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Thursday, 13 June 2013

North West Railways Project

The North-West Railways project appears to be on the verge of being realised. Government will soon sign a memorandum of understanding (MoU) with promoters of North-Western Railway to pave way for the start of vonstruction of railway line in the mining region to ease transportation of copper and other goods.

North-West Rail project is promoted by a group of Zambians, who hold 65 percent shares under North-west Rail Company (NWR) with Enoch Kavindele as CEO, 20 percent shares held by three Americans, five percent shares from United Kingdom and 10 percent shares by South Africans.

NWR holds a railway line licence for construction and operating a rail from Chingola through Solwezi to Lumwana with the second phase planned to extend to Angola's Benguela line. The development is expected to cost around US$1.1 billion is expected to start in July following the approval by the Zambia Environmental Management Agency (ZEMA). Enoch Kavindele says the project is expected to move five million tonnes of cargo annually and create over 8,000 jobs for the locals.

The North-Western railway project will be done in two phases with the first phase expected to gobble about US$500 million and about US$600 million in the second stage. According to Kavidendel, "the engineers will move in, in the next two months to come up with the designs for the project .This will be a one-track heavy duty line designed to carry five million tonnes of heavy cargo per annum".

He said the railway project will provide a cheaper and easier mode of transportation of copper by mines in the area with the recent increased investment in mining sector in North-Western Province.

Thid is a welcome development. And it will certainly sound the death of TAZARA. There's currently not enough demand to sustain both projects even with Trident and other mining developments in the area. NWR is talking about a business model sustained by 5m tonnes of cargo. Well, mining will only be around 1m tonnes by 2015. This seems wildly optimistic. One hopes they are working with better numbers. 

I have reviewed the "impact assessment" submitted to ZEMA and it seems very poor on the key demand projections of traffic. The economic case has not been demonstrated. It is more of a strictly environmental assessment. 

Update (13 July 2013):

A friend working on this project has kindly offered some important clarifications. Here is how he has explained it to me. He was very kind so let me quote him in full :

Let me highlight a few issues that you may not be aware. Firstly, the 5 million tonnes is the design capacity i.e. the track will be designed to be able to carry 5 million tonnes, but the break even tonnage that makes the project viable is 1.5 million tonnes which is achievable. The current tonnages available with current mines in northwestern is close to 1 million tonnes of copper ore. This ore is processed on the Copperbelt and for FQM in Solwezi. There are four other mines coming up within the next three years that will increase tonnage to over 2 million tonnes. With rail new opportunities will arise in agribusiness, cement exports to Angola and future fuel products imports from Angola.

The main reason for this rail is the need to transport copper ore into the Copperbelt and so there is still need for ZR and Tazara to remain as a complementary support service since they are the lines with links to seaports. So actually NWR will be a complement to the rail industry and will not in any way lead to the demise of TAZARA. In fact NWR plans to have strategic alliances with both ZRL and TAZARA.

The first phase of the project is Chingola to Lumwana which is a 300 km stretch and then second phase is the link to Angola rail. The Northwestern province is the future Copperbelt of Zambia and with a rail in place that whole region including the DRC and Angola will open up to huge opportunities for trade and investment which can only be good for Zambia and the SADC region. Also it will give Zambia Railways and TAZARA to carry cargo from Durban and Dar ports respectively all the way through to Solwezi to Jimbe and to Lobito on the Atlantic Ocean. The project has been independently assessed and has undergone a pre-feasibility study and detailed feasibility and viability study.

On your point concerning the EIA, please note that it is not possible to include commercially sensitive information in a publicly available document. ZEMA have the full confidential report which includes all the necessary commercial information required by law. Also the Government has also full details as we have the duty free import licence for capital equipment

Copyright © Zambian Economist 2013

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