Zambia rail industry

REPUBLIC OF ZAMBIA

MINISTRY OF TRANSPORT, WORKS, SUPPLY AND COMMUNICATIONS

RAIL TRANSPORT SUBSECTOR

COUNTRY SPOTLIGHT

INVESTMENT OPPORTUNITIES IN RAILWAY

Presentation at the

Venue: The Sandton Convention Centre in Johannesburg, South Africa.

Date: 29TH JUNE-1ST JULY 2015

TABLE OF CONTENTS1.0 ZAMBIA RAILWAY SYSTEM – Background

1.1 ZAMBIA RAILWAYS LIMITED

1.2 TAZARA RAILWAY LINE

1.3 ROUTE MAPS

1.4 RAIL SUPPLY CHAIN

2.0 ZAMBIA RAILWAY SYSTEM CHALLENGES

2.1 ZAMBIA RAILWAYS LIMITED CHALLENGES

2.2 TAZARA CHALLENGES

3.0 EEFORTS TO REVITALISE ZAMBIA RAILWAY SYSTEM

4.0 COUNTRY SPOTLIGHT OR FOCUS

5.0 CONCLUSION

ZAMBIA RAILWAY SYSTEM1.0 BACKGROUND

The Railway System of Zambia (RSZ) consists of two major railroad networks, namely:

i) Zambia Railways Limited (ZRL) network; and

ii) Tanzania Zambia Railways Authority (TAZARA) network.

1.1 ZAMBIA RAILWAYS LIMITED (ZRL)

Zambia Railways Limited (ZRL) is the National Railway of Zambia, with gauge (Capegauge) of 1,067 mm (3 ft 6 in)

ZRL network was built during British colonial rule as part of the vision of the Cape-Cairo railway but the economic spur was to access the mines of Central Africa.

The Railway started as part of Rhodesian Railways, the company which ran therailways of Northern Rhodesia(now Zambia) and Southern Rhodesia(now Zimbabwe)as an integrated operation.

The Railway arrived in the future Zambia early in 1905 when the 150 km Livingstone-Kalomo line was built.

1.1 ZAMBIA RAILWAYS LIMITED CONTINUED.

The line reached Broken Hill (Kabwe) in 1906 and Ndolain the Copper belt in 1909 (connecting to Sakania in theCongo DR).

In the mid-1960s spurred by the Rhodesian UDI crisis,the newly independent Zambia split its Railways off fromRhodesia Railways, and Zambia Railways came intobeing.

Now, ZRL is Mandated under the Railways Act to operateFreight and Passenger Trains.

Therefore, ZRL was set up to be the main carrier ofheavy cargo, particularly for the Mining Sector.

1.1 ZAMBIA RAILWAYS LIMITED CONTINUED

ZRL – Current Route Network

The current ZRL total route length is 1,248 km of 1,067 mm gauge, single track and ismade up of:

i) Segment from Vic Falls Bridge to Kitwe…………...848 km

ii) Branch Lines…………………………………………………..214 km

iii) Mulobezi Line………………………………………………...162 km

iv) Chipata- Mchinji Line………………………………………..24 km

It was first planned in 1982.

On the Malawi side of the border, the line to MCHINJI was finished in 1984, but aconnection to CHIPATA in Zambia was only opened in 2010.

This line remained idle because there were few facilities at Chipata until 2014 whenthe Chipata- Mchinji railway was operationalized.

https://en.wikipedia.org/wiki/Chipata

1.2 TAZARA RAILWAY LINE (ALSO CALLED THE TANZAM RAILWAY)

The other railway system is the bi-national TAZARA Railway (TAZARA) that interconnectswith the ZR at Kapiri Mposhi in Zambia's Central Province, and provides a link to theTanzanian port of Dar es Salaam.

The TAZARA Railway is single-track railway and has a length of 1,860 km (1,160 mi). It

costed US $500 million to build and at the time, TAZARA was the largest single foreign-

aid project undertaken by China.

At the time of its completion, two years ahead of schedule, the TAZARA was the single

longest railway in sub-Saharan Africa.

The governments of Tanzania, Zambia and China built the railway to eliminate landlocked

Zambia's economic dependence on Rhodesia (now Zimbabwe) and South Africa, both of

which were ruled by white-minority governments.

The railway provided the only route for bulk trade from Zambia's Copper belt to reach the

sea without having to transit white-ruled territories.

1.2 TAZARA RAILWAY LINE (ALSO CALLED THE TANZAM RAILWAY)CONTINUED

The Government of the People’s Republic of China has also over the years continued to

support TAZARA through the Technical Cooperation Agreements (Protocols) by providing

further loans in form of materials, spare parts, training and equipment to support the

smooth operations of the Authority.

TAZARA Governing Legislation

TAZARA is governed under the provisions of the Tanzania Zambia Railway Authority ACT

number 10 of 1995.

This Act gave effect to the Agreement relating to the Tanzania-Zambia Railway made

between the Government of the United Republic of Tanzania and the Government of the

Republic of Zambia, dated 28th September, 1993.

Figure 1.3(a): MAP OF ZAMBIA’S CURRENT ROUTE NETWORK

Figure 1.3(b): MAP OF TAZARA ROUTE NETWORK IN TAZANIA

ZAMBIA RAILWAY SYSTEM

1.4 RAIL SUPPLY CHAIN

TAZARA ZRL

o Council of Ministers (MoF, MTWSC , MCTI of both Governments) MoF

o

o MTWSC

o Boards of the Railway Companies (TAZARA & ZRL)

o Railway Companies (TAZARA & ZRL)

o Population

(MDG target groups)

2.0 Zambia Railway System Challenges Although substantial investments were injected in the sector soon after independence,

subsequent investments over the years have not been able to sustain the existinginfrastructure resulting in its deterioration.

Lack of a comprehensive policy framework to provide the necessary guidance ininvestment programs for the sector also contributed to its poor performance in theeconomy.

2.1 ZAMBIA RAILWAYS LIMITED (ZRL) CHALLENGES;

2.1.1 Period from 1960-1990

Up until about 1990, the railway was the main carrier of heavy cargo but due tonumerous problems in the Land Transport system (Rail and Road) in Zambia, therailway’s traffic tremendously reduced.

2.1 ZAMBIA RAILWAYS LIMITED (ZRL) CHALLENGES CONTINUED;

2.1.1 Period from 1960-1990

The problems included:

Deterioration of assets;

Poor performance of the Inter-mine Railway Network resulting in Heavy Inter-mine Cargomoving by road;

High Railway Transportation Costs resulting in excessive road usage for heavy cargo, andminimal or non-utilization of Railway Transportation;

Failure to meet minimum service levels for passenger freight;

Unacceptably high levels of derailments, resulting into loss of life and property due to abad track and poor signalling and telecommunication system.

Much lengthier than planned turnaround times for freight, resulting into loss of marketshare to the Tracking Sector.

2.2 TANZANIA ZAMBIA RAILWAYS AUTHORITY (TAZARA) CHALLENGES

2.2.1 Period from 1975-1990

The TAZARA has been a major economic conduit in the region but it faced operatingdifficulties from the start and, owing to various subsequent developments, never reachedthe expected delivery tonnage of two million tons per day.

Within the first years of operation, serious problems arose with maintenance andemployees:

i) In their haste to complete the railway ahead of schedule, the Chinese did not trainsufficient African Technicians to take over management of the railway. Service wasfrequently disrupted, especially during the rainy season due Landslides and washouts(e.g. rain season of 1979).

ii) The initial diesel hydraulic locomotives sent by the Chinese were insufficiently powerful tohaul heavy loads up the steep escarpment between Mlimba and Makambako.

iii) When the Chinese rolling stock broke down, there was limited local capacity to repair.Therefore, by 1978, 19 to 27 of the locomotives were out of operation for repair and sowere half of the rail cars.

2.2 TAZARA CHALLENGES;

2.2.1 Period From 1975 -1990 Continued

iv) Employee theft was serious enough that many crew members were fired in 1978 forstealing.

v) Lengthy turnaround times for freight .

Intervention of 80s and early 90s

In 1983, Tanzania and Zambia invited the Chinese back to help manage the railway and operational profitability was brought back to the railway and expenses were paid through revenues.

Additional zero-interest loans to pay for spare parts and rehabilitation were issue by the Chinese.

In 1985, seven European countries pledged additional aid to the TAZARA and provided $150 million from 1987 to 1993. China also gave more aid during this period.

TAZARA PERFORMANCE IN TONNAGES FROM 1982-3 TO 1990

Table 2.2(a):The Intervention of 80s and the early 90s and its productivity

Traffic type 1982-3 1984-9 1990

Transit freight493ooo 492000 580000

Local freight492000 490000 620000

Total freight985000 982000 1200000

PassengersBelow

500000Below

500000988000

Source: PAD ECO/JICA

2.2 TAZARA CHALLENGES;

2.2.2 Period from 1990 To Date

Decline

In the 1990s, the economic performance of TAZARA began to decline with changes to thebroader economic and political environment;

i) With the independence of Namibia in 1990 and the end of apartheid in South Africa1994, Southern African regimes were no longer dominated by unfriendly white leadersand Zambian copper had more economic outlets to the south and east.

ii) Road Transport provided competition in the form of the Trans-Capriv Highway and the

walvis bay Corridor to Namibia.

iii) The completion of the U.S.-sponsored Tan-Zam Highway brought direct roadwaycompetition along route, resulting in Traffic falling from 1.2 million tons in 1990 to 630,000tons in 2003 to 534,000 tons in 2011 and 480,000 tons in 2013.

iv) In September 2013, the TAZARA was reporting monthly losses of about $1 million on

$1.53 million in monthly revenue against $2.5 million in average monthly expenditures.

TAZARA PERFORMANCE IN TONNAGES FROM 1991-9 TO 2012-3

Table 2.2 (b):The decline of 1990-9 and 2000-13 and its productivity:

Traffic type 1991-9 2000-7 2008-9 2010-11 2012-13

Transit freight332000 320000 354869 476924 238000

Local freight231000 310ooo 28186 57040 242000

Total freight563000 630000 383055 533964 480,000

Passengers993500 995423 996548 786759 715638

3.0 EFFORTS TO REVITALIZE ZAMBIA RAILWAY SYSTEM

In the early 90s, Government of Zambia showed commitment to ensuring that theTransport Sector performed its role as a catalyst in the social and economic developmentprocess of the country by Providing Policy guidelines for the Transport Sector designed toeffectively contribute to the growth of the Zambian economy.

Therefore, in 2002, the Transport Policy was formulated (Transport Policy of 2002,currently under review).

The policy guidelines were in line with the economic measures being pursued byGovernment to resuscitate the economy.

The measures included, the liberalization of the sector and privatization orcommercialization of state owned enterprises.

Nevertheless, the Transport policies and strategies then only helped the Road Sub-sectorin achieving appreciable milestones (Adequate Institutional Framework; Adequate LegalFramework; Road Sector Investment Programme; RoadSIP I and II etc.)

3.0 EFFORTS TO REVITALIZE ZAMBIA RAILWAY SYSTEM CONTINUED

Whilst, the Rail, Air and Water Transport Subsectors recorded less milestones.

Zambia Railways Limited

Consequently, Zambia Railways was Concessioned to Railway Systems of Zambia (RSZ)Limited after signing of the Freight Concession Agreement on 14th February 2003.

The Concession was to operate for a period of 20 years with a possible extension for a further 10 years.

However, in September 2012, the government revoked the concession and Zambia Railways resumed control.

The acquisition was necessitated by a number of issues, some being:

i) Mismanagement of Zambia Railways infrastructure and rolling stock.

ii) Abandonment of the inter-mine railway network resulting in loss of Intermine freight modal share (heavy inter-mine cargo moving by road);


iii) High railway transportation costs accounting for 60% - 70% of the cost of production

and resulting in excessive road usage for heavy cargo, and minimal or non-utilization of

railway transportation;

iv) Failure to meet minimum service levels for passenger freight despite being a beneficiary

of a substantial Government subsidy;

v) Unacceptably high levels of derailments, leading to loss of life and property and resulting into enormous cost to Government; and

vi) Blatant disregard of the provisions of the concession agreement and unsatisfactory

performance, resulting in great risks to the sustainability of Railway Transport in

Zambia.

Upon Zambia Railways resuming control after the revocation of the concession in September 2012, the company immediately showed positive trends as indicated in figures 1 and 2:

3.0 ZRL & RSZ PERFORMANCES COMPARED IN TONNAGES FROM 2002-2013

figure 3.0(a): Comparison of ZRL & RSZ periods - Tonnage

ZRL & RSZ PERFORMANCES COMPARED IN TERMS OF PASSENGER TRANSPORTATION FROM 2009-2013

Figure 3.0(B): Comparison of ZRL & RSZ periods - Passanger

223 347 236 198

177 097 192 608

247 062

-

50 000

100 000

150 000

200 000

250 000

300 000

2009 2010 2011 2012 2013

ZRL PERIOD


In an efforts to invigorate Zambia Railway Limited, Government of the Republic ofZambia in February, 2013, allocated a sum of USD120million (K618,532,000.00) to ZRLfor infrastructure and rolling stock rehabilitation.

Achievements

The milestones achieved owing to government financing to ZRL are:

Track rehabilitation; More than 120 km have been fully rehabilitated (laying concrete ties,ballasting etc. targeted length of about 442km)and track capacity increased. So speedhas increased from average 15-20Km/h to 40-80Km/h for Passenger and Freight trainsrespectively.

Resumption of inter- mine train operations on full scale.

Commencement of train operations on Nacala Corridor(9th May 2014).

Taking over Mulobezi train operations on 1st January 2014; rehabilitated the line, builtstation building and Re-Engineered passenger coaches.


Achievements continue

Locomotive availability of 80% has been achieved. However, locomotive reliability is still

low for most locomotives averaging 8700km/failure( target 10,000Km/failure).

Wagon availability of 81% has been achieved on average(Target is 100%).

Installation of a new signaling and telecommunication system


TAZARA

At the beginning of 2010, the Chinese government gave TAZARA a US$39 millioninterest-free loan to revive its operations.

However, TAZARA management estimated that it would require US$770 million tobecome commercially viable.

In 2011, China wrote off about half of the debts it was owed by TAZARA; and

In October 2012, gave $42 million for four new main locomotives, two shuntinglocomotives, other equipment, spare parts and staff training.

In April 2013, With Government involvement, Zambia’s second largest Copper Mine,Konkola Copper Mines, agreed to re-commence shipping copper on the TAZARA after afive-year stoppage and by November 2013, the line was reported shipping 15,000 tons ofcopper weekly, but still prone to breakdowns and delays.


TAZARA

In August 2014, the Zambian government gave TAZARA Zmk 18, 353, 109 towards thecompany’s liabilities.

Again in January 2015, the Zambian government gave TAZARA Zmk 19, 500, 000towards the company’s liabilities.

In March 2014, Tanzanian, Zambian and Chinese officials held talks to recapitalize theTARZARA and to decentralise operations of TAZARA to the two regions, Zambian regionand Tanzanian region.

All these efforts and much more have not yielded required results. TAZARA requiresustainability.

4.0 ZAMBIA RAILWAY SYSTEM-COUNTRY SPOTLIGHT/FOCUS

To improve Rail Freight and Passenger Transport performance, the Government’s focus is:

Strengthening the management of the Railway Companies including ‘Down size and upskill’ (i.e. less labour intensive and more core competences), especially for TAZARA;

Improving the existing Railway Net Work to maintainable standard and extending the net work along development corridors and to link sea ports both on the East and West coasts;

Facilitating corridor development by intermodal transport;

Review and Formulation of national railway policy and strategy;

Linking trains into supply chains (inter-modalism and multi-modalism ); increasing market reach without increasing network length;

Improving and up grading Rolling Stock;

4.0 ZAMBIA RAILWAY SYSTEM-COUNTRY SPOTLIGHT/FOCUS

PROJECTS/PROGRAMS BEING UNDERTAKEN

i) STRENGTHEN THE MANAGEMENT

Government is facilitating restructuring programs in the railway companies with the view to Down size and up skill (i.e. less labour intensive and more core competences) the institutions especially the TAZARA.

ii) EXISTING RAILWAY NET WORK (TRACKAGE PROJECTS)

Government is facilitating improvement of the existing Railway Net Work through financing:

Replacement of steel rails and timber ties (sleepers) with concrete ties to maintain aconsistent distance apart, or gauge.

Welding rails together to form lengths of continuous welded rail to counteract additionalwear and tear on rolling stock caused by the small surface gap at the joints between railsand also make for a quieter ride (passenger trains).

ii) IMPROVING EXISTING RAILWAY NET WORK-TRACKAGE PROJECTS CONT.

Stabilizing the foundation made of compressed earth and ballasting to distribute the

load from the ties and to prevent the track from bucking as the ground settles over

time under the weight of the vehicles passing above and to serve as a means of

drainage.

Replacing of cracked or split Concrete ties or sleepers.

lifting of rails settled due to soil subsidence.

Removing ballast and replacing with clean ballast to ensure adequate drainage.

Constructing and cleaning Culverts and other passages for water to prevent impoundingof water by the track bed, causing landslips.

iii) NETWORK EXTENSION PROJECTS

Construction of branch lines to Link trains into supply chains and to increase marketreach e.g. ZRL in the inter-mine region instituted works aimed at revamping the rail

infrastructure in order to service KCM’s Konkola and Nchanga mines.

The works included:

Rehabilitation of a 1,048 m stretch and opening up of drainages in Konkola Plant;

Construction of a 700 m rail track in Nchanga Plant;

Track rehabilitation works on the Luano-Chililabombwe.

Construction of rail lines to facilitate Intermodal Land Transport Corridor Development:

As a landlocked and a transit country, Trade Corridors and a well managed transport systemare vital. In Zambia's case, these are road and/or rail routes which cross internationalborders to Sea ports and which are the subject of international agreements on planning, useand management.

They are not separate from the road and rail networks in the country, but are entitiessuperimposed on those networks for strategic economic and trade development.

Figure 4.0: Proposed Rail Projects to Connect Zambia to Major Transport Corridors Leading to Sea Ports

Chingola-Sol-Jimbe

Nseluka-Mpulungu sprail Chipata-TZR Mpika

Kafue-Lions Den

Livingstone-Katima M

RSZ

TAZARA

TAZARA

iii) NETWORK EXTENSION PROJECTS CONTINUED

Corridors of importance to Zambia are as follows:

Southern Corridor: to Durban Port via Johannesburg, South Africa via Zimbabwe (road or rail) or Botswana (road).

Maputo Corridor: As for (1) but rail or road from Johannesburg to Maputo Port, Mozambique.

Walvis Bay Corridor: Road via Livingstone/Sesheke/Katima Mulilo to Walvis Bay Port, Namibia.

Beira Corridor: Road to Harare or rail to Bulawayo, then rail via Mutare to Beira, Mozambique.

Nacala Corridor: road to Lilongwe then rail to Nacala, Mozambique or road to Chipatathen rail to Nacala, Mozambique, .

iii) NETWORK EXTENSION PROJECTS CONTINUED

Tazara Corridor: Road or Rail via kapiri mposhi to Dar es Salaam, Tanzania.

Lobito Corridor: Northern Route and Southern Route

(a) Northern Route :

Rail via DR Congo to lobito bay, Angola (not currently operational, depends on Katanga-Benguela line, which is incomplete).

(b) Southern Route:

Currently, Rail to Road in Chingola via Solwezi, Zambia to Jimbe on the Angolan border.

Construction of the Rail Line from Chingola to Jimbe is being considered on either PPP basis or joint venture.

iii) REVIEW AND FORMULATION OF NATIONAL TRANSPORT POLICY AND

RAILWAY STRATEGY

Objective;

Government strategies and policies to help both rail freight and road freight industry succeed for modal balance.

Promote Un-constrained commercial instinct and freedoms of Rail Freight Companies.

Promote Effective Private Sector participation in the Rail Sector.

Promote the development of International Rail Corridors.

Trains and their passengers must be able to cross borders freely within an integrated area by improving the interoperability of networks by stimulating investment in infrastructures and implementing policy to harmonise passengers’ rights and working conditions, within the region.

Promote integration of Rail Transport with other modes.

Promote freight carriage via track access rights.

iv) IMPROVING AND UP GRADING ROLLING STOCK;.Investment and Maintenance policy shift for Railways.

i) Investment in High speed trains with high design speed.

ii) Investment in Sustainable Rail Passenger Transport.

iii) Investment in railway upgrades.

iv) Apt Investment in maintenance:

Maintenance Facilities with good access, Cleaning and Stabling facilities, wheelprofiling facility( wheel lathe), Inspection Sheds, Excellent Rolling stockmaintenance programs (by mileage, by time or by conditioning monitoring),performance based maintenance contracts.

v) Installation of High-Tech Signalling and Telecommunication System.

vi) Investment in Mass Rapid Transit, or MRT,

5.0 CONCLUSION

RAILWAYS HAVE A PARTICULAR ROLE TO PERFORM:

1. THEY CAN CONVEY A MUCH WINDER RANGE OF FREIGHT TYPES THAN PIPELINES.

2. THEY ARE FASTER AND MORE UNIVERSALLY AVAILABLE THAN INLAND WATER WAYS ROUTES.

3. THEY HAVE INFINITELY GREATER CARRYING CAPACITY AND CARRY AT A FRACTION OF THE COSTSOF AIR TRANSPORT.

4. IF WELL DESIGNED AND MANAGED, THEY CAN, FOR A WIDE RANGE OF COMMODITIES DELIVERBOTH HIGHER CAPACITY AND LOWER COSTS OF OPERATIONS THAN ROAD HAULAGE AT LOWEREXTERNAL COST TO THE COMMUNITY.

5. ABOVE ALL, RAILWAYS ARE MORE ECO TRANSPORT THAN ROAD.

Business

Zambia rail industry