Inter-regional trade is becoming increasingly important but infrastructure has to catch up to demand.

Inter-regional trade is becoming increasingly important but infrastructure has to catch up to demand, writes Karim Sadek, Managing Director at Qalaa Holdings
The countries of East Africa are currently grappling with a set of challenges and developmental priorities that are similar to what we are going through in Egypt, our home market. Expanding trade and building infrastructure to keep pace with the demands of young, growing populations are among the most pressing challenges at present.
In 2015 Egypt’s trade with Africa accounted for less than five per cent of total trade and intra-African trade as a whole stood at only 12 per cent of the continent’s aggregate trade. Although an upward trend has started to emerge, there is still much that needs to be done. The Africa Union’s Agenda 2063 envisions a fully functional African common market with free movement of people, goods, capital and services. To realise this transformation goal, Africa needs to put in place the necessary strategies, processes and infrastructure to harness the continent’s potential.
While trade is growing by up to eight per cent per annum across the region, without the transport and logistics sector becoming more efficient, growth will be severely constrained. Reducing cost and time of transport and logistics would increase trade, reduce the cost of living, contribute to higher exports and faster growth for Africa.
According to the African Development Bank (AfDB), “Africa still has massive infrastructure needs” yet invests only four per cent of its GDP in infrastructure, compared to China’s 14 per cent investment. The AfDB estimates that bridging the infrastructure gap could increase GDP growth by an estimated two percentage points a year.
According to the African Union’s Programme for Infrastructure Development in Africa, six of 11 cross-border railway lines will need physical expansion by 2020 and all 11 cross-border railways will need to be expanded by 2040 to meet demand and run efficient rail services.
In terms of logistics, it’s not just the physical infrastructure that is lacking but also the development of international-standard logistics services. In Africa, you are better able to operate as a logistics service provider if you own the transportation asset.
Within the above context, the investment case for Rift Valley Railways (RVR), the national railway of Kenya and Uganda, was obvious. In 2010 Qalaa Holdings acquired a stake in RVR and today controls 85 per cent of the rail operator. The decision to invest was underpinned by the strong freight volumes moving through the Port of Mombasa, the drive to expand intra-regional trade, and the simple fact that a properly functioning railway should be the most efficient provider of long-haul bulk transport in Africa. For the past five years we have been working with RVR’s management team to implement a comprehensive $300 million turnaround programme that includes investments in engines, wagons and the rebuilding of track to improve safety and reliability, increase capacity and
enhance efficiency.
By doubling the size of the locomotive fleet, acquiring 500 new high capacity wagons, and installing satellite tracking and GPS technology on all trains, we have managed to nearly triple our haulage capacity and significantly reduce transit time along the Mombasa-Nairobi-Mombasa route. We have reopened 500 kilometre of track on the Tororo-Pakwach railway line in northern Uganda after a 20-year hiatus, and developed the skills of RVR’s 2,000-strong workforce through a management training programme that has proven highly successful. Today we are proud to report that the results of these efforts have been positive for RVR and we believe that the Governments of Kenya, Uganda and Egypt stand to benefit as well.
By making use of an efficient rail transport system exporters from Egypt, Kenya and Uganda can grow their businesses and expand the volume of intra-regional trade. More specifically, we view transportation as a sector with a great deal of growth potential in Africa. The advantage of the rail and logistics business is that there are always going to be goods at port that need to be moved to their destinations further inland. RVR is currently moving six per cent of the cargo from the port of Mombasa, where there is huge opportunity to compete with trucking and take freight off the roads and onto rail. We believe that with our investment to date, and a focus on commercial strategy and efficiency at the port, this number can rise quickly. It is also worth noting that in recent years cargo volumes at Mombasa have been rising by more than 10 per cent year-on-year.
Ultimately we believe that any alternative form of transportation to trucking, be it river transportation or rail transportation, has the potential to unlock assets and economic opportunities in many parts of Africa that are otherwise unavailable because of unreliable transportation and transportation that is simply too expensive. Using rail will also help African countries unlock and export some of the oil discoveries that have been made in the hinterland.
We see the expertise that we’ve developed in Kenya, Uganda, Egypt and South Sudan, on both rail river transportation as expertise that can be replicated and scaled in other countries as well.  ­­­
Rift Valley Railways and Qalaa Holdings
Qalaa Holdings has invested $300 million in Rift Valley Railways (RVR) and now owns 85 per cent of the railway and a 25-year concession to operate its 2,352 kilometre of track linking the Indian Ocean Port of Mombasa to the interiors of Kenya and Uganda, including the Ugandan capital of Kampala and the northern part of Uganda.
Source: Zawya

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