Africa’s largest bank analyses the continents transport routes Infrastructure investment required
Transport is considered a crucial element for growing import and export volumes in Africa. South Africa’s Standard Bank, the continent’s largest banking institute, estimates that African railways need investments of around USD 50 billion just to meet demand. The fact that Africans want to remain an island unto themselves in the cabotage transport field does not fit the picture.
David Humphrey, the head of Standard Bank’s power and infrastructure division, did not mince his words when he said in January that «African nations will need to spend more than USD 50 billion on new rail networks over the next ten years, to meet growing demand for mineral resource transportation.» This relates both to the export of minerals, as well as to bulk operations in mining regions. Distribution networks to ship consumer goods to growing markets have to be improved too.
The bank estimates that about 4,000 km of new rail infrastructure is required to unlock the continent’s mineral resource potential. The infrastructure has not kept up with mineral exports of iron ore, manganese and coal. Mining output has started to exceed rail capacities, despite efforts to upgrade and maintain rail links, above all in West Africa and Mozambique. A USD 3 billion write off on coal mines in Mozambique – due to inadequate transport capacities – is one factor that led to the departure of Tom Albanese as CEO of Rio Tinto, the world’s largest mining corporation in January.
At the same time, bottlenecks may emerge in African coastal shipping. The African Union and the Association of African Shipowners (Asos) may be planning to introduce new cabotage laws that could bar non-African-owned vessels from carrying cargo between African countries.
However, the move contradicts recent cabotage research. A World Economic Forum report entitled «Enabling trade – valuing growth opportunities», compiled with Bain & Company and the World Bank, concluded that in the two cabotage jurisdictions China and the USA such barriers damage the economy and create costs. Lack of competition leads to inefficient shipping. It remains to be seen whether and how quickly the states of the AU will ratify an African maritime transport charter, which would reorganise the cabotage regulations.