Technical Report: Review of the Effectiveness of Rail Concessions in the SADC Region Larry Phipps, Short-term Consultant Submitted by: AECOM Submitted to: USAID/Southern Africa Gaborone, Botswana March 2009 USAID Contract No. 690-M-00-04-00309-00 (GS 10F-0277P) P.O. Box 602090 ▲Unit 4, Lot 40 ▲ Gaborone Commerce Park ▲ Gaborone, Botswana ▲ Phone (267) 390 0884 ▲ Fax (267) 390 1027 E-mail: [email protected] TABLE OF CONTENTS 1. EXECUTIVE SUMMARY............................................................................................. 4 2. INTRODUCTION......................................................................................................... 8 2.1 Background .......................................................................................................... 8 2.2 Objectives of Study .............................................................................................. 9 2.3 Study Methodology .............................................................................................. 9 2.4 Report Structure................................................................................................. 10 3. BEITBRIDGE BULAWAYO RAILWAY CONCESSION ............................................. 11 3.1 Objectives of Privatization .................................................................................. 11 3.2 Scope of Railway Privatization ........................................................................... 11 3.3 Mode of Privatization.......................................................................................... 11 3.3.1 Clauses of Concession Agreement............................................................. 11 3.3.2 National Versus Regional Focus................................................................. 12 3.3.3 Operational Performance Measures ........................................................... 13 3.4 Lessons Learnt................................................................................................... 13 4. RS of ZAMBIA CONCESSION.................................................................................. 14 4.1 Objectives of Privatization .................................................................................. 14 4.2 Zambia Privatization Agency.............................................................................. 15 4.2.1 Scope of Railway Privatization.................................................................... 15 4.3 Railway Background........................................................................................... 16 4.4 Concession Model.............................................................................................. 17 4.4.1 Mode of Privatization................................................................................... 17 4.4.2 The Selection Process ................................................................................ 18 4.4.3 Technical and Financial Evaluation............................................................. 18 4.4.4 Reasons for Dividing the Concession and Potential Pitfalls ........................ 19 4.4.5 Labor Reform And Rehabilitation Action Plan ............................................. 22 4.4.6 Progress Toward These Stated Steps ........................................................ 23 4.4.7 Examination of the Long Haul Focus .......................................................... 23 4.4.8 Status of Rehabilitation of Assets................................................................ 25 4.4.9 The Role of Regulatory or Monitoring Agency ............................................ 27 4.4.10 Procedures for Tendering Technical and Financial Evaluation ................... 28 4.4.11 Operational Performance Measures and Monitoring................................... 31 4.4.12 Contractual Clauses Regarding Market Power Abuse ................................ 34 4.5 Lessons Learnt................................................................................................... 34 5. MOZAMBIQUE RAILWAY CONCESSION................................................................ 36 5.1 Mozambique Concessioning Structure............................................................... 36 5.2 Objectives of Privatization .................................................................................. 37 5.3 Scope of Railway Privatization ........................................................................... 38 5.3.1 Northern Corridor ........................................................................................ 38 5.3.2 The Concession Process ............................................................................ 39 5.3.3 Labor Reform .............................................................................................. 40 5.4 The Central Corridor........................................................................................... 41 5.4.1 Moatize Basin.............................................................................................. 41 5.4.2 Rail Concession and Rehabilitation............................................................. 42 5.4.3 The Concession Financing Features........................................................... 44 5.4.4 The Concession Process ............................................................................ 45 5.4.5 Progress to Date ......................................................................................... 46 5.4.6 Factors for a Successful Concession .......................................................... 46 5.5 The Southern Corridor........................................................................................ 46 5.5.1 Limpopo Railway Corridor........................................................................... 46 2 5.5.2 The Ressano Garcia Line ........................................................................... 47 5.6 Lessons Learnt................................................................................................... 48 5.6.1 Nacala Line ................................................................................................. 48 5.6.2 Beira Concession ........................................................................................ 48 5.6.3 Other Lines ................................................................................................. 49 6. TANZANIA RAILWAY LIMITED CONCESSION ....................................................... 50 6.1 Tanzania Railway Corporation ........................................................................... 50 6.2 Objectives of Privatization .................................................................................. 50 6.3 Scope of Railway Privatization ........................................................................... 51 6.3.1 The Role of Regulatory or Monitoring Agency ............................................ 51 6.3.2 Clear Objectives.......................................................................................... 52 6.3.3 Rehabilitation of Assets............................................................................... 53 6.3.4 Labor Reform .............................................................................................. 53 6.3.5 Rehabilitation Action Plan ........................................................................... 53 6.3.6 Passenger Service...................................................................................... 54 6.3.7 Political Support .......................................................................................... 54 6.3.8 Lessons Learnt............................................................................................ 54 7. CENTRAL EAST AFRICAN RAILWAY CONCESSION ............................................ 56 7.1 Objectives of Privatization .................................................................................. 56 7.2 Mode of Privatization.......................................................................................... 56 7.2.1 Concession Process and Award of Bid ....................................................... 57 7.3 Concession Terms ............................................................................................. 57 7.4 Deficiencies in Concession Process................................................................... 59 7.4.1 Institutional Reforms ................................................................................... 59 7.4.2 Annual Report ............................................................................................. 60 7.4.3 Performance of the Concession.................................................................. 61 7.4.4 Passenger Service...................................................................................... 63 7.4.5 Lessons Learnt............................................................................................ 63 8. SUGGESTED FUTURE ACTIONS ........................................................................... 64 ANNEX 1: SARA CORRIDORS BACKGROUND PAPER................................................ 66 ANNEX 2: Questionnaires ................................................................................................ 70 ANNEX 3: SOW................................................................................................................ 86 II BACKGROUND......................................................................................................... 86 VI REPORTING ............................................................................................................