Bloomberg News | August 24, 2024 |  News Africa Copper 

Lobito railway runs from Lobito port, on Angola’s Atlantic coast, to the DRC and Zambia. Credit: Ministry of Transport, Angola

https://www.mining.com/web/scramble-for-critical-minerals-spurs-an-african-rail-revival/

Lots of lessons for Nigeria to draw from here.

I have questioned for years our incoherent railway strategy wondering why we appear to prioritise passenger rail over rail freight, or why we maintain a NRC which consistently underperforms international benchmarks with some of the worst operating ratios in the global industry.

Whereas our solid mineral sector remains largely artisanal and chaotic, and has become a veritable source of bandit activity. There is hardly any African country with the scale of solid mineral endowment as Nigeria bar DRC perhaps. Yet the sector has remained largely underdeveloped. We may find the reasons for insecurity in Nigeria and DRC to their natural mineral wealth.

Some minerals such as limestone, barytes, coal etc, are being seriously mined for local cement manufacturers but their logistics value chain is remarkably yet to incorporate railway meaningfully. One reason may be the anachronistic NRC Act which sets up the NRC as a state owned exclusive operator, regulator and landlord creating obstacles for the development of private railroads. Its historic epileptic business performance not recommending it as a reliable partner. If in doubt, ask Oando, the petroleum marketer who invested in tank cars that sit rusting in sidings across the country.

At the moment, there are 2 bills before the NASS for railway requiring harmonization and stakeholder consideration. Many challenges lie ahead of us for which we must be wary if we must open up our railway space to private investment:

1. While government has always acknowledged the rationale for rail reform and restructuring as a panacea for its catalytic resuscitative effect, the same vested interests that have conspired to douse the enthusiasm for implementation continue whispering palpable nonsense into the ears of the unknowing political operators in the corridors of power.

2. If we do not demonstrably appreciate the importance of railway in moving large volumes of bulk materials and break bulk, then we may wake up one morning to find that our railways have been taken over by bandits because legitimate miners and manufacturers have not been encouraged to invest in railway. Dangote, Bua, Lafarge (and soon Mangal perhaps) are all mining coal to fire their power plants. These are being moved by road unsustainably rather than by rail, keeping the roads in perpetual dilapidation and making them unsafe for users. Bandits and kidnappers usually attack their prey at bad patches of roads where traffic must slow down. Shipping lines or port operators would like to integrate with rail too.

3. The low hanging fruits of rail freight on the NGR (narrow gauge railway) that we fail to pluck today will not always hang low as long as we allow a NRC with its traditional civil service bureaucratic and unenterprising culture to dominate the sector. Rather than grow, rail provision continues to shrink vis a vis the competition while the people keep hearing of contracts of billions of $$ being awarded to build railway. $12bn Lagos-Calabar, $5.2bn Ibadan – Abuja, $3.1bn Itakpe – Abuja, $3.2bn Port Harcourt- Maiduguri etc… No one tells the people that these contracts are not being funded or why. The answer is simple. Few international lenders will fund these contracts principally because of the opacity in their procurement which negates equator principles while the restrictive provisions of the NRC Act are undermining any business cases.

4. Unbundling the NRC remains the only viable option for government but it must be careful not to bungle its implementation as it did with power. We cannot allow incompetent political patrons with little or no capacity to hijack these assets because then we will be heading in the direction we are coming from.

5. We must build robust independent regulatory capacity with the objective of enabling competition as a basis for obtaining value for money. The regulator lends integrity to any system without which there would be no credible investor.

6. Government must play the long game in rail divestment. Playing politics with rail investment as the Buhari or GEJ governments tried to do is a no brainer. Railway investment takes time for the impacts to be seen and felt. It does not play well in political gimmickry because it would no sooner disappoint.

What the Lobito corridor investment tells us, is that there is significant appetite for rail investment but we must learn to get it right. We must change our ways from government as a main investor to co-investor and enabler, and we can only start to do this by unbundling the NRC. We must involve critical stakeholders and partner with credible development finance institutions for deal preparation. We must learn to shut out the cowboys and bounders. Easier said than done perhaps but needs must.

The more strategic challenge for Africa is about value addition and this is evident in the Lobito transactions. Africa is still exporting too much raw materials whereas we need the factories here producing finished goods, creating jobs for our people rather than for others overseas. With the Dangote refinery threatening the viability of some European competitors, we must appreciate that economic development in Africa is not a zero sum game. It will come at a cost to others who have historically exported finished goods to us while importing our raw materials. We must anticipate a hostile reaction to any attempts at self sufficiency and economies of scope. Political dogma and international geo politics also play a part in investment decisions. This is where African governments need to stand up and be resolute. Too often we are holding the short end of the stick