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Monday, 28 October 2013

Saving TAZARA

Transport Minister Yamfwa Mukanga MP says government has engaged a Chinese firm TSDI to carry out feasibility study on TAZARA in order to recommend to the Tanzanian and Zambian governments on what to do about TAZARA. The study started in 2011 and was supposed to end in 2012, but GRZ is still waiting for the consultant to hand over the documents. 

Hon Mukanga, who is also the Government’s Chief Whip, says TAZARA has been under-performing and is highly indebted. Although the arrears for the workers have been cleared after the two governments released US$8 million, TAZARA is on life support. Among the options which may be presented may include privatising TAZARA.

TAZARA has virtually collapsed. One suspects the team of experts have not issued the report because they have found the task was too difficult. How long does a feasibility study take? The problems facing Tazara are not new but come off the back of historic mismanagement and insufficient demand. No new government money or experts can turn it round. The problems are so huge that even the injection of US$40 million by the Chinese government in 2011 to revive operations following the signing of the 14th protocol yielded nothing.

Tazara has unfavourable debt and equity ratio which closes opportunities for accessing long term operational loans from any financial institution.The company needs more than US$700 million to operate smoothly. In addition it owes the statutory authorities round $100m. These include NAPSA, ZSIC and ZRA. And as if that was not enough, it is still owing TAZARA retirees more than $20m. The list is endless as this does not include legal fees and money owed in other areas.

TAZARA’s fundamental problem is that, even if it were well capitalized and managed, the rationale for its existence largely disappeared once sanctions against Rhodesia / Zimbabwe were lifted and the border re-opened. In recent years the expansion of Beira, Nacala, Walvis and other regional ports has further reduced the need for heavy investment in TAZARA. With RSZ itself having substantial surplus capacity, it is doubtful whether there is sufficient traffic for one railway, let alone two.

Which brings us to the basic question - if not TAZARA, where should government prioritise investment? The answer is clear : roads! Zambia suffers from a "landlocked trap". We are heavily dependent on our neighbours for road and rail access to sea. However, even in terms of internal road network, Zambia has not invested significantly enough compared to other aspirational African countries. In other words, its okay that we have neighbours with poor road or rail network or insufficient port capacity, but there's no reason why cannot do our bit, to get road network in order! Its no surprise therefore that evidence appears to suggest that Zambia's lack of adequate infrastructure is acting as a constraint on the expansion of trade and economic activity. The World Bank's Logistics Performance Index, ranks Zambia's transport infrastructure below the average of other sub-Saharan African countries and low-income countries.

Many of our local areas are isolated and in desperate need of good accessible rural infrastructure. With good roads accessibility improves in terms of delivery of services and local commerce. Without proper rural roads it becomes impossible to make serious efforts in improving market development. Good roads reduce local market failures in critical sectors such as agriculture and tourism.

The PF government therefore should continue to rightly prioritize investments in rural roads over rail because roads have a greater potential to directly affect the poor and enable them to become players in the market. Minister Mukanga is performing exceptionally well in delivering at pace the Link 8000, Lusaka 400 and Pave Zambia 2000 projects. Zambia is on course for total transformation of its road network thanks to the excellent priority President Sata has placed on these project. My prayer is that the Minister and the President do not get distracted with TAZARA issues.

The Government should press ahead and sell TAZARA - but who would buy it?

AUTHOR
Chola Mukanga | Economist
Copyright © Zambian Economist 2013

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