s Konkola plans to move 70,000 tons of the metal using trains by March next year, Joy Sata, a spokeswoman, said early last month. KCM, as the company is known, transports 70% of its copper by truck from Chingola to Kapiri Mposhi, about 210km away, Ms Sata said. The metal is then transported by rail to the port of Dar es Salaam, about 1,400km northeast.

The rest is moved by road to the docks at South Africa’s eastern port city of Durban, about 2,600km away. Glencore’s Mopani uses trucks to transport the metal.

Zambia’s government raised diesel prices by 22% on May 1, more than triple the annual inflation rate of 6.5% in April.

Zambia’s gross domestic product may rise 7.8% this year, the International Monetary Fund said last month, while the central bank estimated in February that the economy grew 7.3% last year.

Security also improves with the shift of more copper to rail, Konkola’s Ms Sata said last Wednesday. The company lost about 60,000 tons of finished copper because of theft in South Africa between April and June last year, she said.

For the Zambian government, the equation in boosting rail transport is simple. “The more copper you move, the more revenue you get,” said Mr Atanga.

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Source : BD live

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