North Western Railway – New Dawn for Zambia’s Mining Industry

Historically, Zambia’s rail transport has been in existence for over 100 years when the first slippers were laid down from Chililabombwe to Livingstone by the British South African (BSA) and Livingstone to Mulobezi-all intended to foster good-reliable transport network.

The development of the railway lines to ‘resource rich areas’ like Copperbelt and Livingstone, commonly referred to as the ‘line of rail, has for long been perceived as a state-driven programme, yet, much has not been said about the participation of the private sector in such projects.

Suffice to say, this development of laying railway slippers to foster passenger and cargo business between the ‘resource-rich areas’, has remained one issue that is still alien to many Zambians.

One may argue that other than the ‘much heralded’ Zambia Railways Limited-the fore-runner to the BSA Company (BSAC) railways, the private sector has remained in the background, leaving the Government as the sole provider of such services.

In the early 1990s two main railway lines were developed. One railway line connected Chililabombwe and Livingstone in the South and another railway line, which came to be known as the Zambezi Sawmills Railway and later renamed to Mulobezi Railway was built to transport timber within Southern and Western provinces and its surrounding areas.

It is against this background that proves indeed the private sector has for sometime now been in the fore-front of spearheading the railway transport in Zambia. In the case of the British South Africa Company, Cecil Rhodes pioneered the construction of the railway line from Livingstone to Chililabombwe.

The famous Sussman Brothers and Wulfson built a similar facility stretching from Livingstone to Mulobezi, ostensibly to transport timber and other goods and services for the people in the surrounding districts.

In a nutshell, the British South Africa Company was responsible for building the Rhodesian railway system in the period of primary construction which ended in 1911.This was when the main line through Northern Rhodesia reached the Congo border and the Katanga copper mines in Democratic Republic of Congo.

Railway construction in British South Africa Company-administered Northern Rhodesia (now Zambia) was undertaken by Rhodesian Railways, established in 1899, as an extension of the system in Southern Rhodesia, now Zimbabwe.

Railway development in Zambia and beyond was undoubtedly a brain child of Cecil Rhodes. His original intention was to build a railway line extending across the Zambesi to Lake Tanganyika, popularly considered as part of a great Cape-Cairo railway linking all the British colonies of Africa.

The other private railway line by Sussman  Brothers was initiated between  1923 to 1924 which gave rise to the facility-it was named as the Zambezi Sawmills Railway and later renamed Mulobezi Railway – a private railway intended for the extraction of teak from Mulobezi and Kataba to its north.  They linked with several branch lines, and also operated passenger services as far as Kataba.

Until the late 1960s then Zambian President Kenneth Kaunda and his Tanzanian counterpart, now late, Julius Mwalimu Nyerere coerced the Chinese Government to assist in constructing the Tanzania Zambia Railway Authority, or TAZARA Limited. 

This stretch of more than 1,800 kilometres built by China and linking the two neighboring countries, was meant to assist ferry goods and passengers between the two states. 

The railway line, built under a US$400 million-loan facility-to be repaid over a period of 10-years at a nominal interest fee, was completed and commissioned in 1976 as part of the bilateral agreements the two countries had with China. 

The loan facility has since then been serviced although not wholly. This then prompted China to write down about 50-percent of all interests accrued on the loan secured from it because of the ‘unflinching’ friendship among the three states. 

In recent years, there has emerged the Chipata-Mchinji railway line-linking Zambia and Malawi, which does not service other parts of the country, although it is intended to foster Zambia’s trade development with its neighbors. 

However, despite all these initiatives of setting up railway liners, none meets the desires of the mining companies and related business houses operating between North western and Copperbelt provinces that need this facility. 

The growth of the mining sector in North western province in recent years has seen the need to transport mineral related products for mining companies in the region to the Copperbelt where smelting facilities are housed. 

The wear and tear of the road infrastructure chiefly between north western and Copperbelt provinces by copper-concentrate-laden trucks to smelting facilities in Chambishi, Mufulira and Kitwe, once again brings in the private sector’s initiative. 

Against this background, the construction of the US$1 billion joint venture North West Rail venture planned to take off before the end of the first quarter of 2014 has come into play. It is seen as being cardinal in resolving the transportation woes being faced by mining companies in north western Zambia. 

Recently, North Western Rail Limited and Johannesburg Stock Exchange Listed Grindrod Limited signed a US$1 billion joint venture agreement to construct a more than 580 kilometer rail link that will soon join Zambia with Angola. 

The facility, once completed, is expected to ease transportation costs as well as save the ‘wear and tear’ of the road network in Zambia-being the main mode of transport for mineral related goods between North western and Copperbelt regions. 

The developers believe that success is imminent in the project after years of concerted efforts in bringing up a private public partnership (PPP) arrangement to see such projects come to fruition. 

Executive Chairman for North Western Rail Limited, Enoch Kavindele says the agreement with Grindrod Limited will undoubtedly resolve the transportation problems faced by among other end users, mining companies in north western province and quipped:

We hope to start the construction of the first phase by March (2014) or thereabout,

The agreement with Grindrod Limited has been cemented under exclusive rights granted to North Western Railway by the Zambian government in July 2006. The partnership will allow the developers conclude a bankable feasibility study now under way. 

Lumwana mine, a unit of Barrick Gold and Kansanshi Copper Mine, a subsidiary of First Quantum Minerals Limited, among other potential beneficiaries, may now have to look to this as a reliable rail transport for delivery of their copper concentrates to refineries on the Copperbelt. 

The continued usage of the Solwezi-Chingola and Chingola-Kitwe and Chingola-Mufulira roads has drastically dilapidated the infrastructure. 

If there was a railway link before it could have saved tax payers’ money in servicing the road network between the two provinces because of the absence of older railway lines, Tazara and Zambia Railways Limited. 

But Kavindele envisages the realization of this dream will reduce the toll on the road infrastructure in both copperbelt and the north western provinces.

Accordingly, the developers envision the US$1billion-worth 590 kilometre railway project when completed, will link Zambia with Angola up to the port of Jimbe for onward exports of finished copper products.

The first 290km first phase of the railway project will run from Chingola to the Kansanshi, Lumwana and Kalumbila mines in north western Zambia, at an estimated capital cost of about $489 million.

The second phase, to gobble about $500m, will connect with the Benguela railway line on the Zambia-Angola border near Jimbe and will open a direct corridor to Lobito.

This, if achieved, will allow landlocked Zambia to import oil directly from Angola and other nearby sources and will stimulate further mining activity in the north western and copperbelt regions.

KPMG’s infrastructure and major projects team have developed the project with NWR over the past one year and facilitated the closure of the deal. Reports say it is envisioned the railway project will be commissioned in less than two years.

The first locomotives will be ready to carry copper concentrate in 18 months,” Kavindele envisions.

His counterpart, Dave Rennie, the chief executive of the Grindrod Freight Services division, is hopeful the finalization of the project will allow his company to extract synergies from its existing investments in the north-south rail corridor and its port operations in Maputo, Richards Bay and Durban.

The rail line venture, upon completion will greatly assist Government reduce the ‘effect on the roads’ made by concentrate-laden trucks that shuttle between the two provinces.

The wear and tear on the infrastructure was not only a problem between Copperbelt and North Western but a burden for all areas in the country, according to Road Development Agency.

The wear and tear has since forced the Government to enact a law, effectively 1 November 2013, which introduced a toll-road system compelling all road users to pay a fee for road maintenance similar to other Southern African states to make roads self-sustaining than use tax payers’ money.

Grindrod Group of Companies has various subsidiaries, joint venture and associated companies in 37 countries worldwide with a labour force of over 7,000 skilled and dedicated people. 

It envisions remaining a dominant and profitable freight service provider, focusing on infrastructural development on the African continent-hence laying the ground for the development of the North West Rail Company Limited.

An agreement signed between North Western Railway Limited and Grindrod entails that the Zambian company and Grindrod’s Mauritius-unit will work together and conclude a bankable feasibility study soon to facilitate loan acquisition for the project to take off ground.

Kavindele, Zambia’s former vice President, founder and owner of NWR, who has been developing this project over the years, believes the synergies with Grindrod’s rail businesses will ensure the success of the venture in due course.

The duo’s partnership would be able to bring this project into being in the shortest possible time, Kavindele adds. More so, Kavindele, who served as Zambia’s vice president from 2001 to 2003, foresees thousands of jobs being created in the country, in line with government policy of “more jobs for Zambians as well as putting more money in people’s pockets”.

It is the Government’s desire to ensure that the 13 million populace is self sustaining with improved welfare as envisioned in the ruling Patriotic Front (PF) manifesto. The manifesto was used and maximized by then opposition PF party as bedrock before and after assuming power after the 20 September 2011 elections that ushered the Michael Sata Government into office -the fifth general election in Zambia after 50 years of independence from Britain.

Accordingly, North West Railway’s partner, Grindrod’s rail division has a undisputable reputation as it runs railways and builds, refurbishes and maintains locomotives and wagons, provides rail signalling systems and constructs and maintains track infrastructure.

According to James Holley, the divisional chief executive of Grindrod Rail, the division had spent the past few years developing its rail capabilities and growing its capacity to participate in the growth in Africa’s rail sector, which makes it “perfectly placed to take up opportunities like this on the African continent”.

Dave Rennie, the chief executive of the Grindrod Freight Services division, said the investment in the new railway line would enable Grindrod to extract synergies from its existing investments in the north-south rail corridor and its port operations in Maputo, Richards Bay and Durban.

“We also see great potential in creating an Atlantic gateway to central Africa through Lobito and look forward to playing our part in making this a reality with the development of phase two,” he said.

For the two mining companies, Barrick Gold Corp. and First Quantum Minerals Ltd., the project is a “dream, come true” for their ‘nagging’ freight problems. According to information accessed by the Mining News Zambia, the two key copper producers will, when the railway is completed and commissioned, cut transport costs by over 50 percent as the link; will run from First Quantum’s Kalumbila mine in the North-Western province via Barrick’s Lumwana operation to the rail network at Chingola.

 

Traditionally, the transport model has been that most copper exports from landlocked Zambia are ‘trucked to ports in South Africa and Tanzania before being shipped to countries where the copper-related products are sold.

Zambia has been forced to revise fuel prices over the years to meet various national economic obligations and the oncoming of this rail transport, more competitive as trucks will make the mining sector realize real returns from their investments while the Government will maximize its tax from the use of various railway related facilities.

Historically, the abundant natural resources including minerals of the North Western Province have been known about for a long time, ever since George Gray founded Kansanshi Mine in 1891.

The subsequent discovery of copper at Lumwana by Rio Tinto and Roan Selection Trust in 1961 failed to materialise into viable mining projects because of the absence of this regional infrastructure.

Experts close to the railway project say the project will be easy to be undertaken because of the expertise of the manpower tasked to undertake the construction and those used for consultancy prior to the agreement by the two companies.

“Some unique features of the project include the fact that the locomotives will be powered by both electricity and diesel, balancing the utilisation of the two sources of energy.

Although this project is a combination of debt and equity financing, mostly from foreign partners, the project is indigenously driven and the doors remain open to other Zambians to participate both in its execution and operation. The ultimate aim will be to see NWR listing on the Lusaka Stock Exchange to further involve the participation of ordinary Zambians.

Others envisage a growth in the economy of the country as well as neighboring states because of the trade connectivity to be created with the oncoming railway line. There is now available automated track-laying equipment capable of laying 1km of rail line per day but we have opted to utilise a combination of this technology and a local labour-force to ensure employment is generated, sources close to the project say.

In the two-year anticipated construction period, experts say, this project is expected to create not less than 4,000 direct jobs with an additional 10,000 jobs for support staff such as caterers, food suppliers, suppliers of safety clothing, gravel, ballast, cement, sleepers and many more.

Other estimate that the railway line’s take-off point will be from south of the bridge over the main Chingola to Chililabombwe road, connecting the existing rail link formerly owned by Zambia Consolidated Copper Mine which feed into the Zambia Railways’ network.

The line runs south of the Chingola-Solwezi road up to 15km, and then crosses the road before meandering through a number of watersheds on its way via the chiefdoms of Kalilele and Mulonga. It will eventually enter the Kansanshi mine area and terminating at Lumwana, 65km west of Solwezi.

An alternative route explored would have taken the rail from Luano in Chingola across the Kafue Bridge into Chililabombwe and over the watershed between the DRC and Zambia. This is the old Copperbelt to Mwinilunga road; however, public opinion settled for the current route.

With north western province now becoming another Copperbelt province-renowned for its high copper reserves previously, Zambia’s reputation as Africa’s top copper producer and world’s seventh rated provider of the red metal, will now be enhanced because of facilitated trade.

Northwestern province, once overlooked as ‘The sleeping giant’ will now awaken to take its rightful place in the economic development of the country. Its vast natural resource wealth is currently witnessing the best in foreign capital coming into the province not only from mining-related activities but other sectors.

Many entrepreneurs and international mining companies are positioning themselves to tap into the huge reserves of copper, gold, iron and other mineral resources known to exist in the area.

With the foregoing, it is assumed that foreign direct investments into the mining sector in north western province alone would be staggering around US$6 billion in the next five years, from an estimated current level of slightly below $2 billion.

The Chinese alone, who also seek to sojourn into the province because of its vast mineral and natural potential, envisage an investment of over $5 billion in the Mwinilunga mining project, while an iron and ore project at Tika is also being touted.

“These planned projects are in addition to First Quantum Minerals’ plans to open the ‘Trident Mine’ at Kalumbila in Solwezi that is expected to gobble over $1.1 billion” experts familiar with the project say.

“The agriculture potential of the area is also coming to the fore as evidenced by a number of foreign entrepreneurs going into the province to take advantage of the highly nutritious soils and good rainfall patterns, to grow crops on a very large scale.

Brazilian and Zambian investors are looking at investing in a sugar estate to produce biofuels, while Saudi Arabians have been granted 5,000 hectares to grow pineapples in Mwinilunga.

The North Western province has weak connectivity currently to the rest of the country, and in some cases it is non-existent.

The decision by the Zambian government to reinstate the license of the North West Rail Company has attracted much interest and it is anticipated that it will be the biggest infrastructural project to be driven by indigenous citizens in the history of Zambia.

With the increased interest by the Government in realizing the full potential of both Zambia Railways Limited, in which it has set aside US$120 million for facelift and the TAZARA’s well-being, it will be in the interests of investors in the NWR as well to work with the two existing railway companies to foster synergies of working together, a notion Kavindele believes is a good idea.

It is hoped that Zambia Railways and TAZARA will remain partners in the development of the NWR railway transport system in Zambia, analysts say.

Experts are hopeful that the interest seen in the Government to facelift ZRL will give rise to improved state and performance of the main-line between Livingstone and the Copperbelt.

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