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How to build Africa’s railroads to the future

Local and international rolling stock manufacturing and leasing companies are investing billions into African rail infrastructure to increase their presence on the continent and tap into rail’s huge growth potential.

In South Africa we have been able to maintain existing rail infrastructure. This capacity is something we need to build on by devising innovative ways to control the value chain.

This is where government needs to make use of regulation, where supply chain industrialisation and growth must be the focal areas. Policies must maximise local value add and spillovers from foreign direct investment (FDI) as well as tackle the fickleness of Original Equipment Manufacturers (OEMs).

The nexus between global industrial networks and African economic growth must not be lost due to the inability to control the supply chain of these rail investments.

The reason the South African government generally struggles to implement regulation effectively in this regard is the lack of research capability, or the apparent disconnect between research centres of excellence and the industry.

The industrial sector of South Africa is often faced with the reality of being excluded from major infrastructure projects due to non-compliance with the set global standard. The effect of this is exorbitant prices at the expense of local industrialisation.

The importance of research and co-ordination

At present, not much has come from the African Union declaration that South Africa should be the rail manufacturing hub of the continent. South Africa can lead the way for rail excellence on the continent. In order to realise this, we must co-ordinate with the country’s research centres of excellence.

The academic community must start to support and promote the knowledge base of South Africa and articulate its relevance to the development of rail infrastructure in Africa, while further co-ordinated research is conducted with the inclusion of the industry.

It needs to be clear to African governments that to obtain sovereign financing and identify technological partners to modernise the industry does not mean contracting out sustained economic growth for the continent.

There are various methods of financing railroad infrastructure in Africa, but the most practical mechanism is sovereign financing. This is the most common scheme in Africa, as opposed to corporate and project financing, since most African countries’ creditworthiness limits them to obtaining financing from international financial institutions, such as the World Bank and the African Development Bank, at lower interest rates.

In order to access wider sources of financing, industrial capacity is vital, and here many African countries are lacking. Simply put: Africa’s industrial technology must be modernised in order to compete on the global stage. In order to build a solid industrial base on the continent, we need technological partners in the undertaking of brownfields projects.  

It is vital for industries on the African continent to be competitive and build sustained economic growth. It is up to the co-ordination of pockets of Africa’s research centres of excellence to make Africa competitive. And governments must enforce the implementation of regulation within industry.

Bongani Mankewu is the CEO of Rail Road Association of South Africa. He writes in his personal capacity.

Africa Rail 2016 is currently underway at the Sandton Convention Centre. The conference is Africa’s only rail conference and exhibition, and highlights the importance of rail infrastructure investment on the continent.

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