AFRICA is experiencing a railway renaissance. With new lines slowly opening and traffic levels increasing on improved colonial infrastructure, it is deserving of its status as one of the world's most dynamic railway markets.
These are the conclusions of The African Rail Market, the latest study by German consultancy SCI Verkehr, which says the overall network is set to grow from 82,100 route-km in 2011 to 96,360 route-km in 2017. Many existing lines are also set to be rehabilitated which will result in the introduction of new and increases in existing services.
SCI attributes much of this upcoming growth to demand for natural resources from China and India. Chinese imports from Africa reached $US 93bn alone in 2011, with an estimated 800 Chinese corporations primarily from the infrastructure, energy and banking sectors now doing business on the continent.
Africa's current primary mining resource is gold and the continent ranks first or second in the world in terms of reserves of bauxite, cobalt, industrial diamonds, phosphate rock, platinum group metals, vermiculite, and zirconium.
However, while several countries have initiated some railway projects, often with Chinese backing, in exchange for access to this mineral wealth, it is far from the scale already witnessed in Southeast Asia and South America. Here local and international companies have established extensive mining operations which are complemented by mine to port infrastructure.
Africa's existing railway network is a patchwork of systems which often connect capital cities, or industrial areas with a single port. Five different track gauges are in use across the continent and South Africa is the only country with a comprehensive network. Travelling long-distances by rail is almost impossible due to absence of some key links; at present there are no north-south links across the Sahara and only limited international connections between east and west. As a result freight shipments from some landlocked countries can take months.
Political instability is the primary cause of this widespread defficiency. And despite most ethnic and ideological conflicts being subdued for the past five to 10 years, the potential for unrest still exists in many areas, as the recent conflict in Mali highlighted.
Yet SCI has compiled strong evidence that the appetite to invest is growing. It estimates that more than $US 50bn is required to build the 4000 route-km of rail infrastructure needed to unlock much of the continent's commodity hotspots, and many African governments are now exploring funding mechanisms to initiate these projects, Nigeria being one prominent example. SCI believes that Western Africa alone could invite investments of up to $US 25bn in infrastructure in the next decade to extract iron-ore. And as IRJ has reported, new heavy-haul railways have opened or are currently under construction in Sierra Leone, Guinea, Liberia, Congo, Cameroon and Gabon as well as in Mozambique.
SCI divides Africa into four distinct market regions - Northern Africa, Sub-Saharan Africa, South Central Africa and Southern Africa - each of which has its own specific market challenges and goals.
Southern Africa, which includes South Africa, Swaziland and Lesotho, is set to remain the largest and most dynamic market in the region as the South African government continues to invest in new and upgraded infrastructure and rolling stock which will also benefit neighbouring countries like Botswana (p26). Northern Africa remains the second largest area. However, developments here have suffered from political instability following the Arab Spring. Prospective projects in Egypt, Libya and Tunisia remain in limbo while plans for international rail links have fallen by the wayside leaving virtually all the countries isolated from one another.
Networks in South Central Africa, which encompasses countries including Botswana, Tanzania, Zambia and Zimbabwe, have suffered from years of mismanagement and neglect which has established it as the continent's smallest market. While there are plans to build new lines and potentially boost capacity on the existing Tazara railway for example, the region is likely to remain in the shadow of Sub-Saharan Africa.
Indeed SCI projects that freight traffic will grow by 10.4% per annum in this region from 2012 to 2017, compared with growth of 1.8% per annum between 2007 and 2012, and will account for 16% of the continent's projected overall annual freight traffic volumes of 195.4 billion tonne-km in 2017. The report says Southern Africa will remain the largest market for freight with a 75% share of 160.9 billion tonne-km transported in 2012. However, despite 2.5% annual growth, this is expected to fall to an overall share of 70% in 2017 as other regions catch up.
Northern Africa currently has an 8% overall share of freight volumes and this is expected to remain static up to 2017 despite 3.3% annual growth. SCI cites the region's already well-developed freight network and increasing competition for paths from passenger traffic as the reason for the levelling off of volumes.
The region is though the continent's largest source of mainline rail traffic with a 72% share of 65 billion passenger-km recorded continent-wide in 2012. It is expected to retain a 71% overall market share of the 76,200 million passenger-km anticipated in 2017 following 2.8% annual growth, as countries like Morocco and Algeria push ahead with projects, but with Libya continuing to be an overall hindrance.
The study reports that most African societies are growing in terms of population and economic development. The current proportion of urban inhabitants ranges from 40 to 60% which is expected to grow annually by between 1.3% in Southern Africa and 4.2% in South Central Africa. This growth will inevitability place greater strain on urban transit and urban commuter services which in the few places they exist are already largely inadequate given the size of the cities.
In particular Sub-Saharan Africa, which is home to 654 million, or 60% of the continent's residents, and has a population density of 42.6 people/km2, the highest in Africa. It currently suffers from a severe lack of public transport infrastructure. But with governments likely to encourage sharing freight infrastructure with passenger services, 13.6% annual growth is expected in the region for a 6% overall share of the market by 2017 compared with 3% in 2012.
With new light rail systems already open in Casablanca and Rabat in Morocco, and Algiers and Oran in Algeria, Northern Africa dominates rapid transit usage figures with 98% of 3.2 billion passenger-km found in this region in 2012. Despite the opening of new lines in Morocco and proposed extensions to Cairo Metro, its share will fall to 90% of an expected increase to 5.3 billion passenger-km in 2017 with Sub-Saharan Africa claiming a 10% share. This will increase by 48.3% per annum as new systems get off the ground, with networks in Lagos, Nigeria, and Addis Abada, Ethiopia, notable contributors. However, this sector remains very small compared with other regions of the world.
Inevitably such intensive growth will correspond with strong prospects for suppliers. Indeed SCI says Africa's railway technology and services market is currently worth €3.6bn per year and projects that this will increase by 10.2% annually to reach €5.4bn in 2017.
With very limited manufacturing capacity throughout the continent, countries will depend on imports. This is potentially attractive for European suppliers suffering from a slowdown in traditional markets as well as Asian players looking to increase exports.
Renewal, maintenance and after-sales services currently have a 62% share of the market. However, this is set to be matched by new development, upgrade and OEMs courtesy of 17.7% annual growth for a 49% share of the market by 2017. Conventional railways will be responsible for 91.7%, or €4.95bn, of this spend, while high-speed in Morocco will account for e155m, or 2.8%, and urban transit €235m, or 4.3%.
As African freight operations are generally very simplistic, there is only limited scope for the installation of complex train control, signalling and electrification systems. This means that track systems will remain the largest supplier sector in the African market, with a €1.83bn, or 33.8%, share of overall spending.
SCI says the market for rolling stock will experience steady but moderate growth. The market is expected to grow by 50% from €2.04bn in 2012 to €3.01bn by 2017. However, overall fleet sizes, apart from electric locomotives, will experience very minor growth with the emphasis on replacing life-expired equipment rather than expansion.
The greatest procurement will be of freight wagons with annual orders set to grow by 74% to around 4000 per year in 2017. The market for emus on conventional railways is expected to grow by 11.7% by 2017, mainly fuelled by developments in South Africa. Dmu orders are expected to increase by 6.4% compared with 2012.
Orders for diesel locomotives are also expected to remain strong at €825m in 2017 with each region responsible for at least €120m of orders. Electric locomotive market share remains low in a global context with growth only likely in South Africa which has 90% of the total fleet. The passenger coach market will similarly grow to €325m in 2017. However, expenditure on rapid transit vehicles is expected to fall.
North American manufacturers EMD and in particular GE, which has a 49% market share, have been the largest suppliers of diesel locomotives in the past few years, but Chinese companies are expected to increase their presence in the market.
Indeed, this is a trend that is expected in the other market segments. Chinese companies, supported by financing and technology agreements that have already been negotiated with domestic governments, are in a particularly strong position to boost their international order books and extract yet more of Africa's growing wealth. The African railway renaissance then is set to have a distinctly Chinese flavour.
The complete study, which includes detailed breakdowns of current and future prospects in certain market segments, and statistics and outlines of specific railway projects, is available at www.sci.de