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World Bank Document ReportNo. 9908-MAI Malawi TransportSector Review Selected Issues Public Disclosure Authorized (In Two Volumes) Volume 1:Main Report August10 1992 MICROFICHE COPY lnfrastructureOperations Division Report No, SouthernAfrica Department Title: rt ANoSO9R8MAI Type ( SEC) Author: BURNS, J. Ext. :35550 Room:J11125 Dept.:AF61A FOR OFFICIAL USE ONLY G 2 V. Public Disclosure Authorized Public Disclosure Authorized '. -. Public Disclosure Authorized DocumentOf the World Bank Thisdocument has a restricteddistribution and may be used by recipients orMyin theperformance of theirofficial duties. Its contents may not otherwise fdisowdwitho Woru d Bankauthorization. CURRENCY EQUIVALENT (as of November l, 1991) Currency Unit - Malavi Kwacha (MK) US$1.00 MK 2.86 MK1.00l US$0.38 MK 1.00 - 100 Tambala GOVERNMENTOF MALAWIFISCAL YEAR April 1 to March 31 WEIGHTSAND MEASURES 1 kilogram (kg) - 2.2 lb I metric too (mt) - 2,204.6 lb 1 liter (1) - 2.116 US pints 1 hectare (ha) - 2.471 acres 1 cubic meter (cm3) * 35.3 cubic feet 1 kilometer (km) - 0.621 miles GLOSSARY OF ABBREVIATIONS ABA - African Ruitineesmen'sAssociation ADMARC - Agriculture Development Marketing Board AFRAA - African Airlines Association AfDB - African Development Bank APRAA - African Airlines Association BA - British Airways CFH-t! - Caminho de Perro-Norte. Hozambique DCA - Department of Civil Aviation DSS - Decision Support System DEMATT - Developmentof Malawi Traders Trust DTM - Directed Track Maintenance EPD - Economic Planningand Development Department GOM - Government of Halawi GSA - General Sales Agent IATA - International Air TransportAssociation INDEBANRK - Investmentand Development Bank of Malawi INDEFUND - Investmentand DevelopmentFund of Malawi KRA KRamazu International Airport KLM - Royal Dutch Airlines LAM - Mozambique Airlines LPC Leasing and Finance Company of Malawi LS - Lake Services MMS - Material Management Systems MOP - Ministry of Finance MOTC - Ministry of Transport and Communications MOU - Memorandum of Understanding MOW - Ministry of Works MPF - Monthly Payment Factor MR MMalawi Railways MTIT - Mlnistry of Trade, Industry and Tourism NTC - Northern TransportCorridor NRZ - National Railways of Zimbabwe OAS - Operations Audit System OPC - Office of the Presidentand Cabinet PCC - PetroleumControl Commission PR - Passenger Kilometers PRP - Prime Route Policy pVHO - Plant and Vehicle Hire Organization QAS - Quality Assurance System QM - Air Malawi RAP - Restructuring Action Plan ROC - Return on Capital Employed RSP - Road Service Permit RTA - Road Traffic Act RTC - Road Traf.ic Conmission RTD - Road Traffic Department RTOA - Road Transport OperatorsAssociation SM - South African Airwkys TEU - Twenty Foot Equivalent Unit (containers) SM - Stagecoach Malawi. Ltd. TR - Tanzania Railways UNHCR - United Nations High Commissionerfor Refugees ZR - Zambia Railways FOR OFFICIALUSE ONLY MALAWl TRANSPORT SECTOR REVIEW - SELECTED ISSUES VOLUME I Table of Contents Page No. EXECUTIVE SUMMARY . I. INTRODUCTION AND OVERVIEW . 1 A. Purpose and Scope of Study . 1 B. Geographic Setting and Transport System . 1 C. Economic Development and Transport Policy . 3 II. STRUCTURE OF DEMAND FOR TRANSPORT ... 6 A. International Plows .... 6 B. Transport Cost Savings ... 11 C. Future Demand .... 12 D. Domestic Flows .... 13 III. MALAWI RAILWAYS - STRATEGY FOR RECOVERY . 15 A. Background ....... .. .. .. .. .. .. 15 B. Corporate Objectives and Strategy . 16 C. Framework for Financial Viability . 17 D. Restructuring Plan .... 18 E. Tariff Restructuring .... 22 F. Management Effectiveness .... 22 G. Railway-Goveroment Relationship . 23 H. Projections and Action Plan . 24 IV. LAKE SERVICES . 30 A. Introduction .30 B. Objective and Strategy ..... 31 C. Restructuring . 31 D. Operations Improvement .34 E. Financial Projections ..... 35 V. AIR MAIAWI ......................... 36 A. Background ....... .. .. .. .. .. .. 36 B. QM's Current Operations and Competitive Position . 36 C. QH's Financial Position . 40 D. Current 'issues ..... 44 VI. PRIORITY ISSUES FOR ROAD FREIGHT TRANSPORT . ...... 51 A. Background ..... 51 B. Industry Structure .... 52 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. C. Institutional Constraints. .... 57 D. Recommendations. 60 VII. PRIORITY ISSUES FOR PASSENGER TRANSPORT . 62 A. Overview . 62 B. industry Structure . 62 C. Regulatory Issues . 66 D. Other Constraints . 69 S. Rural Passenger Transport . 71 F. RecommendedActions . 72 VIII. STRATEGY AND ACTION PLAN . ......... 76 ANNEXES 1. Transport Costs (Land, Port and Sea) as Percentage of the Commodity Value in Two Scenarios 2. Forecast of Exports and Imports of Malawi, 1990-2010, in Four Scenarios 3. Malawi Railwayst Basic Data and Key PerformanceIndicators for the Malawi and Some NeighboringRailways 4. Malawi Railways: Current Estimates of MR Assets and Depreciation 5. Malawi Railways (IncludingLake Services): Cost Structure and Trend (1985/86-1989/90) 6. Malawi Railways: Operational PerformanceTargets 7. Malawi Railways: Current Estimates of MR's Usable Assets and Depreciation 8. Air Malawi: Financial Projectionsof Jet Aircraft Purchase Scenarios MAPS IBRD No. 23293 IBRD No. 23294 This report is based on the findings of a mission that visited Malawi in October/November,1990. Mission members were Imogene Burns (Mission Leader, AF6IN), Yash Pal Kedia (AFTIN), Mats Gustavsson (AF6IN), Maria Kiwanuka, Made Kofod, Erik Ostergaard,Edward Ramsdell, Gary Roberts, Harold Shenton and Vim Spit, Consultants. The mission was also joined by Steve Siwande, Ministry of Transport and Communications,during the course of the review. The report was discussed with the government in Malawi in March 1991. Ms. Sonia Ainsworth provided graphics and secretarial support in the preparation of the report. MALAWI TRANSPORTSECTOR REVIEW - SELECTEDISSUES VOLUME1 Executive Suvnary Purpose and Scope of Study 1. The Malawi transport sector review focuses on modes of transport under the auspices of the Ministry of Transport and Communications (MOTC). Accordingly,the review covers key issues pertaining to Malawi Railways (MR) and its subsidiaryLake Services (LS), Air Malawi (QM), the road freight transport industry, and road passenger transport services. Roads, which fall under the Ministry of Works, have been covered elsewhere and are not addressed in this review. 2. The aim of the review is to identify the most.pervasive and pressing issues facing these transport subsectors. To a large extent these issues pertain to the efficient and effective allocationof resources,with specific emphasis on creation of a policy environment that can facilitatethe necessary supply response from the private sector. The Government of Malawi (GOM) also is approaching a number of investmentdecisions throughoutthe transport sector, and the transport sector review aims to establish a context and sound principles for making such decisions. Of particular concern is the effective use of existing assets, improved financial performance of +-4 sector, cost reduction and, to the extent possible given the unce tain environment, minimization of risk. Background 3. As a landlockedcountry that depends on neighboring countries' overland routes and seaports for regional and international traffic, Malawi faces a range of difficult transport problems that have adversely affected prospects for growth and development. Foremost among these has been the insurgent activity in Mozambique,which by 1985 had effectively severed Malawi's traditionalaccess to rail routes for imports and exports through the ports of Nacala and Beira. This same external unrest caused an influx of Mozambican refugees totaling one million, more than 10 percent of Malawi's population. The refugees continue to place additionalstrain on Malawi's economy, and food aid and services for the refugees further aggravate the shortage of domestic transport supply. 4. The alternative routes available for handling Malawi's external trade to and from InO Ocean ports vary greatly in length and reliability. The major tra':I ersion, from the Mozambican routes to the port of Durban in South *t-1 has not only increased transport distances by 200 to 300 percenu, but also the number of countries transited. This has had important implicationsfor reliability,loss and damage, time in transit, as well as out-of-pocketcost. Recent - ii - disturbancesin the Tete Province in Mozambique, through which trucks following the fastest and most direct route to Durban have to pass, have exacerbated the problem. During periods of closure, trucks must instead travel via Lusaka and Harare at significantlyhigher cost. An alternative route through Tanzania, the Northern Transport Corridor (NTC), is being developed to provide a less costly alternative to the various routes to Durban, and although behind schedule, is expected to become fully operationalby late 1992. In addition, the route to Nacala reopened in December 1989 with one train a week, later increased to two. However, disruptionsstill occur along the line, which carried less than five percent of Malawi's external trade in 1990. 5. The cost savings anticipated from the NTC and unhampered operation of the Nacala line are critical, as the economic burden associated with the closure of the Mozambican routes has been great. Prior to 1983, nearly 95 percent of all import and export traffic, in value terms, went through the Mozambique ports of Beira and Nacala.
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