|
[<<] PREVIOUS PAGE 1 2 3 |
|||
|
Conclusions To conclude, the African market is a very diverse market: many railways, many of which do not connect with each other; lots of countries with conditions ranging from good to bad; a less competitive market because there are fewer players and more opportunities; on the other hand, it is more risky because a lot of the opportunities that appear to be out there are in fact illusory. Success in this business will rely on the ability to understand the country more than the ability to understand the railway business. Success will also rely on a willingness to take risks. At Railroad Development Corporation we have demonstrated a willingness to take risks, though we have been too cowardly to invest in the UK and Australia where Open Access, in my opinion, is probably a greater risk than political uncertainty in many other countries. And finally, it is very important to be both a Patient Investor and an Impatient Manager. We recognize that in developing countries conditions are different than in the USA or Europe so we are willing to keep going when hurricanes wipe us out or financial markets collapse. But we are not patient managers. Once we are involved in a business, we expect to stick to the plan and the timetable to the extent that Mother Nature will allow us, because it’s a big world out there and we want to make our contribution to it. |
|||
| At this point I would like to present our activities in Guatemala as a Case Study, a railway that I think is worse than anything found in Africa. | |||
| Let me close with the picture that I think encapsulates most distinctly everything RDC stands for, which is Joint Ventures. This photo was taken in Nacala and pictured are Mozambicans and Americans working together in a very difficult business with very limited resources. The slogan of Samora Machel is particularly appropriate to our business – “A luta continua!” or “The struggle continues!” This is the philosophy behind Railroad Development Corporation. |
"A LUTA
CONTINUA!" |
||
|
Q: |
How do you view separation of infrastructure from operations? | ||
|
A: |
When you separate infrastructure from operations you lose control over your ability to deliver the product. The main constraint on rail freight in the UK has been the unresponsiveness of Railtrack to the needs of the freight sector. In fact, last week I read a financial report that stated ‘don’t invest in Wisconsin Central’ and the reason is because Railtrack said that they are going to raise the access fees even more. That is both a cost and revenue problem, but what is even worse with Open Access is the cannibalization of rail carriers competing with each other on more or less the same variable cost basis. Anyone can go out and lease a locomotive and compete for the right, for example, to haul Railtrack infrastructure trains. This is exactly what you see taking place today and that is one of the reasons that investment in the UK rail sector, at least on the freight side, is being discouraged. I will also argue that there is a compromising of safety that occurs when you separate infrastructure from operations. My personal opinion is that the accident at Ladbroke Grove was at least an indirect result of the separation of infrastructure from operations. What you had was a Railtrack controlled infrastructure, a Great Western passenger train, and a commuter train from a third company. I do not see how discipline, which holds our business together, can be clearly maintained when you have so many different companies trying to work together in such a complicated environment. I hope that answers your question. | ||
|
Q: |
Regarding
the “Fundamentals of Africa’s Freight Railways are Sound”
discussion, one of the top fundamentals for railways in Africa is the
fact that truck weights are very high and compounding the issue is that
enforcement is not practiced to any great degree.
Has RDC considered this an issue before investing and if so, has
RDC developed a particular strategy to deal with this issue because just
recently in Malawi, the gross vehicle weight will be officially raised
further? |
 Top |
|
|
A: |
To answer your question, a level playing field is the ideal that I believe we should all aspire to, but if we wait for the playing field to be leveled, then nothing will ever happen. We make our investment decisions based on the current unfair environment in which railways operate. We have not seen a case yet where a railway’s playing field was leveled, with the exception of New Zealand – to their credit – and also a tax case in Australia and that’s to their credit. They were basically windfalls to the railway. We certainly do not make business decisions in the hope that we are going to get a windfall. We have to move on and we will compete with trucks based on whatever the environment is. There is benefit to an organization like SARA making the case on a regional basis because country by country I do not think you can support the cost of the lobbying that it takes. I would like to point out Bob Mortensen, who is Managing Director-Africa for RDC; he is one of our two people in Africa and we are very proud that he is also Vice President of the Southern Africa Railway Association. This is one of our contributions toward leveling the playing field and an entity like SARA is probably the best vehicle for making those types of cases. The world is unfair but if we wait for it to be fair, then we are out of business, so we have to move on. | ||
|
Q: |
In the case of concessioning, how do you address the risk of political interference and the concern that a public monopoly is being replaced by a private monopoly? | ||
|
A: |
That is a political reality that has to be accepted and it is not just Africa. There was a labor dispute in Argentina where it was suggested that because the railway was on strike, the concession should be revoked. But the discipline that underlies our industry is that that type of threat is seldom carried through. Political threats may be made but countries are usually more serious about attracting foreign capital. Sometimes it makes politicians feel good to talk about renationalizing the railways, but for the most part railway nationalization has been a failure, and in the case of Argentina it bankrupted the country. The whole question of whether we are creating private monopolies rather than public monopolies can be answered very easily in Guatemala where we are the railway monopoly. But the railway hasn’t been run for 3 years, so what did people do when the railway wasn’t running? Yes, we are a railway monopoly but in fact, because of the trucks, we are not the transport monopoly. Even in the zone of influence of The Central East African Railways, we compete more with ports than with trucks; we compete with Dar es Salaam via the TAZARA and truck; we compete with Beira by truck; and we compete with Durban by truck. So increasingly there are fewer and fewer monopolies out there and that is the discipline that prevents us from being a true monopolist. | ||
|
Q: |
How do you view the impact of privatization on employment? | ||
|
A: |
In
the short run the answer usually is that employment is reduced; The
World Bank plays a very important role in financing the redeployment of
people who lose their jobs. But
I think the fundamental question is, “Is the railway’s business to
provide employment or to provide transportation?”
In some countries it may be that the objective is to provide
employment and that is a decision for each individual country.
But if a country chooses to privatize, what usually happens in
the short run is that employment is reduced, with a restructuring
payment financed by The World Bank to help the people who lose their
jobs. Hopefully in the long run, employment increases as traffic grows. Having said all of that, this was not the case in Guatemala. In Guatemala the railway was abandoned and if you include the people who were working on the track programs at any given time, we figured that we created approximately 500 jobs; some were short-term and others longer-term. Again, we are very proud of what we’ve done in Guatemala because it actually increased employment, which is one of the few cases where that happened with a privatization. |
||
|
Q: |
I agree that New Zealand is an excellent environment for railways, so how do you explain the management changes at Wisconsin Central? | ||
|
A: |
I think the problems with Wisconsin Central were the result of what happened in England, not in New Zealand. What happened in England was that people underestimated how bad Open Access was and they also underestimated the resistance of Railtrack to growing the business. Those two factors, combined with the fact that England was their biggest investment, created a negative financial result and I think that is the answer. | ||
| [END] | |||
|
[<<] PREVIOUS PAGE 1 2 3 |
|||
|
|
|||
