Supplied/ Adele D Photography
Currently, African countries currently trade only about 15% of their goods and services with one another, compared to more than 65% with European countries. One of the best and most effective ways of improving intra-African trade is to improve cross border rail services, writes Mesela Nhlapo.
A vibrant and functional rail network across Africa is the key to expanding access to a growing market and improving economies across the continent.
Africa Month this year focuses on stimulating competitive markets for trade among African countries, and as we celebrate it, we need to focus on how rail can improve and expand gateways that have been opened up by the African Continental Free Trade Agreement (AfCFTA).
The AfCFTA, which came into effect on 1 January 2021, brings together more than 50 economies, from Algeria to South Africa. It aims to boost intra-African trade by 60% by 2034, creating a potential economic bloc of $3.4 trillion.
The World Bank estimates that by 2035, real income gains from full implementation of the agreement could be 7%, or nearly $450 billion. By 2035, the volume of total exports would increase by almost 29% relative to business as usual. Intra-continental exports would increase by more than 81%, while exports to non-African countries would rise by 19%.
The World Bank research also shows that the full implementation of AfCFTA could lift 50 million Africans out of extreme poverty and raise incomes by 9%.
However, currently African countries currently trade only about 15% of their goods and services with each other, compared to more than 65% with European countries.
One of the best and most effective ways of improving intra-African trade is to improve cross border rail services. The most effective way to achieve this is to open the market to private, third-party operators. This has already been successfully implemented across the world and represents a fundamental strength of the American and European economies (among many others).
One example of third-party access working well for both government and private enterprise is the TAZARA line between Tanzania and Zambia. Opened to third-party operators in 2018, overall volumes transported on this line increased by 60% year-on-year. The success of this initial third-party operator has seen the board of TAZARA accepting more private operators onto their network.
Rail transport has an important role to play in the growth and sustainable development of the African continent over the next few decades. Moving freight from road to rail increases safety on the roads, reduces damage to roads and is far more environmentally sustainable.
Third-party access to the rail network both in South Africa and Africa will create economic opportunities and ensure job creation in the rail sector, as more freight on trains means that more capacity will be required in terms of locomotives and wagons.
Additionally, more train capacity will also create more local manufacturing opportunities to assemble the locomotives and manufacture the wagons. The upstream economy associated with this will create thousands of new job opportunities, which will significantly boost employment and contribute to GDP.
However, much more important is the material impact that enhanced rail capacity on the broader upstream economy of general economic growth where millions of African people find employment.
Africa is becoming an increasingly important trade partner across the globe – whether it is the export of mining and agriculture products to developed markets or trade being stimulated by AfCFTA – there is a demand for more efficient trade activities, and this presents a world of opportunity for financing partners and investors that can close this gap.
By allowing third-party operators into the rail network across Africa, we will create more jobs and grow economies all over the continent.
Mesela Nhlapo is CEO of the Africa Rail Industry Association (ARIA). News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.