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Wednesday, 25 September 2013

North West Railways Project, 2nd Edition

It appears the North West Railway is struggling to materialise. Government revealed recently that it is in the process of advertising the North-West Railway (NWR) project to local and foreign investors who may be interested to develop the infrastructure. Transport Deputy Minister Panji Kaunda says the project is still at the "planning stage".

The negotiations with the project initiators, principally Kavindele, are yet to be finalised. Government had opened discussions with Mr Kavindele but that, they did not come to a conclusion, hence the need for the resumption of talks so that the matter could be finalised.

Transport Minister Yamfwa Mukanga MP last month said, "We believe that though it is a private investment, we as Government, are major stakeholders, so we need to link up with [Kavindele] and discuss it. We had opened discussions but we never came to a conclusion, so we are waiting for him to come back to the ministry to ensure that we finalise".  Crucially, the Minister as Government believes that the feasibility study, which had been conducted previously, needs to be upgraded to enable concerned parties come up with the "correct values".

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 first phase is expected to gobble about US$500 million and about US$600 million in the second stage.

I have previously said the NWR project economics need careful scrutiny. NWR is currently talking about a railway cargo line capable of sustaining 5m tonnes of copper ore. However, it is unclear what level of demand is actually needed to make the project viable, given we are far from 5m tonnes.

A figure of 1.5m tonnes has been suggested which is potentially possible given there are three mines coming up within the next three years that will increase copper ore tonnage to over 2 million tonnes. But this is what Government needs to test. What is clear is that this project will most likely need GRZ funding to help kick start it. The question is whether the economics will allow it given other competing priorities.

Chola Mukanga | Economist
Copyright © Zambian Economist 2013

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