Classifieds | Archives | Jobs | About TGT | Contact | Subscribe
 | 
Last updated 14 minutes ago
Printer Friendly Version | TGT@Twitter | RSS Feed |
HOME LOCAL MIDEAST ASIA WORLD BUSINESS SPORT OPINION WRITERS
Africa’s transport bottlenecks
April 17, 2013
 Print    Send to Friend

DONDO, (MOZAMBIQUE): Mozambique’s transport system offers a cautionary tale to African mining ventures, as investors play poker with the government over fixing links that remain shambolic two decades after its civil war.

Foreign mining companies are betting in Mozambique on one of the world’s largest untapped reserves of premium hard coking coal relatively close to Africa’s east coast, a prime location for feeding hungry markets in Asia.

But they have run into a problem facing many minerals exporters across Africa. “If you can’t take those goods to the market, you are wasting your time,” said Sipho Nkosi, CEO of South African coal producer Exxaro, explaining the difficulties experienced by many such projects on the continent.

 Tens of millions of dollars have poured into the only rail link between Mozambique’s remote coal fields and the port of Beira, its export gateway. But despite the upgrades, heavy rains flooded parts of the Sena line in February, paralysing exports.

Brazil’s Vale declared “force majeure” on coal shipments due to the two-week shutdown, invoking clauses in supply contracts covering disruptions beyond its control. A mine run by the Anglo-Australian Rio Tinto group also ground to a halt, leaving rows of empty railway wagons at Dondo, about 20 km (12 miles) from Beira.

About $20 billion is needed to revive Mozambique’s railways and ports, industry leaders estimate, a massive cost for a country the United Nations lists as the third poorest on earth.

While Vale is spending heavily on a separate line to the northern coast, rail investments have generally fallen short of needs so far. A concession deal to bring the Sena line back into full operation fell short of expectations and infrastructure development is generally slow, lagging the coal mining bonanza.

Mozambique’s government insists that any infrastructure development projects also serve other uses such as non-coal cargo, shipments from neighbouring states and passengers.

“We are not building infrastructure just for coal,” Transport Minister Paulo Zucula told Reuters. Much is at stake for the former Portuguese colony where the average annual per capita income is just over $400. The government is counting on mining and new transport routes to boost economic growth and create jobs, in coal and elsewhere.

Rio Tinto’s January announcement of a $3 billion write-down on the value of its Mozambican assets, partly due to problems of getting coal to port, was a wake-up call to the mining firms and the government. They worry that buyers of coking coal may turn to other markets if Mozambican supply is held up.

With coking coal markets over-supplied due to lower demand from steel mills and higher domestic production in China, the delays may favour the mining firms in the short term. They hope prices will have recovered to highs hit in 2011 by the time they can export Mozambican coal in greater quantities.

A Japanese steelmaker, asking not to be named, said the delays were part of the price his firm was willing to pay for the high-quality Mozambican coal. Mills in India, a target market for Mozambique, have said they expect coal from there to be available by the time global supply tightens again. 

But as in Guinea, Democratic Republic of Congo and Africa’s biggest economy, South Africa, the same question hangs over Mozambique’s need to link its mines to its ports: who will invest the billions of dollars needed for railways and terminals and who will control them once they are running?

At one stage the government asked mining companies to commit themselves contractually to specific planned shipments so it could use this to obtain the billions of dollars of financing needed for infrastructure. Many firms declined.

Investors are sceptical too about Mozambique’s promise that it will be able to move up to 120 million tonnes of coal per year - a sixth of the global steel industry’s demand - by 2020. 

“This is an annoying poker game in which every side wants the other to do something without committing,” said Joseph Hanlon, a senior lecturer at Britain’s Open University and an expert on Mozambique.

When Vale and others arrived in 2004, the Sena railway had not run for over a decade. Uprooted at various points by rebels during the 1975-1992 civil war, parts of it lay twisted and ruined, trees sprouting between the tracks.

The job of repairing the 600 km (375 mile) line, backed by a $110 million World Bank loan, was given to a consortium of two Indian firms and Mozambique’s national logistics group CFM. 

In 2011, the Mozambican state took the concession from the Indian firms when they failed to deliver after many delays and gave control to CFM.

Reuters

Add this page to your favorite Social Bookmarking websites
Comments
 
Post a comment
 
Name:
Country:
City:
Email:
Comment:
 
    
    
 
FRONTPAGE
 
GALLERY
 
PANORAMA
 
TIME OUT
 
SPORT
 
 
Advertise | Copyright