“Trans Kalahari Rail has massive spill-offs for Namibia”

NAMIBIA’s economy stands to take a major leap forward and reduce the unemployment figures by 3000, if the implementation of the long debated Trans Kalahari Rail (TKR) Project, a joint venture between the governments of Botswana, South Africa and Namibia, becomes a reality.

The Governments of Botswana, Namibia and South Africa have formed a joint committee to assess the various proposals relating to a Trans Kalahari Rail in the context of the countries’ transport strategies.

The three countries have committed to a process of selecting a preferred consortium to undertake the development of the Trans Kalahari rail by May 2010.

“Delays could potentially scupper the project,” Steve Wynter, Senior Project Manager for Industrial Development Corporation Ltd South Africa warned.

He said the international coal producers, particularly China, Australia and Columbia are ramping up exports to fill the existing market shortfalls. This will put pressure on coal prices and limit the African producers’ ability to access the export market. The TKR will then struggle to attain volumes to achieve commercial viability.

Wynter said the US$6 billion project, if implemented on time, will create 3000 new permanent jobs in Namibia and a total of 8000 jobs regionally. The project will have a fundamental impact on the economy through job creation, cost savings, enhanced currency earnings potential and foreign direct investment. It could create an additional 2500 jobs in other sectors of the economy through the multiplier effect.

“The nature of infrastructure development is such that the real employment benefits are created through the development of the secondary industries which support the railway, fuel yard and port, and resultant increase in shipping and freight operations. These include all sectors of the economy from informal trading to Small and Medium Enterprises (SMEs) and large industry servicing the Trans-Africa Rail Consortium, freight and shipping operations,” elaborated Wynter.

The Trans Africa Rail Consortium is baying for the appointment of project developer, against a backdrop of vastly experienced consortium members. The Development Bank of Namibia (DBN), were engaged as a local partner in Namibia capable of assisting with project financing and manage political interests in Namibia.

Although the DBN has not disclosed how much it will inject into this mammoth project, it is expected to be significantly larger than any investment the Development Bank has made to date.

Also in its midst, is African Infrastructure Investment Managers Pty Ltd(AIIM), a joint venture between MacQuarie Capital and Old Mutual plc. MacQuarie Capital, the world’s largest private owner of infrastructure assets brings a wealth of infrastructure project development and management experience. Energy Corporation (CIC) is a coal miner and power developer with coal exploration rights in Botswana. South Africa’s largest black controlled diversified miner, Exxaro, owners of the world’s largest coal washing facility at Goodehoop Colliery will come in with its expertise on coal mining, while Industrial Development Corporation of South Africa Ltd (IDC) has given public commitment to invest R100 billion over the next five years. The IDC is one of the continent’s largest development finance institutions with assets in excess of N90 billion.

Wynter said the TKR project has been on the drawing board for three decades now and the main reason why the grand project has not taken off is the massive financial investment that is required. Interest to undertake the project was rekindled due to rising commodity prices and various private parties approached the three governments offering “solutions”, Wynter said.

“The project scope of the Trans Africa Rail Consortium is the development, financing, construction and operations of a dedicated privately owned 1 500km heavy haul railway line, rolling stock, maintenance depots and associated port, to transport resources from eastern Botswana and Waterberg regions to the coast of Namibia,” Wynter elaborated.

Wynter said the TKR will comprise a total rolling stock of 170 locos and 6400 wagons. Each train will comprise four locos and (based on a 30 tonne axle load) 160 wagons. Forty one train sets will be available at any given time.

Said Wynter, “The 50 million tones per annum TKR capacity will require on average 11 trains per day each way. Taking into account the end effects such as breakdowns in the port, breakdowns in the mine load outs, the number of trains will vary on a day to day basis with the peak number approaching 15 trains per day.”

Namibia could stand to benefit from significant cost savings on coal transport costs – (transport costs in the order of USD 25 - 30/t delivered Walvis Bay). The new port facilities will contribute significantly to Namibia’s foreign earnings potential and provide extensive business opportunity resulting from the increased shipping trade.

Wynter said the project will stimulate increased trade through Namibia, broaden the country’s tax base (the project should generate a US$ 2.5 billion over the medium term of operations), provide development stimulus to the local financial industry (local financial markets would be encouraged to provide facilities) and Namibia would be provided with a strategic exit point for the North-South trade corridor.

Spelling out the consortium’s competitive edge, Wynter said their consortium shone above the rest because TAR would not seek direct financial recourse to the Governments adding that the TAR project would seek government support in terms of regulatory/licensing procedures, and general government processes and interactions.

“A positive to the TAR proposal is that the governments are not ‘procuring’ anything from TAR and thus have only to apply a transparent licence application process (to own and operate a rail) to progress the project development.”

Wynter said TAR consists of a winning combination of financiers, project developers, Direct Finance Institutions (DFI’s) and major coal producers. “The consortium has vast experience in developing and financing major projects. Furthermore, the fact that the consortium both incorporates and has relationships with key major coal producers is fundamental to the success of the project, Wynter justified. So far, TAR has spent in excess of N$13 million in initial project development.

The consortium spokesman said his consortium together with appointed advisors, has the expertise to develop the project to a point where it should prove attractive to prospective heavy haul rail operators.

Wynter said this scenario would give the consortium added leverage in negotiating both price and elements of local content and skills transfer which would ultimately stand to benefit the country. The TAR model will allow direct government participation in the project by way of “free carry” equity and equity participation rights during the development of the project.PF