AfDB Lends $40 Million to Mozambique Rail and Port Authority to Buy Rolling Stock

African Development Bank lends $40 million to the Mozambique Rail and Port Authority to buy rolling stock for the Ressano Garcia railway line.

Project implementation will improve logistics and reduce the cost of transporting goods and products using cost-effective, efficient means benefiting from economies of scale.

Finance

Approval date: 31 January 2024

Project name: Mozambique - Portos e Caminhos de Ferro de Moçambique EP (CFM)

Amount: The African Development Bank is making a $40-million corporate loan to the state-owned enterprise Portos e Caminhos de Ferro de Moçambique EP (CFM), the Mozambique rail and port authority, to help fund its strategic plan for the period 2021-2024. The Bank also plans to mobilize an additional $30 million for the project from other potential lenders.

Implementation period: 2024

Objectives

The project objective is to enable CFM to finance the purchase of rolling stock (locomotives, wagons and tank containers) for its main corridor, the Ressano Garcia railway line, which generates more than 90% of rail traffic volume and comprises 70% of CFM's overall rail transport volume.

Components

The operation includes the acquisition of 10 3000/3300 horsepower diesel-electric locomotives, 300 wagons, and 120 tank containers. The funding will also cover a three-year maintenance programme for the purchased locomotive and for training CFM maintenance staff.

Target area and population

The project will make it possible to purchase rolling stock for CFM's main corridor, an 88-kilometre line between the port of Maputo and the South African border.

Expected outcomes

Project implementation will improve logistics and reduce the cost of transporting goods and products using cost-effective, efficient means benefiting from economies of scale. It will lead to a paradigm shift that will improve the corridor's competitiveness and make it an economical logistics transport solution.

The project is expected to improve the access of households to infrastructure through rail transport services. It will potentially reduce congestion and journey times by two minutes per kilometre and will reduce road fatalities by shifting road traffic to rail. It should also increase the number of private companies using freight services and ports, reduce congestion and logistics costs, and contribute to the overall competitiveness of companies while generating links with the local economy through local procurement and demand for other non-tradable services.

Project development outcomes will include trade facilitation, job creation and skills transfer.

The project will also significantly increase foreign earnings, which will grow from $225 million in 2022 to $360 million in 2036. During this period, the project is expected to bring the government a cumulative total of $1 billion in tax revenue.

It will strengthen intra-African trade and regional integration by increasing capacity and the volume of goods transported from neighbouring countries by the most efficient route, with Mozambique serving its neighbouring countries of South Africa, Eswatini, Malawi, Zimbabwe, and Zambia, providing them with a port for exporting their products and importing goods.

The project will achieve net carbon savings of 744,511 kilotonnes of CO2 over the period 2023-2035.

Beneficiaries

Local communities along the corridors, including women, will have better access to markets to trade their goods and services.

Background

Strategically located in southern Africa, Mozambique is arguably the main logistics gateway for countries in the region’s interior, such as Zimbabwe, Zambia, Malawi and Eswatini.

The country's three main corridors offer relatively shorter corridor options over road and rail networks for transporting freight from neighbouring countries and providing access to world markets for exports and imports.

The goods transported over these corridors are mainly raw and processed materials, agricultural products, containerized freight, and bulk liquids.

The Maputo corridor, where the rolling stock purchased under this project is to be deployed, is essentially used to export mineral commodities (such as bulk magnetite, ferrochrome, chromium ore and coal) from the mining belt of north-eastern South Africa through the port of Maputo, which provides the shortest seaport access.

February 04, 2024