rail infrastructure development growing in africa
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An analyst briefing presentation on the rail infrastructure market in Africa.TRANSCRIPT
Rail Infrastructure Development Growing in Rail Infrastructure Development Growing in AfricaAfrica
James Milne, Research Analyst
EBT
20 June 2012
© 2012 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.
Functional Expertise
• Particular expertise in:
- Project Design and Development
- Market Research and Analysis
- Client Relations and Management
- Analytical Research Methods and Writing
Industry Expertise
� Experience base covering broad range of sectors, leveraging working relationships with leading industry
participants’ Senior Executives
- Infrastructure Development and Mapping of Infrastructure Investment Trends in Africa
Today’s Presenter
James Milne
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- Private Equity Market and Emerging Market Developments in Sub-Saharan Africa
- Energy Efficient Technologies
What I bring to the Team
• Strong analytical approach to research services
• Financial background
• Excellent interpersonal communications skills
• Strong quantitative and qualitative analytical abilities
• Good verbal and writing skills
Education
• B. Bus Sci Finance (Honours) CA Route, University of Cape Town, Cape Town, South Africa
James MilneResearch Analyst
Frost & SullivanEBTAfricaCape Town
Focus Points
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1
2
4 Major Regional Corridors: Sub-Saharan Africa Focus
Megatrends influencing rail development in Africa
African Rail Infrastructure Development
Analysis of Infrastructure Development – Key Projects
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5
An Emerging Trend: Metropolitan Light Rail6
Case Study: Citadel Capital7
Conclusions8
Major Challenges, Drivers and Restraints
MegaTrends influencing Rail Development in Africa
�Urbanisation in Africa will be primarily resource driven
�Mass migration will result in the formation of mega cities, mega regions and mega corridors
• Infrastructure development is a primary driver of regional integration
• As trade borders are increasingly opened, the potential for the establishment of a unified African free trade zone exists
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• The creation of integrated trade routes linking countries is crucial to the concept of innovation to zero
• Countries will then be able to transport raw materials to particular zones in which beneficiation can take place
• The improvement of rail infrastructure will allow cheaper opportunities for freight and passenger travel
• Light rail services within major cities will also offer alternative options to road transport
Source: Frost and Sullivan
African Rail Infrastructure Development
• Ethiopia$3.70bn3 ongoing projects7 planned projects
• Kenya• Nigeria
• Ghana$6.40bn
KEY:
- Planned Projects (Number)
- Ongoing Projects (Number)
Key profiled projects across Africa in both ongoing and planned rail
infrastructure investment amounted to a total of $48.12 billion
• Morocco$14.67bn1ongoing projects2 planned project
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• Kenya$405.5 million1 ongoing project3 planned projects
• Tanzania$5.37bn3 planned projects
• Mozambique$3.66bn1 ongoing project4 planned projects
• Botswana$1.40bn1 planned project
• Zambia$93.8 million2 ongoing projects
• Nigeria$6.40bn7 ongoing projects1 planned project
$6.40bn1 ongoing project5 planned projects
Mega Projects (Multi-Country)
Botswana-Mozambique-Zimbabwe
$7.00bn
Isaka-Keza-Kigali (Tanzania-Rwanda)
$1.93bn
Namibia-Botswana $1.30bn
Source: Frost and Sullivan Analysis*Note projects included are key ongoing and planned projects. Base Year is 2011
• Namibia$2.68bn3 ongoing projects2 planned project
Rail Infrastructure: Major Multi-Country Rail Links (Africa), 2012
Analysis of Infrastructure Development – Key Projects
43.18%
68.18%
NORTH AFRICA: (Morocco)
Project Cost ($ Million)
Tangier-Casablanca High Speed Rail
4,000.0
High Speed Train Line Project 7,000.0
Strait of Gibraltar Undersea Rail Tunnel
3,673.2
WEST AFRICA: (Nigeria, Ghana)
Country Project Cost ($ Million)
Rail Infrastructure: Breakdown of Key Ongoing vs Planned Projects (Africa), 2012
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*Note: Analysis of Projects is by number of projects
Ongoing Projects Planned Projects
SOUTHERN AFRICA: (Namibia, Botswana) EAST AFRICA: (Ethiopia, Kenya, Tanzania, Mozambique)
Country(s) Project Cost ($ Million)
Botswana-Zimbabwe-Mozambique
Botswana-Zimbabwe-Mozambique Link
7,000.0
Namibia-Botswana TransKalahari Link 1,297.6
Country Project Cost ($ Million)
Tanzania-Rwanda Isaka-Keza-Kigali 1,925.0
Ethiopia Addis Ababa-Me’eso
1,600.0
Country Project Cost ($ Million)
Nigeria Abuja Light Rail 2,179.0
Ghana Western Railway I 1,640.0
Ghana Eastern Railway 1,400.0Source: Frost and Sullivan Analysis
Regional Corridors: Sub-Saharan Africa Focus
•The development of regional trade corridors is crucial to the promotion of intra-regional trade in Africa
•Prior analysis conducted by Frost and Sullivan indicates the development of two significant continental corridors:
�The ‘North-South’ Corridor�The ‘East-West’ Corridor
•The construction of such corridors is a long-term strategic goal, dependant on a range of factors, including regional investment and political conditions.
Rail Infrastructure: Regional Corridor Development (Sub-Saharan Africa), 2012 - 2020
Rail Infrastructure: Key Trade Corridors (Africa), 2012 - 2020
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- Key Trade Corridors
Analysis of ongoing investment in Sub-Saharan Africa reveals a number of intra-regional rail developments, planned for implementation between 2012 and 2020
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2
3
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5
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1. Trans-Kalahari2. Trans-Cunene3. Beira4. Nacala5. Central6. Northern
KEY:
Source: Frost & Sullivan
Major Challenges, Drivers & Restraints
Key Industry Challenges
Future (>5 years)Current (<5 years)
Market Drivers
Significant Ongoing Development is driving investment opportunities
Massive Demand exists on the continent for improved transport possibilities
Cheap Labour reduces the cost of large scale infrastructure development
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Future (>5 years)Current (<5 years)
Funding
Skills Shortages
Poor Infrastructure
Gauge Type
Rehabilitation Capacity
Political Conditions
Industry Challenges involve long and short term factors which deter potential market participants from investing
Market Restraints
Lack of Knowledge discourages companies from investing in Africa
Poorly Established Supply Chains drive up project costs
Political Risk is heightened by the long term investment horizon of large construction projects
Source: Frost & Sullivan
An Emerging Trend: Metropolitan Light Rail
Country City Project Cost ($ Million) Contractors (ifapplicable)
Nigeria Lagos Lagos Rail Mass Transit System
1,200.0 CCECC
Nigeria Abuja Abuja Light Rail 2,179.0 CCECC
•A Notable emerging trend across countries in Africa is the development of urban metro rail systems, which are aimed at easingcongestion and road traffic pressures in heavily built up metropolitan areas.
•Metros are not to be confused with commuter or suburban railways, which operate on main line tracks unsegregated from other rail traffic.
Rail Infrastructure: Key Ongoing Metropolitan Railway Developments (Africa), 2012
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Nigeria Abuja Abuja Light Rail 2,179.0 CCECC
Mozambique Maputo Maputo Electric Railway
995.0 Unknown
Ethiopia Addis Ababa Addis Ababa Light Rail 400.0 CREEC
• The development of urban metro rail systems reflects a shift in the sophistication of both rail infrastructure planners and users.
• As cities in Africa develop into major metropolises (often housing over ten million people), the option of reducing extreme road transport pressures through the introduction of urban metro rail systems becomes more viable
• Major challenges include funding and logistical planning
Case Study: Citadel Capital
2010 2011 2012
Upon acquisition, Citadel Capital developed a three point turnaround programme for the railway system, requiring investments of $287.0 million. By September 2011, $234.0 million had been raised
By 2012, the following had been achieved:- RVR recorded its first positive monthly
EBITDA in the company’s history- Key turnaround times had improved by
30.0%
Rail Infrastructure: Timeline of Rift Valley Railways (Kenya), 2010 - 2012
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Prior to Rift Valley Railways (RVR) acquisition by Citadel Capital (CC), the company was a loss-making operation running ageing rolling stock on a poorly maintained network. Travel delays were frequent, and transport costs exceptionally high.
In February 2010, Citadel Capital gained control of RVR through the acquisition of a 51.0% stake through CC subsidiary Africa Railways.
Key Funding Participants
African Development Bank KfW Entwicklungsbank
International Finance Corp FMO
Equity Bank ICF Debt Pool
BIO IFC
DEG FISEA (PROPARCO)
Citadel Capital was able to raise a total of $234.0 million in senior debt and equity through a number of large multinational funding partners:
30.0%- Passenger train frequency rose from
eight daily trains to sixteen
“Citadel Capital’s successful ongoing venture is testament to the potential for investment in Africa’s rail infrastructure”
Conclusions
Conclusion
Investment in rail infrastructure is significant, amounting to $48.12 billion in key ongoing and planned projects
Opportunities
Major opportunities exist for construction firms, engineering firms and equipment suppliers operating within the rail sector
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African governments are shifting focus towards large-scale investments in rail infrastructure in order to ease the burden on road networks
Significant potential exists for further investment in the sector, as intra-regional trade grows
Although political risk still persists, there is a growing opportunity for multinational financiers to provide funding to governments embarking on large projects in the sector
Improved rail services are expected to reduce trade costs and increase access to Africa’s huge population
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For Additional Information
Christie Cronje
Corporate Communications
Africa
+27 21 680 3566
David Winter
Research Manager
EBT
+27 21 680 3275
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James Milne
Research Analyst
EBT
+27 21 670 3297