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Saturday, 15 March 2008

Free riders...., 2nd Edition

Henry Chipewo (Chartered Institute of Logistics and Transport) has weighed in on the problem of infrastructure free ridership. Henry's radical proposal is for government to come up with a policy framework that will restrict the movement of cargo above a certain tonnage on roads in order to avoid damage to infrastructure :

The roads, railway and air transport have to complement each other. What the roads can’t do, we expect the railway to do the job and what the railway sector cannot provide, the airlines are expected to offer the service.....Now what government should do is come up with a policy framework that will restrict the transportation of bulk goods on roads but through railway. This will reduce on
the depletion of our road network which is already in a bad state...It is unreasonable to carry a bulk of copper, sugar or any other goods by road when that can be done using the railway lines.....There is no time that government will be able to reconstruct 80,000 kilometers of the road network in Zambia. For the country to be competitive in terms of trade, we require strong rail infrastructure because this is the most appropriate for the transportation of bulk goods"
Its an interesting proposal, but freight will always need the road system, not only to get to those "rail stations" but also in terms of wider distribution of bulk. So presumably what Chipewo has in mind is restrictions focused on the mines. That would require forcing the mines to invest heavily in rail use - they would argue thats discriminatory.

12 comments:

  1. Or you could just change the incentives so that rail becomes the cheaper option.

    I mean, isn't rail more efficient for transporting minerals anyway ?

    In Cameroon, they tax tonnage on roads (which is more politically feasible than tolls, isnt it ?). With the right investment policies, doing the same may make railroad investments desirable, wouldn't it ?

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  2. By "efficient", I assume you really mean "cheaper"?

    If so, rail is certainly cheaper from society's perspective but perhaps very costly to the mining companies....

    The life asset of the rail is longer than the road....its therefore more socially beneficial to invest in rail, despite the high upfront cost. For the mining companies, the opposite is true.
    If their company will be in operation only for 10 - 15 years, why waste money on rail, with its up front costs?

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  3. yeah cheaper.

    Rail is costly to build but cheap to use. Even in 10 or 15 years, they could make their investment back with, couldn't they ?

    I mean nearly every railway in Africa has been built by or for mining companies. May be the issue is with the investment framework.. Joint-ventures instead of state-owned and operated companies ?

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  4. It comes back to the market failures one is seeking to solve. For rail, its not really the question of freeridership, its one of uncertainty in long term investments and higher upfront costs.

    There's a case for both PPP or straight subsidies coupled with specified lease years
    e.g. the Eurotunnel model.

    I note that TAZARA will soon be privatised. It would be interesting to see what level of investment is poured into on both sides of the border.

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  5. Any ideas what to do about TAZARA?

    http://www.thisday.co.tz/News/4770.html

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  6. Here is a TAZARA timeline:

    1999

    China calls on Tanzania and Zambia to rehabilitate TAZARA, reaction is slow

    JULY 2008

    TAZARA stops paying salaries to staff

    AUGUST 2008

    July salaries are paid
    Top management 'quitely changed'
    New CEO appointed
    Major changes made to the Finance Department

    SEPTEMBER 2008

    President Jakaya Kikwete talks to Chinese delegation
    " time is rife to privatize Tazara like we did to the Central Railwayline "

    ***************

    According to the same article, their operations dropped from 1.2 million tonnes to 'about half'.

    I wish I could look at their annual report, which might show what is really going on.

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  7. The PriceWaterhouse Coopers / World Bank report would also be good to look at for reasons for the current situation and a view of the economics of operating the railway. It is one thing to build infrastructure, but if there are no funds to maintain it, then what is the use of building it? Even though it carries half a million tons, that may be still be too small to operate a very long railway economically.

    What is the status of the rail line to South Africa? Can it be used for exports instead? And when the Benguela railway is rehabilitated by the Angolans, can that be used instead of Tazara by Zambia thereby saving it money?

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  8. More reasons from the Transport Minister for TAZARA's decline.

    http://www.bloomberg.com/apps/news?pid=20601116&sid=aPN1.GFo5UVg&refer=africa

    I speculate that in the 1980's and 1990's with Zambia's economic decline that scheduled maintenance and replacements were not done.

    Lesson: It is not just the cost of building the infrastructure that should be considered, but also the costs of maintaining it.

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  9. Tazara to raise cargo capacity:

    http://thecitizen.co.tz/newe.php?id=13527

    ReplyDelete
  10. More progress on Tazara:

    http://www.times.co.zm/news/viewnews.cgi?category=11&id=1247723536

    ReplyDelete
  11. Half of unpaid TAZARA construction loan cancelled:

    http://www.daily-mail.co.zm/media/news/viewnews.cgi?category=8&id=1267265055

    ReplyDelete
  12. WHERE IS MMD TAKING ZAMBIA...PERSONALLY I DO NOT KNOW..http://zambianunion.blogspot.com/

    ReplyDelete

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