Should the Zambian government invest in railways?

By Gaël Raballand  and Alan Whitworth

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Until the 1990s nearly all Zambia’s foreign trade was transported by rail. Today trucks are the dominant transport mode. The resulting damage to Zambia’s roads and concerns over congestion, safety and environmental damage have led to widespread calls for the Government to act to reverse the switch from rail to road. Plans have been announced to rehabilitate existing rail lines and to construct new routes.

This paper questions the case for public investment in the railways. It shows that the economics of road versus rail has been fundamentally transformed since the 1990s. The collapse in copper exports from the 1980s triggered a vicious circle of decline in the railways; lower copper revenues meant there were insufficient funds for maintenance and investment, which in turn led to a steady deterioration in speeds, reliability and security. Meanwhile, following the end of apartheid, a highly competitive trucking industry has developed from scratch between South Africa and Zambia. Whereas trucks return empty from other African countries, the recent recovery of copper exports has meant trucks operating to Zambia carry loads in both directions. Along with rehabilitation of the trunk road network, this has enabled Zambia to enjoy some of the lowest trucking costs per tonne kilometre in Africa.

Following privatisation Zambia’s mines are no longer obliged to export via rail. With their poor reliability, the railways are simply not competitive with the low trucking rates. Since most of the recent increase in copper production has taken place in the ‘new copper belt’, 200 km from the nearest railway, it is not surprising that the railways have hardly benefited from the rebound in copper exports. Investment in improving railway reliability appears unlikely to be profitable given low trucking rates.

The economic prospects for rail could improve as a result of growing copper production in DR Congo, most of which is exported in bulky concentrate form by road through Zambia. However, once the Benguela line is rehabilitated, Congolese exports may be diverted to Atlantic ports.

With the poor economic and financial returns to railway investment and the uncertainty over Congolese traffic, public investment in railways in current circumstances appears highly risky. Few of the new rail routes proposed in the Sixth National Development Plan appear economically viable under any circumstances. While certain new routes could possibly be viable if mines are prepared to sign long term contracts, such decisions are best left to the private sector. Given its poor track record in railways and the under funding of essential public services, rather than investing in railways itself, the Government’s role should be to: (a) facilitate private investment in the sector; and (b) ensure that trucks cover the full cost of the damage they cause to the roads by enforcing appropriate road user charges.

Gaël Raballand is a Senior Economist with the World Bank. Alan Whitworth is Technical Adviser, Zambia Institute for Policy Analysis and Research (ZIPAR).

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