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A PARADOX
OF FINANCING: |
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SPEECH DIRECTORY: Background on RDC USA Argentina Guatemala Peru Estonia Malawi / Mozambique Investment Parameters The Case for Privatization in Africa Case Study: Financing the Nacala Corridor Structural Trends in African Privatizations Conclusions Q & A Session |
Investment
Parameters |
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| The
Case for Privatization in Africa While the solution for African railways in the past has been unilateral aid by donors, that has mostly dried up as have the underlying assumptions. In general, railways in Africa are less risky as businesses to privatize simply because they have less traffic; they have gotten worse, not better; and therefore the need for change is higher. It is kind of like Argentina. The reason that Argentina was the first country to privatize its railways was because they felt that they had nothing left to lose. I think that in many parts of Africa this is almost where we are. Most encouragingly, I think that in the last several years it has been proven that financing is available from the private sector as well as from donors in selected instances. But let me give an example of why aid doesn’t work. |
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(click on photos
to enlarge) This is an example of a Donor locomotive in the mid 1990s. |
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The Donor locomotives now look like this. Throwing money at the problem is not a solution. What we are talking about with concessioning is as much institutional change as technological change. |
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Case Study: Financing the Nacala Corridor Now let’s discuss the Nacala Corridor. In 1996 we began looking for financing, and then the opportunity for privatizing Malawi came along and that transaction was actually completed in 1999. And finally in 2003 we have been able to raise the financing for the Nacala Corridor on the Mozambique side as follows: 25% of the financing will be private equity that will come from the various partners I have discussed earlier; private and quasi-private debt — notably OPIC and Nedcor, who are represented today — will comprise the other 75% of the financing. The donors have also been involved to the extent that emergency funding has been required because of the famine, and that is occurring even as we speak. But we never went back to the government and said that we need to renegotiate this deal — instead what we said was that we needed more time. Fortunately for us at the very last minute we were able to obtain the financing because our credibility was on the line. We are very grateful to OPIC and Nedcor for coming through on this. |
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| Structural
Trends in African Privatizations What are the structural trends of Africa’s privatizations? I came up with an exhibit (Table 1) of recent privatizations in Africa. There is really only one point I would like to make and that is that there are really three companies that are active in rail privatizations in Africa. SNCF, which is the government railway of France; Spoornet, which is the government railway of South Africa; and Railroad Development Corporation and our partners, who are the bunch of people that you see here today. I would like to take this theme and use that to draw some conclusions as to how railways can be financed in the future. |
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