19 August 2022 Cristiano Volpi
Will Tanzania's SGR Railway Ever Work?
Tanzania continues to show strong commitment to its large $ 14 billion 1,800 km standard gauge railway (SGR) project. According to recent reports, the government is carrying out the Tabora-Gitega and Isaka-Kigali phases, connecting the infrastructure with Burundi and Rwanda respectively. In this way, it is hoped that Tanzania will become a transportation hub for its many landlocked neighbors. The government's firm approach to the SGR is commendable. At this stage of the project, it would make no sense to have doubts. However, much more needs to be done to ensure the SGR's future commercial and economic profitability.
For starters, while economic and population growth, global supply chains, landlocked countries and mining investments all require better and more reliable transportation infrastructure, the SGR was not the right solution for Tanzania. Numerous reports have made this clear. At this point, there is no economic justification for SGR investments across East Africa.
A 2013 World Bank report noted that an SGR project requires a volume of 55 million tons to be profitable, while EAC railways are estimated to reach only 14.4 million tons in total by 2030. With such requirements, given that the Tanzania Railways Corporation (TRC) has not even reached a third, it would have been enough to refurbish the Central Railway at a third of the cost of the SGR, but the authorities have chosen the most expensive option possible!
Neighboring Kenya is paying dearly for its stubborn decision to ignore the fundamentals of the rail economy. Ian Taylor, author of Kenya's New Lunatic Express, notes that the Madaraka Express generated a loss of $ 7.35 million per month in 2018, operating at less than 15% of its planned capacity. This is the fate that awaits Tanzania, unless the government has some very special tricks up its sleeve.
But the long list of failed or failing public projects - TRC, UDA, BRT, TTCL, NHC, ATCL, Tanganyika Packers, etc. - suggests that this is rather unlikely. Although the Government may carry out a project here and there, it does not have a successful track record of managing substantial medium- and long-term operations. To give the SGR a chance, the government must demonstrate a high degree of determination in facing its future challenges.
First, the SGR will have to pass the service quality test. In the 1990s, when the road between Tanga and Moshi was rebuilt, people quickly abandoned rail services, which were withdrawn. People today have choices. There are 86,000 trucks and 49,000 buses crossing the country every day. If the TRC tackles this challenge with the same ease with which it has faced it in the past, we can also conclude today that the Tanzanian SGR will be the most expensive white elephant in East African history.
Secondly, the DRC challenge. At present, although over 90 percent of goods to or from Rwanda and Burundi pass through Dar es Salaam, they represent less than a third of the goods transiting through the port. The integration of the economic region around Lake Tanganyika could improve the situation. For example, the populous eastern provinces of the Democratic Republic of the Congo (North and South Kivu, Katanga, Maniema and Ituri), rich in resources but forced to depend on the cumbersome railway line to South Africa, could use a solid alternative line to Dar. which could most likely reduce transport times by up to 70%.
Third, the marketing challenge. In the heyday of rail transport in Africa, people often did not have viable transport alternatives, but today, throughout sub-Saharan Africa, trucks dominate the tracks, even in cases where the tracks have very clear cost advantages. .
Statistics indicate that TRC is not competitive in the transportation of fertilizers, minerals and minerals, cement and oil, the kind of business successful operators thrive on. Similarly, even when ticket prices were half that of buses, people still preferred the convenience of buses. A laissez-faire approach to the market will not convince Tanzanians to use rail transport.
Finally, the port of Dar es Salaam deserves a separate discussion.
In general, the railway is a strategic resource on a national level. Unfortunately, Africans have approached the railway business the wrong way.
In the 1870s, just two decades after the introduction of the railways, Indian mechanics began to produce better and cheaper locomotives than British ones. Today, Indians advise the British on how to manage their railway networks. Likewise, in 1930s South Africa, railways pumped skilled craftsmen to the rest of the economy, leading to the industrialization of South Africa. At its peak in the 1970s, South African Railways had 230,000 employees. Such is the potential of the railways in economic transformation.
Investing billions in a project will not lead to these results. There must be a paradigm shift, without which thousands of trucks will continue to damage roads, congestion will continue to cost the nation dearly, and accidents will continue to reduce human lives as hundreds of new vehicles are on the road every day.
In this case, will the SGR ever work?
Given Tanzania's record, it's hard to see anything more than failure. The most likely scenario is that the network will perform well below expectations for years, incurring losses that the government will struggle to subsidize. As the situation worsens, TRC will begin to reduce maintenance, causing the infrastructure to degrade more rapidly, thereby reducing the speed and reliability of the network. At that point, customers will abandon public transport services en masse, returning to privately owned trucks and buses, and we will be back exactly where we started.
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Cristiano Volpi 635 posts
Passionate about economics, politics and geopolitics, I decided to create this site to show a different face of Africa, a continent full of business and investment opportunities, a continent in constant change.
La Tanzania continua a mostrare un forte impegno per il suo grande progetto di ferrovia a scartamento standard (SGR) da 1.800 km e da 14 miliardi di dollari. Secondo recenti rapporti, il Governo sta portando avanti le fasi Tabora-Gitega e Isaka-Kigali, collegando l'infrastruttura rispettivament