Published on April 3, 2008
Slide1: World Bank Transport Forum 2006 Rail concessions in Africa since 1990 March 31 2006 R. G. Bullock This presentation summarises the results of a review undertaken in mid-2005 of the impact of rail concessions and privatisations in Africa: This presentation summarises the results of a review undertaken in mid-2005 of the impact of rail concessions and privatisations in Africa One of three such reviews, covering Latin America, Africa and Australasia respectively Funded by a grant from TRISP (IBRD/DFID) Principally concerned with the results of privatisation rather than the process or detailed concession structure. Primary focus on whether private sector participation has been better than a continuation of the previous situation Review only covers sub-Saharan Africa generally describes the situation as it was in mid-2005. Full version available at www.worldbank.org/transport The review has three main sections: The review has three main sections Summary of railway development in the region to the start of the 1990’s and a brief description of the main concessionaires Discussion of the thirteen concessions which have been awarded, particularly the three which have been operating the longest Assessment of the overall results of railway privatization/concessioning in terms of: Role of rail (traffic level, mode share etc); Productive efficiency; Allocative efficiency, including service quality as appropriate to the market; Investment in rail system (including renewal of assets); Accessibility of the rail system to passenger and freight users; Affordability, and possible direct and indirect impacts on the poor.. 13 concessions had been awarded by mid-2005 and there have been a further two since then.: 13 concessions had been awarded by mid-2005 and there have been a further two since then. Kenya/Uganda and Tanzania have both been awarded and are scheduled to commence in 2006. Sizarail (DRC) was ‘cancelled’ following a change in government Ressano Garcia was cancelled in late2005 Transgabonais was cancelled in 2003 and is being temporarily operated by the losing bidder. Role of rail – only minerals are likely to remain a natural rail traffic – and government railways are handicapped in a competitive general freight market: Role of rail – only minerals are likely to remain a natural rail traffic – and government railways are handicapped in a competitive general freight market Rail in Africa has been very slow to respond to: increased road competitiveness economic liberalisation and privatisation Infrastructure investment largely bilaterally and multilaterally funded typically after the damage was done, and in some cases not at all. Rail has also suffered severely from natural disasters and the various wars and conflicts. Rail can be lower-cost than road, especially for minerals but not so clear-cut for general freight which requires road PUD The remaining rail monopolies, other than bulk minerals, will soon be gone and no rail system will be able to survive unless it becomes a transport business Productive efficiency - the evidence is quite clear: concession operators, almost without exception, operate their railways with fewer staff and with better asset utilization.: Productive efficiency - the evidence is quite clear: concession operators, almost without exception, operate their railways with fewer staff and with better asset utilization. Three key indicators are: (i) traffic units (passenger-km plus net tonne-km) per staff, an indicator of labor productivity; (ii) traffic units per locomotive, and (iii) net tonne-km per wagon. Allocative efficiency - the right transport flows moving on the right modes and routes at the right costs. rail – is probably better following concessioning: Allocative efficiency - the right transport flows moving on the right modes and routes at the right costs. rail – is probably better following concessioning Are the costs the right costs? Not ideal but a lot better than pre-concessioning Will the traffics be using the right mode? Much more likely. Will the right traffic be going on the right routes? This is not an issue on stand-alone systems but more difficult elsewhere For passenger services there are some special issues. Few medium/long-distance passenger trains cover even variable costs. Local trains are almost always poorly-performing Concessionaires improve the allocative efficiency for these services by: drawing the government’s attention to loss-making passenger services, generally trying to operate them in the most efficient way possible Investment - little infrastructure to date that is not financed by IFIs but some rollingstock has been privately funded : Investment - little infrastructure to date that is not financed by IFIs but some rollingstock has been privately funded Most African concessions have been associated with substantial investments principally in infrastructure. Mostly bilateral and multilateral financing Concessioning has been, in most cases, a necessary condition to investment Much of the investment has been ‘catch up’ Only ‘commercially-funded’ concessions are the Beitbridge Railway, Nacala and Zambia With the exception of Sitarail, rollingstock financing is the responsibility of the concessionaire Overall investment record so far is patchy. Two major considerations few concessions have been generating the required cash flow A reluctance to invest in assets whose life is significantly beyond the length of the concession. Accessibility - little evidence of customers access to rail services being constrained : Accessibility - little evidence of customers access to rail services being constrained Few examples of any service reductions so that resources could be redeployed to selected users Comilog mineral trains on the Transgabonais are reported to receive priority over passenger services But this is really an access regime issue In Zambia, the concessionaire is reportedly concentrating on longer-distance traffic from the Copperbelt to South Africa at the expense of local inter-mine movement of bulk minerals. This reflects a decision by the concessionaire to concentrate his assets on those traffics which will be most profitable for him And the mines do have the alternative of road transport Potential problems where the rail operator is, say, a major forwarder competing with other forwarders using the service Affordability - little evidence that users have been adversely affected : Affordability - little evidence that users have been adversely affected Adverse impacts on the poor can arise: directly, by making personal transport more expensive indirectly, by making their supplies more expensive and reducing the prices they can achieve for their outputs through increases in freight tariffs. These need to be balanced against the financial benefits to the government of concessioning, No evidence that personal travel has been made more expensive for the very poor. The impact of concessioning on freight rates is ambiguous. Some have increased but in general market shares are not sufficiently large significantly affect the selling price of commodities. Any such price rises will generally have been baanced by an improvement in service level Apart from a few cases, freight rates are effectively set by the competition, Overall, concessioning has been broadly positive for most systems in Africa: Overall, concessioning has been broadly positive for most systems in Africa Role of rail Normally essential for the conversion of a traditional government railway to a commercial transport business. Productive efficiency Improved labour productivity and asset utilisation Allocative efficiency Better grasp of costs – and decision-making primarily on commercial basis leading to more efficient provision of services Investment Some rollingstock and support systems privately-funded but most infrastructure funded by IFIs / - Accessibility No evidence of any widespread negative impacts - Affordability No evidence of any widespread negative impacts. - But is the model sustainable in the medium/long-term? And, if not, does it matter?