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| South Africa is leading infrastructure push in Africa, as it seeks to maintain its status as the gateway to the continent. |
Intra-regional trade in Africa is not growing fast enough to cushion against the economic slowdown that is affecting important international trade partners; of the estimated US$1bn trade earnings generated by the three largest Regional Economic Communities (RECs) - ECOWAS, SADC and COMESA, only 7.6% is intra-African.
The causes of low trade figures are well documented. They include poor regional transport infrastructure and inefficient cross-border procedures, which drive up the cost of transportation. To address these challenges, RECs are taking collaborative approaches through various initiatives, which include building transport infrastructure.
South Africa’s President Jacob Zuma champions one such initiative - the North South Corridor (NSC) Aid for Trade Programme, a brainchild of the COMESA, SADC and EAC.The NSC comprises of inter-related projects that address road, rail, port, air transport infrastructure; border posts and energy interconnectors. It comprises the Dar es Salaam corridor linking the Port of Dar es Salaam in Tanzania with the Copperbelt in Zambia and Democratic Republic of Congo; and another link via the Copperbelt to the Port of Durban in South Africa.
When completed, the project is envisaged to improve 8,650 km of roads (outside SA) and 600 km of rail tracks. There are 157 identified projects in various stages of the project life cycle, including 59 road projects, 38 rail projects and 6 bridge projects. President Zuma, while updating the African Union on the progress of corridor last year said that the Trans-African Highway Route 4 would be incorporated to extend the NSC from Cape Town to Cairo. This development increased the number of projects to 204; 81 road, 48 rail and six bridges.
The NSC is particularly important to South Africa, as the country tries to maintain its position as the ‘gateway’ to Africa. Consequently, the government is pushing for deeper regional integration in order to access resources, and investment and trade opportunities in the rest of the continent. A well-developed transport network (road and rail), and elimination of barriers to trade would help shore up South Africa’s exports to the rest of Africa, which currently account for about 18% of the country’s total exports, and nearly one-quarter of manufactured exports. This would also give international investors who use the country as a springboard an established network to reach customers.
“There are questions about whether South Africa can sustain its position as the ‘gateway’ to the rest of Africa, yet its best card in the BRICS alliance is this fact. The North South Corridor could be exactly the competitive advantage that South Africa needs to maintain the gateway title,” says the director of Trade Law Chambers, Rian Geldenhuys.
The World Bank’s Africa Infrastructure Country Diagnostic for the COMESA region estimates that achieving regional integration for eastern and southern Africa would require sustained spending of US$5.5-billion a year on infrastructure. To meet this requirement, funding will have to be sourced not only from governments and the donor community but also from the private sector. Private capital for transport infrastructure has not been easy to attract due to unfavourable regulatory environments and low returns on infrastructure investments.
Some NSC countries such as Zimbabwe and Zambia have made notable progress in establishing regulatory framework for public private partnerships. Research analyst at Frost & Sullivan, James Milne, says the infrastructure projects would benefit South Africa’s construction industry, which is currently experiencing a lull at home.
“It appears as the construction market continues to stagnate, more South African companies will attempt to enhance their exposure in the tripartite area in order to leverage the opportunities in the NSC,” says James.
A key pillar of South Africa’s beneficiation strategy is a proper local and trans-regional transport network. The beneficiation entails sourcing raw materials within SADC and transporting them to South Africa for beneficiation and consequent re-export to SADC and other countries.
“This is a major reason to prioritise and fast-track the development of rail and road infrastructure. We should send our public sector, for instance Transnet, and private sector into these countries to assist with the development of infrastructure as opposed to the Chinese. This can be done and an example hereof is Airports Company of South Africa (ACSA) operating Guarulhos international airport in Brazil,” says Rian.
One of the key areas that require urgent attention is aligning customs procedures to allow the movement of people, goods and services across borders. Trade research conducted by the World Bank in 2012 said African countries are missing out on billions of dollars in potential trade earnings every year because of high trade barriers with neighbouring countries. Said the bank: ‘…for all the countries South African retailer Shoprite operates in, for example, approximately 100 (single entry) import permits are applied for every week; this can rise up to 300 per week in peak periods. As a result of these and other documentary requirements, there can be up to 1 600 documents accompanying each truck Shoprite sends with a load that crosses a SADC border...’
The NSC corridor is the busiest corridor in sub-Saharan Africa in terms of value and volume of freight. Logically, one would expect that customs integration should have happened already. Unfortunately, this is not the case despite the establishment of a SADC free trade area, which allows many goods duty free status.
“Ideally, one document should allow a truck to travel across several borders. The cherry on the icing will be the establishment of a massive single-market (almost 550m people), which would be very attractive to the local and international community of investors considering opportunities in sub-Saharan Africa,” says Rian.
An example of how reforms at customs can reduce delays at borders such as Beit Bridge is the Chirundu One-Stop Border Post in Zambia. Launched under the NSC project in 2009, the Chirundu border post has resulted in a one-third reduction in transit times; delays for freight transport have been reduced from three days to same day clearance, and 83% (from three hours to 30 minutes) for passenger transport.
Given the relative importance of road transport on the NSC, railway systems have somehow been relegated to the periphery. Railways are unreliable, with high accident and failure rates due to poor management and lack of investment. To deal with the problem, governments across eastern and southern Africa privatised the sector through long-term concessioning. However, experts say the processes are deeply flawed.
“The privatisation process took too long at a time when there was no funding. Besides the agreements were weak and deals signed with unqualified companies,” says Toyin Dawodu, managing partner at Capital Investment Group, adding that the sector has not been regulated and boosted with public investment and subsidies to make it competitive like the road sector.
Only 5% of regional traffic volumes (excluding South Africa) travel by rail. According to a report by TradeMark SA, rail operating costs are high and do not justify the low volumes of goods that are transported. The report also said railways are losing customers and are increasingly unable to attract the necessary funding required to return to competitive levels of reliability. Traffic and income levels would have to increase by three to four times if financial viability and sustainability are to be achieved.
There is a renewed interest to develop rail by government and other stakeholders. Investigations are being made to determine how to best revive the railway systems so that they can be part of a more efficient multi-modal transport system that can take the pressure off roads.
South Africa’s Transnet Freight Rail (TFR) announced recently that it had started negotiations with railway organisations to create a unified railway system on the NSC.
The talks with National Railways of Zimbabwe, Zambian Railways, Societe Nationale des Chemins de Fer du Congo and Beitbridge Bulawayo Railway line, would establish a joint operating centre that would allow for improved rail-time communication and effective and quick deviation management across borders.
Transport minister, Ben Martins, said the four organisations would develop a joint marketing drive, which is intended to encourage exports from South Africa, and identify the return cargo that will optimise the use of the same wagons for imports into the country.
“Rail will always be in the centre for trade in the SADC regional development corridors. It can only increase opportunities that will be spin-offs from the unified railway system. Examples of these are connecting hubs and road transport that complete the logistics solution,” said Martins.
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