1. INFRASTRUCTURE DEVELOPMENT CONSULTANTS Review of the East Africa Railways Master Plan Peter Kieran CPCS Transcom Limited March 11, 2010

2. INFRASTRUCTURE DEVELOPMENT CONSULTANTS 2 Traffic History – Where are we today? East Africa Railways Master Plan Problems with the Concession Model Agenda

3. INFRASTRUCTURE DEVELOPMENT CONSULTANTS 3 Traffic History – Where are we today? East Africa Railways Master Plan Problems with the Concession Model Agenda

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5. 5 Uganda

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7. 7 Traffic History – Where are we today? East Africa Railways Master Plan Problems with the Concession Model Agenda

8. INFRASTRUCTURE DEVELOPMENT CONSULTANTS 8 Overview Study carried out in 2007-08 by CPCS Transcom for the EA Community Secretariat This was not a huge study in terms of budget But we had excellent support from the EAC and the governments Challenge is to be realistic without in any way being short-sighted about the huge potential for growth and the role of the railways

9. INFRASTRUCTURE DEVELOPMENT CONSULTANTS 9 Infrastructure There are many speed restrictions on the system Rail will continue to need replacement on curves but rail wear is not the source of many speed restrictions Wood sleepers on bridges and turn-outs are in poor condition and cause the majority of speed restrictions Inadequate ballast and damaged steel sleepers are the other major causes of speed restrictions

10. INFRASTRUCTURE DEVELOPMENT CONSULTANTS 10 Capacity Rolling stock: locomotives, freight wagons and passenger coaches are all old and in poor condition But removing speed restrictions would boost actual capacity The capacity of the line from Mombasa to Kenya would be over 10 m tonnes per year if average speed could be increased to 50kph.

11. INFRASTRUCTURE DEVELOPMENT CONSULTANTS 11 Traffic As noted traffic on the 4 systems has declined to less than 5 million tonnes – less than half of the traffic in 1970 Rail could however play a major role in the East African economy The demand for rail traffic will reach approximately 16 million tonnes by 2030

12. INFRASTRUCTURE DEVELOPMENT CONSULTANTS 12 Capacity of the Existing Lines With investment, the existing narrow gauge system could meet this demand The following phased investments are required over the next 20 years: – 0-5 yrs: remove speed restrictions – 5-10 yrs: increase axle loads – 10-20 yrs: train control, signals, passing loops and new couplers The estimated cost for these improvements on all 4 systems is approximately US$1.1 billion

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14. INFRASTRUCTURE DEVELOPMENT CONSULTANTS 14 Standard Gauge Gauge – a switch to standard gauge would increase wagon capacity by 15-20% and provide some limited savings in operating costs. The cost to replace the existing active system to standard gauge would cost US$ 13 billion to US$ 29 billion compared to maximum projected revenue (not profit) of $1 billion per year in 2030 The cost could be reduced by use of the existing ROW

15. INFRASTRUCTURE DEVELOPMENT CONSULTANTS 15 Standard Gauge Yes it would be nice to start with a brand new railway, but there are no interconnection issues. The narrow gauge system in South Africa handles over 200 million tonnes per year at world class levels of efficiency Long distance, high speed passenger systems are extremely expensive to operate and will require massive ongoing subsidies For freight, the rehabilitation and investment in the existing system is the most economic option

16. INFRASTRUCTURE DEVELOPMENT CONSULTANTS 16 Institutional More needs to be done to ensure integrated railway development for the EAC EAC level regulation and licensing would be beneficial to ensure inter-operability and to strengthen trade within the EAC

17. INFRASTRUCTURE DEVELOPMENT CONSULTANTS 17 Expansion of the Rail Network Twenty potential new rail routes including rehabilitation of some existing but unused branch lines We have prepared estimated costs for each line at a pre-feasibility level +/- 25% Feasibility studies are at an advanced level for some lines: Isaka – Kigali - Bujumbura, Tororo - Pakwach

18. INFRASTRUCTURE DEVELOPMENT CONSULTANTS 18 Feasibility will depend on actual cost of construction and the potential for new freight and mineral traffic

19. INFRASTRUCTURE DEVELOPMENT CONSULTANTS 19 Traffic History – Where are we today? East Africa Railways Master Plan Problems with the Concession Model Agenda

20. INFRASTRUCTURE DEVELOPMENT CONSULTANTS 20 Concession Model The Concession Model used in Kenya, Uganda and Tanzania was developed by the World Bank (and CPCS) It was very successful at transforming the railways in Argentina and Brazil but has been less effective in Africa The inherent conflict is the responsibility for investment in infrastructure

21. INFRASTRUCTURE DEVELOPMENT CONSULTANTS 21 Concession Problems During the long concession process (more than 5 years) – investment, morale and effort by the staff declined Maintenance of the track and equipment suffered The new concessionaires faced these problems and were willing to repair the equipment but the cash flow is not sufficient to put money into infrastructure especially when the concession will end in 25 years

22. INFRASTRUCTURE DEVELOPMENT CONSULTANTS 22 Concession Problems Ex railway staff and management now are supervising the concessionaires and demanding performance far exceeding what they were able to achieve but without any further support from the government or the donors Is the railway really a gold mine? – or is it what is has always been? – an important service but a marginal business with low profits and high demands on management and capital

23. INFRASTRUCTURE DEVELOPMENT CONSULTANTS 23 A Possible Way Forward The “affermage” approach in French West Africa has been more successful – A real partnership – Government: responsible for infrastructure often with IFI support (low cost) – Operator: responsible for routine maintenance and operations – Much shorter terms (5 years) with rolling arrangements so the concession is not facing an abrupt end

24. INFRASTRUCTURE DEVELOPMENT CONSULTANTS 24 Questions Thank You www.cpcstrans.com