final report malawi

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Framework Contract Beneficiaries 2009 Lot 2 Transport and Infrastructures Specific Contract N° 2009/223653 “Malawi Transport Sector Multimodal Development and Potential Public Private Partnership Study” November 2010 Final Report The European Union’s EDF Programme for Malawi This project is funded by the European Union A Project Implemented by Consortium STTE(SAFEGE-TECHNUM / TRACTEBEL ENGINEERING) This study is funded by the European Union and presented by the STTE Consortium. The report does not necessarily reflect the views and opinions of the European Union

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Malawi Transport Sector Multimodal Development and Potential Public Private Partnership Study

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Page 1: Final report Malawi

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Framework Contract Beneficiaries 2009 Lot 2 – Transport and Infrastructures Specific Contract N° 2009/223653

“Malawi Transport Sector Multimodal Development and Potential Public Private Partnership Study” November 2010 Final Report

The European Union’s EDF Programme for Malawi

This project is funded by the European Union

A Project Implemented by Consortium STTE(SAFEGE-TECHNUM /

TRACTEBEL ENGINEERING)

This study is funded by the European Union and presented by the STTE Consortium. The report does not necessarily reflect the views and opinions of the European Union

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Report Control Path

Project title: Malawi Transport Sector Multimodal Development and Potential Public Private Partnership Study Specific Contract No: 2009/223653 Country: Malawi Framework Contractor: STTE Consortium (Safege/Technum-Tractebel Engineering) Address: Gulledelle 92 – B-1200 Brussels Belgium Tel Number: +32-2-739.46.90 Fax Number: +32-2-742.38.91

E-mail: [email protected]

Specific Contract Implementing Party : Safege Address : Gulledelle 92 – B-1200 Brussels Belgium Tel Number : +32-2-739.46.90 Fax Number : +32-2-742.38.91

E-mail : [email protected]

Date of the Report: 19/08/2010 Reporting Period: Third Phase – Strategic Investment Report

Author of Report: Thierry Molinier and Olivier Crouzier 22/10/2010

Specific Contract Implementing Party – Responsible Person: Daniel Grande and Ignacio Fuster 29/10/2010

Framework Contractor: Date: 25/10/2010

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REPUBLIC OF MALAWI

Ministry of Transport and Public Infrastructure

Chipoka

Salima

Nacala

Chipata

Mbeya

Bangula

Beira

Moatize

Luzaka

Chinde Tete

127, 000 t Cement 80,000 t Lime 28,000 t Fuel

General Cargo

Mtwara

Tobacco, 100,000 t Rice,

Sugar, Tea, Beans and Metals

149, 000 t Fertizers 9,6000 t Fuel

Coal from Moatize Copper from Zambia Bulk minerals from Malawi 364,000 t Sugar 15,000 t Food Crops 165, 000 Tobacco

Liwonde

Chilumba

Lilongwe

Blantyre

89,400 t Fertizers 200,000 Fuel

162,000 t tobacco 36,000 t Tea

11,000 t Cotton 126,000 t Sugar

Durban Tea, Cotton, Tobacco

Expected traffic on corridors in 2020

Sugar

Sugar

% Coal, Fertilizers

500, 000 t Cassava Dar

Figure 1: Expected Traffic on corridors in 2020

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Figure 2: Actual picture

Figure 3 : Expected traffic on corridors in 2020

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TABLE OF CONTENTS

1ST

PART : THE TRANSPORT DEMAND STUDY .......................................................................................................18

1.0 METHODOLOGY ......................................................................................................................................... 18 1.1 COMMERCIAL AGRICULTURAL PRODUCTIONS STUDIED ........................................................................... 22 1.1.2 TEA 22 1.1.2 COFFEE (TOO LOW TONNAGES TO BE SIGNIFICANT) ................................................................................. 23 1.1.3 TOBACCO .................................................................................................................................................... 23 1.1.4 COTTON ...................................................................................................................................................... 27 1.1.5 SUGAR ........................................................................................................................................................ 30 1.2 FOOD CROPS STUDIED ............................................................................................................................... 37 1.2.1 MAIZE ......................................................................................................................................................... 37 1.2.2 CASSAVA ..................................................................................................................................................... 38 1.2.3 SWEET POTATOES AND POTATOES ............................................................................................................ 40 1.2.4 PULSES (BEANS, PIGEON PEAS, COW PEAS, GRAINS, WHITE HARICOT …) ................................................. 41 1.2.4 RICE 42 1.3 DOMESTIC INDUSTRY ................................................................................................................................. 43 1.3.1 LAFARGE CEMENT ...................................................................................................................................... 43 1.3.2 CARLSBERG BEER ....................................................................................................................................... 43 1.3.3 MZUZU TIMBER PROCESSING .................................................................................................................... 44 1.4 NON AGRICULTURAL PRODUCTS TRANSPORT IMPORTED ........................................................................ 44 1.4.1 IMPORTS .................................................................................................................................................... 44 1.4.2 PETROLEUM PRODUCTS ............................................................................................................................. 44 1.4.3 FERTILIZERS ................................................................................................................................................ 46 1.4.4 LIME ........................................................................................................................................................... 50 1.4.5 CLINKER ...................................................................................................................................................... 50 1.4.6 SALT ............................................................................................................................................................ 52 1.5 POTENTIAL MINING .................................................................................................................................... 52 1.5.2 BAUXITE ..................................................................................................................................................... 56 1.5.3 PIG IRON ..................................................................................................................................................... 57 1.5.4 TITANIUM – HEAVY MINERAL SANDS ........................................................................................................ 58 1.5.5 COAL ........................................................................................................................................................... 60 1.6 TRANSPORT DEMAND FROM FOREIGN COUNTRIES. ................................................................................. 61 1.6.1 COAL FROM MOATIZE (VALE AND OTHERS) .............................................................................................. 61 1.6.2 COPPER (FROM THE COPPER BELT - ZAMBIA AND CONGO) ...................................................................... 64 1.7.2 IMPROVEMENTS SUGGESTED DURING INTERVIEWS ................................................................................ 69 1.7.3 SENSIBILITY ANALYSIS ................................................................................................................................ 69 1.7.4 COST AND TIME COMPARISON BETWEEN CORRIDORS ............................................................................. 71 1.7.5 ORIGIN-DESTINATION TIME COMPARISON ................................................................................................ 71 1.7.6 TRANSPORT COST ESTIMATES IN USING THE CORRIDOR ......................................................................... 71 1.7.7 A PICTURE OF THE EXISTING TRAFFIC ........................................................................................................ 73 1.7.8 THE STAKEHOLDERS’ WISHES ..................................................................................................................... 73

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ND PART: THE PRESENT LOGISTICS ANSWERS. ........................................................................................................... 77

2.1 THE DOMESTIC TRANSPORT SYSTEM ......................................................................................................... 77 2.1.1 ROADS ........................................................................................................................................................ 77 2.1.2 RAILWAYS ................................................................................................................................................... 85 2.2 REGIONAL TRANSPORT CORRIDORS .......................................................................................................... 95 2.2.1 NACALA CORRIDOR .................................................................................................................................... 97 2.2.2 BEIRA CORRIDORS ...................................................................................................................................... 99 2.2.3 DURBAN TETE CORRIDOR............................................................................................................................... 2.2.4 WESTERN CORRIDOR ............................................................................................................................... 109 2.2.5 DAR ES SALAAM CORRIDOR ..................................................................................................................... 110 2.3 COST AND TIME COMPARISON BETWEEN CORRIDORS ........................................................................... 114 2.3.1 CORRIDOR PERFORMANCE ...................................................................................................................... 114

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3RD

PART : STRATEGIC ACTION PLAN AND INVESTMENT PROGRAMME ................................................................... 122 3.1 INVESTMENT PLAN PHASE 1 .................................................................................................................... 122 3.1.1 INVESTMENT PLAN PHASE 1 : THE NEEDS ............................................................................................... 122 3.1.2 THE IMMEDIATE ACTION PLAN AND THE DOMESTIC OBJECTIVES .......................................................... 123 3.2 INVESTMENT PLAN PHASE 2: DOMESTIC INTERMODAL CORRIDOR ........................................................ 124 3.3 CHOICE OF AN INTEGRATED MAIN REGIONAL CORRIDOR....................................................................... 126 3.4 THE INVESTMENT PLAN PER MODE ......................................................................................................... 129 3.4.1 ROAD SECTOR INVESTMENT (2011 TO 2021) .......................................................................................... 129 3.4.3 INLAND WATER INVESTMENT PLAN ........................................................................................................ 143 3.4.4. TRAFFIC PROJECTION IN 2020 .................................................................................................................. 145 3.4.5. THE IMPACTS OF THE NEW MULTIMODAL TRANSPORT STRATEGY ........................................................ 150 3.4.6. FORECAST CARGO IN 2020 ....................................................................................................................... 151

4 THE PUBLIC PRIVATE PARTICIPATION ...................................................................................................... 153 4.1 GLOBAL PICTURE AND MAIN PRINCIPLES ................................................................................................ 153 4.1.1 MAIN PLAYERS ......................................................................................................................................... 153 4.2 LIFE OF THE DIFFERENT CONCESSIONS .................................................................................................... 154 4.3 ANALYSIS OF THE GLOBAL SITUATION AND RECOMMENDATIONS ......................................................... 158 4.4 CONCESSION ANALYSIS. INDICATORS AND GUARANTEES ....................................................................... 159 4.4.1 ACTUAL CONCESSION AGREEMENTS ....................................................................................................... 159 4.4.2 CONCESSION ARCHITECTURE ................................................................................................................... 161 4.4.3 REVIEW OF ATTRIBUTION OF RESPONSIBILITIES FOR INVESTMENTS AND OPERATIONS FOR THE CDN . 162 4.4.4 COORDINATION BETWEEN GOVERNMENTS ............................................................................................ 163 4.4.5 COORDINATION SEA PORTS – RAIL- INLAND WATER ............................................................................... 167 4.4.6 REVISION OF PRICES AND PERFORMANCES ............................................................................................. 167 4.5 BID FOR TENDERS IN CONCESSION .......................................................................................................... 168 4.5.1 WORK TO BE ACHIEVED ........................................................................................................................... 168 4.5.2 CONCESSION AGREEMENT ....................................................................................................................... 168

ANNEX A: METHOD AND STAKEHOLDERS MEETINGS ............................................................................................... 173 ANNEX B: DATA ON MINING (MULANJE AND MOATIZE) .......................................................................................... 182 ANNEX C: INLAND WATER PORTS EQUIPMENTS AND MULTIMODAL FACILITIES ..................................................... 187 ANNEX D: MAIN DATA ON SHIRE ZAMBEZI (FROM THE PREFEASIBILITY STUDY WRITTEN BY TERA) ....................... 191 ANNEX E: CONTAINERS AT DURBAN ......................................................................................................................... 199 ANNEX F: POTENTIAL RURAL GROWTH CENTRE ....................................................................................................... 200 ANNEX G: ROADS ...................................................................................................................................................... 202 ANNEX H: RAIL........................................................................................................................................................... 214 ANNEX I: LOGISTIC PERFORMANCE INDEX ................................................................................................................ 224 ANNEX J: THE PRESENT SITUATION OF THE PASSENGER TRANSPORT SYSTEM ........................................................ 225 ANNEX K: 2ND WORKSHOP IN LILONGWE ................................................................................................................ 252 Annex L : 3RD WORKSHOP IN LILONGWE ANNEX M : LIST OF STUDY CONTACTS ...................................................................................................................... 276

TABLE OF FIGURES

Figure 1: Expected Traffic on corridors in 2020 ............................................................................................................ 3 Figure 2: Actual picture ................................................................................................................................................. 4 Figure 3 : Expected traffic on corridors in 2020 ............................................................................................................ 4 Figure 4 : Strategic Scheme ......................................................................................................................................... 13 Figure 5 : Stages of the Value Chain ............................................................................................................................ 18 Figure 6 : Tea exports 52559 tons in 2009 .................................................................................................................. 23 Figure 7 : Tobacco exports in 2009: 232 000 tons ...................................................................................................... 26 Figure 8 : Cotton exports in 2009: Use of Roads to Beira and Durban ....................................................................... 29 Figure 9 : expected Cotton exports in 2020 : Use of Nacala Corridor or Shire Zambezi? ........................................... 29 Figure 10 : Internal Sugar Movements and Cost Associated ...................................................................................... 32 Figure 11 : Sugar exports (actual) ............................................................................................................................... 33 Figure 12 : How to better capture possible improvements ....................................................................................... 34 Figure 13: Northern Region Transportation problems for Sugar ................................................................................ 35

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Figure 14 : Expected Sugar exports in 2012-2015: Use of Lake service and Nacala Corridor ..................................... 36 Figure 15 : Maize local distribution: Use of the lake and railway distribution systems .............................................. 38 Figure 16: Possible routes for Cassava and sweet potatoes ....................................................................................... 40 Figure 17 : Food crops-primary export routes ............................................................................................................ 41 Figure 18 : Rice possible routes .................................................................................................................................. 42 Figure 19 : Cement actual routes ................................................................................................................................ 43 Figure 20 : Imports of Fertilizers in 2009 : Possibilities in the future (1) and (2) ........................................................ 49 Figure 21 : Substitution of Sulfur ................................................................................................................................ 54 Figure 22 : Actual Uranium route ................................................................................................................................ 55 Figure 23 : Expected Coal exports from Moatize mine in 2020 .................................................................................. 64 Figure 24 : Expected Copper exports from Copper Belt in 2020 ................................................................................. 66 Figure 25 : Actual Traffic on corridors ......................................................................................................................... 73 Figure 26 : Main problems on the railway system in Malawi ..................................................................................... 86 Figure 27 : Rail link between Bangula (Malawi) and Gundano (Mozambique) ........................................................... 89 Figure 28 : Recollection of cargo along the lake shore by cabotage ........................................................................... 93 Figure 29 : Roll on-Roll off ferry on the lake ............................................................................................................... 94 Figure 30 : Regional transport corridors ..................................................................................................................... 95 Figure 31 : Nacala Corridor ......................................................................................................................................... 98 Figure 32 : Beira corridor (Sena line + road routes) .................................................................................................. 101 Figure 33 : North-South Corridor completed by Shire-Zambezi Link ........................................................................ 105 Figure 34 : Durban Tete Corridor .............................................................................................................................. 109 Figure 35 : Tazara Corridor + Lake service ................................................................................................................ 110 Figure 36 : Mtwara Corridor + Lake Service and connecting roads .......................................................................... 112 Figure 37 : Projects in relation with Mtwara Corridor .............................................................................................. 112 Figure 38 : Global transport Chain ............................................................................................................................ 114 Figure 39 : Multimodal transport from origin to destination ................................................................................... 115 Figure 40: Distances, travel time from Lilongwe: Transport costs ............................................................................ 119 Figure 41 : Investment Plan Phase 2 ......................................................................................................................... 125 Figure 42 : International Corridor Map ..................................................................................................................... 126 Figure 43 : Expected traffic by rail in 2020 ................................................................................................................ 136 Figure 44 : Loaded Convoys 80Tx22ww per day in 2020 .......................................................................................... 137 Figure 45 : Major suggested links.............................................................................................................................. 139 Figure 46 : Current situation on the railway system ................................................................................................. 139 Figure 47 : Railway network at the upper developed stage ..................................................................................... 142 Figure 48 : Creation of Dry Ports ............................................................................................................................... 143 Figure 49 : Expected traffic on corridors in 2020 ...................................................................................................... 145 Figure 50 : Economic Benefits by Commodity .......................................................................................................... 146 Figure 51 : Traffic shares between corridors ............................................................................................................ 148 Figure 52 : Expected traffic on corridors in 2020 ...................................................................................................... 152 Figure 53 : Puzzle of concessions .............................................................................................................................. 158 Figure 54 : Architecture of Concessions .................................................................................................................... 163

Diagram 1 : Alternative Supply Channels in Malawi’s Cassava Value Chain ............................................................... 39 Diagram 2 : Structure of Fuel Industry in Malawi ....................................................................................................... 44

Note: All pictures, tables, maps and schemes realized by

Thierry Molinier and Olivier Crouzier, unless another source is mentionned

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Abbreviations

AfDB : African Development Bank BBR : Bettsbridge Bulawato Railway system BOO : Build – Own – Operate BOOT : Build – Own – Operate – Transfer BOT : Build – Operate – Transfer CDA : Cotton Development Association CDN : Corridor de Dessenvolvimento do Norte CEAR : Central East African Railways Ltd. CCFB : Compania dos Caminhos de Fero da Beira CFM : Caminho de Ferro de Mozambique CSS : Catalog of Standard Services CVRD : Companhia Vale do Rio Doce DANINA : Danish Aid DBI : Deutch Bahn International (German rail) ISO : International Organisation for Standardization EIB : European Investment Bank EN : European Norm GoM : Government of Malawi GoZ : Government of Zambia GoZi : Government of Zimbabwe LPI : Logistics Performance Index (WB), web-based questionnaire completed by logistics

professionals ICD : Inland Container Depot MBS : Malawi Bureau of Standards MCC : Millennium Challenge Corporation MCCL : Malawi Cargo Centres Limited MGDS : Malawi Growth and Development Strategy MOTPI : Ministry of Transport and Public Infrastructures MtwDC : Mtwara Development Corridor NDC : Nacala Development Corridor NGO : Non Governmental Organizations NLPI : New Limpopo Projects Investments (Pvt) Ltd PCC : Petroleum Control Commission PIL : Petroleum Importers Limited PN : Porto de Nacala PPP : Public Private Partnership PSP : Private Sector Participation PWI : Permanent Way Instructions RA : Road Authority RDC : Railroad Development Corporation, U.S.A. RF : Road Fund RFA : Roads Fund Administration RSDI : Regional Spatial Development Initiative RSZ : Railway Systems of Zambia SADC : Southern African Development Community SBS : Sector Budget Support SDCN : Sociedade de Desenvolvimento do Corridor de Nacala SNCF : Societe Nationale des Chemins de Fer (French rail) TAZARA : Tanzania Railways TERA : TERA International Group, Inc. TWR : Train Working Rules UIC : Union Internationale des Chemins de Fer (rail international regulator) WB : World Bank ZMM-GT : Zambia-Malawi-Mozambique Growth Triangle

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Executive Summary

The global objective of the present assignment was to design an overall strategy for multimodal development in transport sector in Malawi, with emphasis on private sector participation on regional and international corridors with an aim of reduce import/export costs. The specific objectives and the outcomes were the following: I) Assessment of the current status of all components of the Malawi multimodal transport system, II) Review of all regional transport corridors, in multimodal fashion, with respect to their capacities,

economic values and benefits, III) Assessment of the main economic sectors in Malawi, dependant on transport services and their present

and forecasted growth, IV) Assessment of the potential for engaging in PPP or PSP operation in the above mentioned transport sub-

sectors including road, rail, water and air transport, focusing on transport corridors. V) Preparation of Malawi Multimodal Transport Sector development strategy.

The strategy should list the potential investment plans, indicate whether there is possibility for engaging PPP or PSP components in these investment plans, and assess the scale of private investment if PPP or PSP is considerate to be possible.

VI) Prioritization of potential investments plans and their components for Malawi. The prioritization will be made under the unconstrained and constrained budgetary considerations.

The performance of a corridor can be appraised from two perspectives: i) An infrastructure perspective, which considers the physical capacity of links and nodes in the corridor as

well as their use. This approach is often used when deciding on requirements for additional capacity but provides little insight into the effect of corridor performance on trade. This approach often leads to very detailed technical proposals about possible rehabilitation plan … as corresponding studies aimed at given a sound appraisal of existing facilities and description of new improvements.

ii) A Quality of service perspective, which examines the quality of service provided for the goods moving on the corridor. Performance is measured in terms of average transport times and/or costs for transport units moving through the corridor. In terms of trade facilitation, the second perspective is the most appropriate.

Using of the second methodology, the consultant conducted “in depth” inquiries on the main products to be transported. These allowed him to:

Identify global context evolution (past and present) to take in account the opportunities and the “dead end or inefficient” multimodal transport scenarios .

Identify and appraise actual and expected Malawian transport needs (internal, imports/exports) and Transit Transport needs (from neighbouring countries)

Identify for each commodity the type of logistic chain (infrastructures, transport provider) that may bring either flexibility or reduction of transport costs.

This allowed the consultant to demonstrate that the transport issue was today lacking of a heavy loading cargo transportation system, which does constitute a severe obstacle to development and one of the main reasons of tiny volumes transported and high transport costs. Based on diagnostic of the transport needs corresponding to the main existing imports and export products and forecasts regarding the transport needs in the future (10 years), it was the consultant’s understanding that the current cargo volumes are clearly not within the range of commonly accepted intermodal traffic. This approach was clearly approved in a first workshop, held in Blantyre on June the 19th, 2010. This leads the consultant to study the domestic transportation system, prior to the corridors themselves, in order to be able to consolidate significant cargo amounts. Such a scheme led also the consultant to look for possible “clients” for a new transportation system, in Malawi and abroad.

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Further on, the following set of possibilities tests was conducted:

Combine the different transport answers for all the commodities in order to come up with alternate multimodal transport schemes whose technical feasibility and interest as a transport chain have to be checked …

Minimize the transfer operations constraints (idle time, time for operations, cost of the transfer, risks of waste or loss of cargo during the operations).

Define a global multimodal Transport scheme answering to Malawi’s transport needs (based on a Malawian transport needs appraisal and global regional Multimodal Transport demand …

Identify the different phases of implementation of the Multimodal Transport scheme in keeping in mind that flexibility is one of the key success factor.

Decline the investment plan per mode A second workshop, held in Lilongwe the 29th of July, 2010, validated this approach and contributed to the definition of a modal investment programme. In order to finalize his analysis, the consultant carried on the following necessary tasks:

Compare the costs/benefits and added value of the transport scheme with the existing situation.

Identify PPP possibilities/arrangements and advised on their possible implementation. The study stays within a strategic level frame, and much of the investigation conducted as well as the solutions proposed being absolutely new in Malawi, no pre-feasibility study nor business case have been conducted within the report.

Conclusion

The consultants determined through data analysis that the transport demand for heavy cargo in Malawi was weak. The high transport costs themselves are the result of thin transport demand characterized by seasonality, which in turn is the result of the low economic sectors activities. The consultant conducted in depth analysis of the main economic sectors, and studied for each commodity the supply chain and the distribution system. The research allowed the identification of a strategic concept aiming at the realization of an efficient and economically viable transport scheme for important cargo volumes. This addressed one of the key constraints Malawi is facing: marketing existing or potential productions which represent important volumes. Through three successive workshops and many interviews, the consultants tried to elaborate a transport scheme which would allow Malawi to get out of this vicious circle, and to benefit from an efficient cargo transportation system. The transport logistics being different for each product, the consultant studied the sensitivity of each product to different parameters within the transport chain: flexibility, cost, time, regularity, availability of service and safety being the main ones. Tonnage projections for each commodity ten years hence (2020) are made, and the most effective transport mode and corridor are identified for each product. The Consultant’s diagnosis was presented to the stakeholders in a workshop on the 18th of June 2010. The workshop validated the methodology choosen by the Consultant, and validated the identification of several regional sinergies, such as the Malawi bauxite + Mozambican coal = alumina ore/ coal transport = alumina ore as return cargo / Malawi alumina ore + Mozambican hydro electric energy = aluminium. Four main axles of development were identified: - The necessity of offering to the potential economics an efficient domestic transportation system, built up

around a new concept, the “Songwe-Nsanje domestic corridor”, with a Road- Lake – Rail – River intermodal system.

- The necessity to provide other fundamentals to the Malawi economy and notably to produce much

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higher levels of energy, through imported energy sources. The rail connexion to the Mozambican Zambezi Valley is therefore a solution.

- The necessity to develop cheap routes to markets, not only at an intercontinental level, but also regionally. This, basically, signify having an East-West rail corridor crossing the country.

- The opportunity for Malawi of developing as a “hub” of intermodal transportation for Central Africa, and notably Western Mozambique, Southern Congo, Southern Tanzania and Zambia. This opportunity would grant important cargo movement and finance the development and maintenance of an efficient system.

For Malawi to benefit from low transport cost, it needs to organize and prioritize its transport sector within a regional and multimodal framework.

On this base, the consultant built up an investment programme, coherent, multimodal, and phased in three steps to be conducted in the following ten years. The Consultant’s draft conclusions for this investment programme were presented to the stakeholders in a workshop on the 29th of July 2010. The workshop validated most of the recommendations made by the Consultant, and completed the investment choices proposed. Extract of July’s workshop minutes:

For an economy like Malawi to grow, there should be reliable transport service for passengers and goods through various means like good roads, rail and improved airports.

Passengers and goods travel from one place to another, and services include freight forwarding and communication.

The nation, like any other developing country in the world needs quality transport services, but to achieve the goal, both the public and private sector should work together through Public Private Partnership (PPP).

Transport is critical to the socio-economic development of the country as it facilitates international and domestic trade, smooth flow of people and goods plus access to social amenities like hospitals and schools.

Government through the Malawi Growth and Development Strategy (MGDS) is developing the transport sector, with a priority on infrastructure development in the country.

Key experts in the transport sector and other related sectors should be able to consolidate their views and come up with a comprehensive Transport Sector Investment Strategy (TSIS) for multimodal transport development.

There had been strengthened cooperation between government, development partners and the private sector, said deputy Minister of Transport and Public Infrastructure, Francis Kasaila during a day long Transport Sector Investment Plan (TSIP) workshop held in Blantyre mid-June this year.

Kasaila explained that transport sector performance depended largely on concerted efforts and constructive dialogue between government and the private organizations to ensure optimal economic development for the country.

He also informed key players in the transport sector that government was committed to implementing the recommendations that could be made, urging all Malawians to fully participate in the transport sector industry.

“There has been cooperation between government, development partners and the private sector in improving the transport sector in the country. Through concerted efforts and constructive dialogue among the partners, we can ensure optimal economic development for the country,” said Kasaila.

The Minister added that under the leadership of His Excellency the State President, Professor Ngwazi Dr Bingu wa Mutharika, there was commitment and seriousness to develop the transport sector through government’s development agenda within the MGDS.

The workshop, organized by the European Union (EU) and African Development Bank (AFD) through the Institutional Support to Transport Public Sector Bodies Programme (ISTPSBP), brought together key transport players from public and the private institutions.

As the deputy Minister indicated the need for cooperation between government and its partners, the private sector could play a big role since it is regarded as an engine for the country’s economic growth.

There are a number of ways the private sector could contribute to the successful transformation and

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improvement of the country’s transport system through social responsibility.

Managing Director for Malasha Holdings Limited, which owns a fleet of 20 big buses, that commute nationwide and internationally, Lowani Munkhondia says PPP is an essential tool in developing the country’s transport sector.

Munkhondia believes the private sector has a social responsibility in assisting government through the PPP to improve transport facilities like roads, railway lines and airports to boost Malawi’s economic ties with other countries.

He commends government for its development agenda through the MGDS, including the construction of Nsanje Port, major roads and improvements on the airports, saying the development would attract more investors to come to Malawi.

The MD observes that passenger service providers should ensure comfort for their customers to appreciate what government is doing in improving the country’s transport system.

“The partnership (PPP) is an essential tool to developing the transport system in the country to boost economic ties with other countries,”

“Government should be commended with projects like the Nsanje port, good roads and airports, and Malasha as a passenger service provider, we ensure comfort to our customers to appreciate what government is doing in the transport industry,” says Munkhondia.

The only way to improve the transport sector is for stakeholders to consult and work with other countries to tackle issues like inter-government dependent issues, government role in fostering facilitation, cargo management (both in transit and storage) and passenger transport.

In addition to that, transport sector players should seek expertise from the developed and industrialized nations on strategies to improve Malawi’s transport sector.

A conceptual leap from a local orientation to regional one is the core of the new transport strategy. The proposed strategy provides a framework to allow Malawi to be a regional model (phase2) and to integrate the transport demands/ traffic /flowing on Nacala priority corridor for the neighbouring countries (phase3). In addition to the road priority investment program, which is validated by the consultant, and to the Nsanje Port (Phase 1 investment programme) under realization by private operators, the consultant defined a multimodal and regional investment plan. The additional investment programme in the present report is phased in three steps: - phase 1: immediate action programme (years 2011/2012 and 2012/2013) for 192 millions US$ - phase 2: Songwe – Nsanje domestic corridor and link to Moatize (years 2013 to 2015): 287 millions $ - phase 3: rehabilitation of the main corridor (NACALA) and links between the corridors, in Malawi and

abroad (years 2016 – 2019) for 756 millions US$ Most of the investment programme is realized in the rail, notably through two important extensions of the network, in Malawi Shire Valley and Mozambique (link to Moatize and SENA line, 110 M$, and in Zambia (link with TAZARA, 490M$). But roads and much more lake and river transportation are participating to the global scheme, as crucial elements of the domestic consolidation of cargo and the international linkage of the corridors. 45% of the investment programme would be in Zambia, 37 % in Malawi and approximately 18% in Mozambique. The Malawi multimodal transport strategy framework balances regional investment with domestic complementary investment, which would result in growth of domestic production, exports and imports. Further, transport service cost and travel and custom processing time would decline. More important, the transport system will be more reliable making possible to plan expansion of production and commerce and sustainable supply which stabilize domestic prices: The impact of the plan would be impressive, at a macro-economic level. The consultant’s estimates for the value of the cargo transported in 2020 figures more than 3 billion dollars, which represents more than 50% increase in the Malawi GDP.

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Rutenga

Bulawayo

Victoria Falls

Livingstone

Mazabuka

Lusaka

Kanona

Tunduma

Mbeya

Beira

Nacala

Dar Es Salam

ZIMBABWE

MOZAMBIQUE

ZAMBIA

BOTSWANA

CONGOTANZANIA

Tete

Harare

Mzuzu

Lilongwe

Blantyre

Chipata?

Chinde

Strategic Scheme

NsanjeDoaSENA Moatize

KapongaTAZARA

COPPER Belt

Figure 4 : Strategic Scheme

The main benefit of the proposed transport sector strategy based on multimodal and regional coordination is improved competitiveness of the economies of the cooperating countries resulting in reduced transport service costs; reduced delay time on the corridors and at custom posts; and, above all reliable transport services at reduced fixed investment cost. The long distance land transportation tariffs would drop by 50%, and the share of the total transport cost in products would drop from 30% to 18% approximately. The economic and social impacts of the plan would be extremely important, through facilitation of important new mining activities, marketing of the poorest communities’ productions such as food crops and fishes, and important changes in the economic viability of the whole Malawian productive sector. It is important to acknowledge that any major investment program to better the transportation system should be completed by important institutional and organizational changes, and notably at a regional level, a harmonization of standards, norms and procedures, and the necessary build-up of some international concessions program. A sincere and long lasting cooperation with neighbouring countries, notably Zambia and Mozambique, but also Tanzania and Zimbabwe is a compulsory part of the programme. The consultant identified PPP partners and proposed guidelines for the revision of concessions, and for the global organization of the transport scheme. The Consultant’s final conclusions for the investment programme, phasing and organization were presented to the stakeholders in a workshop on the 1st of October 2010. The workshop validated the Consultant’s recommendations, which received the support of the European Union representative, the European Investment bank representative and the World Bank representative. The main conclusions were used by His Excellency the Deputy Minister for Transport and Infrastructure in his remarkable speech.

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Data about Malawi

History Established in 1891, the British protectorate of Nyasaland became the independent nation of Malawi on 6th July, 1964. After three decades of one-party rule, the country held multiparty elections in 1994 under a provisional constitution, which took full effect the following year. National multiparty elections were held again in 1999 and 2004 electing present president Bingu wa Mutharika. Geography

Population Preliminary results of the 2008 national census indicates a population of 13.4 million of whom the majority belong to tribal groupings such as Chewa, Nyanja, Yao, Tumbuka, Lomwe, Ngoni, Tonga, Sena, Ngonde, Lambya. 83% are engaged in agriculture The urban population is growing rapidly. There are insignificant numbers of Asian and European origin although members of the Asian groups are disproportionately represented in commerce and industry. Most Malawians profess a monotheistic faith. Of the religions mainstream Christianity is the largest in numbers with Islam a significant second. Other minority religions are also practised. Many aspects of traditional beliefs co-exist with the introduced religions and are not seen by their adherents to be in conflict.

Language The official language of Malawi is English. English is widely spoken but not universally so. There are numerous languages which, generally, take their names from the tribes which speak them. The most widely understood and spoken of these languages, is Chichewa.

Malawi (Chichewa: Malaŵi) is a country in Africa, bordered by Mozambique to the south and east, Tanzania to the north, Zambia to the west. Lake Malawi, the third largest lake in Africa, runs along most of its eastern border. It's described as the "Warm Heart of Africa", referring to the friendliness of the people.

Lilongwe - The political capital of country and the seat of government. Blantyre - The economic capital and largest city of the country. Limbe - A largely commercial town next to Blantyre Mzuzu - The largest town in the Northern Region, and a staging-post for transport to Tanzania. Karonga - The first and last stop from/to Tanzania at the very top of Malawi. Karonga is quickly growing spurred on by the recent development of a uranium mine. Mangochi, formerly known as Fort Johnston, is found at the southern end of Lake Malawi where it empties into the Shire River on its way to join the Zambezi River as it heads towards the Indian Ocean. Monkey Bay, a popular large village loacated up the Lake Road from Mangochi toward Cape Maclear. Nkhata Bay - a rocky bay towards the north of the lake Nkhotakota on the shores of Lake Malawi in the Central Region, is where the explorer David Livingston sat down with the Swahili Arab slave traders to attempt to negotiate an end to the slave trade. Zomba, colonial capital of Malawi and is noted for its British colonial architecture, the University of Malawi, and the remarkable Zomba Plateau which rises immediately west of the city.

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The main Chichewa-speaking regions are the Centre and much of the South. The North is linguistically very diverse with Chitumbuka as the dominant language. Other tribal languages are widely spoken with Chiyao spoken by a significantly large minority in the south of the country.

Climate Malawi has a sub-tropical climate, which is relatively dry and strongly seasonal. The warm-wet season stretches from November to April, during which 95% of the annual precipitation takes place. Annual average rainfall varies from 725mm to 2,500mm with Lilongwe having an average of 900mm, Blantyre 1,127mm, Mzuzu 1,289mm and Zomba 1,433mm. Extreme conditions include the drought that occurred in 1991/92 season and floods of 1988/89 season. The low-lying areas such as Lower Shire Valley and some localities in Salima and Karonga are more vulnerable to floods than higher grounds.

A cool, dry winter season is evident from May to August with mean temperatures varying between 17 and 27 degrees Celsius, with temperatures falling between 4 and 10 degrees Celsius. In addition, frost may occur in isolated areas in June and July. A hot, dry season lasts from September to October with average temperatures varying between 25 and 37 degrees Celsius. Humidity ranges from 50% to 87% for the drier months of September/October and wetter months of January/February respectively. Key Economics ratios and Long Term Trends

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Economic outlook for Malawi Malawi’s growth has accelerated while inflation has moderated in recent years. On account of this economic and fiscal consolidation, Malawi remains one of the few countries to have come out of the global financial and economic crisis relatively unscathed.

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Growth in 2008 is estimated to have reached an unprecedented 9.7 % buoyed by exceptional tobacco and maize harvest, and rapid expansion services. Agricultural production has benefited from both favourable weather and the input subsidy program. Building on this performance, growth in 2009 remained robust at 7.5 per cent, on account of strong performance in tobacco and maize, the onset of uranium production and expanding wholesale and retail trade. In 2010, growth is estimated to remain strong at 6.5 per cent. Inflation has trended downward during 2010, reflecting moderation in food prices and reduced monetary expansion. Going forward, inflation is expected to be contained within single digits. Over the past five years, fiscal management have been strengthened which has not only allowed the containment of both inflation and domestic debt but also supported the overall GDP growth prospects. However, the FY 2008/09 budget targets were missed by a wide margin, owing to difficulties in containing spending on the fertilizer subsidy program coupled with expenditure overruns on goods and services and a shortfall in tax revenues and grants. Overspending on fertilizer, sold to farmers at subsidized prices of K500/50 Kg bag, reflected a combination of high fertilizer prices in mid-2008, at the time of the government’s planned purchases, and an additional unbudgeted purchase later in the year for flood relief victims. This resulted in a fiscal deficit of K36.7 billion. K24.5 billion of this deficit was financed domestically thereby increasing the stock of domestic debt to K116.9 billion from K92.8 billion at the end of the FY 2007/08. Consequently, from a planned deficit of 3.3 percent of GDP which was revised to 4.2 %, actual end of year outturn was substantially at variance with the approved and revised estimates by 0.9 and 2.3 % of GDP, respectively. The approved repayment f domestic debt of 0.2 percent of GDP, which was revised to a net borrowing of 1 percent of GDP, was also missed by a substantial margin with the end of year outturn at 3.7 percent of GDP. The FY 2009/10 budget reflects a prudent fiscal stance, targeting modest fiscal deficit f 1.6 percent of GDP and a substantial net repayment of domestic borrowing of 1.5 percent of GDP. During the first half, a combination of front-loading of expenditure especially on the Input Subsidy Program with a shortfall in foreign financing led to rapid credit expansion to the government and contributed to higher than targeted growth in reserve money. Large injections by the government in the irst half of the fiscal year led to high market liquidity. However, reserve money growth has since moderated, with the 12-month change in reserve money declining significantly from the beginning to end of 2009. Moreover, with expected donor inflows and containment of expenditure in the second half, the fiscal targets are on track.

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1st Part : The Transport Demand Study

1.0 Methodology

Value chain analysis was applied. Value chains essentially represent enterprises in which different producers and marketing companies work within their respective businesses to pursue one or more end markets. Value chain participants sometimes cooperate to improve the overall competitiveness of the final product, but may also be completely unaware of the linkages between their operation and other upstream or downstream participants. Value chains therefore encompass all of the factors of production including land, labor, capital, technology, and inputs as well as all economic activities including input supply, production, transformation, handling, transport, marketing, and distribution necessary to create, sell, and deliver a product to a certain destination. The main stages of an agricultural value chain are illustrated in the Figure below. In this diagram, dashed arrows flow from input supply to all other stages to show that this is a crosscutting function that affects all participants, not just at the farm level. Dashed arrows are also drawn from farm production to processing and distribution to show that some farmers may deliver their crop directly to a factory or, in the case of unprocessed goods, directly to the final market, thereby fulfilling the assembly and delivery function as well.

Figure 5 : Stages of the Value Chain

In value chain analysis, all inputs and outputs carry forward their inherited value from the previous stage. This concept is important to stress in value chain analysis where the focus is on accumulated costs at different stages as a key determinant of trade competitiveness. The competitiveness of any domestic product depends on the efficiency of input supply, farm production, assembly, processing, and logistics up to final delivery point where the good competes internationally as an export or import substitute. By looking at the cost composition at each stage of the value chain and comparing these costs with world standards, the methodology not only shows if the country is internationally competitive, but also helps identify key stages where costs could most effectively be reduced as a strategy for sector growth. A. Analytical Framework Based on these guiding principles, the analysis of Malawi’s agriculture competitiveness was prepared using a specific methodology developed for a recent study of Competitive Commercial Agriculture in Africa (CCAA). The methodology is built around a set of interlinked Excel templates designed to calculate standard indicators of costs and profitability at each major stage of the production cycle. Following the CCAA project methodology the consultant developed value chain research covering most agricultural volumes available or not for transport, and tried to determine which changes in the logistics might allow this products to be economically marketable, and thus transportable.

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Another important distinction in the methodology is that agriculture commodities can take on different forms at each stage of the value chain. In the most basic sense, this can be the difference between a recently harvested farm product with high moisture content and one that has been assembled in a warehouse and dried for several months. Agriculture raw materials may also be processed into one or more finished goods. Seed cotton, for example, is processed into lint and seed while leaf tobacco must be threshed to remove the tips and stems before export. Similarly, paddy rice must be milled to produce polished grain. DVA and SV are therefore measured according to equations [1] and [2] on a per ton basis for the following product forms:

Finally, the value chain analysis is also interested in the private costs and returns that accrue to individual participants. Agriculture production, processing, and marketing begins with the decisions private investors make and it is important to have a sense of the underlying financial costs and profitability of competing enterprises first to determine if the system is viable and second to identify opportunities for poverty reduction. Because the methodology is constructed around enterprise budgets, these measurements are easy to make. At the farm level, private costs and returns are measured in per hectare and per ton terms; at later stages, values are measured in per MT terms only. From these indicators, calculations showing the rate of return to variable and fixed expenditure, total investment requirements, demand for labour, and other components of private and social importance can be made.

Agriculture prices. Prices mentioned in annex are for the 2007/08 agriculture season. Farm input and output prices include transport up to the farm gate or other place where the next participant in the value chain takes over responsibility for that commodity. Input prices and output prices for maize are based on information collected from primary informants and were chosen to represent the prices most producers in all parts of Malawi can expect to encounter. In the case of cotton, the government established minimum price for seed cotton was used to, and for rice, the farm gate price is the one paid by NASFAM. For burley tobacco, two price levels are considered based on average auction values for good and better quality tobacco grown at the FAM-low and FAM-high levels respectively. Crop yields. Crop yields reflect a realistic expectation in a year with “normal” growing conditions using the inputs charged at each management level. Due to an almost limitless number of possible variations related to seasonal growing conditions, local soil type, farmer skill, seed quality, and many other factors, actual yields on individual farms can be quite different than shown here. Naturally, this can have a significant bearing on individual profits and total costs per ton. Family labour. No charge is included for family labor in the calculation of a private costs and returns. This approach is necessary for the financial calculations because family labour is not paid for with an actual expenditure of cash. The use of family labour does, of course, have an opportunity cost, but by excluding this from the financial estimates, crop profits can easily be reinterpreted as returns to family labour and all other non-cash inputs used to produce and market that commodity. The benefit of this method is that it allows direct comparisons between enterprises without the risk of applying incorrect proxy values. This approach is also consistent with the standard definition of an opportunity cost which states that the value of family labour is the income foregone by not engaging in the next most profitable activity.

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For the calculation of DVA and SV, however, a different approach is needed. At this level, the value chain analysis is interested in the total cost of all factors used in the production and marketing of each agricultural commodity. Because family labour often accounts for a large share of production costs in Malawi, some proxy value needed to be applied. For this reason, the approach taken was to apply a rule of thumb estimate to the value chain calculations by charging family labour at 60% of the rate for casual labour.

Data collection Considering the lack of updated data in the existing studies, and the difficulty to obtain official data from the institutional structures, the consultants took the initiative to conduct their own enquiry. It was conducted from April to June 2010 through meetings with the main economic stakeholders on the international market and second, through a team of enquirers visiting international transport operators. The enquiry results have been crossed with the seldom data obtained through statistics, and allowed the consultant to present up-dated estimates for the transport demand. The consultant conducted his in depth analysis of the main agricultural productions, in two groups –commercial crops and food crops - segregated by individual products for the ones which represent the most important volumes. For each product, the area of production, the complete scheme of transport and – when necessary - processing and packaging schemes were identified. The product destinations and the related times and costs of transport have been analysed or computed. Commercial agricultural products represent the essentials of today’s export, but the volumes are relatively small, and would hardly sustain a heavy loads transportation system. Food crops have been very little marketed up to now. They would benefit a lot of the existence of a cheap transportation system for heavy products. The same type of study was conducted on Industry, imports, and potential mining. Imports are due to rise in volume. Transport represents a significant part of their cost, and the whole economy would benefit from lower prices on them. Most mining products are not exploited, mainly because of the lack of transport for inputs (coal to produce energy) or for marketing the commodities. We also studied foreign mining opportunities. The huge quantities these mines want to market are an opportunity to equip Malawi with an efficient heavy load transportation system. The consultant also studied the sensitivity of each product to different parameters within the transport chain: cost, time, regularity, availability of service and safety being the main ones. Tonnage projections for each commodity ten years hence (2020) are made, and the most effective transport mode and corridor are identified for each product. Immediate observations Several issues appear, which are determinant to the transportation system: - The domestic transport demand is much higher than international transport, with the crucial issue of

transport from the farm to the factory, especially in the case of commercial crops such as sugar and tobacco.

- The huge production of maize, cassava, potatoes, sweet potatoes and other food crops in Malawi is one of the major challenges faced by the transporters and by the national economy;

- The imbalance in the transport of containers is one of the most critical issues for exports; - The dispersion of cargo is a major problem to market food crops, either in the country or for export. - The road is used in most transportation issues, resulting in high transportation costs. - The transportation costs might oust many isolated areas of the food crops market. - The potential emergence of a major mining sector is crucial to the national economy, and requires a

major change in transport capacity and energy provision, The discovery of Uranium in Karonga at Kayerekera will soon boost the economy. Mining is already in progress and exports commenced in December 2009

- The problem of passenger transportation, specifically for business trips, has been completely neglected up to date and appears to be a serious bottleneck to development.

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Agricultural needs Agriculture accounts for the major part of the GDP, the major part of employment in Malawi, and virtually all the exports in 2009. Malawi agriculture has much specificity as regards to the traditional agricultural sector in Africa, specifically: relatively intensive occupation of soil, important use of fertilizer, important workforce. Commercial crops are tobacco, sugar, tea, coffee and cotton. Only tobacco and sugar account for significant weights in term of transportation, and cotton accounts for significant volumes.

Malawi is 60% dependent on tobacco exports for its non aid foreign earnings.

The expected growth rate for 2020 is not that great due to Anti Smoking lobby in Western markets.

Malawi has diversified into other major cash crops such as Sugar, Tea, Cotton, Coffee and pulses

Food crops also play an important role in both national production and exports: maize, rice, potatoes, sweet potatoes, cassava, beans, ground nuts represent significant income, although only maize and rice represent significant weights to transport abroad. There are important imbalances in production-consumption in most regions, resulting in the necessity of important cargo transportation within the country. Another aspect is the difficulty to market surpluses abroad, for lack of marketing support and high costs of transport.

QUANTITY OF EXPORTS OF SELECTED COMMODITIES

Year Tea Tobacco Cotton Sugar Pulses Rice Coffee Nuts Skins & hides Maize Uranium

Tonnes (000)

Tonnes (000)

Tonnes (000)

Tonnes (000)

Tonnes (000)

Tonnes (000)

Tonnes

Tonnes (000) Tonnes

Tonnes (000)

2006 60,00 235,30 23,40 140,40 240,00 233,23 2676,00 17,10 695,50 0,00 0,00

2007 48,10 110,72 18,80 260,00 21,10 201,87 2505,00 33,60 679,20 3444,41 0,00

2008 41,64 194,71 13,40 270,00 8,40 328,79 629,90 22,60 791,90 3767,41 0,00

2009 52,56 232,63 27,56 280,00 452,59 106,11 612,54 29,53 1164,20 3201,68 500,00

2020 68,33 279,16 38,58 364,00 543,11 137,94 796,30 38,40 1397,04 4802,53 700,00 (Source: enquiry by the consultant with exporters and the national statistics. Some figures vary depending of the date of shipment)

Seasonal imbalances are an important issue very often neglected when planning transport schemes.

MONTHLY DATA for 2009

Tea Tobacco Cotton Sugar Pulses Rice Coffee Nuts Skin & Hides Maize

Jan 4,60 0,00 0,60 17,50 0,40 0,00 123,30 0,30 14,40 0,00

Feb 5,00 0,00 1,20 5,30 0,60 20,00 47,20 4,60 173,30

March 5,40 0,00 0,60 0,60 0,20 170,50 2835,90 0,50 68,60 0,00

April 4,90 0,00 0,30 17,70 2,10 118,00 22,10 0,20 21,30 0,00

May 4,70 0,00 0,20 0,50 1,30 680,00 34,20 1,40 106,80 0,00

June 4,90 0,00 0,00 12,70 0,30 120,25 0,00 2,60 197,70 0,00

July 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00

6 Months 29,50 0,00 2,90 54,30 4,90 1108,75 3062,70 9,60 582,10 0,00

2009 52.56 232.63 27,56 280.00 45.59 106.11 612.54 29.53 1164,20 3202

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Addressing this issue might significantly better the lack of containers in the country. This might be addressed through efficient warehousing, both for crops and fertilizers.

1.1 Commercial agricultural productions studied 1.1.2 Tea Tea is the second major cash earner for Malawi to tobacco and has registered tremendous growth. Tea is mainly localized in the Tylolo and Mulanje area, East of Blantyre. Nkhata Bay is also producing significant volumes. The tea leaves are cropped and transported to Blantyre, where there are processed and packed. Tea being subject to infection, the protection process is a crucial part of its transformation. 2010 crop is projected at 60000 metric tonnes due to good rains. The Chiperoni rains will have an impact as well. Most tea is exported, in containers, towards other continents. Major buyers of tea in crescent order (as per 2008 statistics) are as follows: UK, RSA, Kenya, USA, Pakistan, Holland, Botswana, and Canada. 70% of tea goes via Durban port, 10% via Mombasa port, 10% via Beira and 10% is sold to Johannesburg in Republic of South Africa. The sea link is an important part of the transport costs and times. Packaging and export process

$ US$254.09/kg

PACKING MODE : Containerised

Packed in paper sacks

52 559 TONS 68 330 TONS

MODE ROUTES WEIGHT % ORIGIN DESTINATION GROUPING PT TIME (days) COST $/TON $/T/Km

Road Mulanje Tholo Southern Region

to Blantye Tylolo, Mulanje

Road Nkhata Bay Northern Region

to Blantye Nkhata Bay

PACKING MODE CONTAINERS

52 559 TONS 68 330 TONS

MODE CORRIDOR WEIGHT % ORIGIN DESTINATION GROUPING PT TIME (days) COST $/TON $/T/Km

Transit Time Road freight to ports Sea freight to destination

Rail Nacala 0% US$36

Road Beira 10% 70% The Uk US$79 US$75.4

30% South Asia US$79 US$98

Road Durban 70% 54% The Uk US$126.9 US$75.4

46% USA US$79 US$107

Road Johannesburg 10% South Africa US$93 0

Road Beira Holland US$79 US$72

Mombasa 10% Kenya US$160.7

RECENT EXPORTS EXPECTED EXPORTS 2020

INTERNATIONAL PART

SPECIAL CONDITIONS : SUBJECT TO INFECTION

INTERNATIONAL PRICE

RECENT PRODUCTION EXPECTED PRODUCTION 2020

LOCAL PRICE

NATIONAL PART

(Source: consultant enquiry)

Leaves collection Treatment in Blantyre Processing and packing in paper sacks

Trucks

Blantyre plant

70% Durban (fumigation in Joburg ) 10% Mombasa 10% Johannesbourg ( regional market )

No transfer to rail to be expected

? Not important

Very sensitive

Good storage

Packed in paper sacks then containerized

Tea

Choice of the corridor

Long Term contracts

Pricing of land leg

Time of arrival

Conditions At Port

Processing and packaging

Criteria for exports/imports

to be expected ? Not

important Very sensitive

Good storage

Packed in paper sacks Tea

Choice of the corridor

Long Term contracts

Pricing of land leg

Time of arrival

Conditions At Port

Processing and packaging

Criteria for exports/imports

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Nacala

Chipata

Dar Es Salam

Mbeya

Tyolo

Beira

MoatizeLuzaka

Chinde

Tete

Mtwara

HarareNsanje Port

DurbanJoburg

Kanona

5255 tons (10%)

UK (70%), South-Asia, Holland

Tea Exports 52559 tons in 2009

36,791 tons (70%)

Nkahta Bay

Tyolo

36,791 tons (70%)

Mulanje

Nkhata Bay

UK (54%), South Asia (46%)South Africa

Kenya

5255 tons (10%)

Figure 6 : Tea exports 52559 tons in 2009

1.1.2 Coffee (too low tonnages to be significant)

Coffee production is concentrated in the MZUZU area, and a significant part of it is consumed in the country. Exports are significant in value, but the volumes do not represent a major issue by themselves.

1.1.3 Tobacco

In terms of value, tobacco is the most important production of Malawi. Although its relative share has lowered, it still accounts for more than the 2/3rds of Malawi exports in value. In terms of transport, the issue is crucial, and represents high quantities (exports are above 230 000 tonnes per year). The tobacco issue in Malawi includes importation and distribution of fertilizer, collection of bales and transport to the auction floor, transport from the auction floor to the factory (and additionally some international exchanges of bales, both in import and export from/to Zambia and Zimbabwe), export of processed tobacco blends. The most difficult issue is transportation of tobacco bales to the auction and organization of the auction floors. While the biggest tobacco farmers have no significant problem to register and transport tobacco to the auction floor in due time, the issue is much more complicated for smaller farmers, especially for family production in the villages. Inefficient handling of the crop from the fields through the grading processes, packing in bales, storage at satellite depots and transport to the auction floors are recurrent problems for the tobacco industry.

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In order to address this issue, several developments have been taken in the recent years: - Secondary auction floors, - Warehousing in railway stations of small quantities, - Accepting intermediate buyers to collect, group and sell very small crops. These two last measures helped a lot in easing the production problem, but resulted in new difficulties. Warehousing tobacco is a complicated matter, as tobacco bales are constituted of wet tobacco, and stations or villages warehouses are not adapted. It results in two inconveniences: unfair order in transport priorities to the auction floor (one entrance warehouses do not practice a first-in first-out procedure) and occurrence of losses of production in the warehouses (rotten bales). Long delays are sometimes experienced on rail transport because of the lack of appropriate wagons and the time it takes to move the wagons once loaded. Auction Holdings prefers the rail mode, however, because of the ease of unloading directly into the warehouse. But most of the green leaves are transported by truck. Additionally, the intermediate profession attracted most truck owners in Malawi, who improvised themselves as tobacco brokers, attracted by potential margins. Most of these brokers having no tobacco background ignored regulatory procedures for participating to the auctions, either in quality requirements for bales, or for administrative requirements. As the opening of this opportunity coincided with some new more restrictive regulations in term of bales contains, the effect has been devastating during these last years. In addition, many brokers neglected to register as operators in the auction floor, therefore being barred to download their trucks on the Floor, sometimes for several months. As many as 20 or 30 trucks can often be seen lined up for as long as a month or two before they offload. This had an impact not only on the brokers, but on the whole road transportation system, and, consequently, on the economy as a whole. Another consequence, mainly linked to the refusal of bales containing a significant part of non-tobacco products, is that illegal exports of green leaves are on the rise. These illegal exports are not to be confused with legal export and import of leaves the tobacco companies are practicing in order to prepare their blends. Synthesis

The three main auction floors (Lilongwe, Limbe and Mzuzu) attract the local production of their respective provinces. Lilongwe attracts more than 50% of the total, Limbe and Mzuzu a little less than a quarter each. The second phase (Auction floor to factory and some international exchanges of green leaves) has relatively little impact, as the factories are well organized, the operating time is relatively long, and distances are short. The international part of this step is relatively low.

Fertilizers Green leaves

Collection of bales

Auction floors

Lilongwe (50%) Limbe Mzuzu

Satellite depot

Secondary auction floors Warehousing of wet Tobacco in railway stations Intermediate buyers to collect, group and sell

Factories (Processing) Lilongwe or Limbe

Fumigation containerization

Break Bulk to Joburg Where it is fumigated and sealed in containers for Durban

Nacala Beira

Durban Export (June to november)

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The third phase is exportation of processed tobacco. Once again, at that stage, the transport impact is considered important. Exports are 232 000 tons per year, mainly by containers, and concentrated on six months per year (from June to November) in 2009. For tobacco moving ex-factory from Limbe Leaf, which accounts for approximately 80% of total sales, the customer nominates the route based on pricing, past performance, and long-term contracts. For approximately 30% of Limbe Leaf’s shipments, time of arrival is a critical factor for the customer in choosing the route. For FOB shipments, Limbe Leaf determines the routing to be used. For processed tobacco the greatest cost is generally in the sea leg. As a consequence, the most popular ports for shipping agencies (Durban, Dar) have a consistent comparative advantage.

The coordination between the vessels and the land transportation system is crucial: confidence in the land transportation system organization is apparently the most important criteria for the users, far beyond the land transport costs or delays.

Tobacco shipped through Nacala and Beira is generally fumigated, containerized and sealed at the factory in Lilongwe or Limbe. This is because of the high humidity, difficulty of getting a container inland, and lack of handling facility at the Mozambique ports. Tobacco exiting through Durban can be shipped in greater volume break bulk to Johannesburg, where it is fumigated and sealed in containers before being sent to Durban. Some freight forwarders have tried to convince the international buyers to use Beira for storage, fumigation, containerized and sealing, but the buyers have resisted so far. Nevertheless some freight forwarders are beginning to invest in more sophisticated storage and handling facilities at Beira, while others claim that Beira’s storage and handling capacity is already congested and prefer making Nacala perform better. All agree on the total lack of organization and performance of Nacala. With the railway in Malawi currently being closed north of Balaka, however, it is necessary to move the empty containers from Blantyre to Lilongwe by truck at an added cost. Hence, this situation creates an incentive to send tobacco as break bulk to Johannesburg and containerize it there, where containers are more readily available without the added cost of a container release fee. The cost of shipping containerized tobacco from Blantyre or Lilongwe includes a container release fee.

$1.75/kg $

PACKING MODE : BALES

232 140 TONS 279 TONS

MODE ROUTES WEIGHT % ORIGIN DESTINATION GROUPING PT TIME (days) COST $/TON $/T/Km

Road to fob Sea freight

Road & Sea BEIRA 162498,70 70% Central Region Germany Road to fob Sea freight

Containerised DURBAN 69641,30 30% Kasungu,Dowa Poland Beira Route 35 US$79/t/km US$70/t/km

Lilongwe, The USA 35 US$79/t/km US$85/t/km

Dedza Belgium 50 US$79/t/km US$107/t/km

Mchinji The Netherlands Durban Route 35 US$120/t/km US$72/t/km

Northern Region Russia 35 US$120/t/km US$72/t/km

Rumphi, Spain 45 US$120/t/km US$80/t/km

Mzimba Egypt 30 US$120/t/km US$75/t/km

Southern Region Turkey 25 US$120/t/km US$70/t/km

Mangochi Austria 30 US$120/t/km US$75/t/km

Liwonde 40 US$120/t/km US$120/t/km

PACKING MODE CONTAINERS

40' high cube containers

232 140 TONS 279 TONS

MODE CORRIDOR WEIGHT % ORIGIN DESTINATION GROUPING PT TIME (days) COST $/TON $/T/Km

Road to fob Sea freight

Road & Sea BEIRA 162498,70 70% Central Region Germany Beira Route 35 US$79/t/km US$70/t/km

Containerised DURBAN 69641,30 30% Kasungu,Dowa Poland 35 US$79/t/km US$85/t/km

Lilongwe, The USA 50 US$79/t/km US$107/t/km

Dedza Belgium Durban Route 35 US$120/t/km US$72/t/km

Mchinji The Netherlands 35 US$120/t/km US$72/t/km

Northern Region Russia 45 US$120/t/km US$80/t/km

Rumphi, Spain 30 US$120/t/km US$75/t/km

Mzimba Egypt 25 US$120/t/km US$70/t/km

Southern Region Turkey 30 US$120/t/km US$75/t/km

Mangochi Austria 40 US$120/t/km US$120/t/km

Liwonde

INTERNATIONAL PART

RECENT EXPORTS EXPECTED EXPORTS 2020

PRODUCT : TOBACCO

SPECIAL CONDITIONS : PERISHABLE

LOCAL PRICE INTERNATIONAL PRICE

NATIONAL PART

RECENT PRODUCTION EXPECTED PRODUCTION 2020

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Figure 7 : Tobacco exports in 2009: 232 000 tons

Tobacco in a station depot

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Green leaves exports to Zambia

1.1.4 Cotton Cotton can be grown in the same places sugar is present. Nowadays, the main area of production is in the low lands along the Shire River, and the cotton production area may be extended through the “green belt” programme and through the development of Chikwawa region. The Salima area is also producing important quantities. The main characteristic of cotton, from a transport point of view, is its low density. Therefore, road transportation proves to be competitive, at least for domestic transport and local recollection.

Criteria of choice of an export transport chain for Tobacco

Road to BeiraNacala rail

corridor

XVery important

IdemFumigation at the factory Limbe or Lilongwe

In 1000 kg sacs then containerised

Tobacco(2nd logistic

Chain)

Road to JoburgXLess that sea leg

Very important

Good storage and handling

facilities

Green leaves in BulkFumigation at Joburg then

sent to Durban

Tobacco(1st Logistic

Chain)

Exports

Current Choice of corridor

Long Term contracts

Pricing of land leg

Time of arrival

ConditionsAt Port

Processing and packaging Criteria for exports

Road to BeiraNacala rail

corridor

XVery important

IdemFumigation at the factory Limbe or Lilongwe

In 1000 kg sacs then containerised

Tobacco(2nd logistic

Chain)

Road to JoburgXLess that sea leg

Very important

Good storage and handling

facilities

Green leaves in BulkFumigation at Joburg then

sent to Durban

Tobacco(1st Logistic

Chain)

Exports

Current Choice of corridor

Long Term contracts

Pricing of land leg

Time of arrival

ConditionsAt Port

Processing and packaging Criteria for exports

Use of Nacala Rail Corridor

Use of railway fromAuction Floor to factories

Conditions of a possible transfer toNacala’s corridor (in 2015)

Railway in good conditions between Lilongwe and Nkaya

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28

Cotton is another key export commodity for Malawi. The crop has faced a major challenge recently due to sharp fall of prices in 2008/09 season. The government set a minimum price of 60Mw Kwacha per kg BUT the traders were buying at 25Mw kwacha per kg. This discouraged the farmers and coupled with dry spell the crop production for 2010/11 season has fallen by 50%. The World Bank and Cotton Development Trust have come in and planned to increase production for the future. The current price is at 50Mk/ kg, for 2010/11 season equivalent to 30 US cents per kilogram. International markets are in the Far East, mainly China.

0.33/KG $ $

PACKING MODE : CONTAINERISED

Bagged in hessian sacks of 120kg each

27 560 TONS 38 580 TONS

MODE ROUTES WEIGHT % ORIGIN DESTINATION GROUPING PT TIME (days) COST $/TON $/T/Km

Road Chikwawa Southern Region

to Blantye Chikwawa & Balaka

Road Balaka,Salima Central Region

to Blantye Salima & Ntcheu

PACKING MODE CONTAINERISED

Bagged in hessian sacks of 120kg each

27 560 TONS 38 580 TONS

MODE CORRIDOR WEIGHT % ORIGIN DESTINATION GROUPING PT TIME (days) COST $/t/km Cost$/t/km

Transit Time

Road Beira 40% 70% Far East ( China) 50 US$79 US$98

30% South Asia 45 US$79 US$92

Road Durban 60% 54% Far East ( China) 50 US$126.9 US$98

46% South Asia 45 US$126.9 US$92

Road Johannesburg 0% 0% South Africa N/A US$93 0

INTERNATIONAL PART

RECENT EXPORTS EXPECTED EXPORTS 2020

PRODUCT : COTTON

SPECIAL CONDITIONS : NONE

LOCAL PRICE INTERNATIONAL PRICE

NATIONAL PART

RECENT PRODUCTION EXPECTED PRODUCTION 2020

Synthesis

• Cotton is grown up in the same places than sugar (along the Shire River) and around Salima

• Cotton production may be extended through the green belt program and the development of Chikwawa Region

• Low density => the road transportation is competitive

• Major challenge due to a sharp fall of prices in 2008/2009 season (minimum price set up by GOM of 60 MKw/kg but traders were buying 25 MKw/kg

Cotton collection

Trucks

40% Beira60% Durban..% Johannesbourg)

Treatment

Far East (China)South East Asia

Not an easy market for rail

ImportantNotsensitive

Good storage

Bagged in hessian sacks of 120kg each

Cotton

Choice of the corridor

Long Term contracts

Pricing of land leg

Time of arrival

ConditionsAt Port

Processing and packaging

Criteria for exports/imports

Not an easy market for rail

ImportantNotsensitive

Good storage

Bagged in hessian sacks of 120kg each

Cotton

Choice of the corridor

Long Term contracts

Pricing of land leg

Time of arrival

ConditionsAt Port

Processing and packaging

Criteria for exports/imports

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29

Nacala

Chipata

Dar Es Salam

Mbeya

Chiwawa

Beira

MoatizeLuzaka

Chinde

Tete

Mtwara

HarareNsanje Port

DurbanJoburg

Kanona Dwenga

11,024 t (40%)

Far East (70%), South Asia (30%)

Cotton exports in 2009Use of Roads to Beira and Durban

Dwenga

Chiwawa

Far East (64%), South Asia (46%)

16,536 t (60%)

Figure 8 : Cotton exports in 2009: Use of Roads to Beira and Durban

Nacala

Chipata

Dar Es Salam

Mbeya

Chiwawa

Beira

MoatizeLuzaka

Chinde

Tete

Mtwara

HarareNsanje Port

DurbanJoburg

Kanona Dwenga

38,580 t (100%)

Expected Cotton exports in 2020Use of Nacala Corridor or Shire Zambezi ?

Dwenga

Chiwawa

Far East and South Asia

Figure 9 : expected Cotton exports in 2020 : Use of Nacala Corridor or Shire Zambezi?

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30

Malawi’s ginning activities are dominated by two major players, who have organised themselves in the Cotton Development Association (CDA). The CDA was seen as a requirement for improving and developing the Malawi cotton market. 80,000 mT production. 15% is grown in the north, 15% in the central province, and 70% south of Blantyre. To be cost effective the cotton from the North would need to be shipped via Mbeya to Dar es Salaam. Local demand for cotton lint has dried up completely. All production is for export: 85% to South Africa, 10% to Zambia and the remainder to varying buyers. All exports take place by road, in trucks. The ginning companies are looking at other markets, i.e. the Far East. For overseas shipment the industry usually uses Durban. Going through Beira offer a potential, but there is not enough traffic (vessels) from there. Nacala is not favoured, mainly because of its inefficiency and unreliability.

1.1.5 Sugar

Sugar is presently the second major Malawian export in volume, (280 000 tons) and one of the major productions. The EU and the US increased the quota for Malawi sugar as one way of promoting trade with the third word countries such as Malawi. But one should also consider the crucial aspect of prices on the European sugar market: due to the European deregulation, prices are now much lower on this main export market than what they were, say 10 years ago. Higher transport prices of a couple of dollars per ton oust Malawi of the market. Production accounts for approximately 350 000 tons per year, (corresponding to 3.5 million tonnes of sugar cane) in two areas: in the North-Eastern part of the Central province, around Nkhotakota, providing cane to the Dwangwa Sugar Mills; and in the Southern part of the Southern Province, in Nchalo (in Chikwawa District; production around 200 000 tons). 90% is grown on these two large estates owned and managed by the Illovo Sugar Company Transportation is a real problem in both cases (Northern and Southern estates) From the farm to the factory, transport costs are huge: The average transportation cost per ton is MK450 for growers located six km from the mill to MK1000 for growers located 40 km from the mill. Depending on distance from the mill, the transport share of total cost is 16.8% to 20%. The average cost of inputs per hectare is MK90000 and the average net earnings are MK43000 per hectare. The transport of sugar cane is very costly as the product is transported by dedicated lorries, used only during the crop season. In many countries, rail is preferred to road to collect sugar cane, but the investments are huge. They should be justified when the rail can also be used for other commodities as well as other inputs and when the rail directly links the factory to its markets and its providers. Illovo Company exploits farms surrounding its two factories by approximately 6 km. A major distance should not be economically profitable in this firm structure. Nevertheless, due to the rise in the demand of sugar, Illovo is presently studying various options that would allow it to increase its cane production. The sugar is leaving the factory as bulk, and is traditionally containerized for export in grouping centres.

Northern Estate

In the case of Nkhotakota, it used to leave the factory by boat to Chipoka, from where it was sent to Mozambican corridors. New conditions were generated by an accumulation of difficulties: The lack of services in Chipoka, The dredging difficulties in Nkhotakota lake embankment, The location of the inland port facilities 25km away from the factory (which implies trans-loading on

trucks and then on boats) and Frequent disturbances in traffic on the road between the lake and the factory.

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Nowadays Dwangwa Sugar Mills in Nkhotakota supplies the local markets in the central and northern regions. Export sugar to Zambia, Tanzania, Rwanda, DRC and Burundi is also loaded into trucks from Dwangwa. The sugar market is very competitive and cost sensitive: the use of trucks discards most of the production on international markets, apart that of landlocked countries. The opening of a railway line to Zambia and Congo, or a best efficiency of a lake corridor, North and South, would result in better consumer prices, and thus wider markets and more important exports.

Synthesis

$ $

PACKING MODE : C0NTAINERISED

packed in 1000kg bags

280000 TONS 364000 TONS

MODE ROUTES WEIGHT % ORIGIN DESTINATION GROUPING PT TIME (days) COST $/TON $/T/Km

Road Nchalo in Chikwawa Southern Region

to Blantye Nchalo in Chikwawa

Road Dwangwa Northern Region

to Blantye Dwangwa in Nkhota kota

PACKING MODE CONTAINERS

packed in 1000kg bags

280000 TONS 364000 TONS

MODE CORRIDOR WEIGHT % ORIGIN DESTINATION GROUPING PT TIME (days) COST $/TON $/T/Km

Transit Tim( days) Road freight to ports Sea freight to destination

Rail Nacala 140000 Mt 50% Chikwawa 50% EU 35 US$36 US$80

(South Mw) 40% USA 50 US$36 US$107Dwangwa (C/Mw) 10% Far East 45 US$36 US$98

Road Beira 126000 Mt 45% Chikwawa 50% EU 35 US$79 US$80

(South Mw) 40% USA 50 US$79 US$107Dwangwa (C/Mw) 10% Far East 45 US$79 US$98

Road Other 14000 Mt 5% Chikwawa 3% DR Congo 12 US$126.9 US$170

(South Mw) 1% Egypt 30 US$79 US$70Dwangwa (C/Mw) 2% local 1 US$79 US$107

INTERNATIONAL PART

RECENT EXPORTS EXPECTED EXPORTS 2020

PRODUCT : SUGAR

SPECIAL CONDITIONS : NONE

LOCAL PRICE INTERNATIONAL PRICE

NATIONAL PART

RECENT PRODUCTION EXPECTED PRODUCTION 2020

Definition of a new transport strategy for the Northern Estate

Location of production

• One of the major production in Malawi in volume (350000 tons in 2009) corresponding to 3.5 million tons of sugar cane.

• 2nd major export in volume (280 000 tons of sugar in 2009)

• 3rd cash earner for Malawi

• Actual and expected logistics

Nkhotakota(Central Province

Nchalo(Chiwawa District

Transport by dedicated lorries of raw cane. 6 km from the mill: MK 450 per ton

. 40 km from the mill : MK 1000

Dwanga SugarMills

Nchalo SugarMills

Local Markets : Central and Northern Regions

Exports : Zambia, Tanzania, Rwanda, RDC

Trucks

47 km

Truck

Luchenza Warehouse

Containers

16,8 to 20% of total cost

954 km

Train Nacala

197 km

954 km

Train NacalaTrain

Improvement : dedicated railway line to allowcheeper transport of raw cane

Improvement : Replacement of the Chimoro bridgeand rehabilitation of the railway between Limbe and Bangula

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32

Internal Sugar Movements Costs Associated With Internal Sugar Movements

Figure 10 : Internal Sugar Movements and Cost Associated

These volumes are currently shipped via the Nacala Corridor or at a premium via road to Beira. This is dependant upon ensuring back-haul rates from transporters (50% difference in cost, USD 80 single run versus USD 40 for return trip) and decisions are influenced entirely by availability of back-haul and the structural state of the rail route. Currently out of the total shipment costs met by Illovo on its processed commodity are 28% for internal haulage costs (this includes internal product distribution as well as costs to move the product to consolidation points prior to export). This equates to in excess of USD 2 m per annum. Of this value over USD 1m is for the consolidation at Limbe of 50,000mT of sugar prior to export. The decision making process is very simple and considers only financial castings. The priority is entirely about minimising costs. Prior to the increase in transport costs, during the cutting season the milling volumes were running at full capacity. Supposing this would be the case with rationale logistics, the simplest opportunity to increase the volumes milled at the Northern plant would be to extend the length of the growing season. This is determined by the weather and seasonal changes, yet the topography of the Malawian lakeside provides opportunities to extend the season. The rains come from the north of the country so as plantations move south they can be cut for longer. The critical factor in the cutting and milling of sugar cane is that it must be milled within 24 hours of being cut to optimise the sucrose extraction.

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To date it is difficult to utilise the opportunity of extended dry season as the transportation infrastructure for cane collection is inefficient. However if an alternative to road were available, i.e. floating the cut cane up the lake and then by a canal or light rail into Dwangwa, then it might be possible to extend the milling season and utilise the climatic variations. An analysis was carried out by IMANI on export process in the sugar sector in 2002 and the following shows the importation process. Unfortunately, little has changed since then.

Import Process Malawi Sugar Industry

Figure 11 : Sugar exports (actual)

Goods passed to AMI clearing

Agent

AMI Post Bond for value of

Duty

Clearance by Customs into

Temporary Store

Local Customs transfer Bond

AMI Co mplete Bills of Entry

for each Item

Customer Performs Tariff code

check

Duties Paid, Customer

documents Stamped

Need for Product Identified

Price Enquiry to Supplier

Pro Forma Invoice received

Exchange Control Allocation

Place Order

If Goods > $2000 then S.G.S

Pre Shipment Inspection

Supplier Arranges SGS

Inspection

Despatch

7 Sets of Export

Documentation Prepared for

each Item

Shipment : Border Delays

Last Set of Documents

Surrendered Duties Paid to Customs

Stamped Docu ments provided

to Customer

Product Cleared into Goods

Receiving

Customer Prepares docs to

apply to Commercial Bank for

funds transfer

Interest charged fro m date o f

despatch

Apply to Commercial Bank for

Exchange Control allocation to

pay Interest Charges

Exchange Control allocation

enables payment of Interest

Goods passed to AMI clearing

Agent

AMI Post Bond for value of

Duty

Clearance by Customs into

Temporary Store

Local Customs transfer Bond

AMI Co mplete Bills of Entry

for each Item

Customer Performs Tariff code

check

Duties Paid, Customer

documents Stamped

Need for Product Identified

Price Enquiry to Supplier

Pro Forma Invoice received

Exchange Control Allocation

Place Order

If Goods > $2000 then S.G.S

Pre Shipment Inspection

Supplier Arranges SGS

Inspection

Despatch

7 Sets of Export

Documentation Prepared for

each Item

Shipment : Border Delays

Last Set of Documents

Surrendered Duties Paid to Customs

Stamped Docu ments provided

to Customer

Product Cleared into Goods

Receiving

Customer Prepares docs to

apply to Commercial Bank for

funds transfer

Interest charged fro m date o f

despatch

Apply to Commercial Bank for

Exchange Control allocation to

pay Interest Charges

Exchange Control allocation

enables payment of Interest

Page 34: Final report Malawi

34

Definition of a transport strategy for the southern Estate

Figure 12 : How to better capture possible improvements

In Nchalo, the traditional route is by road southward to the Bangula station (47km) then by train North to Luchenza. The routing of sugar to Nacala via the Luchenza warehouse was convenient as far as the train was linking Bangula and the processing warehouse. The destruction of a rail bridge in Chiromo, North of Bangula several years ago resulted in a shift to trucks and road, which is circuitous and expensive. Sugar to Nacala via Luchenza travels a total distance of 1017 kilometres. From Nchalo to Luchenza, the distance is 147 kilometres and the only road linking the Lower Shire and Shire Highlands goes through two high escarpments before reaching Blantyre on the way to Luchenza. The last 40 km to Blantyre represent a declivity of 1000m. This new transportation mode adds US$7.5 per ton to the cost of transporting sugar from Nchalo to Nacala. It would be preferable to have a route from Nchalo Factory to Bangula, which is only 47 kilometres, and the longer rail leg from Bangula to Nacala through Blantyre, which is 954 kilometres with no cargo transfers on the way. Blantyre to Nacala by rail is US$22 per ton, while road haulage from Blantyre to Beira is US$35 per ton with backhaul and US$60 per ton without backhaul. Stock movement to Nacala and Beira goes through warehouses in Luchenza and Blantyre. Sugar for Nacala is containerized or loaded in covered wagon in bags to Nacala. The cost of warehousing and handling at Blantyre or Luchenza is US$5 and at the ports is approximately US$24 per ton. Sugar is the major export cargo transported by train, on the Nacala corridor.

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35

Figure 13: Northern Region Transportation problems for Sugar

Warehousing sugar production also requires specific equipment and management. The change in the route resulted in the non-occupation of Bangula warehouses, which have been eventually rented to cotton producers.

As a conclusion, it is crucial to the sugar industry to rehabilitate the railway from Limbe to Bangula and rebuild the bridge in Chiromo as soon as possible.

It would also be an important development to develop a rail link between Bangula and the factory. Another corridor alternative would be the use of the Shire-Zambezi corridor, with a rehabilitation of the railway from Bangula to Nsanje. This would result in lower transportation costs to Beira, but would not divert traffic to Nacala. European sugar cargoes do not touch in Beira, where physical constrains do not allow heavy tonnages. Sugar loaded in Beira is primarily shipped to Madagascar and Mombasa.

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Figure 14 : Expected Sugar exports in 2012-2015: Use of Lake service and Nacala Corridor

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1.2 Food crops studied

1.2.1 Maize

Maize is the most important product produced in Malawi, in terms of tonnage and strategic importance. Maize being the very basic daily food of all Malawians, the successive governments of Malawi favoured the constitution of strategic reserve rather than exporting. Production is between 3 and 3.5 million tons per year, meanwhile human direct consumption is around 2.5 million tons per year. Huge silos surround Lilongwe and important silos can be found in most important cities. Potentially, Malawi might be one of the regional major exporters of maize, along or even above Uganda, Tanzania and SA. Regional markets are huge, as Maize consumption is the rule in Eastern and East-Central Africa. Kenya and Zimbabwe suffer important deficits, and Zambia or Tanzania may experiment casual deficits in bad years. Domestic prices are generally not far from international prices. Whatever the international policy might be, domestic transportation of Maize, unprocessed or processed, in bulk or bags, is one of the most important local traffic all along. Road is the unique transportation mode for bulk, with many traditional transportation means (including animal cars and bicycle), and the main transportation mode for processed maize. Most highlands are maize producing, especially in the central and southern regions; meanwhile the hottest areas and the cities are consumers.

Trends in domestic gaps

In February 2008, the price of maize had more than doubled from MWK 21 per kg in the previous year (Feb 2007) to MWK43 per kg. From January 2008 to March 2008, the price had increased by 10%, with March representing the peak of the lean season. The maize harvest period which started in March in some parts of the country did not result in the weakening of the prices, as expected. As such, maize prices have kept on an upward trend, currently reaching over MWK60 per kg. The high volatility of prices between the harvest (March – June) and lean season (October – February) is typical of thin Maize markets. Farmers are compelled to engage in distress selling at low prices during the harvest period, only to buy back the maize during the lean season at much higher prices. Over 80% of the smallholder farmers end up being net food buyers.

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The use of train for distribution of processed maize from Blantyre silos Eastward and Southward would make sense, just like distribution around the lake and especially to the Northern cities and to Monkey Bay area, by train and boat, might be efficient. Apparently, these routes have never been studied up to date. The possibility of a lake + road corridor to Kenya, from Chipoka, has not been studied either.

Figure 15 : Maize local distribution: Use of the lake and railway distribution systems

1.2.2 Cassava Cassava is the most important production in the country in volume (3,913,309 metric tonnes in 2009, according to the Secretary for Agriculture and Food Security). Production in 2006 was 3.2 millions tons. It grows country wide, needs little water and is drought resistant. 21% of small holders grow cassava as food or cash crop. There is a cassava starch processing facility in Nkhota Kota that was established in 2006; a smaller facility exists in Lilongwe. Opportunities identified are the following: . Transformation into starch for paper and packaging industries, . Use in starch for Ethanol Energy projects, . Use in glues, snacks, sweeteners, pharmaceutical. An export market may exist at a regional level (Mozambique, Zambia and Zimbabwe).

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Alternative Supply Channels in Malawi’s Cassava Value Chain

Diagram 1 : Alternative Supply Channels in Malawi’s Cassava Value Chain

Transportation of Cassava From the producing areas to the markets: Land rovers (especially in Lilongwe) and lorries (3, 7 to 10 tons) - return trips from original trips/places. A majority of the traders arrange their own transport. In some cases, especially for smaller markets, a number of wholesalers will hire one vehicle to transport their produce to a given market. Packaging could be either Sacs (50 or 90 kg) or bulk in the vehicle. For areas within the vicinity (20-30 kilometres from the city), bicycles are used to transport cassava. These can transport cassava of up to a 50 kilograms bag.

Push factors to grow cassava . 2002 drought . Withdraw of input subsidy, . Reduced urban purchasing power and dwindling farm sizes. Pull factors . Relative ease of cassava cultivation, . Utility of ‘sweet’ cassava as an uncooked snack food, . Lower price of the raw roots in urban markets compared to maize

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1.2.3 Sweet Potatoes and Potatoes Sweet potatoes also represent huge quantities, with 2,714,245 tonnes, while potatoes account for 758,560 tonnes. (Same source) These two products are mainly used for local consumption, although one can hardly understand how Malawi can consume such quantities. Regional imbalances are huge, and the Northern region, which is a big producer, has difficulties to market its products nationally. The same problem occurs in the mountain areas of the Southern region. Other food crops include a wide range of products, each one accounting for small volumes (main ones are ground nuts, pulses and tomatoes).

Possible routes for Cassava and sweet potatoes

Chipoka

Salima

Nacala

Chipata

Dar Es SalamMbeya

Bangula

Beira

MoatizeLuzaka ChindeTete

main

production

area

efficient lake

services allow

marketing

Figure 16: Possible routes for Cassava and sweet potatoes

The major cost element in cassava market is transportation costs from the production points with the middlemen incurring the largest portion of the transport costs. This is the case because in many cases, the markets were distant places often another district from producing areas. Once at the wholesale point, the transportation costs tended to be low because of the short distances involved.

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1.2.4 Pulses (beans, pigeon peas, cow peas, grains, white haricot …)

Pulses represented in 2009, a production of 383,000 tonnes. 411,750 tonnes were produced in 2006. Producing areas are in the Central Region – Kabunga, Ntchis, and Mzimba 14 purchasers package, locally distribute and export pulses. Traditional markets are South Africa, EU, India and the Far East. India is the biggest producer, consumer and importer of pulses. Food crops are moved to overseas destinations primarily via Nacala (50%), for domestic consumption to South Africa (35%), and to other African destinations (15%), primarily Zambia and Congo. From Nacala, final destinations include India (82%) and Malaysia (18%). It should be noticed that exporters consider the delays in transport and the poor storage conditions in Nacala as a limitation to the volumes exports and to the variety of products exported. With 15 to 20 000 tons transported by rail to Nacala, peas and food crops are the second major exports by train from Malawi. The sector opportunities are the following: . Meat, bakery, animal feed supplement, . Oil, . Food for fish farmers, . Milks and cosmetics. Although each product has its own distribution system, the global export figure presents as follows:

Other Africa

15%

Malawi50%

Nacala

35%

RSA

FOOD CROPS

Primary export routes

India

Malaysia

82%

18%

Figure 17 : Food crops-primary export routes

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42

1.2.4 Rice

Amazingly, rice has been forgotten or neglected in most studies, in which more valuable products representing very small quantities are over represented (i.e. coffee, whose exports are less than 5 000 tons per year). Considered as strategic, rice exports are restricted. The government itself is passing export quotas to specific countries. Exports are currently of 100,000 tonnes yearly. Rice regional markets are numerous: Kenya, Somalia, Djibouti, Ethiopia, and occasionally Zimbabwe. Other countries in Africa, such as Senegal, are important importers. On a commercial base, the use of the TAZARA corridor should be the most geographically attractive for it links the Lake area (producing rice) to the most important international markets.

$ $

PACKING MODE : BULK

131 058 TONS 137 940,00 TONS

PRODUCT : RICE

SPECIAL CONDITIONS : PERISHABLE

LOCAL PRICE INTERNATIONAL PRICE

NATIONAL PART

RECENT PRODUCTION EXPECTED PRODUCTION 2020

Chipoka

Salima

Nacala

Chipata

Dar Es SalamMbeya

Bangula

Beira

MoatizeLuzaka ChindeTete

MonkeyBay

Lower Shire

Figure 18 : Rice possible routes

Food crops are an eventually rewarding cargo, since its growth potential is said to be substantial. The main cargo movers in this sector were said to be Bharat Trading Co., HMS Ltd., Rab Processors and Transglobe Exports. They export mainly to Far Eastern countries and consequently use most the Nacala line. As the season for food produce coincides with the seasons of other agricultural products, the supply of international trucks is a marked constraint in this sector

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1.3 Domestic industry The same study is conducted on other type of commodities necessitating transport.

1.3.1 Lafarge Cement Malawi has the potential to mine most heavy products entering in the category “construction materials”, as: - Malawi is a major producer of wood, and export some of it; - Malawi has most stone necessary to construction; - Malawi has limestone and coal, which are necessary to produce the clinker, the main raw material for

cement production. Malawi has both limestone and coal deposits, although the reserves are generally small, with relatively high mining costs. The very high cost of imported clinker and cement should make it possible and viable to produce these products in Malawi, and to offset the high regional transport costs against the higher mining and production costs in Malawi. The GOM policy should promote a coordinated approach to reduce the transport cost component in the Malawi cement sector. This may first come through an efficient North-South transportation system for heavy products, including the Lake, intermodal facilities and efficient railways. The second step might be efficient links for heavy products with Tanzania (completion of a railway to the lake) and Zimbabwe (railway link to Moatize)

20

From Malawi Transport Cost Study (2004)

The total Malawi cement demand is of the order of 235,000 tons per annum.Local Supply of Cement2 Cement factories in MalawiPortland Cement in Blantyre : 160,000 tons/year from imported clinker,Shayona Cement at Kasungu : 30,000 tons/year. Imports of CementImports from Mbeya Cement in Tanzania and Chilanga in Zambia.

Cement is made of clinker (66%), mineral filler (30%), and gypsum (4%). The clinker is produced from limestone, burnt in a kiln using coal (coal is about 22% by weight of clinker production)Pb: Cheap a nd reliable sour ce of coal supplies in Malawi and the region

Before 2004 : Mining of limestone and manufacturing of clinker at ChangalumeClinker imported mainly from Harare at US$44 to US$50 per ton at the rate of about 114,000 tons per annum (compared to the ex gate average selling price of cement of US$131 per ton during Sept 2004).

The recent increase in road user charges in Zimbabwe from US$47 per truck to US$87 per truck will have a direct bearing on cement prices by an additional US$1 per ton. In order to reduce transport costs and to optimize truck utilization, trucking companies are focusing on securing backhaul on the long routes. Trucks bringing clinker to Blantyre are returning to Harare with coal picked up at Moatize, and trucks supplying coal to Mbeya Cement in Tanzania are bringing back cement for northern Malawi. Trucks are even hauling coal from Moatize to Mbeya, and bringing cement back to Lilongwe, a round trip of more than 2,000 km costing US$118 per ton.

Clinker fromZimbabwe (114,000 tons/y)

MbeiaTanzania

160,000 tons/y of Cement

30,000 tons/y of Cement

Imports of cement

Figure 19 : Cement actual routes

1.3.2 Carlsberg Beer

Malawi has a large production plant for Carlsberg beer in Blantyre. Southern Bottlers Limited /Carlsberg Beer Limited are exploring export opportunities for their beer products and local squash. According to their own estimates, there is an export potential of 40,000 cases a week (or up to 50,000 cases at peak times), which is comparable to current weekly shipments to Lilongwe and Mzuzu. There export drive is mainly focused on Mozambique, potential for Tanzania is less clear. Carlsberg beer is currently bottled in returnable bottles. Disposable bottles will need to be used if exports are to be realizable.

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Cans or thin-wall glass are options. All in all, market potential is estimated at 20 containers a week. In term of transport, and considering the packaging specificities, this is the equivalent of 30000 mT per year. The Sobo-Carlsberg operation is not nearly realising its potential currently. Capacity is no constraint for expansion into export; the factory can produce up to 40 000 bottles an hour. River transport is a very likely and probably option for most of the exports. The transport mode is cheap, adapted to the product specificities, and relatively safe when on board. As imports are coming from Beira, the imports might be a return cargo. Sobo-Carlsberg imports many of their raw materials. Overseas imports come in 20 foot containers, in total approximately 300 per year. They use the port of Beira (via Durban) and from Beira the containers are trucked to Blantyre. Sobo find Beira to have many advantages over the other routes: cheaper, quick turnaround, delays only occur for a good reason. Additionally, road transport (as opposed to rail) gives them more control over their own shipments. They have a well established logistics system enhanced by corporate operations.

1.3.3 Mzuzu timber processing

Several projects of forestry development in the Northern region: the privatisation of the Luwawa Mzamba Nthungwa and Lusangazi forestry concessions on the Vipya plateau in northern Malawi are valued at USD 44 million, to underpin downstream investment in a large integrated sawmill in Mzuzu valued at USD 8.5 million and a Medium Density Fibre Board plant, also in Mzuzu valued at USD 75 million (combined investment of USD 127.5 million); it would create a transport demand for timber products of 1,750,000 tpa

1.4 Non agricultural products transport imported

1.4.1 Imports

Imports are essential for Malawi economy, with four big groups of products: The inputs to agricultural sector, in volume mainly fertilizers of different types, the petroleum’s products, the construction materials and sophisticated industrial products. The main commodities of the three first groups have been studied, and the fourth group, for being too diverse, hasn’t been studied.

1.4.2 Petroleum products

Malawi imports refined products including five groups of fuels: diesel, petrol, lubricants, paraffin and bitumen. Imports of fuels close to 240,000 cubic meters (200 000 tons) of petroleum products annually and the importation has been in the hands of the oil companies from independence on. The oil companies form a consortium Petroleum Importers Limited (PIL): its role is to import fuel on behalf of five oil companies; BP, Mobil, Total, Caltex and Petroda. PIL wholly handles the fuel importation and PCC (Petroleum Control Commission) is the government monitoring body.

Structure of Fuel Industry in Malawi

ETHCO

(7%)PLAYERS

Global Oil

Market (93%)REGULATORS

ENERGY MINISTER

BP = 40% Board Appointment

Policy Guidance

Strategic Planning

Mobil = 27% Broad-Based

PETROLEUM

PRICING

Total = 9% COMMITTEE

Caltex = 12% REGULATOR (PCC)

Appeal - Price Regulation

- Technical Regulation

PETRODA = 12% - Environmental Aspects

- Legal Regulation

Regulate

P

I

L

L

T

D

DOWNSTREAM LIQUID FUELS MARKET

Diagram 2 : Structure of Fuel Industry in Malawi

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Multinational oil companies have fuel storage facilities both in Blantyre and Salima. Fuel offloaded in Blantyre is for local distribution in all districts in the Southern Region and Ntcheu district in the Central Region. Salima storage was traditionally serving the rest of the Central Region as well as the Northern Region, although the distribution system is presently more decongested. The Rail occupies a small share of the local exchanges, as shown on the graphic below:

FUELS MOVED FROM YEAR 2005 TO DECEMBER 2009

-

5 000

10 000

15 000

20 000

25 000

TO

NN

ES

TONNES - 2 444 - 11375 21 337

Year 2005 Year 2006 Year 2007 Year 2008 Year 2009

Current Routes for Fuel Imports

Regional political changes (end of apartheid, end of the war in Mozambique) resulted in changes in costs and efficiency of the fuel corridors, with a decrease of Tanzania as a transit zone, benefiting to Mozambique. Today, fuel is imported through the TAZARA corridor (mainly diesel), the Nacala corridor, and moreover the Beira corridor.

Nacala by rail;

Beira by road;

Dar es Salaam by rail to Mbeya and road to Malawi. The route-mix for fuel imports in 2009 was Beira 80%, Nacala 5% and Dar es Salaam 15%. (Source: PIL) The shares of Nacala have been decreasing for the last six years, from 15% to 5%, due to the lack of efficiency of the rail operator and the organizational problems in Nacala port.

Constraints and Challenges faced by the Liquid Fuels Industry in Malawi

Malawi is obliged to import refined petroleum products since it lacks domestic refining capacity and studies confirmed that domestic refining and the construction of pipelines from the coasts of Mozambique or Tanzania would not be viable in the short to medium term given the relatively low demand for liquid fuels. The main constraints are inadequate inland storage facilities and insufficient distribution network, particularly in the rural areas. It is frightening to observe that, in June 2010, an acute diesel shortage occurred in the capital City, forcing some vehicles to ground. High oil prices justified by inadequate investment in retail outlets, high transportation costs and limited national involvement in Liquid Fuel and Gas Industry. Unreliable Rail Services: the consultant was alarmed by the users on the inability of the current rail administrations to maintain and sustain both domestic and regional services.

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Fuel haulage by rail from Beira, was once able to sustain the country’s demand hence the Nacala rail link could do more. It is quite amazing to notice that most transport is done from Beira by road, at a much higher cost.

Proposed solutions for a better fuel sector

Reforming industry’s downstream market by restructuring it, might avoid the consortium turning into a cartel. Nevertheless, due to the small market size, the Government should be extremely cautious in its attempts to develop the competition between the companies.

Improving rail services on the Nacala Line: Nacala port has an adequate and well-equipped fuel tank farm(s). Several fuel-block train trials can be used, and indeed make the trip in 41 hours. Lack of efficiency, very likely on both side of the border, make that the Nacala corridor did not yet captured the lion’s share in the fuel imports, and is, at the opposite, losing the market shares it conquered in the late 90s.

Building up strategic storages: the existing fuel storages are notably insufficient. It is of national interest to have strategic storages, in specific transport nods. It is also quite important to have these strategic storages decentralized in at least three fuels tank depots, in order to prevent the country from a possible accident in the fuel storages. Most countries consider that a thirty days reserve stock of each strategic commodity is a minimum. The location of the storages should be done considering the facility to get the fuel from the ports, and the most important market places. We would thus recommend storing the fuel strategic reserves in Blantyre or Limbe, Lilongwe and Nkhata Bay, in addition to existing distribution storages.

Construction of a pipeline: the construction of a pipeline is actually considered by the GoM, a feasibility study is to be conducted on a pipe from Beira to Nsanje (cost of the study 60mMKW). It is not certain that a pipeline might have an interest for the country, as there are different strategic fuel products to be imported, which cannot use the same pipe. Importing crude oil and developing a refinery seems either impossible, due to the reduced size of the market and the high cost of transport.

The choice of Nsanje as the pipeline terminal is also highly questionable, as Nsanje is presently linked to the country demographic and economic centres only by road. One should also consider that this road is subject to high declivities and is not adapted to important traffic of heavy loaded vehicles. As a matter of fact, and supposing that barges might transport the fuel from Beira to Nsanje, it would apparently make more sense to build a pipe from Nsanje to Limbe…

1.4.3 Fertilizers

Fertilizers are essential to the development of Malawi’s agricultural sector, both for domestic food production and to achieve growth in the export sector. Most fertilizer is imported as a finished product. For fertilizer that is blended or granulated in Malawi, most of the components are imported. Approximately 85% of the Malawi population is rural and dependent on agriculture for their livelihood. Hence, the international transport and distribution costs of fertilizer have an important impact on most of Malawi’s population.

Existing Supply Trends, Buyers and Markets

Fertilizers are bought and sold by companies on a commercial basis. These companies compete on price and service. The main companies currently providing fertilizer in Malawi are Optichem, Yara, SFFRFM, and Farmers World (which has merged with Agora that previously served the Southern Region). A number of the fertilizer companies in Malawi are subsidiaries of fertilizer companies in South Africa and Europe. They import some of the fertilizers ready-made and bagged for immediate distribution. In other cases, they import the components and blend them with local ingredients to make the final product and then distribute. Farmers World, for example, has a blending plant in Liwonde. Fertilizer components are shipped to Liwonde, blended and then distributed around the country. On the other hand, fertilizers that they buy in their final form can be sold directly to the consumer. Optichem also blends fertilizers in the Blantyre area as well as making granular fertilizers.

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Malawi imported some 369,000 tons of fertilizer in 2008, which is more than two time the average imports for the period 2000-2005. Some products were a blend of imported and domestic ingredients meaning the total amount of fertilizer used in Malawi was higher than this figure. The Malawi Bureau of Standards (MBS) periodically certifies fertilizer products to insure that they match the specifications for each given product. SFFRFM had many regional sales outlets around the country during the period when they were the only supplier to smallholders nationwide and were using ADMARC warehouses. They are closing down not viable outlets. YARA arranges truck transport to regional depots. It relies on traders and agents to sell the fertilizer to local farmers clubs and farmers. The buyer arranges the transport to the farm gate. Farmers World arranges truck transport to the regional depots and individual outlets. In order to operate the outlets year round and encourage customer loyalty, they sell a variety of products in demand in villages in addition to fertilizer and sprays. Optichem concentrates on the production side and sells from its warehouses in Blantyre and Lilongwe. During the 2004-5 growing season, there were major shortages of fertilizer. The need for high volumes of fertilizer coming through the system all at once, meant transport congestion, insufficient vehicle capacity and high prices. Transporters were able to charge US$2,800 for break bulk fertilizer from Beira for a route that would normally cost US$2,000. Such high transport costs were passed to the customer with prices as high as MK 3.500 for 50 kg of urea which cost under MK 2.000 during the 2004 growing season. According to IFDC, the total fertilizer in-country by January exceeded the previous year. By the time it reached the customer, it was late for the initial planting with a negative impact on both food and commercial crop production. The early shortages also meant higher prices beyond the ability to pay of many users.

Imports from and through South Africa

Most fertilizer products come from South Africa, Greece, or the Middle East. The major fertilizer producers in South Africa are primarily in the Johannesburg area making it easy to put together loads for a specific retailer in Malawi. The roads are good and there are many South African trucks available that can handle this cargo. The all road route is most useful for specific products where time is critical or a shortfall has occurred. These are often transfers between a parent company or affiliate and the Malawi company/distributor. Therefore, dedicated trucking systems can be used on the most efficient routing and best cost. The all road route from South Africa is the fastest, but the most expensive. Much of the fertilizer is shipped bagged and trucks on the route are limited to 28-ton loads. The road freight portion from the Gauteng to Lilongwe was in 2004 US$98 per ton for a total cost of US$2,744 travelling as break bulk. The same load containerized would be a net 24 tons, because a 40’ container weighs four tons. Hence, even though the transport cost would be the same, since the product landed would be less, the transport cost would be US$114 per ton as opposed to US$98 per ton.

Imports through Mozambique

Through Beira The second and also fast route for Malawi’s fertilizer imports is from Port of Beira. The Port at Beira is better equipped than the Port of Nacala, taking maximum vessel length of 195 meters and 180 meters, respectively. Beira suffers from shallow channel and harbour that often cause delays in berthing of vessels. Slow loading and offloading of cargo at the Port of Beira also limits its throughput. However, there is a good tarmac road all the way from Beira to Mwanza through Tete and the road connections within Malawi are good as well. Trough Nacala Truck availability at the port is less of a problem than availability of locomotives and wagons on the railway at Nacala, although rates are very much tied to the presence or absence of scheduled backhaul.

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During the height of the tobacco season, surplus trucks are at the port waiting for loads, which they are willing to discount rather than returning to Malawi empty. As seen with sugar, there is considerable difference in rates based on whether backhaul is guaranteed or not. In general, imports are seen as subsidizing exports since the trip from the port is likely to be more expensive than the return. An important part is transported by train through the Nacala corridor:

FERTILISER MOVED FROM YEAR 2005 TO DECEMBER 2009

-

10 000

20 000

30 000

40 000

50 000

60 000

TO

NN

ES

TONNES 38 201 36 496 50 036 47005 35 280

Year 2005 Year 2006 Year 2007 Year 2008 Year 2009

Table below presents the estimated times for the routes from South Africa, Nacala, and Beira. Transit Time from South Africa to Blantyre/Lilongwe

Description Overland Nacala Beira

Sea leg 7-10 days 7-10 days

Overland leg 6 days 3 days 4 days

Total 6 days 10-13 days * 11-14 days

Source: IFDC, “Malawi Agricultural Inputs: Report on Logistic Constraints from Supplier to Retailer”, September 2002.

Farmers World imports fertilizer to the Northern Region through the Port of Dar es Salaam for imported finished product shipped from Greece. The transport cost from Dar es Salaam to Mbeya by TAZARA Railway was in 2004 US$606 for a 20’ container. The truck rate from Mbeya to Mzuzu is US$40 per ton. As break bulk, the rail rate from Dar es Salaam to Mbeya is US$35.2 per ton. The all road rate from Dar es Salaam to Mzuzu is US$85.9 per ton.

Fertilizers Transport and Logistics Constraints

In terms of transport costs, using the Port of Nacala and the railway is the best route for fertilizers. Some companies are using it with mixed success, but others have found the railway to be unreliable. Improvements in the management, coordination, efficiency, and reliability of the port and railway are crucial to reducing the cost of fertilizer in Malawi. Getting fertilizer to communities that are far from the main distribution points is a problem. Each fertilizer company has a different solution for cost effectively getting fertilizer to the end user. Growers’ organizations also face difficulty in making fertilizer more accessible and affordable to their members. Financing is very expensive in Malawi.

Importing fertilizer earlier and taking greater advantage of backhaul opportunities might achieve some reduction in transport costs. Due to the high cost of financing and fluctuating wholesale prices and exchange rates, however, companies are hesitant to do advance purchasing of fertilizer.

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Government/donor programs providing subsidies are not always coordinated well enough with the fertilizer companies handling the shipments in order for the companies to better anticipate time and location of demand. The 2004-5 growing season is a good illustration of the problem. Reduction in the average fertilizer price is the prime objective of the Government. Due to the bulk nature of fertilizer, like sugar, the ideal mode for this commodity is rail because of the volumes, weight and ability to transport the fertilizer in specialized bulk wagons. Since fertilizer producing plants offer better prices on fertilizer bought in bulk and shipping lines offer cheaper sea freight rate for bulk loads, it benefits Malawi to take advantage by utilizing bulk handling on rail. The same rationale for improving rail reliability given for exports applies to fertilizer. Bagged fertilizer involves multiple handling and has an added cost for the bagging materials as well as labour and special handling equipment such as pallets, specialized forklifts and human labour. Bagging in Malawi is not expensive (approximately US$9 per ton, for 50kg bags sold in retail 75$), but can be time consuming. Occasionally, bagged product would not be suitable, especially when product is destined to be mixed with other materials to make the final product (e.g., compound D) because the bags would need to be emptied to allow mixing and such bags cannot be reused. Maximum efficiency and availability of suitable rolling stock is crucial to gaining the greatest benefit from increased railway use. Greater emphasis should be placed on achieving a more balanced flow of goods in order to reduce transport charges. Also, the government might offer a loan subsidy for early importation and/or requirements to establish a buffer stock several months in advance of the season. The government also needs to plan any fertilizer subsidy program well in advance of the growing season so that fertilizer companies and farmers can plan and purchase at the most advantageous price with the best transportation and storage options. This policy might have another positive impact, by facilitating the coincidence of transport offers in both ways import/export, easing the prices by providing return cargo.

Figure 20 : Imports of Fertilizers in 2009 : Possibilities in the future (1) and (2)

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1.4.4 Lime Lime is the main raw material for clinker production. As by now, clinker is imported. Imported lime is used as a complement input in cement factories and uranium mining.

IMPORTS STATISTICS

$ 50 kg bag $

PACKING MODE BAGS or CONTAINERS

1250 KG BAGS, PALLETED

38000 TONS Transported b/bulk 76000 TONS

MODE CORRIDOR WEIGHT % DESTINATION ORIGIN GROUPING PT TIME (days) COST $/TON $/T/Km

Transit Time Fob Beira/LL Sea freight

Road & SeaDar es salaam 295200,00 100% Karonga Thailand Dar es sa 35 US$156/km US$80/t/km

ContainerisedDar es salaam 73800,00 100% Karonga UAE & Saudi / ArabiaDar es sa 35 US$156/km US$65t/km

Dar es salaam 295200,00 100% Karonga Tanzania Dar es sa 35 US$156/km US$80/t/km

Dar es salaam 73800,00 100% To Lilongwe Thailand Dar es sa 35 US$200 US$80/t/km

PACKING MODE : BAGS

TONS TONS

MODE ROUTES WEIGHT % ORIGIN DESTINATION GROUPING PT TIME (days) COST $/TON $/T/Km

NATIONAL PART

RECENT CONSUMPTION EXPECTED CONSUMPTION 2020

PRODUCT : LIME

SPECIAL CONDITIONS : NONE

LOCAL PRICE INTERNATIONAL PRICE

INTERNATIONAL PART

RECENT IMPORTS EXPECTED IMPORTS 2020

1.4.5 Clinker

Cement is made of clinker (66%), mineral filler (30%), and gypsum (4%). The clinker is produced from limestone, burnt in a kiln using coal (coal is about 22% by weight of clinker production), and a cheap and reliable source of coal supplies has been the main problem with cement production in Malawi and the region. There are two cement factories in Malawi, which supply the domestic market: - Portland Cement in Blantyre (belonging to Lafarge Group), which produces 160,000 tons per annum from

imported clinker, and - Shayona Cement at Kasungu which produces up to 30,000 tons per annum. - Cement is also imported from Mbeya Cement in Tanzania and Chilanga in Zambia, both of which also

belonging to the Lafarge Group. The total Malawi cement demand is of 235,000 tons per annum. Portland Cement previously mined limestone and manufactured clinker at Changalume, which was then transported by rail to the cement factory in Blantyre. Portland had now ceased clinker production, partly because the limestone reserves are limited, but also because of the problems and cost of coal supplies. Clinker is now being imported mainly from Harare at US$44 to US$50 per ton at the rate of about 114,000 tons per annum (compared to the ex gate average selling price of cement of US$131 per ton during Sept 2004). This has been shown to be more profitable for Portland Cement, although they are planning to install a smaller vertical kiln based on new technology. Shayona Cement produced its own clinker on a smaller scale, and the Changalume facility is currently for sale, being negotiated with possible new operators.

Cement transport and logistics (data from Malawi Transport Cost Study – July 2004) Malawi’s cement industry is therefore highly dependent on the transport sector, and prices of cement are largely dictated by transport costs. For instance, the increase in road user charges in Zimbabwe from US$47 per truck to US$87 per truck had a direct bearing on cement prices by an additional US$1 per ton. In order to reduce transport costs and to optimize truck utilization, trucking companies are focusing on securing backhaul on the long routes.

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Trucks bringing clinker to Blantyre are returning to Harare with coal picked up at Moatize, and trucks supplying coal to Mbeya Cement in Tanzania are bringing back cement for northern Malawi. Trucks are even hauling coal from Moatize to Mbeya, and bringing cement back to Lilongwe, a round trip of more than 2,000 km costing US$118 per ton. Through interviews with Lafarge, the consultant learnt about the import corridors used for clinker. The Rivi-Rivi Bridge washout has directly affected transport costs and cement prices. Prior to the washout, some 40% of Portland’s cement production went to Lilongwe, of which 75% went by rail at a cost of US$9.50 per ton. The road haulage costs are now US$16 per ton and increasing. Imports are now coming from Zambia (via Chipata) and Zimbabwe (via Mwanza) or from Beira depot, whatever might be the clinker origin. Portland has attempted to import clinker through Nacala but this was not considered successful, due to organizational problems. While conducting the interview, a Lafarge logistic executive in Blantyre had this word: “it would be great if you could provide us a railway”; this says quite long about the opinion they have regarding the existing railway corridor. Malawi has both limestone and coal deposits, although the reserves are generally small, with relatively high mining costs. The very high cost of imported clinker and cement should make it possible and viable to produce these products in Malawi, and to offset the high regional transport costs against the higher mining and production costs in Malawi. The GOM policy should promote a coordinated approach to reduce the transport cost component in the Malawi cement sector.

This may first come through an efficient North-South transportation system for heavy products, including the Lake, intermodal facilities and efficient railways. The second step might be efficient links for heavy products with Tanzania (completion of a railway to the lake) and Zimbabwe (railway link to Moatize)

Clinker IMPORTS STATISTICS

$ 50 kg bags $

PACKING MODE BAGS IN BREAK BULK FORM

50 kilogram bags

202000 TONS Transported b/bulk 160000 TONS

MODE CORRIDOR WEIGHT % DESTINATIONORIGIN GROUPING PTTIME (days) COST $/TON$/T/Km

AS PER 2008/09 STATISTICS Transit Time Fob Beira/LL Sea freight

Road & Sea BEIRA 80800,00 40% To Blantyre India/China Beira 35 US$115/t/km US$80/t/km

Containerised Nacala 121200,00 60% To Blantyre India/China Nacala 35 US$78/t/km US$80/t/km

FROM 2010 ONWARDS, LAFARGE WILL CHANGE SOURCE FOR KLINKER

Lusaka via Chipata 101000,00 50% To Blantyre zambia Lusaka 2US$66.67/ t/kmUS$80/t/km

Zimbabwe via Mwanza101000,00 50% To Blantyre Zimbabwe Harare 2 US$50/t/km US$65t/km

PACKING MODE : BAGS

TONS TONS

MODE ROUTES WEIGHT % ORIGIN DESTINATIONGROUPING PTTIME (days) COST $/TON$/T/Km

NATIONAL PART

EXPECTED CONSUMPTION 2020RECENT CONSUMPTION

PRODUCT : KLINKER

SPECIAL CONDITIONS : NONE

LOCAL PRICE INTERNATIONAL PRICE

INTERNATIONAL PART

RECENT IMPORTS EXPECTED IMPORTS 2020

These imports are due to rise in volume. Transport represents a significant part of their cost, and the whole economy would benefit from lower prices on imports.

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1.4.6 Salt Malawi’s annual requirement for salt amounts to 30,000 mT. A large part of it is obtained from Botswana, averaging between 5,000 and 10,000 mT. Small quantities, varying every year, come from Mozambique. The Nacala pans can supply a much larger part of the Malawian demand. Nacala salt is reportedly of higher quality than Botswana salt. If the railway connections were adequate and reliable there would certainly be more imports from Mozambique.

1.5 Potential mining Malawi has considerable potential mining resources, which were, until this year not exploited. The consultant identified the obstacles to such development, which are, mainly, energy and logistics. The potential products studied are:

Historical aspects

Mining was not considered an important sector prior to multiparty elections in 1994. No serious mineral exploration initiatives took place close to 30 years. But this position has been proved wrong in recent years with the discovery of huge deposits of different kinds of precious minerals and metals such as gold, uranium, gemstones, graphite and glass sands which are set to turn the economic fortunes of the country. Mining exploration has increased to unprecedented levels as many companies, mostly foreign, have been granted mining licenses to scout for minerals throughout the country. However, no mining exploration has generated much interest compared to the discovery of the Uranium deposits in the northern district of Karonga by an Australian company Paladin Africa.

Mineral Deposits and Estimated Reserves 2006

Deposit Location Reserve (million tons) Grade

1 Bauxite Mulanje 28,8 43.9% AL203

2 Uranium Karonga/Chipa 12,5 0.15% Ur. 308

3 Monazite/strontianzite Balaka 11 8%Sr.and 2% REO

4 Corundum Bntcheu 8 75.6 gm per m3

5 Graphite Dowa 2,7 5.8% C

6 Limestone Ntcheu 15 48%CaO,1.2%MgO

7 Limestone Balaka 10 46.1%CaCo, 3.5%MgO

8 Titanium Heavy Mineral Sands Salima 700 5.6% HMS

9 Titanium Heavy Mineral Sands Mangochi 689 6.0% HMS

10 Titanium Heavy Mineral Sands Zomba 15 6.0% HMS

11 Vermiculite Mwanza 2,5 4.4% (Med+fine)

12 Coal Nsanje 4,7 30% ash

13 Coal Karonga 15 21.2 % ash

14 Phospate Phalombe 2 17% P205

15 Pyrite Dowa 34 8% S

16 Pyrite Lilongwe 10 12% S

17 Glass Sands Mchinji 1,6 97% Si02

18 Glass Sands Zomba, Mangochi 25 92.755SIo2AND o .62%

19 Dimension stone Chitipa, Mzimba, Mangchi, Mchinji large vol. black, blue, pink,green,granite

20 Gemstones Mzimba, Nsanje,Chitipa, Chiwawa

21 Gemstones Rumphi, Ntcheu large vol. numerous pegmatite& volcanics

22 Gold

Neno, Ntcheu, Nkhotakota,

Mongochi, Blantyre, Chikwawa

23 Gold Mangochi, Blantyre, chikwawa occurrence

24 Diamonds

Mangochi, Mwanza, Rumphi,

chikwawa occurrence

Source: Geological surveys, Department Bulletins and Reports and the private company Mineral Exploration Reports

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Production

On the whole, mining production has increased due to demand for both industrial and domestic use and on the international market. However, coal registered a decrease in production by 3% due to some hiccups at Mchenga Coal Mine Limited and Phoka Mining Company. Gemstones registered the largest increase in production. Production went up by 70% while production of ornament stones shot by 42%.

Economic importance and performance of the sector

According to statistics by the Department of Mines, a total of 3,246 people were employed in mining sector in 2007 of which 1,013 people were formally employed in the coal mining sub-sector and 1,030 in the quarry aggregate. Coal is being explored in Nsanje, Southern Malawi and also Karonga in the north while graphite is pursed in the central region of Dowa district. New entrants into coal sub-sector Eland Coal Mining Company and Consolidated Coal Mining Limited were granted mining concessions licences in 2007. Crown Mines limited was expected to start mining the Heavy Mineral Sand in the last half of 2008, but the project has been delayed. (See details below)

Management of the sector

The Department of Mines in the Ministry of Natural Resources manages the mining sector and enforces the Mines and Mineral Act. It acts as a facilitator and catalyst for all mining activities with special emphasis on technical assistance to small-scale miners to ensure economic growth and poverty reduction. To ensure that mining activity does not damage the environment and risk the lives of the people, the government has started a campaign to have all mines and quarries comply with the Environmental Impact Assessment (EIA). The government encourages companies, individuals or joint-ventures to engage in mining activities. To this end, government continues to grant mining and prospective licences to companies and individuals who want to venture into mining. In 2007 government granted total of 215 different mining licences. Mining and Prospecive Issues in 2007

Type of Licence Number issued

Mineral(s)

Non Exclusive prospect Licence 61 Gemstones

Mining Claim Licence 50 Gemstones, ornamental stones

Reserved Claim Licence 57 Gemstones

Exlusive Prospecting Licence 35 Uranium, heavy mineral sands, bas metal minerals and PGEs

Mining Licence 12 Quarry aggregate, heavy mineral sands, limestone, rare earth minerals

Challenges

Mining is an expensive venture. Local companies do not have mining expertise and capacity to engage in mining exploration, let alone carry out mining activities. As result, the mining sector is dominated by foreign companies. This has raised fears that the country may not benefit from the huge mining potential because the economic benefits will enjoyed by the privileged few owners. Another challenge is the one of energy. Mining needs power, which is not provided for by the existing equipment.

In order to avoid individual diesel power station to appear here and there, at high costs, the GOM should adopt an aggressive energy policy, combining interconnection to the Mozambican facilities and thermoelectric plants. Those might be oriented either towards coal or to bio fuel, or combine both. The by-products of cassava or of the sugar industry might provide opportunities for energy production. The use of solar energy might also be promoted in remote areas and national reserves.

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Mining development process scheme

Four major projects might completely change the national transportation scheme, as the tonnage to carry would, for each one of them, be superior to the present grand total of transported goods:

Coal

Bauxite Mining Project

Nickel Mining Project

Heavy Mineral Sands Mining Project

Figure 21 : Substitution of Sulfur

1.5.1 Uranium The multimillion dollar Kayelekera uranium mine, which started operations in January 2009, is a major milestone in the history of mining in Malawi and set to contribute significantly to Malawi’s GDP. It already changed the transport situation in the Northern area, due to:

The necessity to import several row materials such as sulphates and lime in important quantities (20 000 tons/year of each category)

The obligation for the mine to build its own energy plant, diesel operated, resulting in new diesel imports.

At the opposite, exports, although very valuable, represent low tonnages -500 tons in 2009, expected 10,000 tons in 2020- exported by road to Walvis Bay (Namibia) for security reasons and storage facilities.

Kangankunde Hill Monozite and strontianite

Rare Earth Co

Mpemba Hill, Kapeni River (Southern Region) Linthipe, Katakwi in Central Region

Nickel, copper, platinium (concessions)

Albidon Ltd (Australia)

Thambani Mountains and Mzimba

Tantalite, zircon and corundum

Maravi Mineral Dev. Ltd

Mulanje Bauxite Gondo Resources (Zimbabwe)

Production : 5000 tonnes per month

Coal Mchenga coal mine

Chimwazulu Ruby mine (Nyasa Ruby)

Ruby Hargreaves family

Chimwadzulu Inium and palladium

Lisungwi Mineral Resources

Chipokas HMS Pipe to Chipoka and harbour and onwards by barges

Ilemenite, rutile, zircon and garnet

Allied Procurement Agency Ltd

Lake Chiwa (Zomba) Deposit of 15 million tonnes

Ilemenite, rutile and zircon

Salima, Makanjira (Mangochi),

Heavy mineral sands

Millenium Mining

Mine location & transport facilities

Minerals Companies

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Nacala

Chipata

Dar Es Salam

Mbeya

Chiwawa

Beira

MoatizeLuzaka

Chinde

Tete

Mtwara

HarareNsanje Port

DurbanJoburg

Kanona

KayelkeraKayelekeraIn Karonga

10,000 t/year

Figure 22 : Actual Uranium route

$ $

PACKING MODE : CONTAINERISED

(In Drums of 333kg's each)

500 TONS 10000/ yr TONS

MODE ROUTES WEIGHT % ORIGIN DESTINATION GROUPING PT TIME (days) COST $/TON $/T/Km

Road Kayelekera Nothern Rgn

in Karonga Karonga

0%

PACKING MODE CONTAINERS

(In Drums of 333kg's each)

500 TONS 10000/ yr TONS

MODE CORRIDOR WEIGHT % ORIGIN DESTINATION GROUPING PT TIME (days) COST $/TON

Transit time Road freight to port Sea freight

Road Walvis Bay in 100% Kayelekera 100% CANADA 50 US$1179/TON US$107

NAMIBIA Karonga

NOTES: The discovery of Uranium at Kayelekera in Karonga, the Nothern part of Malawi, is a massive breakthrough

in the economy of Malawi. The country is already earning over 300 million kwacha in loyalties. There is a lucrative market in Canada

and the mine has got a life of aver 15 years. Paladin Africa have already exported 27x20' containers since the commissioning of the mine.

More uranium has been discovered at Kanyika and Globe Metals are on Bankable Feasibility study stage and mining is expected to

commence in 2012/13 season.

RECENT EXPORTS EXPECTED EXPORTS 2020

PRODUCT : URANIUM

SPECIAL CONDITIONS : SUBJECT TO INFECTION

LOCAL PRICE

NATIONAL PART

RECENT PRODUCTION

INTERNATIONAL PART

INTERNATIONAL PRICE

EXPECTED PRODUCTION 2020

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1.5.2 Bauxite This project, although it demands extremely serious mitigation and social attention, is one of the most beneficial for the nation. The process of transformation of Bauxite into aluminium is very specific, and the regional environment is extremely favourable to a very competitive exploitation, of which Malawi would durably benefit. Bauxite is first transported, in a dust form, through pneumatic pipes or rolling bands to a railway station (the rail is presently at approximately 50 km from the claim). It is processed in a factory at its reception point and transformed in alumina ore. This process needs significant quantities of coal and chemicals. It is then transported (rail and river are competitive, depending of the distance) to a place where huge quantities of electricity can be used at low price (as power is the most expensive input in the electrolyte process, it is not economically viable to transport electricity), and transformed in aluminum. Cahora Bassa hydroelectric plant is located at relatively low distance from the mine (approximately 250 km in Western Mozambique). Such a project might allow Malawi to take a significant part in the whole process and be an important actor on this metal market.

In terms of transport, the use of a Limbe – Tete rail link would be peculiarly interesting if it is coupled to the Moatize Coal mine, located 14 km from Tete.

Mulanje Project description

Mulanje mountain bauxite is situated about 70 kilometres east of Blantyre city. On its foot is situated Mulanje Boma (district headquarters). A Tarmac road connects Mulanje Boma to Blantyre and a rail line from Blantyre to Beira passes through Luchenza township about 30 kilometres west of the massif. A 66 Kv electric line is available from Nkula Hydroelectric Power Station. Telecommunication system is very good.

MET-CHEM Canada Inc carried out a feasibility study on the techno-economic evaluation of the feasibility of setting up an integrated alumina/aluminium plant based on Mulanje mountain bauxite.

The study was undertaken in 1993 through funds from African Development Bank. The results show that: 1. The probable and indicated reserves of bauxite amount to 25.6 million tons using a cut off grade of 30%

Al2O3. 2. 580000 tons of bauxite will be mined per year to produce 200 000 tons of alumina which in turn will

produce 100 000 tons of aluminium through the use of Bayer process in Alcan P-180 cells. 3. The capital cost estimate for the project is estimated at US$ 820 million. 4. The project will provide direct employment opportunity to 1,265 people Deposit description Mulanje bauxite is a residual product which resulted from the weathering of syeno-granitic rocks that form Mulanje massif. Six extensive bauxitic areas have been identified, but the best deposits are found on Lichenya and Linje plateaus. A feasibility study conducted by LONRHO showed that the two deposits on Lichenya and Linje amount to 28.8 million tons within an average depth of 4.5 metres. Project description The bauxite deposit exists in form of lenses which are located on the plateaus at an elevation between 1800 and 2000 meters. The bauxite will be mined through the use of a front end loader and a backhoe hydraulic shovel will load it into articulated trucks. The bauxite will then be hauled to a loading bay where it will be transported by a ropeway to an alumina plant about 600 meters below. The proposed mining output has been set at 580 000 tons of bauxite (on dry basis) to produce 200 000 of alumina tons per year to meet an annual production of 100 000 tons of aluminium. The processing methods will be employed to produce alumina and aluminium. The Bayer process will be used to transform the bauxite into alumina.

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Before the Bayer process the bauxite will be beneficiated to reduce the quartz content as well as reduce the quartz size to an undersized product below a 65 mesh size. The second process will be alumina smelting using an aluminium smelter with a capacity of producing 100 000 tons of aluminium sows per annum based on the Alcan P-180 cell. The aluminium smelting will depend on the availability power from Cabora Bassa which will be in the region of 15.3 kWh per kg of aluminium produced. The present power supply in Malawi cannot meet this demand. The main waste from the bauxite processing will be the tailings from beneficiation plant and the red mud from the Bayer process. The red mud will be washed in high capacity wash thickeners to remove chemicals derived from the Bayer process. The red mud and the tailings will then be pumped to a mud disposal area. The plants and residential areas will be supplied with water from a dam in the Likabula river.

There is enough electricity to supply the alumina plant, but for the smelter more electricity will have to be sourced elsewhere. Suggestions have been made to import electricity from Cabora Bassa through Electricity Supply Commission of Malawi (ESCOM).

Market

If the Mulanje bauxite project starts with alumina production, then its market will either be ALUSAF Smelter at Richards Bay in South Africa or the MOZAL Smelter in Mozambique.

Costs and Revenues

The capital cost estimate for the whole integrated project to produce 100,000 tons of aluminum is US$ 820 million. If options for construction of a rail extension, power line and port are considered, a total addition of US$ 50 million will be required. Full capacity operation in the fifth year will put operating costs of alumina and aluminum at US$122.03 per ton and US$ 1003.49 per ton respectively.

Environmental aspects

Within the mine itself, there will be no blasting as the ore is soft and friable. There will be no mining benches as the average thickness of the bauxite is 4 to 5 meters. The top soil (0.2 m) will be scraped and conserved for later mine rehabilitation in form of reforestation and replanting grass.

Mulanje mountain is a sensitive area, therefore it has been decided that the alumina plant and smelter will be located on the plain at Mangani village. These processing plants have the potential to pollute air and water. Air quality will be affected by dust emission from excavation, loading and hauling activities. Roads will be sprayed with water to avoid airborne dust. Pot grass emissions will be reduced by 99 % using dry scrubbing systems in the smelter chimneys. Dust collection systems and ventilation systems will be installed in the plants.

Paved chutes and sediment traps will be used to avoid water pollution from the mine. Original Vegetation cover will be used, wherever possible to control suspended solids.

Flora and fauna will be protected as much as possible. The mining area is covered by grass and some bushes. This will reduce loss of flora. Occasional tree thickets found in the mining area will be kept intact wherever possible. Construction of the aerial ropeway from the mountain to the foot of the mountain and a railway from Luchenza to the plant site is expected to cause no impact on the flora. Movement of fauna on the mountain will be less affected through avoiding the use of high flood lights avoiding the use of explosives during mining and through the use of the ropeway instead of constructing long distant roads.

1.5.3 Pig iron

Iron ore is one of the by products of the heavy sands to be exploited in Salima. In order to value this by product, the project includes a foundry with pig iron for local and regional markets as the main output commodity.Pig iron necessitates important quantities of coal to be produced, the highest quality (coke) the best. Coal is to be doing from the lake (start of the programme) but probably from Moatize, by rail. The output (120,000 T expected yearly in 2020) are to be transported by rail to most of its markets. Expect for Monkey Bay shipyard and Mzuzu factories, to be deserved by barges.

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1.5.4 Titanium – Heavy Mineral Sands Malawi hosts at least 2 Billion tones of mineable heavy mineral sands around the shores of Lake Malawi and along the Shire River. The deposits are mainly dune deposits and contain exceptionally high grades of the titanium/iron oxide mineral and ilmenite. In addition the deposits contain significant quantities of valuable zircon and rutile. Malawi has interesting potential for mining of heavy mineral sands, around the lakes. There are 3 envisaged projects requiring an investment US$ 350 Millions, in Chipoka, in Salima and in Tengani. One company is looking at setting up an operation for mineral separation and/or smelting in Chipoka. The Titanium Oxide Slag and Pig Iron Smelters at Chipoka are valued at USD 300 million. The project would cover the entire lake-system, including shores/beaches/dunes. Feasibility studies and business plans are still being undertaken. If projects are implemented, Malawi may export up to 1,200,000 mT of titanium oxide and 1,100,000 mT of pig iron. According to several research studies Malawi’s titanium resources are large and would justify a smelting operation. Investments for any kind of operation would be huge and conditions need to be favourable. i.e.: - Reliable, adequate and a well priced supply of electricity are essential. - The road and transport infrastructure needs to be adequate to come with the movement of the ore. Competitiveness of the transport routes is essential (i.e. a seamless rail connection to the ocean). This project would contribute very significantly to the economic viability of any Development Corridor.

Allied Procurement Limited holds licenses over some of the largest ilmenite bearing heavy mineral sands deposits at Chipoka and in May 2005 has started mining the sands at a rate of 5,000 metric tones per annum to increase to 40,000 metric tones per annum. The project was connected to the Nacala rail system at Chipoka Port, and to the power supply. Disorganization of the rail, inefficiency of the port and lack of energy resulted in delays in the operations, and the present situation. It is highly damageable to Malawian economy.

It is suggested that: o Enough power should be made available as a national priority, in order that a smelter should be built; o The railway link to the Nacala corridor should be immediately restored; o The Chipoka interesting equipment should be reviewed and rehabilitated.

It is of first national importance to remember that at full capacity, this smelter would produce 250,000 tpa of titanium oxide slag. In addition the plant would produce approximately 125,000 tpa high purity pig iron as well as significant amounts of zircon and rutile.

The project would have the potential to generate an income of around USD 120 Million per year, resulting into enormous employment and tax revenue benefits.

The importance of the heavy mineral sands to southern African economic well-being cannot be over emphasized. The value of the worldwide titanium dioxide industry is estimated at $7 billion. Six out of eight of the world’s proposed new project areas are in southern and eastern Africa, and a seventh at Tamil Nadu in India is partly owned by a South African company, Kumba Resources. The HMS industry can be highly lucrative; its return on capital is the best in the mining industry. There are, however, problems, particularly in the smelting technology. The often considerable affect of mining on environmentally sensitive coastal dunes is also becoming increasingly important. The medium-to long-term demand for Tidioxide pigment and ceramic grade zircon appears very healthy. If, as predicted, the costs of producing titanium metal can be reduced, then there is huge potential for the metal. In summary, the HMS industry is an attractive one to be in, with good returns and generally manageable risks. New business opportunities and their economic implications for Africa are discussed. The relative ease of mining these loosely consolidated, profitable deposits makes HMS operations attractive. Mining coastal areas of natural beauty and environmental importance is not uncontested, as Richards Bay Minerals (RBM) discovered when they were prevented from expanding their operations into the St Lucia

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coastal dunes in the 1990s. Waste products of the ilmenite-upgrading technologies along the so-called sulphate route, produces large amounts of iron sulphate, some of which is economically recycled and sold. The chloride route involves calcinations of ilmenite with coke and chlorine gas to produce Ti-dioxide. Furthermore, the smelting of titanium slag is tricky with even the largest of companies, for example Anglo American at Namakwa Sands struggling to make new technologies work. The development of new technologies, such as electrolytic separation of titanium metal and improvements in electrostatic mineral separation should have a marked effect on the viability of future projects. Though the type and grade of deposit is important, the ability to market the HMS products provides the competitive leverage and determines the profitability of the operation. In this respect the products are akin to industrial minerals where consumers have very narrow tolerance on the type and levels of impurities in the products. Demand and uses of heavy mineral sands products Titanium Over fifty per cent of titanium dioxide production is used in the manufacture of pigments in lacquers, paints and enamels (www.tzmi.com). Titanium dioxide’s ability to absorb ultraviolet light slows the degradation of plastics and paints and makes it useful as an inert barrier in sunscreen lotions. Being non-toxic, biologically inert and non-fibrogenic it can be safely used as a whitener and filler in foodstuffs, pharmaceuticals, and cosmetics. Products from the beneficiation of ilmenite via the chloride route are used at the premium end of the business, in paints, plastics and the chemical industry, whereas those produced via the sulphate route are used mainly in the paper industry. Rutile is used as a high-grade top-up in times of increased plant utilization, and in the production of titanium metal. Titanium metal is forty-five per cent lighter than steel, twice as strong as aluminium, and can be machined with the same equipment as stainless steel (Saager, 1984). These characteristics, combined with the low thermal expansion coefficient and high melting point (1670°C), have enabled titanium and its alloys find important applications in the aerospace and defence industries. Under atmospheric conditions the metal is resistant to corrosion; it is unaffected by strong alkalis, chlorides sulphides or nitric acid. These properties mean that titanium is now being increasingly used in chemical processing plants, oil refineries, water desalination, and especially heat transfer applications where mildly corrosive seawater is the coolant. Titanium’s good cryogenic properties mean that it can be used in tanks for shipping liquid nitrogen, hydrogen or helium (Kuhlman, 1980). The metal is increasingly used in advanced engineering applications, spectacle frames, jewellery, bicycle frames and sporting goods, the most important of which has (since 1995) been the manufacture of golf club heads. Its general inertness means that it is finding use in prosthetic surgery, such as hip replacements, spinal implants, and dentistry, and in heart pacemakers. The effects of new technology on the industry So much of the profitability of HMS operations depends on the processing and marketing of the product that companies guard information on their proprietary technologies jealously (Were, 2001). New technologies for mineral separation include developments in spiral circuits, applications of power ultrasound for cleaning mineral sands, electrostatic and high tension electrostatic separation, as well as improved gravity separation techniques (Abela, 2003; Collings and Farmer, 2003; Elder and Yan, 2003; Germa et al., 2003). Technological advances in a number of fields should increase the profitability of HMS operations in the near future. Despite its incredible usefulness, titanium metals major drawback is its cost, currently six times that of stainless steel. The production of Ti metal requires more energy than any other primary metal. The process is tricky as molten titanium readily combines with oxygen, nitrogen, carbon, water and most refractory products! The two commercial processes (Kroll and Hunter) are similar and involve the chlorination of rutile or synthetic rutile to titanium tetrachloride. An important area of research is that of using electrolysis to purify titanium dioxide. The work is being undertaken by British Titanium PLC, using the so-called FFC Cambridge.

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1.5.5 Coal

Most mining products are not exploited, mainly because of the lack of transport for inputs (coal to produce energy) or for marketing the commodities.

Coal requires urgent attention as an alternative source of energy. A combined coal and thermal power plant will require investment of US$ 225 m. Mining at Mchenga is very difficult and will produce a maximum of 80,000 tpa, which is well below the required output levels. In Malawi, coal is only mined at Mchenga Mine in the north. Production could average 5,000 (occasionally up to 8,000) mT per month (60,000-84,000 mT/annum), but has been much lower in recent years (as low as 35,000 mT in 2000), either way not enough to cover domestic demand. Local demand comes from tobacco, sugar, brewing and textiles industry and averages 90,000 mT annually. The Mchenga Mine coal is of high quality, but difficult to mine. Opinions on the size of deposits vary and extensive research would be required to determine real quantities owning to the manner in which the coal seams have developed are. Costs for this kind of research easily get up to USD 7m or USD 8m. According to government documents Mchenga has a proven reserve of 2.3 million mT. It seems that deposits in other countries in the region are larger (and maybe easier to mine) than Mchenga. Major investments are not likely on the short term. Some of the current product is exported to Mbeya, where it is used for the production of cement. To meet with local demand, coal is being imported mainly from Mozambique (Moatize near Tete) and Zimbabwe (Hwange). In 2002, 17,000 mT was imported from Mozambique and approximately 2,200 mT from Zimbabwe. According to the National Statistical Office (NSO), Malawi has imported varying volumes over the past years: from SADC countries 21,000 mT in 2000, 12,000 mT in 2001, 64,000 mT in 2002. Mchenga is the cheapest option for coal users: USD 100/mT for Blantyre. Cost for Hwange in Zimbabwe to Blantyre is USD 130/mT; Moatize (Tete) in Mozambique is in between those figures. Tanzania has a potential to provide high quantities at comparable or lower prices. Transport costs could be reduced if the lake were used for transport down from Itungi to Chipoka, from where it could be either railed or trucked to Lilongwe or Blantyre. Kiwira Coal Mines in the south of Tanzania are operating far below potential, due to years of financial mismanagement and lack of investment in the operation. Its present potential is 50,000 mT of washed coal per year, but is only producing approx. 15,000 mT/a. All production goes straight to Mbeya Cement Company 50,000 mT/a, who also use an annual average of 7,000 mT coal from Mchenga in Malawi. Estimated landing costs for Kiwira coal at Itungi are USD 60/mT for Blantyre, USD 55/mT for Lilongwe by shipping via Chipoka. The mine is based 40 km from the Itungi port.

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1.6 Transport demand from foreign countries.

Western Mozambique and Zambia are, to some extend, landlocked areas depending of Malawi for an easy access to / from the sea. Their dependence, in term of multi-modal transport, is basically for mining products exports and for food imports. Food imports might be solved by an improvement of logistics in Malawi, and these areas may be considered as potential clients for Malawi agriculture. The mining products are very sensitive to the transport costs, thus to the distances and the mode. Malawi may consider these cargoes as a serious opportunity to finance an efficient transport system for heavy products. List of foreign mining product wishing to transit through Malawi:

1.6.1 Coal from Moatize (Vale and others)

Moatize coal mine is said to be the biggest in Africa. Its potential will require a capacity of transport to the Indian ocean of approximately 6-10 million ton per year for several decades. Moatize has a 2,440 million tons of estimated reserves

The initial box cut for the open cast mine would start in the second quarter of 2011. The mine is expected to produce on 1st phase from 2011 to 2015 . 12.7 million Tonnes (mT) annually of hard coking coal for export; . 2.4mt/year of export thermal coal, . 2.5mt/year of thermal coal to supply a local power station (should one be built) In phase 2 (after 2015) it would produce 21 million tonnes per annum, run-of-mine, which implies a 1,500 MW mine-mouth power plant. Addressing the Coaltrans South Africa conference being held in Santdon, Vale GM finance Fabio Bechara said planning was for the port of Beira to handle all the Phase One exports but that the port of Nacala would be required to handle export volumes above those levels.

Moatize is 575 km from Beira and the existing Sena-Beira railroad is being upgraded to handle the anticipated

initial export levels.

Moatize - which is located near Tete in Western Mozambique – is 1,000kms from Nacala. Access to Nacala is

complicated because the railway line will have to cross Malawi to reach the port situated in northern

Mozambique.

Bechara commented, “The Nacala corridor is a very important solution for the future of the Moatize coalfield

where we are not the only company planning to develop coal mines. The Sena/Beira line has limited capacity

and we will need Nacala in the future.” “We estimate the rehabilitated line (Moatize-Beira) will be able to transport between 6mt and 8mt of coal annually which is clearly not enough for our requirements and there are other potential coal producers in the Moatize region”.

Also in this area, Riversdale expects to produce 20-million tons of coking coal from Mozambique by 2016.New African coal mining company Ncondezi, which is soon to list on the London AIM market, plans to export 10-million tons a year of thermal coal from mine

There is no doubt that the Beira corridor, which is going to be used as a starter, will not cope with such quantities and that Nacala is the only harbour in the area which meets the physical requirements to handle such amounts of cargo.

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To transport the coal to Nacala, the Vale Company and the 2 others mining companies (Riverdale and Ncondezi) may use the existing Mozambican lines, but transit through Malawi would represent an important shortcut.

Mozambican government concentrates on projects which target the most convenient transport line for the export of the Moatize coal. Presently, three alternatives are planned which might be complementary options, namely: - The Sena-Line under reconstruction by the Indian consortium Rites, - The extension of the Nacala Corridor through Malawi to Moatize, proposed by the Brazilian

concessionaire CVRD and - The use of Zambezi (with barges of 1000 to 3000 tons). Riverdale raised the prospect of Riversdale barging its coal 400km down the Zambezi from Tete to the coast, from where it would be barged out to sea and loaded on to vessels anchored offshore. A SADC study is underway, exploring ways of using the Zambezi and Shire rivers to transport cargo from Zambia, Malawi, Zimbabwe and Mozambique. There are some obvious problems, even though; construction materials for the Cahora Bassa dam were barged upriver during the early Seventies. Among those is that water levels drop sharply in the winter months due to the river’s flow being controlled by outflows from Cahora Bassa. Such an option might obviously involve co-operation, such as getting a more reliable release of water from Cahora Bassa throughout the year.”

Malawi would benefit from all options. Concerning the Sena Line, Mozambique actively supports an extension spur into Malawi, which would connect to the Malawi railway system on the old track through Nsanje and Bangula. This would give Malawi a direct railway link to its main trade port Beira, which crosses the Zambezi on the Dona Ana Bridge at Sena.

The other option would be an extended and improved Nacala Corridor railway with the added advantage to offer Malawi an up to now non-existent railway link to the west into Mozambique.

The main concessionaire of the Moatize coal, CVRD from Brazil, apparently prefers the Nacala line, for which it pretends to obtain a complete long-term (25 years) concession. This however raises fears among present Malawi users of the Nacala line, that their transport needs may be disregarded or down rated, despite the provisions which the government is actually negotiating with CVRD.

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Moatize in May, 2010 visit from the consultant

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Figure 23 : Expected Coal exports from Moatize mine in 2020

1.6.2 Copper (From the Copper Belt - Zambia and Congo) Four important markets are to be considered by the Malawi Rail network as potential users of heavy transport facilities. o Chipata gems and stones mining are already linked to the western branch of the CEAR, and would benefit

from an efficient railway system; o Zambia copper mines represent millions of tons annually, which are presently using the Tanzanian

corridor and the Angolan (Atlantic) route. A shorter facility, through Nacala, might prove to be an interesting complement or alternative, supposing that the missing railway link be completed (approx. 150 km), and the Nacala corridor be efficient.

Given the privatization introduced in 2003, Railway Systems of Zambia (RSZ) was awarded to have the rail concession for the railway system running in Zambia, except for the line of TAZARA, and the new line Chipata- Malawi. RSZ operates the line from the Zambian copper belt to Livingstone, where the railway system joins the Bettsbridge Bulawato Railway (BBR) system, with the company operating the RSZ and BBR concessions being the same. Through the concession contract, RSZ took control of 20-year freight rail operation and 7-year passenger train operation between Livingstone and Kitwe with USD 250 million. The main shareholders of RSZ are Transnet (Spoornet, 20%), NLPI (New Limpopo Projects Investments (Pvt) Ltd, headquartered in Mauritius) and Zambia Railways. Edlow Resources which was a shareholder of Malawi CEAR also participated in the bidding. It is said that Edlow Resources planned to export the mineral resources in Zambia from the port of Nacala through Malawi. Regarding the performance of the concession of RSZ, it is reported that the concession has been successful in avoiding the deterioration of the railway infrastructure and equipment. Especially for the freight service over the long haul corridor, it has been significantly improved.

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Ongoing projects in Zambia are as follow:

Congo huge mining facilities in the copper valley South of Kolwezi today use mainly the Angolan route, and occasionally the Tanzanian corridor. The same remarks apply.

(Extract from GOPA Study) “As basis for the Railway Master Plan, only safeguarded traffic potentials have been considered, in other words amounts of traffic that customers intend to transport. Accordingly, traffic on the Nacala Corridor will amount to 524,000 tonnes equivalent to 409 m tonne-kilometres per annum. With the start-up of the extension to Chipata (Zambia) in 2012, these figures are expected to increase to 962,000 tonnes and 890 m tonne-kilometres and further to 1.45 million tonnes and 1,445 m tonne-kilometres in 2016.”

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Nacala

Chipata

Dar Es Salam

Mbeya

Chiwawa

Beira

MoatizeLuzaka

Chinde

Tete

Mtwara

HarareNsanje Port

DurbanJoburg

Kanona

Expected Copper exports from Copper Belt in 2020

1.45 MT

Figure 24 : Expected Copper exports from Copper Belt in 2020

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1.7 Evolution of the terms of trade for Malawi

The steep decline in the prices of commodities (oil, minerals, metals) following the global financial crisis is clearly having an effect on African countries. But the effect is asymmetric between importers and exporters of commodities. For instance, oil importers, who suffered in 2008 from the sharp increase in oil prices (reaching $140 a barrel), will benefit from the decline in oil prices, whereas the reverse is true for oil exporters. Using the latest commodity forecasts available, IMF has calculated the size of the terms of trade shock (expressed as a percentage of 2006 GDP) for African countries in 2008 and 2009. As the table below indicates, the rankings are almost completely reversed: the countries with the most favorable terms of trade shocks in 2008 (“top five”) are among those with the most negative in 2009 (“bottom five”), and vice-versa. The documentation for the IMF External Shock Facility approved for Malawi in December shows the following Terms of Trade changes: 2008 - minus 3.8% of GDP 2009- plus 4.4% of GDP

Terms of trade shocks (percent of 2006 GDP)

Top five 2008/2007 Top five 2009/2008

Equatorial Guinea 32.5 Seychelles 5.4

Angola 21.9 Eritrea 3.8

Congo, Rep. 19.3 Togo 3.6

Gabon 17.9 Comoros 2.2

Mauritania 16.3 Senegal 2.2

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Bottom five

Togo -6.1 Nigeria -10.2

Senegal -6.2 Gabon -12.5

Table 1 shows cumulative changes in trade unit value expressed in current US dollars between 2004 and 2007. Nominal changes in US dollars were deflated with the US GDP deflator. Trade unit values show a considerable increase in chemicals, which includes oil and fertilizers; a more moderate rise of import unit value of some crops, as well as a reduction in the import unit value of maize and rice. A substantive share of maize is imported informally from Mozambique, where 2007 brought about a bumper harvest, albeit of low quality (Jayne et al., 2008). Apparently Mozambican farmers at the border to Malawi have few alternative market outlets other than Malawian traders: such oligopsony power, together with the bumper harvest, has most likely put pressure on import prices. For rice, data from COMTRADE show that between 2004 and 2007 Malawian rice imports were increasingly sourced from China, and less from the US. This has contributed to reduce the import unit value, and should in itself be considered a coping strategy against raising prices, which was implemented by several other LIFDCs even before the world price spike of 2008.

A static measure of the terms-of-trade change that followed from the changes in trade unit values reveals that Malawi experienced a negative shock, corresponding to 2.5 percent of GDP The shock arises primarily from the change in the import unit value of chemicals, which in itself correspond to 7 percent of the GDP.

This is partially compensated by gains in agricultural and food exports unit values.

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1.7.2 Improvements suggested during interviews

During interviews, representatives of different sectors have been suggesting some improvements regarding roads, lake service and missing railway links

Expressed needs and functions Projects, Constraints and actions

Illovo (Dwangwa Sugar Estate) : Building a jetty at Dwangwa Estate

Jetty at Dwangwa Sugar Estate : Necessity of dredging a port in shallow water A new adapted boat for actual packages

Sucoma Sugar Estate : Private line along the 20 km of sugar estate to be able to collect raw sugar canes (3 millions tons)Interest for a line that could allow the processed sugar to be distributed or exported by train either to Zambia, Nacala, .. Moatize Mine : Possibility of sending coal trains to Nacala

Missing link between Sena Line and Bangula Building a new connecting line between Sena Line and Bangula Rehabilitation of railway between Bangula and Blantyre General rehabilitation of the internal railway network

MCC is willing to restore competitive advantages to the Northern Corridor in rehabilitating Chipoka and Chilumba. Connection with the railway may attract a lot of sectors that could use the Lake service for reducing their costs of distribution through Malawi (Maize, Cassava, …)

Lake service : As trucks are often selecting the M1 road along the Lake Shore due to lack of convenient boats and shallow waters at the multimodal points, obligation of transfers before and after the lake crossing, it is suggested to create a RoRo line between Monkey Bay and Chilumba and the Mbamba Bay port that leads to Mtwara. Indeed all the roads feeding this project have to be rehabilitated

Giving the opportunity of sending by rail goods and commodities to Nsanje with possibility of loading barges of coal from Moatize

Bangula Nsanje New railway infrastructure from Bangula to Nsanje Port This section allows a transfer of Moatize coal from the rail to barges on the river. Coal terminal will have to be settled along the warehouses

Allowing transport of Minerals from Zambia or RDC via a railway link in connection with Zambian Railway

Chipata- Kanona New line of … km between Chipata and Kanona in Zambia

Other connection with the Beira line to be able to switch from one line to the other … namely for coal trains

Southern Border – Makhanga estimated costs add up to 110 m US$

Night trains offer for business men between Blantyre and Lilongwe

Rehabilitation of sections between Lilongwe and Blantyre A railway operator might be interested to buy passengers carriages and operate them

1.7.3 Sensibility analysis The transport logistics being different for each product, the consultant also studies the sensitivity of each product to different parameters within the transport chain: flexibility, cost, time, regularity, availability of service and safety being the main ones. Tonnage projections for each commodity ten years hence (2020) are made, and the most effective transport mode and corridor are identified for each product. A similar exercise was conducted for the main imported products. These represent important volumes and have a significant impact on production costs within Malawi. They are petroleum products (detailed in three categories), fertilizers, limestone and clinker.

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To complete the exercise, and considering that the total volumes of production and imports are still relatively low compared to the capacity of heavy rail, for example, it is assumed that over the next four years Malawi will develop its impressive mining potential, and that its transport system would be used by the transit of mining products coming from landlocked places. In particular Mozambican coal in the Tete province (Moatize and others) and Zambian copper from the Copper Belt are considered.

Tables of presentation of criteria of corridor use, mode use (flexibility, cost, time, regularity, availability of service and safety being the main ones).

Criteria for exports/imports

Processing and packaging

Condition at Port

Time of arrival

Pricing of land leg

Long Term contracts

Choice of the corridor

Rice (Regional markets)

Preference for Northern Corridor

Coffee Small quantities i.e. 5,000 tons/year

Road only

Mining Huge quantities in Bulk

Dedicated terminal

Not sensitive Very sensitive

X Railway

Imports

Fertilizers Exported in Bulk Blending in Liwonde (Farmers World)

Satisfactory Critical if no storage

Very Important

X Important share For Nacala

Fuel Fuel storages in Blantyre and Salima

Dedicated terminal (well equipped fuel tank in Nacala)

Critical Nacala and Northern corridor (using lake services

The efficiency of the different multimodal scenarii (combining different corridors’ infrastructures with multimodal transfer centres) has to be compared in terms of transport cost, transport time, reduction of risks. The different corridors could be used based on their characteristics and attraction from importers/exporters point of view or even more sensitive in relation to constraints of ports and shipping companies …

Criteria for exports/imports

Processing and packaging

Condition at Port

Time of arrival

Pricing of land leg

Long Term contracts

Choice of the corridor

Exports

Maize (Regional markets)

In sacs , limited exports

Good storage Preferably Northern Corridor

Tobacco (1

st Logistic Chain)

Green leaves in Bulk Fumigation at Jo’burg then sent to Durban

Good storage and handling facilities

Very important

Less that sea leg

X Road to Jo’burg

Tobacco (2

nd logistic Chain)

Fumigation at the factory Limbe or Lilongwe In 1000 kg sacs then containerised

Idem Very important

X Road to Beira Nacala rail corridor

Sugar Transport cost of sugar cane to the mill (16,8% to 20% of cost)

Satisfactory Not sensitive Very important

no Massive transfer to Nacala corridor expected and through Shire-Zambezi

Tea Packed in paper sacks then containerized

Good storage Very sensitive Not important

? Not transfer to rail expected

Cotton Bagged in hessian sacks of 120kg each

Good storage Not sensitive

Important Not an easy market for rail

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Nevertheless, it is important to keep in mind that road corridors will keep their transport share for some of the commodities due critical factors such as travel time and transport conditions for tobacco … Some other commodities deserve less attention such as fertilizers.

1.7.4 Cost and time comparison between corridors Distance from cities to ports in Mozambique in using the alternate multimodal transport schemes

In bright green : the shortest route in km, in red : the longest route

The shape of Malawi had a clear impact on distances of the major towns from the different ports in Mozambique. Located in the south of Malawi, Blantyre is closer from Quelimane and Chinde and might choose these two corridors if distance may consider at the unique criteria to select a corridor for exports. Taking in consideration the distance criteria, Chipata might be attracted either by the Shire-Zambezi (925 km), Quelimane (863 km) or Nacala corridor (1138 km). It appears quite clearly that the corridor notion is not describing precisely enough the multimodal logistical chain as some downstream or upstream links can be achieved in using either roads or lake services.

1.7.5 Origin-destination time comparison It is quite difficult to identify the different transit times per route and per mode of transport. During our survey, we got the different overall time and costs upstream/downstream of the sea leg.

From towns in Malawi to

Dar Es Salam

Nacala Nacala Beira Beira Durban Jo’burg Mombasa Lusaka via Chipata

Rail Road Rail Road Road Road Road

Overland leg 3 4 2

Overland leg cost (in US$ per ton)

156 36 79 120-126 93 160,7 66

Sea leg 7-10 7-10

Sea leg Cost Depending on final destinations

Overall time (in days)

35 35-50 35-50 50

1.7.6 Transport cost estimates in using the corridor The different commodities in 2009 are sent by different corridors based on the logistic constraints and convenience/costs for the exporters.

From/To Dar Es Salam Dar Es Salam Nacala Quelimane Chinde Beira Beira Durban Durban Joburg

Tazara road railway road Zambezi railway road road road road

road/lake road lake/road lake/road/lake rail/road/lake road via Tete via Lusaka via Tete via Lusaka Mzuzu 1200 1300 1356 1073 1143 1315 1475 3017 4076 4452

Lilongwe 1550 1667 989 714 776 948 1108 2650 3709 4085

Blantyre 1876 1976 678 397 465 568 1419 2339 3398 3774

Chipata 2025 2125 1138 863 925 1097 1257 2799 3858 4234

Freight share 20,22% 0,00% 0,00% 1,12%

Comparison between corridors (distances)

17,70% 60,10% 6,47%

Products Destination Cost $/ton Tobacco Tea Sugar Maize Cassava Cotton Rice Food crops Uraniu m Coal

Package Bales Paper sac ks 1000 kg bags Bags Sacs (50 to

90 kg) 120 kg sacks Bags Drums of

333 kg Mchenga

Mine Final pac kage 40' Container Container

Corridors 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons Northern Corridor Dar US$ 120 100 Road Mombassa US$ 160,7 5,25 Western Corridor Lusaka US$66 Mtwara Corridor Nacala Rail Corridor Nacala US$36 140 15 Nacala Road Corridor Nacala Shire-Zamb ezi waterway Chinde Sena Lin e Beira Road Beira US$79 162,5 36,79 126 11,024 Road Durban US$126,9 69,64 5,25 16,536 Road J'burg US$93 5,25 10,5 Road Zimbab we US$50 Other US$126,9 14 Corridor to Walvis B ay US$1179 0,5

Total 232,14 52,54 280 0 0 27,56 0 25,5 0,5 0

Exports

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The imports are also sent on defined corridors

Corridors Tonnage

(1000 tons) % share Total cost in millions US$

Northern Corridor 251 17,77% 39156000

Road to Mombasa 5,25 0,37% 843675

Western Corridor 0

Mtwara Corridor 0

Nacala Rail Corridor 285,6 20,22% 10281600

Nacala Road Corridor 0

Shire-Zambezi waterway 0

Sena Line 0

Road to Beira 848,714 60,10% 67048406

Road to Durban 91,426 6,47% 11601959,4

Road to Jo’burg 15,75 1,12% 1464750

Road to Zimbabwe 25 1,77% 1250000

Other 14 0,99% 1776600

Corridor to Walvis Bay 0,5 0,04% 589500

Total 1412,24 100,00% 135012490

The estimates of transport costs are around 18.57% of the total exports+ imports

Products Destination Cost $/ton Fertizers Fuel CG imports Cement Lime Clinker Coal

Package 20 M liters/month

Final package Tankers Containerized

Corridors 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons

Northern Corridor Dar US$ 120 73,8 39,20 38

Road Mombassa US$ 160,7

Western Corridor Lusaka US$66

Mtwara Corridor

Nacala Rail Corridor Nacala US$36 9,6 121

Nacala Road Corridor Nacala

Shire-Zambezi waterway Chinde

Sena Line Beira

Road Beira US$79 295,2 137,20 80

Road Durban US$126,9

Road J'burg US$93

Road Zimbabwe US$50 25

Other US$126,9

Corridor to Walvis Bay US$1179

Total 369 186 38 201

Imports

Road to Beira is getting the lyon’s share with 60% of the cargo. In 2

nd and 3

rd position, Nacala and

the northern corridor are circulating respectively 18% and 20 % of the cargo)

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1.7.7 A picture of the existing traffic

Figure 25 : Actual Traffic on corridors

1.7.8 The stakeholders’ wishes

Through interviews, the “ideal” transport mode and corridor are identified for each product, shown in Tables 1 and 2 Table 1: Mode and Corridor for largest volumes exported

Most important agricultural exports

Tea Tobacco Cotton Sugar Nuts

Tonnes (000) Tonnes (000) Tonnes (000) Tonnes (000) Tonnes (000)

Quantities 2009 52.56 232.63 27.56 280.00 295.33

Projection 2020 68.33 279.16 38.58 364.00 383.93

Existing Mode Road Road Road Road or Rail Road+rail

Existing Corridor Durban Beira Durban +

Beira Beira /Nacala Tazara

Best Mode (if unconstrained) Road Rail Rail Rail lake+rail

Best Corridor (if unconstrained) Durban Beira Beira Nacala Tazara

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Table 2: Mode and Corridor for largest volumes of food production

Most important agricultural food crops

Cassava Potatoes Sweet Pot. Maize Rice Pulses

Tonnes (000) Tonnes (000) Tonnes (000)

Tonnes (000)

Tonnes (000)

Tonnes (000)

Quantities 2009 3913.00 758.00 2714.00 3201.68 106.11 383.00

Projection 2020 5258.74 1018.69 3647.39 4802.53 137.94 514.72

Existing Mode none none none road road Road+rail

Existing Corridor none none none none any Tazara

Best Mode (if unconstrained) Lake + Rail Lake + Rail Lake + Rail lake+rail lake+rail lake+rail

Best Corridor (if unconstrained) Western any Western any any Tazara

A similar exercise was conducted for the main imported products. These represent important volumes and have a significant impact on production costs within Malawi. They are petroleum products (detailed in three categories), fertilizers, limestone and clinker. Table 3 shows mode and corridor results for the largest volumes imported.

Table 3: Mode and Corridor for Imported commodities

Most important imports

Petrol Paraffin Diesel &

other Fertilizer Coal Lime Clinker

Tonnes (000)

Tonnes (000)

Tonnes (000)

Tonnes (000)

Tonnes (000)

Tonnes (000)

Tonnes (000)

Quantities 2009 107.80 14.80 157.40 141.61 2.00 38.00 21.00

Projection 2020 215.60 29.60 314.80 283.22 4.00 76.00 42.00

Existing Mode Road Road Road Road Train Road Road+Rail

Existing Corridor Beira Tazara Beira Beira Beira Tazara western

Best Mode (if unconstrained) Rail or river

Rail+lake Rail or river

Rail or River

Rail Road +

lake Rail + Road

Best Corridor (if unconstrained) Shire or Nacala

Tazara or

Nacala Shire or Nacala

Shire or Nacala Nacala Tazara western

To complete the exercise, and considering that the total volumes of production and imports are still relatively low compared to the capacity of heavy rail, for example, it was assumed that over the next four years Malawi will develop its impressive mining potential, and that its transport system would be used by the transit of mining products coming from landlocked places. In particular Mozambican coal in the Tete province (Moatize and others) and Zambian copper from the Copper Belt were considered. Table 4 shows the mode and corridor results for potential Malawian mined products, and Table 5 shows the results for Mozambique and Zambia.

Table 4: Mode and Corridor for Malawian mined products National Mine Products Uranium

Titanium ore Pig Iron Alumina Nickel Nal Coal

Tonnes (000)

Tonnes (000)

Tonnes (000)

Tonnes (000)

Tonnes (000)

Tonnes (000)

Quantities 2009 0.01 0.00 0.00 0.00 0.00 0.00

Projection 2020 10.00 250.00 125.00 200.00 1,000.00 60.00

Existing Mode Road none none None none none

Existing Corridor Western

Best Mode (if unconstrained) Road Rail Rail Rail Rail Lake +rail

Best Corridor (if unconstrained) Western Nacala Nacala Moatize Nacala domestic

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Table 5: Mode and Corridor for Mozambican and Zambian mined products

Most important mining (international transit)

Mozambican Coal Zambian and Congolese Copper

Tonnes (000) Tonnes (000)

Quantities 2009 0.00 0.00

Projection 2020 6,000.00 1,450.00

Existing Mode rail train

Existing Corridor Beira TAZARA or Angola

Best Mode (if unconstrained) Water +rail or rail rail

Best Corridor (if unconstrained) Nacala or Beira Western + Nacala

Note: Quantities for Mozambican Coal and Zambian Copper are only those projected to transit through Malawi.

For each of these main products, the origin-destination study and the cost study allowed to determine an urgent programme, which would result in an immediate reduction in transport costs and in many cases a significant increase in the production. Table 6 lists the urgent programme for current imports and exports, and potential Malawian mine productions.

Table 6: Urgent Domestic Transport Sector Investment Programme Needs IMMEDIATE NEEDS Tea Tobacco Cotton Sugar Nuts

Quantities 2009 52.56 232.63 27.56 280.00 295.33

Existing mode Road Road Road Road or Rail Road+rail

Existing corridor Durban Beira Durban + Beira

Beira or Nacala

Tazara

Priorities for Transport Improvement and Investment

Tete Bridge efficient rail services

Chiromo Bridge

Chiromo Bridge

lake service in Nkhata Bay

Border crossing

rail link Limbe - Lilongwe

Tete Bridge Dwangwa road to lake

MCC equipment in

Mbeya

Border Crossing

Dwangwa port + lake

service

Border Crossing

Cassava Potatoes Sweet Potatoes

Maize Rice Pulses

Quantities 2009 3913.00 758.00 2714.00 3201.68 106.11 383.00

Existing mode None none none road road Road+rail

Priorities for Transport Improvement and Investment

Lake service Nkhata Bay

Cheaper road transport

Lake service Nkhata Bay

warehousing Lake service MCC equipment

rail link Limbe - Chipoka- Lilongwe –

Chipata

rail link Limbe - Chipoka-

Lilongwe -Chipata

rail link Limbe -

Chipoka- Lilongwe -

Chipata

efficient rail services

efficient rail services

Ro-Ro service on the lake

Equipments to produce flour

Petrol Paraffin Diesel & other

General Petroleum

Fertilizer Imported Coal

Quantities 2009 107.80 14.80 157.40 280.00 141.61 2.00

Existing mode Road Road Road Road Road Train

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Existing corridor Beira Tazara Beira Beira Beira Beira

Priorities for Transport Improvement and Investment

77km in Mozambique

Ro-Ro service on the lake

Ro-Ro service on the lake

warehousing lake service Link with Moatize

rail link Limbe - Chipoka- Lilongwe –

Chipata

rail link Limbe - Chipoka-

Lilongwe -Chipata

rail link Limbe -

Chipoka- Lilongwe -

Chipata

efficient rail services

efficient rail services

Services on the lake

Ro-Ro service RoRo service

Lime Clinker Uranium Titanium ore Pig Iron Alumina

Quantities 2009 38.00 21.00 0.00 0.00 0.00 0.00

Existing mode Road Road+train Road none none none

Existing corridor Tazara western

Western and TAZARA none none none

Priorities for Transport Improvement and Investment

lake service Tete bridge MCC equipment

Energy Energy Rail link to Moatize

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2nd Part: The Present Logistics Answers.

2.1 The domestic transport system

2.1.1 Roads

a) The Network (Source: Road Sector Program – 21.12.2010) The classified network consists of 15,451 km of roads. The main secondary and tertiary roads, shown in the following table, total around 10,600 km. They form the trunk road network; meanwhile district roads account for 3,500 km and urban roads for 1,350 km. Approximately 25% of the network is paved. Road Network by Surface Type and Designation (km)

Paved Unpaved Total

Main (M) 2,809 548 3,357

Secondary (S) 407 2,718 3,125

Tertiary (T) 44 4,077 4,121

District (D) 8 3,492 3,500

Urban (U) 770 578 1,348

Total 4,038 11,413 15,451 Source: Road Authority, Road Data Manager

9,073 km of unpaved unclassified or community roads, mainly tracks and trails1 were identified to be designated as part of the net. The majority (6,950 km) are proposed to be designated under a new class of Community (C) roads. The reminder is proposed to be classified as Secondary (10km) or District (2,473 km) roads. It is assumed that by financial year 2012/13 these roads will be classified, and are therefore included in the RSP from that time.

b) Road Condition The state of the network has varied widely in recent years, though it is currently in reasonably good shape. The road condition survey of 2007 addressed 14,211 km (92%) of the network. Roads not included in that survey include a number of urban roads known to be in poor condition, and the survey results have been adjusted to reflect this. The paved network is generally in good to fair condition, partly as a consequence of the very large donor funded programmes of backlog maintenance. The unpaved network is generally in worse shape, but even so, only 17% was in poor condition. Unpaved road conditions tend to be dynamic, and are sensitive to environment, weather, and changes in traffic levels.

Road Conditions in 2007 Condition Paved Unpaved Total

Criterion (IRI) Km % IRI Km % km %

Good < 3.5 2,204 54.6 < 7.0 2,481 21.7 4,685 30.3

Fair 3.5 – 5.0 1,196 29.6 7.0 – 10.0 7,013 61.5 8,210 53.2

Poor > 5.0 638 15.8 > 10.0 1,919 16.8 2,556 16.5

Total 4,038 11,413 15451 100.0 Source: 2007 Road Condition Survey, adjusted for un-surveyed roads

1

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c) On site investigation The consultants conducted on site investigation on all major roads of southern and central Malawi, and observed that the state of major roads is good, far better than any other sub-Saharan country they visited (except South Africa), and often as good as standard secondary roads in western Europe. Two important exceptions should be mentioned, and a limitation for possible future developments. The M3 road, between Zomba and Blantyre has poor sub-base and should be reconstructed. It is likely this road has been deeply damaged by the transport of clinker in the early 2000s, as the present traffic does not seem too heavy for the road characteristics, and surface is in a good shape. The M1 road is saturated between Lilongwe and Dedza, at the Mozambican Border, and its present characteristics obviously do not cope with the traffic density. Another important limitation relates to the characteristic of the M3 for the 50km Northward from Lilongwe to Mangochi, which are sufficient for the present traffic, but would not allow the development of an intermodal corridor Road-Lake with a port in Monkey Bay. The M3 westward from Mangochi to Chiponde is not asphalted, One should remember that this road is in fact a secondary road, as long as the boarder in Chiponde is closed and the road connection in Mozambique is not opened.

d) Road Management

Administration

In 1997, The Government of Malawi set up a National Roads Authority (NRA) and a Roads Fund. The NRA at that time administered the Roads Fund and was responsible for the whole classified network of approximately 15,451 km. In 2006, under the Roads Authority and Roads Fund Administration Act, responsibility for the Roads Fund was transferred to the Roads Fund Administration (RFA), and the Roads Authority (RA) was made responsible for the management of designated roads. Local authorities (district and urban assemblies) are responsible for maintaining some urban and district roads, tracks and trails, but presently the Roads Authority tends to take care of these roads. One of the purposes of the Road Fund is to finance on a cost sharing basis, routine and periodic maintenance of roads, tracks and trails under the responsibility of a City, Town, Municipal or District Assembly. Local authorities do undertake maintenance, and need human and technical capacity enhancements in order that they can manage their networks more efficiently. Active consideration is now being given to devolving the management of local roads to the local authorities, starting with the major cities, in the expectation that each local authority would receive an allocation from the Roads Fund, which they could supplement with local funds.

Funding

There are two main sources of funds for roads under the RA. The largest part comes from the Government’s Development Budget, including development partner grants and loans, and is used mainly for major road improvements, new roads, upgrading unpaved roads to paved, and rehabilitation and periodic maintenance. The second source is the Re-current Budget funded by the Roads Fund, which raises revenue from the fuel levy, transit fees and various other minor sources, and provides this money to finance (under Section 19 (1) (a) of the Act) the maintenance and rehabilitation of public roads and surveys and monitoring related to such maintenance and rehabilitation of public roads. Under Section 18 (1) (a) of the Act, the Roads Fund may also be supplemented by Government grants The allocation of the Roads Fund to the RA is the subject of an annual financing agreement, which identifies the work programme for the coming year and costs each component. The purpose of the Roads Fund is to finance the maintenance and rehabilitation of public roads, along with relating surveys and monitoring activities. At present, the GoM contribution and development partner project resources are administered separately, but consideration is being given to making the RFA responsible for handling all road sector funds from whatever source.

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Until recently, the Roads Fund has not raised sufficient money to pay for all necessary maintenance work. In early 2009, the Government increased the fuel levy to MK 23.7 per litre for diesel, and MK 28.7 per litre of

petrol. The Roads Fund revenue for FY 2009/10 is forecast to be MK 8.34 bn (US$ 60 million). Roads Fund Income from Fuel Levy FY 2001/2 to FY 2008/9

Income 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09

MWK bn 1.48 1.53 1.82 2.70 3.67 5.70

US$ m 18.5 17.0 16.5 16.2 20.2 37.8 Source: RFA audited accounts.

Provided the real value of the Fuel Levy is maintained, the RFA revenue should continue to increase approximately in line with the growth in GDP. For the purposes of projecting revenue, it has been assumed that GDP will grow at an average of 5% p.a., and, on this basis, the revenue forecasts are shown in Table 3.5.

Projected Roads Fund Revenue (MWK bn)

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16

Fuel Levy 8.34 8.76 9.21 9.67 10.15 10.66 11.18

Other2 .4 .42 .97 1.01 1.06 1.12 1.17

Total 8.74 9.68 10.18 10.68 11.21 11.78 12.35

Source: Roads Fund Administration Strategic Plan, 2009

e) Road Program Between 2002 and 2008, development partner funding rehabilitated approximately 1,250 km of the national road system, with works on the M1 accounting for 675 km. Ongoing and planned development partner projects will rehabilitate or upgrade a further 1,020 km by 2011. In addition, planned projects include the upgrading of approximately 820 km of unpaved roads to improve accessibility in rural areas. The Programme for 2009/10 is shown hereafter.

2009/10 Roads Authority Development Programme

Road N° Description Work Funding Length 2009/10 allocated million MWK

- Mzuzu City roads Upgrading GoM 22 112

- EU Feeder Roads Spot Improve. 9th EDF 2,400b

1100

- Infrastructure Service Program Feasibility World Bk 0 50

- Mzimba St, Lilongwe Upgrading GoM 3 200

M1 Lilongwe By Pass Construct° ADB 14 132

M1 Lilongwe-Nsipe Periodic 9th EDF 137 1800

M1 Chikwawa-Nchalo Rehabilitation 9th EDF 50 600

M1 Chiweta – Mlowe Rehabilitation GoM 70 200

M1 Bangula-Nsanje Upgrading GoM 50 650

M1 Nchalo-Bangula Rehabilitation GoM 30 950

M10 Masasa - Golomaoti Monkey Bay Rehabilitation 9

th EDF 80 35

M18 Mangochi - Monkey Bay Rehabilitation 9th

EDF 70 5

M26 Karonga - Chitipa Upgrading PRC 109 (a)

M3 Liwonde - Naminga Rehabilitation OPEC 22 885

2 International Transit Fees and Road User Charges, excludes loans

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Road N° Description Work Funding Length 2009/10 10

6

MWK

M3 Blantyre Zomba Rehabilitation ADB 47 140

M35 Zomba - Jali - Phalombe – Chitakale Upgrading

Kuwait OPEC BADEA 102 3950

M5 Msulira – Nkhotakota Rehabilitation GoM 33 300

M7 Lumbadzi-Dowa-Chezi Upgrading GoM 24 750

M9 Rumphi-Nyika-Chitipa Feasibility (Upgrading) BADEA 275 280

S107 Mzimba – Mzalange Upgrading GoM 87 1800

S108 Mzuzu - Bula – Usiysa Rehabilitation GoM 25 200

S113 Kasilu - Lupashe - Kakwale Rehabilitation GoM 86 200

S117 Lilongwe - Kasiya - Santhe Feasibility (Upgrading) GoM 133 200

S125 Bunda – Mitundu Upgrading GoM 9 310

S135 Ntcheu-Tsangano-Neno-Mwanza Feasibility ADB 140 126

S138 Mwanza - Chapananga – Chikwawa

Feasibility (Upgrading) GoM 106 49

S147 Chiradzulu-Miseu Folo - Chilinga Upgrading GoM 90 681

S150 Malowa- Goliati - Chiperoni Upgrading GoM 36 300

S161 Thyolo - Thekerani - Makhanga - Bangula Upgrading

Kuwait, OPEC, BADEA 94 3216

S212/M9/S209/M24 Jenda - Euthini - Rumphi

Feasibility (Upgrading)

Kuwait, Saudi donors 200 835

T393 Ntaja – Nayuchi Rehabilitation GoM 50 200

T415 Chiringa-Mloza Upgrading GoM 80 70

Total 2,274 20,326 A Directly financed by PRC; B Spot improvements, not included in total length

EU Feeder Road programmed works are shown. The total in the Government budget is MWK 20,326 million, and excludes costs associated with the Karonga – Chetopa scheme. The re-current budget for the year is MWK 7,665 million, giving a total MWK 28 billion. It should be noted those two current contracts: Lilongwe - Nsipe and Chikwawa-Nchalo-Bangula are currently the subject of negotiations for contract amendments which will give rise to additional expenditure shown in 2010/11 and 2011/12. Summary Road Programme Upgrading Schemes (2010/11 to 2014/15)

Road No. From To Length

(km) Cost

( M MWK) Cost

(USD M)3 IRR

M010 Njolo Kapiri 15.4 377 2.7 79.1

D328 Nsomba Madziababgo 20.2 495 3.5 77.2

T411 Chinkankheni Nguludi 11 270 1.9 76.0

M001 Ngabu Lalanje Bridge 13.1 321 2.3 54.0

T418 Didi Thunga 23.5 576 4.1 34.1

S129 Makanjira Chingo 61.4 1,504 10.7 34.0

S125 Mitundu Diamphwi Bridge 22.1 541 3.9 33.5

S149 Losa Chonde 11.8 289 2.1 33.3

S126 Linthipe Lobi 27 662 4.7 24.0

S118 Kawere Mkanda Kapiri 31 760 5.4 24.0

T378 Monkey Bay Cape Maclear 18 441 3.2 16.5

S138/T401 Lirangwe Machinga 74 1,813 13.0 15.0

Total 328.5 8,049 57.5

3

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The summary road programme will have to be checked taking in account the multimodal transport scheme.

Scheme Intervention Status 2010/11 2011/12 2012/13 2013/14 2014/15

Paved Roads Routine Maintenance Maintenance Annual 888 905 915 965 1,026

Unpaved Roads Routine/Grading Maintenance Annual 3,178 3,026 4,670 4,593 4,448

Paved Roads Re-Seal Maintenance Annual 2,577 3,411 4,170 4,464 3,221

Unpaved Roads Rehabilitation New 4,169 4,635 3,581 3,692 3,391

District and Urban Roads Rehabilitation New - - - - 143

Msulira - Nkhotakota Rehabilitation Contracted 1,319 - - - -

Chikwawa - Nchalo - Bangula Rehabilitation Contracted 1,963 841 - - -

Liwonde - Naminga Rehabilitation Contracted 902 902 902 - -

EU Feeder Roads Rehabilitation Under Tender 1,088 1,138 275 - -

Lilongwe - Nsipe (additional works) Rehabilitation Negotiation 770 330 - - -

Chikwawa - Nchalo - Bangula (addendum) Rehabilitation Negotiation 945 405 - - -

Chiweta-Mlowe Rehabilitation New 57 57 1,855 1,855 1,855

Blantyre-Zomba Rehabilitation New 1,306 2,472 2,753 - -

Mzuzu-Bula-Usiysa Rehabilitation New 82 82 1,680 2,772 3,948

Kasilu-Lupashe-Kakwale Rehabilitation New 70 70 1,445 2,384 3,395

Nyata-Nayuchi Rehabilitation New 40 40 800 1,890 1,510

M3 Liwonde-Mangochi Rehabilitation New 1,449 - 1,411 - -

M1 Bus River - Miti Rehabilitation New 920 - - - -

S124 Lilongwe-Chinsapo Rehabilitation New 256 - - - -

M1 Miti - Lumbadzi River Rehabilitation New - 1,865 - - -

M1 Nkumbe River - Mlombe Rehabilitation New - 1,235 739 - -

M1 Kasungu - Bua River Rehabilitation New - 1,441 - - -

S122 Mpatsanjoke Bridge - Livinstonia Hotel Rehabilitation New - - 92 - -

M5 Mlowe - Nkhotakota - Chilua Rehabilitation New - - 4,179 2,541 -

M1 Karonga - Songwe Rehabilitation New - - - 2,258 1,722

M5 Salima - Balaka Rehabilitation New - - - 2,685 2,685

T318 Majiga - Nkhata Bay Rehabilitation New - - - - 193

S137 Chirimba - Blantyre Rehabilitation New - - - - 227

M5 Mzuzu - Kwale Rehabilitation New - - - - 1,588

S117 Njewa - Airwing Rehabilitation New - - - - 168

M24 Rumphi - Njakwa River Rehabilitation New - - - - 353

Goliati - Chiperoni Upgrading Contracted 502 502 - - -

New Bunda - Mitundu Upgrading Contracted 492 123 - - -

Ekwendeni - Ezondweni & Ezondweni - Njakwa Upgrading Contracted 785 - - - -

Mzimba - Eswazini - Mzalangwe Upgrading Contracted 1,841 3,068 1,227 - -

Lumbadzi - Dowa - Chezi Upgrading Contracted 1,117 745 - - -

Chiringa - Misewu Folo - Chiradzulo Upgrading Contracted 1,574 1,574 - - -

Nsanje - Bangula Upgrading Contracted 1,998 1,076 - - -

Karonga - Chitipa (Phase 1) Upgrading Contracted - - - - -

Zomba - Jali - Phalombe - Chitakale Upgrading Contracted - - - - -

Thyolo - Thekerani - Muona - Bangula Upgrading Contracted 2,900 3,480 2,320 - -

Rumphi-Nyika-Chitipa Upgrading Feasibility 100 100 50 1,000 1,500

Lilongwe-Kasiya-Santhe Upgrading Feasibility 40 20 1,788 2,950 4,202

Ntcheu-Tsangano-Neno-Mwanza Upgrading New - - - 1,604 3,207

Mwanza-Chapananga-Chikwawa Upgrading Feasibility 81 2,646 2,646 2,646 -

Jenda-Euthini-Rumphi Upgrading Feasibility 815 2,200 2,200 2,300 2,650

Chiringa-Mloza Upgrading New 40 40 815 815 815

S126 Lintipe - Lobi Upgrading New - 331 331 - -

S138/T401 Lirange - Machinga Upgrading New - 364 364 - -

M10 Njolo - Kapiri Upgrading New - - 377 364 547

D328 Nsomba - Madziabango Upgrading New - - 495 - -

T411 Chinkankhene - Nguludu Upgrading New - - 270 - -

M1 Ngabu - Lalange Bridge Upgrading New - - 321 - -

T378 Monkey Bay - Cape Mclear Upgrading New - - 447 - -

S118 Kawere - Mkanda - Kapiri Upgrading New - - 381 381 -

S125 Mitundu - Diamphwi Upgrading New - - - 541 -

S129 Chingo - Makanjira Upgrading New - - - 549 956

T418 Didi -Thunga Upgrading New - - - - 576

S149 Losa- Chonde Upgrading New - - - - 289

Lilongwe Bypass New Construction New 1,068 1,576 407 - -

Total 35,333 40,699 43,907 43,248 44,614

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Anticipated Committed Development Partner Support for Road Sector

Development Partner Project(s) Anticipated Support

2009/10 to 2014/15

European Union Rehabilitation of Chikwawa – Nchalo Lilongwe - Nsipe Feeder Roads Upgrading Sector Budget Support for Works Sector Budget Support for Capacity Building

Euro 16 M Euro 7.6 M Euro 18 M Euro 65 M Euro 5M

Republic of China Upgrading Karonga – Chitipa USD 38 M

Kuwait, Saudi donors Upgrading Thyolo- Thekarani- Bangula USD 24 M

BADEA Upgrading Jenda – Eutheni – Rumphi USD 25 M

African Development Bank Ntcheu – Tasangano Lilongwe By-pass Zomba-Blantyre

USD 1.77 M USD 21.01

4 M

USD 36.17 M

Millennium Challenge Account Feeder Road Upgrading Capacity Building

USD 45 M USD 7 M

DFID Unpaved road rehabilitation and upgrading (URP) Capacity Building

GBP 19 M GBP 1 M

JICA Bridge Replacement USD 20 M

World Bank Infrastructure Service Project USD 35 M

Infrastructure costs for road sector interventions (‘000 USD per km)

Intervention Trunk District Urban Community

Routine maintenance – paved roads 1 1 2 -

Routine maintenance and grading – unpaved roads 3 2 3 0.2

Periodic maintenance – paved roads 88 33 120 -

Rehabilitation – paved roads 300 120 250 -

Rehabilitation – unpaved roads 25 5 25 -

Upgrading to Class I of unpaved roads 625 - 625 -

Upgrading to Class II of unpaved roads 514 0 514 -

Low cost seals on unpaved roads 175 175 - -

New Construction 1,000 - 1,556 -

Replacement of single-lane timber deck bridges with concrete decks (per m length)

1 1 1

f) Primary Indicators The Primary Indicators are intended to be the targets for the release of the variable tranche of Sector Budget Support (SBS) proposed under the 10th EDF. The European Union have indicated that a sum of Euro 70 million (US$ 95 million) will be available for SBS, of which Euro 5 million is intended to be devoted to capacity building. The fixed tranche of SBS is assumed to be 60% of the total, leaving Euro 26 Million as variable support over 5 years, depending on the extent to which the targets are met. 7 Primary Indicators have been defined as follows: Government budget available for roads – intended to demonstrate the Government of Malawi’s commitment to meeting the needs for road rehabilitation and upgrading, without over-relaince on development partner support Road Fund budget available for roads – intended to demonstrate an increasing use of domestic resources to address road maintenance needs. EU fixed tranche support for roads – intended as a comparator to the above indicators to show that domestic resources devoted to the roads sector are increasing relative to external support.

4

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Rehabilitation of Paved Roads – intended to show the Government’s commitment to overcoming the historical lack of maintenance which has led to a large number of paved roads being in poor condition. The indicator shows the total kilometres of paved roads which should be the subject of rehabilitation construction contracts. Rehabilitation of Unpaved Roads – in 2007, nearly 2,000 km of unpaved roads were in poor condition, and this figure will have increased due to a lack of substantial intervention, increasing traffic, and two intervening rainy seasons. This indicators intends to show the government’s commitment to improving the overall quality of the unpaved network, especially in rural areas, by rehabilitation. Maintenance of unpaved roads – this indicator intends to show that, as the unpaved network is rehabilitated, a greater proportion of the network will be able to be placed under routine maintenance contracts, and adequately cared for. Regular periodic audits – this indicator intends to show that the activities of the Roads Authority, both technical and financial, are transparent and effective. These indicators are shown in Table 3.7 Secondary Indicators Secondary indicators are designed to show the overall performance of the sector, and to present a factual picture of the sector around which all stakeholder scan engage in productive dialogue in order to improve sector performance. These indicators are shown in Table 3.8 Table 3.7 : Primary Indicators for SBS Variable Tranche Release

SI Indicator Unit 2009 2010/11 2011/12 2012/13 2013/14 2014/15

1 Annually available funding source GOM Budget for Roads

USD mill.

32.1 75.4 156.9 147.1 106.1 120.5

2 Annually available funding source Fuel Levy for Roads

USD mill.

62.4 69.1 72.7 76.3 80.1 84.1

3 Annually available funding source from EU fixed tranches

USD mill.

0 10.6 10.6 10.6 10.6 10.6

4

Rehabilitation (Rehabilitation/Reconstruction) of paved trunk roads)

Km 250 266 259 384 390 423

5 Rehabilitation Unpaved Km - 1,341 1,617 1,499 1,491 1,792

6 Maintenance Unpaved (Routine & Spot Regravelling)

Km 7,468 7,500 7,600 7,700 7,800 7,900

7 Regular Periodic Audits (Technical & Financial)

No. of Reports

2 2 2 2 2 2

Table 3.8 : Secondary Road Sector Performance Monitoring Indicators

Key performance indicators Unit June 2010

2011 June

2012 June

June 2013

June 2014

1a Length of classified road network km 15,451 15,451 15,451 15,451 15,451

1b Paved classified road network % 26% 27% 28% 30% 31%

2a Paved classified road network in good and fair condition % 90% 90% 90% 90% 90%

2b Paved classified road network in good condition % 50% 52% 54% 55% 56%

2c Unpaved classified network in good and fair condition % 70% 70% 70% 70% 70%

2d Unpaved classified network in good condition % 12% 14% 16% 18% 20%

3 Classified road maintenance coverage (expenditure/needs)

% 55% 60% 65% 70% 75%

4a Paved classified road network under routine maintenance % 81% 82% 83% 84% 85%

4b Unpaved classified network under routine maintenance % 35% 40% 45% 50% 55%

5a Total rehabilitation works needed (paved) km 450 400 350 300 250

5b Total rehabilitation works needed (unpaved) km 7,000 6,000 5,000 4,000 3,000

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Key performance indicators Unit June 2010

2011 June

2012 June

June 2013

June 2014

6 Development Budget allocated to backlog maintenance % 35 40 45 50 55

7 Total Number of fatal road accidents (- 10%) Nr. 700 630 570 520 460

8a Axle -load control at fixed weigh bridges - total trucks weighed

Nr.

8b Axle load control inland - total trucks weighed Nr.

8c Axle -load control at fixed weigh bridges at borders- trucks overloaded

% 5% 5% 4% 4% 3%

8d Axle load control inland - % trucks overloaded %

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2.1.2 Railways

a) Institutional and organizational aspects (Railway Transport Division) The 1907 Railway Act is the principal regulatory legislation applicable to the railways sub sector. Most of its provisions are no longer relevant or have never been applied. The provisions of the Railway Act were enacted at a time when concession agreements of railway transport were not in the mind of the legislatures. As such, it is an Act that in its current form does not provide a facilitative environment for the operation of railway concessions. On 1st December, 1999, the Government of Malawi (GoM), desirous of increasing the productivity of rail transport and reducing transport costs to, from and within Malawi and achieving the objectives of the 1996 Public Enterprise (Privatization) Act, signed a Concession Agreement with Central East African Railway (CEAR) to manage and operate the railway transport sub sector for a twenty-year period. Malawi Railways Holdings Act, 1986 provides for the incorporation of the Malawi Railway Holdings Company (Holding Company) as a company with limited liability, and a board to manage the company. It is the Holding Company that held the shares in Malawi Railways (1994) Limited which was the rail operator during the such as SADC Railway and the Railway Act. As one of the technical wings of the Ministry, the Division will also play a crucial role in the provision of advisory services to other Government institutions and stakeholders in the Rail transport sub sector. The long term goal of the Division is to ensure that Malawi has an efficient, affordable and effective rail transport network that eases pressure from the road network and provides an alternative means of transport for period immediately preceding the concession of the rail operations. The Railway Transport Division is a newly established regulatory arm of the Ministry of Transport and Public Infrastructure to oversee all matters relating to railway transport system currently being run by CEAR, as well as those issues pertaining to the implementation of policies and directions sanctioned under various regional groupings the movement of both people and long haul large volumes of cargo.

1. Key strategies institutionally defined i. Improving operational efficiency and commercial viability of the existing railway infrastructure and

levels of service to all users including people with disabilities at an affordable cost; and

ii. Promoting railway safety and environmental protection through sustainable management practices in catchment areas around rail infrastructure such as bridges and culverts and other environmentally sensitive areas.

2. Description of infrastructure The railway network is shaped in a T, with its crossroad between Liwonde and Balaka. The condition of the rail is uneven over its lengths.

The Liwonde – Nayuchi Eastern branch is the connection to the Eastern Mozambican network, and the trunk rail to Nacala.

The Liwonde Balaka Chipoka northward branch allowed the connection to the lake, and follows on to Salima, then westward to Llilongwe, Mchinji and Zambia. It ends in Chipata, 24 km within Zambia. Unfortunately, the section is presently cut north of Balaka, disconnecting the North-Western net from the Nacala corridor.

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The Southern branch goes from Balaka to Limbe, then Eastward to Luchenza, (not far from Mulanje) and Southward to Chimero, Nsanje, and connects to MOZAMBIQUE and the BEIRA corridor in Mutarara. Unfortunately, the line most southern part is nearly lost or definitely lost: several decades without

maintenance or investment grants that it necessitates very important investments.

Figure 26 : Main problems on the railway system in Malawi The main problems can be listed as:

The loss of the rail between Balaka and Chipoka;

The bridge of Chimero, which disable the rail between Chimero (in the heart of the sugar region) and Luchenza, where are located the main sugar warehouses;

The loss of the Chimero – Nsanje – Mutarara railroad, which should be reconstructed, considering that the last part is apparently completely lost.

The very poor state of the Limbe-Balaka section, partly linked to under-utilization, resulting in vandalism and stealing of the infrastructure, and partly linked to the poor investment, which combined result in the absence of viability, and in a very poor service, in transport time and reliability.

The Blantyre –Mukaya (88km) is also poor. About 350 km of the rail within Malawi is under restrictions with speed limit in the range 20 to 25 km. As a result the speed between Blantyre and Nacala (800 km) takes 40 to 41 hours; however for the 533 km in Mozambique, the speed is between 70 km to 80 km.

Due to the present conditions, major investments in rail improvement are required. Steel slippers (30 kg/m) covering 29 km need major repairs. The bridges washed out should urgently be rebuilt. However, the concrete slippers (40 kg/m) which extend for 420 km have no significant problem.

In general, rail slippers worn out, vandalism and encroachment continue to be problems. Vandalism is a major problem in certain localities, but this might be efficiently addressed with better train frequencies.

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The Railway concession by CEAR in 1997 for 20 years has brought some improvement in routine maintenance. However, the rail is owned by Malawi and the concession agreement does not ask CEAR to make major investment. As a result, improvement in rail operation is not as expected.

CEAR has made repairs in the rail. These include changes of 1000 slippers (7 km) from Blantyre-Nyaka from steel to concrete. Other 2 km slippers were changed from 30kg/m to 40kg/m. The CEAR operation has also experienced vandalism over a length of 20 to 25 km near Salima.

TOTAL TRAFFIC MOVED FROM YEAR 2005 TO 31 DECEMBER 2009

-

50 000

100 000

150 000

200 000

250 000

300 000

TO

NN

ES

Tonnes

Tonnes 194 167 191 045 230 898 216 995 245 576

Year 2005 Year 2006 Year 2007 Year 2008 Year 2009

LOCAL MOVED FROM YEAR 2005 TO 31 DECEMBER 2009

-

5 000

10 000

15 000

20 000

25 000

TO

NN

ES

LOCAL

LOCAL 23 315 19 580 14 987 17 391 12 231

Year 2005 Year 2006 Year 2007 Year 2008 Year 2009

3. Rehabilitation costs (sources GOPA Study) A Railway Task Force has been assembled to focus activities, ensure a regional approach to the problem and verify the "bankability" of the overall rehabilitation of the rail network.

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Nacala corridor rehabilitation: The railway operating programmes indeed apply to the entire Nacala Corridor, i.e. the lines Nacala – Nkaya – Chipata and Blantyre – Nkaya. To assess the economic viability of the railway development project within the region, cost estimates for the entire corridor were already considered. Accordingly, initial investment costs (2009-2014) for the entire corridor are roughly estimated to add up to US$523.8 m, thereof: US$222.2 m for infrastructure rehabilitation in Malawi, US$5.4 m for network development in Malawi, US$110.0 m for infrastructure rehabilitation in Mozambique, US$15.0 m for loading/unloading equipment at Nacala Port, US$1.6 m for Chipata (Zambia) extension, US$8.7 m for signalling (entire network), and 160.9 m US $ for rolling stock. In the period from 2017 through 2029, additional investments into rolling stock of up to US$49.5m may

be required to cope with increasing traffic.

Link with Zambia A new rail link from Chipata to Mchinji (Malawi) was completed in May 2010 and gives Zambia access to the network. On the long term, a rail connexion to the TAZARA and the Zambian network, possibly at the Southern border of Congo with Zambia, might be considered.

Linking with Beira Though the Nacala rail route is the lowest cost route for foreign trade, the broken rail link through the south of Malawi via Nsanje and Marka represents a possible (but expensive) alternative link to Beira. Rehabilitation costs from the Southern Border – Limbe section (Beira Corridor), is up to 305.0 m US $, out of which : . 95.3 m US $ for renewal of 198.9 track kilometres and 40 turnouts, and . 209.7 m US $ for replacement / renewal of 144 steel bridges with a total length of 1,591 metres, 2,323 bridge beams and 90 rail frames. The major part of this link in Mozambique is being rehabilitated by Compania dos Caminhos de Fero da Beira (CCFB) - a joint venture between CFM and two Indian companies (Arcon and RITES) - which has also the concession to operate the line; this rehabilitation is funded by the concession and with a World Bank loan. Rehabilitation of the Malawian part of the Beira link is engaged.

Suggestion from the consultant

The Nacala rail route is a regional and national necessity, due to the demand of transport coming from the Moatize area and from Chipata. A missing link is clearly identified between the Moatize – Beira rail route and the Malawian infrastructure. This missing link can hardly be addressed between the northern part of the Mozambican network, and the Central part of the Malawi network, due to the presence of important escarpments (1st) and to the important distance between the two networks (2nd). On another hand, linking the network through the Southern border of Malawi, along the Shire River, with a connexion with the Mozambican network at the confluence of the Shire and the Zambezi restarts the Beira rail corridor for Malawi, but do not answer to the coal transport demand (from the Mozambican point of view), and clearly discards the Nsanje inland port project (from Malawi point of view). The huge cost of rehabilitation is also a major problem.

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The consultant suggests studying the possibility to link the two networks between Bangula (Malawi) and Gundano (Mozambique).

Between Bangula and Gundano, the declivity is minimal, the distance between the two networks is reduced, the distance from Gundano to Moatize is still acceptable for the mines, and this choice will clearly facilitate the economic development of the Mwanza and Lower Shire valleys (Sugar and cotton), presently aisled by the Blantyre escarpments. In this option, the rail link would act as feeder to the inland Port at Nsanje with goods from Western Mozambique, Malawi and Zambia.

Figure 27 : Rail link between Bangula (Malawi) and Gundano (Mozambique)

Description and appraisal of financial viability of the concession The economic appraisal has to consider both financial viability from the concessionaire’s and economic viability from the public’s view. On the basis of O & M costs estimated as Malawi: Technical Assistance to Rail Sector Development fixed base amount of 13.30 m US $ p.a. plus 1.0125 cents per tonne-kilometre, and an average traffic income of 6 cents per tonne kilometre, the financial evaluation results in a NPV of 30.28 m US $ and 11.1% FIRR for the network. Even though, a lower tariff of 5 cents per tonne kilometre would still result in financial viability.

4. Key Rail Sub Sector Monitoring Indicators The Rail Transport Indicators used for performance measurement and monitoring are numerous. Table 2 below shows Key Rail Transport Monitoring Indicators, their base and targets in terms of total revenue against total operation costs, cargo and passenger volumes as well as track maintenance coverage:

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Table 2: Key Performance Monitoring Indicators Key Performance Indicators Baseline

2007 June 2008

June 2009

June 2010

June 2011

1 Track maintenance coverage (%)* 29.7% 36.3% 32.9%

2 Total Annual Freight in Tones (‘000)

230.90 217.00 245.58 384.18 422.60

3 Total Annual Passenger Traffic 652,306 814,047 572,492 628,515 691,367

4 Total Revenue (MK Million) 370.15 405.25 468.15 966.00 1,182.30

5 Total Operational Cost (MK Million)

1,036.00 1,195.18

Baseline yet to be determined

2.1.3 Lake Malawi Regulatory Authority The Marine Department is a regulatory arm of the Ministry of Transport and Public Infrastructure, responsible for all matters relating to water transportation, as well as those issues pertaining to the implementation of policies and directions sanctioned under various Regional and International Conventions and Protocols such as SADC, COMESA, IMO, etc. As a technical wing of the Ministry, the Department also plays a crucial role in the provision of advisory services to other Government institutions and stakeholders in the Water transport sector. The Mandate of the Department is prescribed in the Inland Waters Shipping Act (1995) which provides a legal framework for the water transport industry in Malawi. The Act places a responsibility on the Department to ensure that:

i. All commercial vessels are registered, licensed and seaworthy;

ii. All ports and harbours are properly manned and secured;

iii. All vessel manning requirements are met.

The Department performs the following functions:

a. Assesses and evaluates vessel seaworthiness and competence of seafarers and dock workers;

b. Regulates maritime traffic and shipping services;

c. Provides maritime training for seafarers and dock workers;

d. Develops and manages Malawi Lake Ports and Harbours;

e. Co-ordinates Search and Rescue activities and regulate marine pollution control; and

f. Most recently, oversees the management and operations of the Malawi Lake Services.

Dry dock facilities Malawi Lake Services owns ship building and ship repair facilities at its Headquarters in Monkey-Bay. These facilities comprise a fully fledged slip-way; a 620 Ton lifting capacity floating Dock and engineering workshops. These facilities are also used by other ship-owning companies and organizations both within and outside Malawi.

Ports The major ports are Chilumba, Nkhata-Bay, Chipoka and Monkey-Bay. All these Ports handle domestic as well as international cargo. Chipoka and Chilumba are fitted with container handling equipment with adequate container handling and stacking areas. Table 2 lists machinery and equipment, quay capacity, jetties and buildings for each port. In addition, Chipoka has a rail line interface to the major commercial centres of the country as well as the major import and export corridors, such as Nacala, etc. All the Ports are served with excellent all weather road networks, providing a seamless connection of cargo and passengers.

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Marine vessels Currently, the main vessel operator in the country is Malawi Lake Services Limited which provides passenger and cargo services on Lake Malawi.

Vessels Operated by MLS

VESSEL TYPE YEAR BUILT

GROSS TON

PASSENGER CAPACITY

CARGO (TON)

CURRENT CONDITION

Ilala Pass/Cargo 1949 620 460 100 Operational

Mtendere Pass/Cargo 1980 924 420 45 Needs Repair

Katundu Container 1991 720 Operational

Vessels Operated by MLS

Karonga Cargo 1975 430 300 Operational

Ufulu Tanker 1983 424 290 Laid-up

Chancy Maples

Pass./Cargo 1899 226 180 20 To be converted into floating Hospital

Viphya Pontoon 1974 - - 600 In service

Viphya Tug(Towing) 1976 - - Used for Towing

Barge 300 Barge 1966 - - 60 Anchored at Ngala. Needs Dry docking

Nkhwazi Cargo 1956 295 200 Laid-up

Mpasa Cargo 1935 250 200 Laid-up

Dowa Tug(Towing) 1947 17 - - Needs Maintenance

Mulanje Tug(Towing) 1947 17 - - Needs Maintenance

Thyolo Tug(Towing) 1947 17 - - Needs Maintenance

Zomba Tug(Towing) 1947 17 - - Laid -up

Ncheni Workboat 1957 20 12 5 At Nsanje, under repair

Barge 91 Barge 1961 - - 22 Needs Maintenance

Barge OP1 Barge 1971 - - 20 Needs Maintenance

Barge 201 Barge 1956 - - 30 Needs Maintenance

Barge 203 Barge 1956 - - 30 Needs Maintenance

Actual Concession The concession of Malawi Lake Services to Glens Waterways between 2003 and August, 2008 did not bring in the intended investment as the concessionaire failed to provide the required capital for the maintenance of the existing assets as well as the provision of faster and more efficient ferry services. Starting this year, a new concessioner has been chosen. Mota Engil, a Portuguese consortium, attained the highest evaluated score for both technical and financial bid and such has been designated as the preferred bidder. Mota Engil has committed itself to rehabilitate the existing vessels and ancillary facilities within a period of two years, invest in two additional vessels for the tourist market and support the development of human capital by supporting the Marine Training College.

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Traffic volume The activities of Malawi Lake Services failed to pick up significantly for the reasons cited above.

Lake Traffic Volumes Years Cargo (Ton) Passengers

2003 6,690 66,902

2004 4,179 66,008

2005 14,380 62,037

2006 17,885 58,656

2007 21,214 68,309

2008 22,496 72,095

2009 23,140 71,545

The main cargoes carried are fertilizer imports and sugar exports through Chipoka, and sugar and fish exports and drink imports through Nkhata Bay. At present freight through Chilumba port is minimal. There is considerable cargo movement through Nkhata Bay by unlicensed vessels with attendant potential safety risks. The Department wishes to deploy an officer to enforce regulations, but does not have a vessel.

Expected volumes and key water monitoring Transport indicators The Water Transport Indicators, in terms of cargo and passenger volumes, ship and port operational costs versus ship and port revenue, have been very low over a long period of time due to lack of capital investment in both ship and port operations. However, with the concession of the MLS to Mota Engil who have committed themselves to invest and the construction of the Nsanje World Inland Port, it is expected that substantial capital investment would be injected into the sub-sector and hence improve the indicators substantially.

Key Water Transport Monitoring Indicators (base and targets):

Key Performance Indicators

Baseline

2009

June

2010

June

2011

June

2012

June

2013

June

2014

1 Total Port Design Capacity (Tons)

600,000 600,000 1,000,000 1,000,000 1,000,000 1,000,000

2 Total Ship Design Capacity (Tons)

2,640 2,640 4,640 10,500 12,400 16,000

3 Total Annual Freight in Tones

23,140 120,000 950,000 2,200,000 2,350,000 2,500,000

4 Total Annual Passenger Traffic

71,546 100,000 120,000 250,000 375,000 525,000

5 Total Port Revenue/ Total Operating Cost (MK)

- 10,500,000 -6,000,000 - 500,000 2,500,000 5,000,000 15,500,000

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THE OBJECTIVE OF FIGHTING POVERTY NECESSARILY INCLUDES THE DEVELOPMENT OF A SYSTEM OF DISTRIBUTION AND RECOLLECTION OF CARGO ALONG THE LAKE SHORES At continuation, the consultant describes a standard of cabotage ports for communities integration, facilitating the access to market of products such as fish, cassava, vegetables and so on. The cabotage recollection might be consolidated in some main harbours like Chipoka, Nkhata Bay … The intention is to build up port capacity to annual figures of 250,000 tons (Chipoka), 250,000 tons (Nkhata Bay), 100,000 tons (Chilumba), and by 2011 a further 400,000 tons at Nsanje World Port.

Figure 28 : Recollection of cargo along the lake shore by cabotage

h) Development of a Roll-on Roll off ferry service on the Lake: The system would facilitate transport from the southern and central parts of Malawi to Tanzania and vice-versa, providing a credible alternative to the road if accurately organized.

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Figure 29 : Roll on-Roll off ferry on the lake

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2.2 Regional transport corridors

The number of potential so-called corridors is really impressive, and it is indeed challenging to classify them. Here are the main ones.

Figure 30 : Regional transport corridors

2.2.0. List of the corridors

1 Nacala Launched in 2000, Nacala Development Corridor (NDC) is a “traditional” strategic transport route from the port of Nacala in Mozambique through Malawi to eastern Zambia and serves Malawi’s major economic and population centres. Poor transport infrastructure and facilitation has inhibited the use of this shortest and potentially Malawi’s cheapest transport route.

2 Beira Beira corridor is historically the most effective for Malawi, although it has very severe limitations: absence of a complete rail network, physical limitations in Beira port are the most obvious. Beira is in competition with Nacala, and might be an interesting terminal for the Shire-Zambezi corridor.

2 b Shire-Zambezi More recently, Malawi has taken another important step to embark on another project aiming at re-opening the Shire-Zambezi Waterway in order to have direct access to the Indian Ocean ports which will reduce transport cost further and stimulate production as well as growth of the Southern region. This corridor needs the use of a sea port apart from the Zambezi Mouth, and has therefore been studied as an option of the Beira corridor.

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2 c Quelimane There is no Quelimane corridor as an identified entity up to date, but the use of this port has been considered.

2 d Tete Although a road corridor only, Tete has rail development possibilities. It is not only a link to western Mozambique, but also to Beira, Zimbabwe and South-Africa. Most of Malawi international trade uses the bridge over the Zambezi in Tete. This bridge, in repairs, is a severe bottleneck. It is a critical part of the wider Durban and Beira corridors.

3 North – South Durban corridor The Jo’burg Durban corridor is a road corridor, going North South through Zimbabwe and either Tete or Zambia. It is today the most crucial corridor to Malawi general cargo imports. Durban is also linked to the Beira corridor, as Beira port is mainly a cabotage collecting point for Durban.

4 Western corridor West of Lilongwe, the road connects Malawi to Zambia and its copper belt, and further on to Congo’s mining fields.

5 Dar es Salaam corridor One of the most effective corridors deserving Malawi, it is also the most multi-modal one, as it integrates: train from Dar to Mbeya, Road from Mbeya to Malawi, and sometimes the water transportation on the Lake.

6 Mtwara The Mtwara Development Corridor initially identified as a Transport Corridor in 1992 by SADC, has been turned into a development corridor after extending its scope to cover the concept of harnessing economic sectors in the defined region extending from the port of Mtwara in Tanzania to regions of southern Tanzania, northern Mozambique, northern and central Malawi and North-Eastern Zambia. It was launched in December, 2005. For necessitating sophisticated intermodal procedures, and for having a costly extensive road part, it is not really effective at the date.

2.2.1 Connexions

Although there are several links between the corridors, these are effective only by road.

Connexions by road: The main connecting roads are: Tete – Massano - with then one branch to Mwanza - Blantyre and the other one, in Mozambique to

Dedza, then Dedza – Lilongwe. This is presently the main gateway for Malawi. Mbeya – Chilumba connects Tanzania and Malawi. Misanje – Mocuba, in gravel, and then Quelimane, Nacala and Beira connects Coastal Mozambique and

Malawi. Lusaka – Chipata - Mchinji - Lilongwe connects Zambia and Malawi

Rail links: There is no direct link with neighbouring Tanzania with as there is a 1,067 mm (3 ft 6 in)/1,000 mm (3 ft 33⁄8 in) break of gauge. Though there is no change of gauge, there is currently no connection with Zambia main net, even so the CEAR line has now been extended to Chipata. Direct linkage is available with Mozambique, however, which has the same gauge track. Linkage is called the Nacala Corridor line via

Nayuchi to the port of Nacala and the SENA line from Nsanje to the Dona Ana Bridge and Beira. The latter link has not been operational since the war in Mozambique and is in need of reconstruction. River link: The once discovery route has been abandoned since the construction of the Sena line, in the early 20th Century.

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Lake activity: Despite of some recent agreements between Tanzania, Mozambique and Malawi, the lake is marginal in international exchanges between the three countries. It also participates very little to the Dar Es Salaam, the Mtwara, the Western or the Nacala Corridors, although it constitutes an obvious hub between them.

2.2.1 NACALA CORRIDOR

The Nacala corridor includes Nacala Port, a railway line and a road going to Nacala.

2.2.1.1 Nacala harbour

Nacala is located in the Nacala bay, latitude 14 ° 32'S longitude 40°4'E. It is a natural deepwater port which can handle all vessel sizes. Its access is through a channel 800m wide and 6.0 m drought. Climatic events are linked to South and South East winds, of which the harbour is naturally protected. The wharfs offer a drought from 8m to 9.5m offering access without limitation to deep sea vessels, and facilities include two terminals, container and general cargo. The port facilities are said to just being improved. Presents limitations: Insufficient warehousing, insufficient logistics and no “one custom clearance”. Vessel calls are irregular. If operated efficiently, and utilised at greater capacity, the Port of Nacala should become a major source/point of economic activity in Mozambique. Studies (Imani TMT, 2002) indicate that the port of Nacala should be able to increase its traffic volumes very substantially from the present level of about 600 000 tons per annum to well in excess of 1 million tons in the next few years. Furthermore, on the assumption that Nacala port could improve its facilities, cargo handling equipment and management to a reasonably acceptable international standard, it has the potential in the longer term to become the major port for Central African mining and a mini-hub port for the Comoros Islands (Mayotte and Maroni) and the northern ports of Madagascar. Nacala is supposed to have an airport, but in 2010, there is no regular service, and planes deserving the port are landing in Nampula.

2.2.1.2 Nacala road

The road conditions are said to be very bad so that trucking is hardly an option on this route. The best route is going out of Malawi in Milange (South) running South to connect after 176 Km to the Asphalt road, then North-East to Nampula and Nacala. The trip is long and costly.

2.2.1.3 Nacala rail

The railway line is linking eastern Zambia, central and southern Malawi, and northern Mozambique to the Port of Nacala over a distance of about 750 Km. The railway suffers from frequent problems with bridges (washouts) and managerial problems, which makes its traffic unreliable. The border post is Nayuchi. The transit time is said to be 10 days. It could be much better, however the frequent interruptions and delays make this potentially best performing transport corridor not the preferred one for many exporters and importers.

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Rutenga

Bulawayo

Victoria Falls

Livingstone

Mazabuka

Lusaka

Kanona

Tunduma

Mbeya

Beira

Nacala

Dar Es Salam

ZIMBABWE

MOZAMBIQUE

ZAMBIA

BOTSWANA

CONGOTANZANIA

Tete

Harare

Mzuzu

Lilongwe

Blantyre

Chipata?

Chinde

NACALA CORRIDOR

Figure 31 : Nacala Corridor

2.2.1.4 Railway and Port Privatization

The Railway Restructuring Programme in Malawi and the Rail and Port Restructuring Programme in Mozambique financed by the World Bank proposed that a single concessionaire should operate the Nacala Port and Rail systems in both countries to ensure efficiency. In line with this, a consortium of American investors, the Railroad Development Corporation and the Edlow Resources Limited in 1999 acquired a 51% majority shareholding interest in the Central East African Railways (CEAR) of Malawi and the Corredor de Desenvolvimento de Nacala (CDN) in Mozambique. This left 49% owned by CFM of Mozambique. Press Corporation of Malawi submitted the bid but was unsuccessful as they lacked an appropriate technical partner. In that regard, Mozambique offered to keep the Malawi shares in trust. Mozambique finalized the concession for its CFM (N) rail operations as well on 10th January 2005. A loan agreement for US$ 30 Million was signed between Overseas Private Investment Corporation (lender) and a Nacala Railway line operating consortium represented by Central and East African Railways and CDN. The loan intended to rehabilitate rail and port facilities in the Corridor so as to give the landlocked countries of Malawi and Zambia easy access to the sea through the port of Nacala. Part of the loan was supposed be used for the rehabilitation of the railway line, mostly the “77 Km Cuamba-Entrelagos stretch”, acquisition of modern facilities and equipment such as forklifts, tugs and pilot boats and quayside equipment at Nacala port and the extension of the Mchinji-Chipata railway line. 7 years later, only the last project has been finalized. The so-called “77km” rehabilitation is still to be done. About US$12 Million of the loan was used on the Malawi side of the railway system to rehabilitate wash-away, acquire new locomotives and upgrade the railway company itself. Very little has been done. The present situation of rail in Malawi is worse than ever, as we remarked above.

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2.2.1.5 Liwonde Dry Port, Fuel Storage and Pipeline project

The project proposes the establishment at Liwonde of a multi-modal logistics centre, a Dry Port containing facilities for fuel, agricultural products, mineral products and general cargoes, and administration including customs clearing to facilitate easy transiting of cargo through the Corridor. This interface between national traffic and the corridor would be welcomed, and its location, at the very centre of the CEAR network makes sense. It might eventually be completed by similar interfaces in Chipoka and Nsanje. The Government of Malawi also intended to construct a fuel pipeline from the port of Nacala to Liwonde to carry refined oil into the country and storage facility at Liwonde for volumes equivalent to two months stock of country’s requirements. The project is apparently abandoned today.

2.2.2 BEIRA CORRIDORS

Beira Corridors and Beira Corridor Historically, the Beira corridor had been the main Malawi trade artery, having been disrupted by the war in Mozambique. Presently it is returning to its old predominance and handles again nearly half of its foreign trade. Beira offers regular feeder calls for Durban. Beira corridor is presently booming, for the lack of efficiency of Nacala, it attracts a major part of the Malawi import cargo. For its location, it is the natural gate for the booming mining activities and blossoming industries of the Zambezi Valley, and also the natural gate for Zimbabwe. This country has been for the last ten years, in a poor economic situation, but has the capability to play an important role in regional economics very soon. Business opportunities are already attracting Zimbabwe private players, with LonZim Plc, a company listed on the Zimbabwe Stock Exchange. Although its main target is building a portfolio of investments primarily in Zimbabwe, the company indicated in a press statement in April 2009 that it may also make investments in business outside Zimbabwe especially in the Beira corridor. The Beira corridor presently includes Beira port, a road network acting as a corridor to Zimbabwe, Zambezi Valley and Malawi, and two railways corridor, one to Malawi and the other to the Zambezi Valley and formerly Malawi (the SENA line). A water corridor is to complement this scheme, from the lower Shire along the lower Zambezi, and then by cabotage to Beira.

2.2.2.1 Beira Harbour

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The Port of Beira is the hub of the Beira Corridor and it is “self praising” itself as the world’s gateway to Mozambique, Malawi, Zimbabwe, and Zambia, D.R Congo and Botswana. As other major ports in the region, the container handling volume at this port has been increasing rapidly in recent years. However, because of the limitation of depth of the channel, currently only feeder services mostly from Durban are available at this port (except one small vessel from Europe) without any transhipment cargoes. Description of Harbour facilities The Port of Beira has 11 berths with a total length of 1,726 m and berth drafts of 6.8-12 m. In addition, development of a new oil terminal berth at Berth 12 and a new coal terminal at Berth 13 are planned. The design features of each terminal are shown in Table 4.2.7. The container terminal is operated by Cornelder, which is also the container terminal operator of Pemba Port with a large share of a Dutch company, under a 25-year’s concession; the other terminals are operated by CFM, which is also responsible for future development of the port as well as dredging.

Limitation of expansion and coherent action plan The significant bottleneck at this port has been insufficient dredging. Although one dredger for maintenance dredging was provided by Japan in 2000 and another was added in 2007, the capacity of these dredgers has been insufficient for restoration of the Port of Beira. In order to address this problem, a project for restoration of the Port of Beira access channel to its original design characteristics with a depth of 8 m is planned to start in January 2010 with a total project budget of EUR 43 million, funded by CFM, EIB, and ORET. The sandy materials dredged at the channel will be used as reclamation materials for the new coal terminal planned to be developed north of the oil terminal. In addition, a new dredger with a capacity of 2.5 million cubic meters will be provided by DANIDA in 2011.

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The European Investment Bank finances the refurbishing of the Beira port access channel at a cost of EUR42 million.

Rutenga

Bulawayo

Victoria Falls

Livingstone

Mazabuka

Lusaka

Kanona

Tunduma

Mbeya

Beira

Nacala

Dar Es Salam

ZIMBABWE MOZAMBIQUE

ZAMBIA

BOTSWANA

CONGOTANZANIA

Tete

Harare

Mzuzu

Lilongwe

Blantyre

Chipata

Chipoka

Chilumba

Beira Corridor (Sena line + road routes)

Figure 32 : Beira corridor (Sena line + road routes)

2.2.2.2 The roads to Beira

The Beira road corridor is a network of two main roads leaving Beira North-West towards Harare, with a crossroad next to the Zimbabwe border running to Tete, and from there a branch to the Malawi’s border. A ramification follows the Malawi border on the Mozambican side, North to Lilongwe. Most of road traffic towards or from Malawi uses these branches, with a bottleneck and severe limitations in Tete. The only bridge on the Zambezi River in the area has been under reconstruction for years, and is still presently used on one lane only, with alternate traffic, resulting in huge congestion. The road connection Beira - Blantyre is some 800 Km, passing through the border post of Mwanza. The transit time between southern Malawi and Beira by road is about 3 days. The other main road goes north from Beira and crosses the Zambezi River in Vila Machado, some 120 km South of Nsanje. Connections to Southern Malawi are poor and through tracks only.

2.2.2.3 Railways

Companhia Dos Caminhos De Ferro Da Beira (CCFB: Beira railroad company) was established with a 25 years concessionaire contract.

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The Beira rail system comprises two rail lines: (i) a 317-km Machipanda line (Beira Railway) linking the Beira Port to the railway network in Zimbabwe

(along the Beira Corridor); (ii) a 600-km Sena line linking the Beira Port to the Moatize coal mines via Inhamitanga, Caia and Vila de

Sena (along the Sena Corridor). The Beira Railway extends westward up to the border station of Machipanda, where it links to the Zimbabwe rail network at Mutare station. This line is heavily graded which consequently limits the train load. The Sena line takes off from the Machipanda line at Dondo (a station about 28 km. from Beira) and goes northward, crossing the Zambezi River between Vila de Sena and Dona Ana (298 km from Dondo). The line again diverges at Dona Ana, a 254 km line runs on the north bank of the Zambezi River to Moatize and a 44-km branch line extends northward to Vila Nova near Malawi border. While the operations of the Sena line or Sena Railway were stopped for more than 20 years as the civil war raged in this area, the capacity of rail transport function was refocused to utilize the mining potential around Moatize and to enhance the connectivity from the Beira Port to southern Malawi. CCFB is currently implementing a project of rehabilitation and reconstruction of the entire sections with the financial support from World Bank and European Investment Bank (EUR65 million from EIB). The project was planned to be completed in 2010, but has suffered important delays. Works are realized by an Indian consortium. According to the interviews conducted with transporters in Mozambique, the rehabilitation of the Sena – Vila Nova branch with a future connecting spur into Malawi, liaising with the Malawi railway network at Nsanje/Bangula is still to realize. Funding is apparently not a problem: Plutarchos Sakellaris, EIB Vice President responsible for lending operations in Africa, said in 2009 the loan will be complemented by an additional EUR29 million interest rate subsidy from the EU.

Issues and Bottlenecks: The Beira Railway (Machipanda line) now receives a certain amount of traffic (mainly import/export goods from/to Zimbabwe and Zambia) and requires relatively little investment to continue operating profitably. On the other hand, it was continually said that the Sena Railway required extensive rehabilitation, and although the estimated economic benefits are substantial, the relatively slow growth of traffic did not make the line commercially viable without a high share of public sector financial support. This issue may be diminished by several on-going development plans for large-scale coal mining at Moatize, even it is now necessary to consider the alternative route to transport coal, because of the restrictions on transportation capacity of the rail track, even after the rehabilitation.

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2.2.2.4 Shire-Zambezi waterway

a) Rationale The intended waterway connection from Nsanje to Chinde will give Malawi a water access to the ocean. Use of this access would be mitigated by the fact that the facility will be implemented about 90% on Mozambican territory. As the natural catchment area for this project one can assume all the southern part of Malawi as long as suitable hinterland transport links to the port at Nsanje are available or can be established. It is far to be the case, and the road reconstruction to Nsanje will not change the problem of Chikwawa escarpment. This highlights the importance to rehabilitate the once existing railway connection between Blantyre and Nsanje. According to Hydroplan pre-feasibility study, "candidates" for import cargo could be seen in the 128,800 t of fertilizers and the 281,400 t of other, indiscriminate cargo, which are trucked into Malawi. The consultant thinks that the possible users of the corridor haven’t been clearly identified. SAFEGE experts consider that exports diverted to the Shire Zambezi might be some molasses, and food products. New exports might be considered, especially beer and bio fuel.

b) Fuel Malawi imports in average of the last years about 250,000 m3 of fuel. Malawi's main fuel suppliers are BP and Mobil, which operate mainly out of Beira, where they maintain large fuel depots In principle, this would be an ideal cargo for a tanker vessel, were it not for a lacking corresponding liquid cargo on the export side, which means that the vessel would have to make a return trip empty. But the possibility to develop bio fuel in the area might favour the project. There are however indications that the fuel rates charged by road tankers from Beira to Malawi (US$ 77/000t -Km) may even make a one-way fluvial transport leg profitable, if a reasonable option is chosen.

DESCRIPTION OF THE CORRIDOR

The distance between Blantyre and Nsanje is 180 km (access); from Nsanje to Chinde is some 340 km (river navigation), from Chinde to Beira 150 km (sea navigation).

1. Access to Nsanje Port Nsanje, the base port of this project, is presently connected to the rest of the country towards the north, by a gravel road in complete reconstruction over about 80 Km. Towards the south, the same road continues in bad conditions and enters after some 30Km into Mozambique. The road presents a major disadvantage, on its Chikwawa Blantyre link. Despite being in a perfect shape on this 40 km, it is crossing an escarpment, with a declivity of 1000 m on the link. Pendants are as high as 11%, and the consultant conducted its own enquiry along the road, establishing that the loaded truck speed was 8km/h on the passage checked. The road is then improper to cargo traffic from a port to the hinterland. The former railway connection to Blantyre is deactivated. It also continued into Mozambique, linking up with the Sena line at Sena. It presently stops at Makhanga near the Chiromo Bridge, where the tracks cross the Shire River. The bridge suffered washouts and needs an immediate even if provisional rebuilding. Such a reconstruction would also save rehabilitation of the Chikwawa Bridge, which is old but in good condition, and may fit with the remaining road traffic.

Nsanje Port The current design handling capacity as constructed is higher than the pre-feasibility study design, even in its most “optimistic” scenario. The first phase of the Nsanje port is under construction and is expected to begin operation in the following months. The Inland water transport port phase I as designed and under construction has a quay length of 200 metres that can handle at once 3 barges each of 64 meter length with a depth of 8 meter, with capacity of handling 48 containers of 20-ft capacity (equivalent 1000 tons/barge). The designed storage area is 9000 meter square or 230 containers.

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Based on current design, at one time the port would handle three barges with 3,000 tons of cargoes. It has a potential to expand the 200 meter key to 600 meters serving some 9 barges at one time. The business community appears to assess that the government is committed and as reflected in its purchase of lands in the town in anticipation of the port operation.

2. The river navigability The waterway was measured with 490.5 km; the river navigability depends of numerous factors. 1 Bridges upon the river: 2 Obstacles to surface navigation 3 Meanders 4 Draughts

a) Bridges There are two bridges on the Shire-Zambezi Waterway's path, which deserve some comments: The bridge at Caia over the Zambezi This bridge represents a long aspiration by Mozambique, since it is a vital link in the central region, which is divided by the wide Zambezi over hundreds of kilometres. Its construction had begun over 30 years ago, but was halted by the war. In 2005 construction begun again by a Portuguese consortium and the bridge was supposed to be operational this year. The bridge will be 16 m wide and 2.376 km long, with four lanes, two for vehicles and the other two for bicycles, motorbikes and pedestrians. More important under project aspects is the air draught with 13 m over flood level. Thus, there should not be any problem with navigation. The bridge at Morumbal over the Shire Mozambique plans also the bridge at Morumbal, which crosses the Shire south of the Ndinde Marsh. It is being financed by and planned in Japan; the construction is foreseen to start in the following months. The bridge will be a flat two-lane road bridge about 200 m long. At flood level, there will be an air draught of max. 3 meters only. This is clearly insufficient for larger vessels, which will thus be unable to operate on the lower Shire during flood periods. Beyond the cited examples it is apparent that any project in central Mozambique may have impact on this project, being it bridges, roads, railways, ports along the Zambezi river, new cargo sources, cabotage ventures, etc.

b) Surface navigation Shire transports huge amounts of water hyacinths downstream. The existence of water hyacinth vegetation is an obstacle. Especially in the Marshes these plants cause nuisance up to prohibit local navigation. The water hyacinths cling to the river banks, multiply and – for smaller waterways within the Elephant marsh and within the Ndinde marsh – close entire canals in meanders. Nowadays these water hyacinths have to be taken away by adequate devices... In the future, only the constant use will tend to keep the channels open.

c) Meanders The river is exempt of significant meanders except in the Ndinde Marsh and in the Zambezi Mouths.

d) Depths Depth is variable. Although a swamp area, the Ndinde Marsh shows a remarkable depth of 3.5 m. The Shire has huge daily variations of depth, depending of the debit of the upstream dams. The Zambezi, too, is highly variable in his water depth. Shallow locations are followed by water depths of up to 10 m. Further downstream, near Chinde the maximum water depth was measured with 16 m. The minimum water depth of the Zambezi was measured with 2.0 m.

e) Chinde port Although Chinde has an historical tradition as a port, its present infrastructure and location does not allow any hope regarding the development of a port for high sea vessels. Even transboarding operations would rather take place in new installations on the opposite site of the channel. Despite the fact Chinde is not more than a village, some port culture is apparently surviving and the project may use this will.

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Transboarding would certainly be necessary, as barges able to navigate the ocean would require such draught in the river, than the project would not be economically feasible.

f) Cabotage and second transboarding As Chinde offers no perspective for development as a high sea port, cabotage should be organized to Beira, where frequent calls guarantee a link to Durban. This necessitates a second transboarding, plus an additional one in Durban for inter-oceanic business. This constrain will limit the cargo transported on the Shire Zambezi to containerized cargo. Beer, fertilizers enter in this category. Fuel might be treated a different way, as the cost of an offshore fuel terminal is relatively low, transport might be organized directly from Durban or Origin points to Chinde offshore would-be terminal, where it might be tanked, and the river barges might be directly loaded.

g) Final port facilities: Fundamentally, the Shire – Zambezi waterway is one of the competing routes to Beira. An obstacle to development will be the very likely saturation of Beira as a port in a very short period of time, due to the huge amounts of coal originating in the Moatize – Tete area, and to the Zimbabwe interest for Beira, which is much closer to Harare than to any Malawi town. This obstacle can be levied, for reasonable quantities of cargo, by the use of Quelimane as an alternative port.

Rutenga

Bulawayo

Victoria Falls

Livingstone

Mazabuka

Lusaka

Kanona

Tunduma

Mbeya

Beira

Nacala

Dar Es Salam

ZIMBABWE

MOZAMBIQUE

ZAMBIA

BOTSWANA

CONGOTANZANIA

Tete

Harare

Mzuzu

Lilongwe

Blantyre

Chipata

Chinde

Chipoka

Chilumba

M1

M1

M1

Chire Port

North-South Corridor completed by Shire-Zambezi Link

Figure 33 : North-South Corridor completed by Shire-Zambezi Link

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The consultant’s opinion about the Shire Zambezi: 1. About navigability and works:

- Barges having a draught of up to 1 m should be able to navigate from Malawi to the ocean. - Barges of a draught of up to 2m would necessitate dredging, at a reasonable level. This is the choice

used by the consultant in its transport strategy. Cost for operations will be approx. $0.07 per TKm, which is competitive for the mentioned products.

- Barges of a 3M draught or deeper would necessitate intensive dredging, compromising the project. The environment of the river and the Marshes would suffer from such dredging, and the project costs would practice the operators to practice an uneconomic level of price for their services (approx. 0.10 US$ in scenario 1 and 0.14 $ per ton kilometre).

2. About technical difficulties:

Investigations into the design of barges will be necessary. Barges will require means to scan the riverbed ahead. Enquires into forward-looking sonar must be made. Investigation into methods of clearing of sand ahead of barges will be made. For example, high-pressure water hoses might well suffice to clear away a channel in many cases.

3. About multiple transhipments:

The means of transferring cargoes from Chinde to a principal international port will be required. However, the skills available in Chinde will facilitate any port operations. Container operation and fuel terminal in Chinde appear to be the most reasonable choices. The possible saturation of Beira as a destination might force the project operator to look for an alternative harbour. Nacala is too far away, but Quelimane would be a solution.

4. About eco-tourism:

The lack of wildlife makes tourism a limited possibility. Floating hotels might navigate the river with a “niche” market such as “On Livingstone’s Footsteps”.

5. About Nsanje port:

A rail access to Nsanje is the main issue for starting any economic activity in the port. The controversies about the size of the harbour works already realized will be soundless as soon as the operations start. The feasibility study will determine which level of investment is the most appropriate for the future phases.

6. About economic feasibility:

At a level of price of 0.07$/TKm, the project is competitive, as long as it doesn’t suffer from possible competition from a direct surface route to Quelimane, much shorter. The transport mode and the frequent transhipment would be acceptable for some limited products in sufficient quantities to grant the profitability of the operations, probably around 400 000 t each way. This represents a daily movement of 3 to 4 barges of 380mT, loading and unloading.

2.2.2.5 Quelimane

Quelimane has never been qualified as a corridor, although it is by far the closest port to the Malawi border. The reasons for not qualifying Quelimane are: the port limitations, the absence of shipping calls the absence of a railway link to Malawi The absence of road to Malawi. Quelimane is the closest port to Malawi. The capital of the Zambezi province, Quelimane has one of the lowest development index in mozambique. Via Milanje, by road 176 km of gravel to Mocuba. Then asphalted road on 130 KM to Quelimane. Some maps mention a rail link from Mocuba to Quelimane. The port is currently operational, is equiped with a container terminal and realizes exports and imports of

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cargo. (Prices 60$pmT, against an average of 75$ in the area). Currently well equiped and under-utilized. But limitations in capacity, including warehousing, and serious draft problem (5M sand bar at river entrance). No international Shipping companies are presently calling in Quelimane, and the activity is limited to cabotage from and to Nacala, Beira and Chinde. Quelimane is also the outstanding point for molasses and sugar produced in the lower Zambezi area (transport by barge and rail). With Beira becoming saturated, Quelimane might be considered as an alternative solution to Beira for a part of Malawi traffic, presently using the road to Beira, but which might use the Shire-Zambezi. The consultant would like to call the attention of Malawi and Mozambique governments on a somehow important possibility. Due to the very short distance, the construction of a railway link, say from Chiromo or Nsanje to Mocuba, and the rehabilitation of Mocuba – Quelimane line would answer to many problems of heavy load cargo in the southern region, and would be peculiarly attractive for consumers (less transhipment than the Shire-Zambezi option, prices usually below 0,05US$ / TKm on trains, short distance). The impossibility to use high sea vessels differentiates Quelimane from Nacala, and the competition would not attract much cargo needing high sea shipment.

But despite of its limitations in gauge and service, this mini-corridor would certainly attract most of the cargo projected to use the Shire-Zambezi River, as the same limitations apply to the river. The investment required for opening this rail corridor would be in a range from 350 to 500 millions US$, depending of the state of the existing railway, if any. Another possible alternative would be the construction of a high standard road from Quelimane to Bangula or to the Shire oriental shore or to Milange. This would not have such a certain impact, as the road would be more expensive than the inland water transport, but for its efficiency, this road would also severely compete with the water mode.

2.2.3 DURBAN TETE CORRIDOR

2.2.3.1 Port

Durban is the hub of the North South Durban Tete Corridor, serving as a gateway to international trade not only to/from South Africa, but also to/from Botswana, Zimbabwe, Zambia, and Malawi. The Port of Durban has had the largest share of containerized cargo in Africa handling about 65% of the total containers through South African ports. Almost all major shipping lines including Maersk, MSC, OOCL, COSCO, EMC, PIL, NYK, Mitsui OSK, and K Line, make calls at this port, many of which use transhipment via feeder services from the Port of Cape Town. The volume of container cargo handled at the Port of Durban, which reached 2.64 million TEUs in 2008, has been increasing rapidly as have throughputs at other major ports in Africa, following containerization and economic growth in the region. With the recent rapid increase in cargo handling volume, the port has been heavily congested, which has led to delays in container handling operations. Various efforts have been undertaken to reduce this congestion. Recently, rail-mounted gantry cranes to smooth the railway terminal operation were installed. Three additional berths at the container terminal are under construction. The container handling volume of this port is expected to increase to 3.5 million TEUs in 2010.

2.2.3.2 Roads

The North-South (here considered in its Tete branch) corridor is actually a network of roads, linking southern Malawi via the border post of Mwanza and Central Malawi via the border post of Dedza through Mozambique to Zimbabwe and South Africa. It goes Durban – Johannesburg –Bettsbridge – Harare – Tete – Mwanza. This road corridor serves more than a half of the road transport to/from Zimbabwe, Zambia, and Malawi.

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The distances are around 600 km to Harare, 1,600 Km to Johannesburg and 2,000 Km to Durban. Durban is the main intercontinental shipping hub of southern Africa and from there Malawi cargo destined to Europe, America and Far East is shipped. Durban is accessible from Malawi either by land transport by truck or by feeder shipping through the corridor ports of Beira and Nacala. The transit time for the South African run is about 7 days. Considering the North-Eastern branch of the corridor, it runs from Harare to the Mozambican border, then to Tete and to the Malawi border, in two points East towards Blantyre, or North, along the border, towards Lilongwe. Basically, export cargos from Malawi are transported through this road corridor to the Port of Durban and trucks with import cargos from overseas and also South Africa return to those countries. Road conditions except those of some sections in Mozambique are good or fair. However, roads on this route tend to be damaged easily due to heavy cargoes, typified by copper from Zambia, which is transported by road due to the limitation of railway transport capacity. In order to reduce road damage, weighbridges have recently been installed at major road sections in Zambia and Malawi, although some of them are not functional. The border crossing points between Zimbabwe/Mozambique and the Zambezi River crossing in Tete are major bottlenecks.

2.2.3.3 Tete bottleneck

The Northern part of the corridor presents extremely severe limitations, notably: - The borders points between Zimbabwe and Mozambique, first, and between Mozambique and Malawi,

second, are severe obstacles. The consultant, by making the trip, identified five causes : o the absence in Mozambique of an efficient revenue agency or its equivalent, o the incredibly high level of corruption of the Mozambican officers at the border, o the lack of confidence of Malawi customs on Mozambican Cargo statements, o the lack of financial services and efficient communication systems at the border points and, o the inexistence of a unique border point and unified procedures on both sides of the border

- The difficulty to cross the Zambezi river : o as already mentioned, traffic on the Tete bridge is limited, due to works going on for years. But

also, the bridge infrastructure is old and will never cope with the expected levels of traffic in the area on the long term. The very structure of the bridge is far beyond the transport demand expectations.

o The two existing barges are anecdotic and do not represent in any mean an alternative to the bridge.

o This problem will last for as long as an efficient bridge is not built on the river. Only a new bridge including provision for railway transport might dramatically reduce traffic congestion in Tete.

- The lack of hosting infrastructure along the route is also problematic.

o One can hardly believe that Tete is (in fact, it is) the oldest city in Central Africa: poor hotels, no activity, poor maintenance offer for transport, no international banking services, and no international air links. When the consultants visited Tete, in April 2010, it turned to be impossible to change money, to use an ATM, to find a room, to place a phone call. The general feeling was that the civil war finished one week before…

o The same type of problem emerges between Tete and the borders : no fuel, no maintenance, no hotel, no gathering points for English speaking drivers (although this problem also exists in Malawi for Portuguese speaking drivers)

- Eventually, the state of the road is not bad, but still far below the Malawi standards. The branch running

on the Mozambican side between Mwanza and Dedza is not asphalted, but still in good riding conditions. Despite of these limitations, 50% of the international trade of Malawi transits through Tete at one stage.

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Nacala

Chipata

Dar Es Salam

Mbeya

Bangula

Beira

MoatizeLuzaka

Chinde

Tete

Mtwara

Harare

SalimaChipoka

Nsanje Port

DurbanJoburg

Kanona

Figure 34 : Durban Tete Corridor

2.2.4 WESTERN CORRIDOR

2.2.4.1 Railways in Zambia

Kanona – Chipata missing link

The construction of a rail link between the TAZARA line (Kapiri Mposhi connecting to the copper belt line – Mbeya) and Chipata would connect the most important corridors of Central Africa. It would give to the copper belt the shortest access to the Indian Ocean in Nacala and offer the huge markets of Central Africa to Malawian food productions. The result of such a development would be a merge of the Nacala corridor and the western corridor, making of Central Malawi the hub of regional trade. According to the consultant’s projections, more than 3 million tons of Malawian products would use this corridor yearly towards central Africa markets, while 1.5 millions tons of Copper would transit the other way to the ocean. Technically, the construction of such a link might suffer from some inconveniences: - The presence of an extensive game reserve on the western bank of the Luangwa River oblige either to

cross the reserve, with important mitigation measures for such a traffic, or to add an important distance to the route. In such occurrence, the detour should be made by the north, in order to simplify the access to the escarpment.

- The Luangwa crossing might prove to be difficult, especially if done in the game reserve. Should the rail

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cross the reserve, the bridge should be built north of Chilingozi. - The important escarpment of the Muchinga Mts can be approached with acceptable declivities in some

valleys only. - As a result, the junction might be done some kilometres north-east of Kanona. The distance to build would

be 260 km in the 1st scenario, Kanona – Lubechingwe River Mouth -Chipata, we used in our plan, and some 380 km in a 2nd scenario, Kanona – Luambe – Chipata.

2.2.5 DAR ES SALAAM CORRIDOR

2.2.5.1 Historical rationale

The Dar Es Salaam multimodal transport corridor was a major experiment in the early 1990s. In response to the non operation of the Nacala and Beira corridors due to the war in Mozambique, a consortium led by Germany helped install a multimodal transport operation based on Dar es Salaam Port. The 1990s multimodal Dar es Salaam (rail/road/ water) corridor consist of Dar-Makambako –Mbeya (rail or road mode) -Songye-Karonga-Chilumba-Chipoka (or Monkey Bay). However, today, the water link from Chilumba to Chipoka is not operational, initially due to the effect of draught on water level at the Chipoka port. This experience has left mixed feeling about restarting the Lake transport as part of multi-modal transport among certain groups; while on the other hand there is strong support from the Maritime Authority to go ahead with multi-modal project by correcting the earlier factors which caused the lack of optimum use of the Lake Malawi for transport in the corridor and constructing a new port north of Chipoka which will have sufficient depth to handle roll-on roll-off ships.

Rutenga

Bulawayo

Victoria Falls

Livingstone

Mazabuka

Lusaka

Kanona

Kasama

Tunduma

Mbeya

Beira

Nacala

Dar Es Salam

ZIMBABWE

MOZAMBIQUE

ZAMBIA

BOTSWANA

CONGOTANZANIA

Mzuzu

Lilongwe

Chipata

Blantyre

Chipoka

Chilumba

TAZARA Corridor + Lake service

Figure 35 : Tazara Corridor + Lake service

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2.2.5.2 MCCL and dry ports

The principal transport, forwarding and shipping services provider is the Malawi Cargo Centres Limited (MCCL). MCCL has two centres that were gazette by Tanzania Authorities “as dry ports” in Dar es Salaam and Mbeya. The MCCL aspires to:

take delivery of all Malawi import and export cargo transiting Dar-es-Salaam and Mbeya dry ports, and

arrange for its expeditious movement thereafter;

provide a one-stop logistics services to regional traffic using Dar es Salaam Corridor;

Use MCC Mbeya as a major hub for traffic within its immediate regional catchment area;

Establish cargo logistics liaison in the region as circumstances warrant.

MCCL also works to bringing port services closer to users in Malawi, Zambia and DRC.

2.2.5.3 Import and export Commodities

The major imports via the Dar Corridor are: Fuel, vehicle, fertilizers, relief maize, salt and other containerized general cargo. The major exports via the Dar corridor are: Tobacco, tea, sugar, beans and metals. The graphic below illustrate the dynamism of the Dar- Mbeya corridor for containers handling:

IMPORT AND EXPORT CONTAINERS HANDLED AT DAR-ES-SALAAM AND MBEYA IN 2007

0

50

100

150

200

250

300

350

JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC

MONTHS

NU

MB

ER

S(T

EU

s)

IMPORT

EXPORTS

TOTAL

2.2.6 MTWARA CORRIDOR

2.2.6.1 Nkhata -Bay-Mbamba Bay Heavy Capacity Ferry

In October 2003 was decided the commissioning of a Heavy Capacity Ferry between Mbamba Bay and Nkhata Bay. This Project is technically an extension of the Mtwara -Mbamba Bay Road Project from the port of Mtwara in Tanzania connecting to Lake Malawi. It also provides the link and primary motivation for the participation of Malawi in the MtwDC rooted in the original concept of the interstate multimodal transport corridor with Mtwara Port as an alternative gateway for international trade. A total of 79 Projects in Malawi had been packaged as part of the MtwDC, estimated at USD 2, 35 Billion, with USD 1, 52 Billion accruing to the private sector and USD 836 Million required in matching public sector investments.

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Note that most of these projects would similarly benefit from a development of the Nacala corridor or a better performance from the TAZARA corridor.

Rutenga

Bulawayo

Victoria Falls

Livingstone

Mazabuka

Lusaka

Kanona

Tunduma

Mbeya

Beira

Nacala

Dar Es Salam

ZIMBABWE MOZAMBIQUE

ZAMBIA

BOTSWANA

CONGOTANZANIA

Tete

Harare

Mzuzu

Lilongwe

Blantyre

Chipata

Chilumba

Chipoka

Mtwara Corridor + Lake Service and connecting roads

Mtwara

Figure 36 : Mtwara Corridor + Lake Service and connecting roads

Figure 37 : Projects in relation with Mtwara Corridor

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2.2.6.2 The consultant’s opinion on the corridor

The concept of the Mtwara corridor presents some clear advantages: - it allows the use of a deep sea port while Dar Es Salaam is saturated - it provides for a short link to the ocean from northern Malawi - it promotes inland water activities on the lake and - it allows regional exchange between the eastern and western shores Some of these advantages are not real benefit for Malawi: - Nacala is also a deep sea port with more facilities than Mtwara, - Mtwara link will be by road, which is on such distance more costly than the railway link to Nacala. Therefore, the main interest of the project is on the development of economic exchanges and transport services on the Lake, which might be supported and accelerated on the Malawi side, by providing a North-South service and an efficient rail connexion to Nacala to the Tanzanian shores of the Lake.

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2.3 Cost and time comparison between corridors

2.3.1 Corridor performance

Methodology

1. Indicators There are many indicators that can be used to measure corridor performance and these may cover volume and capacity; rates and cost factors; safety and security; and transit times and delays; and productivity aspects.

Transit times and delays indicators usually cover:

Transit time per route per mode of transport;

Transit time origin to destination by country;

Average dwell time at port;

Time of customs clearance at port;

Transit time within port;

Border post crossing time;

Time for customs procedures at destination;

Dwell times within an Inland Container Depot (ICD)/Inland Port; and

Weighbridge crossing time.

Figure 38 : Global transport Chain

Most of the corridor indicators include measures of time and cost, but which time and cost vary from one corridor to another. Likewise, cost could be measured per ton, consignment, truck, container or TEU. There is an increasing focus on costs and times per TEU, but on many corridors the measure used by customs administrations, or often by transporters to price their offers is still per ton per consignment. The unit of cost should be in Twenty foot Equivalent Unit or truckload, whichever is the most relevant to the corridor.

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As a minimum, any package of measure monitoring corridor performance should also take transport time and reliability into account. The World Bank’s Logistics Performance Index uses a comprehensive approach in measuring critical factors of trade logistics performance such as the quality of infrastructure and logistics services, security of property from theft and looting, transparency of government procedures, macroeconomic conditions, and the underlying strength of institutions. The LPI is based on a web-based questionnaire completed by logistics professionals, i.e. operators or agents of the world’s largest logistics services providers.

Figure 39 : Multimodal transport from origin to destination

Respondents rate country performance using a 5-point scale on the following seven areas:

Efficiency of clearance by customs and border agencies;

Quality of transport and information technology infrastructure for logistics;

Ease and affordability of arranging international shipments;

Competence of the local logistics industry;

Ability to trace and track international shipments;

Domestic logistics cost; and

Timeliness of shipments in reaching destination.

2. Trading Across Borders in Malawi International trade agreements Malawi is signatory to a number of regional, bilateral and multilateral trade agreements. These agreements govern various aspects of Malawi’s trade and economic engagement with its neighbouring countries and with the broader international community. Workshop results for international trade agreements

Obstacles Potential solutions Impacts

Implementation of agreements Regular meetings to review agreements specifically on rail, air and water transport

Increase consultation of stakeholders

Process of developing agreements Enacting the agreements in the laws for proper enforcement

Outdated agreements Implementing agencies to be fully aware of agreements

Lack of monitoring mechanisms Proper consultation with stakeholders on the agreements

Enacting them in the laws failure to enforce

Regular meetings to review agreements specifically on rail, air and water transport

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3. Transit and Logistics Costs Delays caused by shortages of equipment, poor communication, lack of coordination and motivation all affect the landed cost of goods and the price and hence competitiveness of exports. General picture of exports Malawi Revenue Authority (MRA) requires documentation for any export or import. This is a critical stage in the logistics chain. Exporters and importers engage the services of agents/freight forwarders to prepare necessary documents for exports and imports and process them through customs before transporting goods to the intended destinations Malawi exports tobacco, sugar, tea, cotton, coffee, ground nuts, pigeon peas, beans, Soya beans and many other agricultural commodities and these are handled by clearing agents appointed by the exporters. The reason for engaging forwarding agents is to take advantage of facilities, such as warehousing and customs bonds, as well as expertise in cargo handling, arranging transport and for their regional linkages with other companies that facilitates movement of cargo through other countries. Agricultural exports from Malawi compete for the same buyers with both countries within the region and outside Africa. Transport efficiency is essential for Malawi export commodities to compete successfully. Apart from competing for empty containers, Malawi exports have a major challenge of truck capacity, especially when several major export commodities move at the same time. Another big challenge is the need to connect with vessel sailing schedules at various ports. Despite this need for efficiency to overcome Malawi’s geographic handicap, exporters and freight forwarding agents are experiencing major inefficiencies by customs in processing these exports documents. Theoretically, export document processing through customs is supposed to be within hours otherwise a worst scenario would be a day. Based on interviews carried out in 2003 with several agents and exporters, in reality, it takes a minimum of two days and maximum of a week before export documents are processed by customs. It has been said that Malawi customs were more efficient in executing their duties before computers were introduced. Document processing was done manually, and there were numerous copies per consignment. Clearing agents were getting their documents returned far quicker than is the case now, despite MRA’s efforts to streamline documentation and introduce computers. Exporters and clearing agents spend hours at MRA Inland Clearing Ports each day waiting for export papers to come out, delaying departure of loaded trucks. Delays in releasing export documents distort the picture given by Malawian exporters to buyers abroad. The buyers assume the consignment has left for the port when it is loaded on a truck from their warehouses. Based on this information, the buyer expects that shipment on the next vessel sailing based on the transit time from day of departure. Because of delays in documentation, this is often not the case. This delay and unpredictability can reduce the competitiveness of Malawi products in the international market. According to the interviews conducted at Dedza border, the delays are mainly due to the lack of electronic transfer of documents from one bank to another.

Description of the export process However, the current system (2003) works this way: an exporter through its agent lodges an export entry through the registry at Malawi Revenue Authority (MRA) and has to wait for 48 hours before knowing the status of that entry. There is no communication between MRA officers and the agents during the processing phase otherwise the next thing an agent gets is either a passed entry or a rejected one. The later scenario leads to delayed dispatch of vehicle(s) that could mean missing a vessel nomination resulting in an exporter losing that export order or facing a heavy penalty for partial shipment. Freight forwarders would like to see transparency and speed in the way export documents are processed and, if possible, be given the contact person at MRA for easily monitoring the status of their export entries.

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Documents commonly used for exports are:

Certificate of Origin Malawi Chamber of Commerce (MCC) sells these certificates to members and to non-members. This document confirms that the consignment exported originates from Malawi

Generalized System of Preferences (GSP

This is also obtained from Malawi Chamber of Commerce at MK650.00 to members and MK800.00 to non-members and its function is to exempt the goods from custom duty in the importing member countries.

CD1 Forms These are obtained from the exporters' bank free of charge for exchange control purposes. It is a requirement that every export consignment has this document attached to other relevant documents

Commercial Invoice This is a document declaring the commercial value of the exported commodity and the exporter usually supplies it.

DA59 This is a specific document for exports to South Africa and this is obtained from the Trade Attaché’ at the South African Embassy free of charge.

EUR1 Another specific document for exports to the UK and European countries and it is available in pad form from stationery shops.

SADC Certificate All exports to SADC countries must have this certificate and it is supplied by MCC.

Phytosanitary Certificate This certificate is issued at the request of the buyer. Tea and tobacco exports to Poland and Egypt, for example, require this certificate. This is issued by produce inspectors from Malawi research centres at Chitedze, Bvumbwe, and Mimosa.

Fumigation Certificate Registered anti-pest companies issue these certificates after they have fumigated the commodities at the request of the shippers. Crops such as cotton, tobacco, groundnuts, maize and rice undergo this process. Fumigation charges vary, some charge per cubic meter, whilst some per consignment, for example, a container load.

The above documents add to the cost of handling and usually clearing agents will combine the fee charge and time spent on documents into a single documentation or agency fee which varies according to the handling contract agreed upon with the shipper. Import process Imports are more diverse than exports; hence customs demands vary from commodity to commodity. Instead of delaying offloading a truck just because one document is missing or the values are not matching, MRA ought to look at possibilities of offloading the cargo under dispute into a temporary warehouse and releasing the truck and other cargo. Delays can be as long as 2 - 3 weeks, affecting delivery of orders to customers and truck utilization. Some of the delays are due to in-house problems within MRA like, for example, the system being down, power failure or insufficient manpower to input entries.

1. One Stop Customs/Immigration Facilities (Workshop results)

Obstacles Potential solutions Impacts

No one stop facilities in Malawi (Chirundu on Zambia /Zimbabwe border has one)

Reduce and harmonize clearance documents and system

Lack of 1-stop facilities results in longer stays at borders

Too much time taken in clearing cargo; negative social impacts

Speed-up implementation of 1-stop facilities at all border posts (agreements, legal instruments and infrastructure)

Better business environment, reduction in corruption and immoral activities.

Different documentation between countries results in cargo delays

Normalization of documents is a priority.

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2. Port clearance Importers of shipments coming by sea have adequate time to have documents handed over to the appointed clearing agents at the port of discharge. Port authorities give a grace period of 6 days from date of discharge before they start-charging storage on imports; hence it is up to the importer to expedite documentation by submitting documents to the clearing agent at the port. Port storage charges are approximately $6 per ton per day (in 2003) and this expense increases the final landed cost of the product. Delays at the port also result to other costs in terms of; lost revenue or production at the country of receipt. For a well-organized importer and customs clearing agent at the port, the six days is adequate for all processes. Late submission of documents to the port agent by the importer is the commonest reasons why imports accrue storage at the port of discharge. Similar delays affect exports when containers cannot be found or loading is slow.

3. Malawi Customs in Seaports (workshop results

4. Cost and time comparison for the corridors It is important to share a view about travelling distances, travel time and average costs per ton of transported commodity. A decomposition of transport cost had been done for the use of railway corridors. The road corridors (Beira and Durban) are winning by a large extent the other corridors. The railway Nacala corridor is getting about 17.7% of the total volume of imported/exported commodities; the actual transport share is 19.27% for Dar Es Salam Corridor The computed cost of inland transport from/to Malawi in 2009 is US$ 128,095,990 /year. The total cost including sea leg costs could be estimated between 256 and 320 million US$ … to be compared to the results of the Cost Study in 2003 of 190 US$ million.

Obstacles Potential solutions Impacts

Protective laws of sea countries Multi-lateral and bi-lateral agreement

Reduce transport costs and times

Lack of confidence in destination countries regarding dumping cleared goods

Harmonized database, tracking and seals

Feeling of “no laws” beyond the national border

System of common penalties for defaulters

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Figure 40: Distances, travel time from Lilongwe: Transport costs

2.3.2.1 Distance from cities to ports in Mozambique in using the alternate multimodal transport schemes

From/To Dar Es Salam Dar Es Salam Nacala Quelimane Chinde Beira Beira Durban Durban Joburg

Tazara road railway road Zambezi railway road road road road

road/lake road lake/road lake/road/lake rail/road/lake road via Tete via Lusaka via Tete via Lusaka

Mzuzu 1200 1300 1356 1073 1143 1315 1475 3017 4076 4452

Lilongwe 1550 1667 989 714 776 948 1108 2650 3709 4085

Blantyre 1876 1976 678 397 465 568 1419 2339 3398 3774

Chipata 2025 2125 1138 863 925 1097 1257 2799 3858 4234

Freight share 20,22% 0,00% 0,00% 1,12%

Comparison between corridors (distances)

17,70% 60,10% 6,47% Colours identify the most attractive corridors when considering distance as the main criteria (green ++; yellow: +/- and orange: --)

The shape of Malawi had a clear impact on distances of the major towns from the different ports in Mozambique. Located in the south of Malawi, Blantyre is closer from Quelimane and Chinde and might choose these two corridors if distance is considered at the unique criteria to select a corridor for exports/imports. Taking in consideration the distance criteria, Chipata might be attracted either by Quelimane (863 km), the Shire-Zambezi (925 km) or Nacala corridor (1138 km). It appears quite clearly that the corridor notion is not describing precisely enough the multimodal logistical chain as some downstream or upstream links can be achieved in using either roads or lake services.

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2.3.2.2 Origin-destination time comparison

It is quite difficult to identify the different transit times per route and per mode of transport. During our survey, we got the different overall time and costs upstream/downstream of the sea leg.

From Towns in Malawi to

Dar Es Salam

Nacala Nacala Beira Beira Durban Jo’burg Mombasa Lusaka via Chipata

Rail Road Rail Road Road Road Road

Overland leg 3 4 2

Overland leg cost (in US$ per ton)

156 36 79 120-126 93 160,7 66

Sea leg 7-10 7-10

Sea leg Cost Depending on final destinations

Overall time (in days)

35 35-50 35-50 50

2.3.2.3 Transport cost estimates in using a determined corridor

The different commodities in 2009 are sent by different corridors based on the logistic constraints and convenience/costs for the exporters.

Transport

Products Destination Cost $/ton Tobacco Tea Sugar Maize Cassava Cotton Rice Food crops Uranium Coal Total % mode Cost in m US $ Products

Package Bales Paper sacks 1000 kg bags Bags

Sacs (50 to

90 kg) 120 kg sacks Bags

Drums of

333 kg

Mchenga

Mine Package

Final package 40' Container Container Final package

Corridors 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000000 Corridors

Northern Corridor Dar US$ 120 0 0,00% 0 Northern Corridor

Road Mombassa US$ 160,7 5,25 100 105,25 14,65% 16913675 Road

Western Corridor Lusaka US$66 0 Western Corridor

Mtwara Corridor 0 Mtwara Corridor

Nacala Rail Corridor Nacala US$36 140 15 155 21,58% 5580000 Nacala Rail Corridor

Nacala Road Corridor Nacala 0 Nacala Road Corridor

Shire-Zambezi waterway Chinde 0 Shire-Zambezi waterway

Sena Line Beira 0 Sena Line

Road Beira US$79 162,5 36,79 126 11,024 336,314 46,82% 26568806 Road to Beira

Road Durban US$126,9 69,64 5,25 16,536 91,426 12,73% 11601959,4 Road to Durban

Road J'burg US$93 5,25 10,5 15,75 2,19% 1464750 Road to Joburg

Road Zimbabwe US$50 Road to Zimbabwe

Other US$126,9 14 14 1,95% 1776600 Other

Corridor to Walvis Bay US$1179 0,5 0,5 0,07% 589500 Corridor to Walvis Bay

Total 232,14 52,54 280 0 0 27,56 100 25,5 0,5 0 718,24 100,00% 65495290,4

Exports

Cargo volumes through the different corridors corresponding to the different exported commodities in 2009 are presented in the here-above Excel table. The here-under Excel table is presenting the different imported commodities

Transport

Products Destination Cost $/ton Fertizers Fuel CG imports Cement Lime Clinker Coal Total % mode Cost in m US $ Products

Package 20 M liters/month Package

Final package Tankers Containerized Final package

Corridors 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000000 Corridors

Northern Corridor Dar US$ 120 73,8 39,20 38 151 19,02% 23556000 Northern Corridor

Road Mombassa US$ 160,7 0 0,00% 0 Road

Western Corridor Lusaka US$66 0 Western Corridor

Mtwara Corridor 0 Mtwara Corridor

Nacala Rail Corridor Nacala US$36 9,6 121 130,6 16,45% 4701600 Nacala Rail Corridor

Nacala Road Corridor Nacala 0 Nacala Road Corridor

Shire-Zambezi waterway Chinde 0 Shire-Zambezi waterway

Sena Line Beira 0 Sena Line

Road Beira US$79 295,2 137,20 80 512,4 64,53% 40479600 Road to Beira

Road Durban US$126,9 0 0,00% 0 Road to Durban

Road J'burg US$93 0 0,00% 0 Road to Joburg

Road Zimbabwe US$50 25 1250000 Road to Zimbabwe

Other US$126,9 0 0,00% 0 Other

Corridor to Walvis Bay US$1179 0 0,00% 0 Corridor to Walvis Bay

Total 369 186 38 201 794 100,00% 70987200

Imports

In adding exports and imports, it is possible to identify the transport market share for each corridor in 2009.

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Corridors Tonnage

(1000 tons) % share

Total cost in millions US$

Dar Corridor 151 9,99% 23556000

Road to Mombassa 105,25 6,96% 16913675

Western Corridor 0

Mtwara Corridor 0

Nacala Rail Corridor 285,6 18,89% 10281600

Nacala Road Corridor 0

Shire-Zambezi waterway 0

Sena Line 0

Road to Beira 848,714 56,12% 67048406

Road to Durban 91,426 6,05% 11601959,4

Road to Jo’burg 15,75 1,04% 1464750

Road to Zimbabwe 1250000

Others 14 0,93% 1776600

Corridor to Walvis Bay 0,5 0,03% 589500

Total 1512,24 100,00% 135482490

15,61%

The estimate of overland leg transport costs is around 15.6 % of the total exports+ imports. Transport sea leg is taking about the same percentage So, a burden of around 30 % is added to the local prices to compete on the international market. This phenomenon advocates for trying to develop exports/imports at a regional scale, whenever the market exists and transport conditions are convenient and reliable.

Road to Beira is getting the Lyon’s share with 60% of the cargo. In 2

nd

and 3rd

position, Nacala and the northern corridor are circulating respectively 18% and 20 % of the cargo)

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3rd Part : Strategic Action Plan and Investment Programme

FIRST STEPS TOWARDS AN INVESTMENT PLAN STRATEGY

As highlighted in the demand study, implementation of efficient Corridors is directly linked to volumes to be transported, either national or transit, to the ability to develop a strong recollection net for feeding the trunk axle of the corridor, and to grant a permanent and confident service.

The first and second conditions might be addressed through three immediate investment measures:

- Providing a sustainable (!!!) intermodal service North-South of Malawi for heavy products. As a credible alternative to the road, heavy products might be transported through the axle Lake Malawi - Chipoka - Nsanje by train - Shire Zambezi.

- Providing a National Energy Master Plan granting to mining operators they will receive the inputs they need in a foreseeable future. Such plan would allow the development of mining and industrial activities which would justify the corridors and dramatically lower transportation prices for the whole economy.

- Providing efficient land passenger transportation between Blantyre and Lilongwe, possibly through daily “de luxe” night trains.

Three conditions might be completed with a supra-national concession of an East-West corridor, managed under strictly commercial rules but supervised by a supra-national committee. It is of vital importance this concession might be responsible -and thus commercially beneficiary- for the rail reconstruction rehabilitation and maintenance. It might also be responsible for defining the rail occupancy and the prioritization of the convoys. Rolling material, trains, specific terminals might be operated through sub-concession or might even be fully liberalized and submitted to free competition. Intermodal points, such as ports, main stations, passengers’ stations might be operated under the responsibility of the main concessioner, either directly or as sub-concessions.

3.1 Investment plan phase 1

3.1.1 Investment plan phase 1 : the needs For each of the main products, the origin-destination study and the cost study allowed to determine an urgent programme, which would result in an immediate reduction in transport costs and in many cases a significant increase in the production. We reproduce once more bellow the table resuming the wishes of the stakeholders for current imports and exports, and potential Malawian mine productions. This was the conclusion of our demand study. Table 1: Urgent Domestic Transport Sector Investment Programme Needs

IMMEDIATE NEEDS Tea Tobacco Cotton Sugar Nuts

Quantities 2009 52.56 232.63 27.56 280.00 295.33

Existing mode Road Road Road Road or Rail Road+rail

Existing corridor Durban Beira Durban + Beira

Beira or Nacala Tazara

Priorities for Transport Improvement and Investment

Tete Bridge efficient rail services

Chiromo Bridge

Chiromo Bridge lake service in Nkhata Bay

Border crossing

rail link Limbe - Lilongwe

Tete Bridge Dwangwa road and port, lake service

MCC equipment in Mbeya

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123

Cassava Potatoes Sweet

Potatoes Maize Rice Pulses

Quantities 2009 3913.00 758.00 2714.00 3201.68 106.11 383.00

Existing mode None none none road Road Road+rail

Priorities for Transport Improvement and Investment

Lake service Nkhata Bay

Cheaper road transport

Lake service Nkhata Bay

warehousing Lake service MCC equipment

rail link Limbe -

Chipoka- Lilongwe –

Chipata

rail link Limbe - Chipoka-

Lilongwe -Chipata

rail link Limbe -

Chipoka- Lilongwe -

Chipata

efficient rail services

efficient rail services

Ro-Ro service on the lake

Equipments to produce

flour

Petrol Paraffin Diesel & other

General Petroleum

Fertilizer Imported Coal

Quantities 2009 107.80 14.80 157.40 280.00 141.61 2.00

Existing mode Road Road Road Road Road Train

Existing corridor Beira Tazara Beira Beira Beira Beira

Priorities for Transport Improvement and Investment

77km in Mozambique

Ro-Ro service on the lake

Ro-Ro service on the lake

warehousing lake service Link with Moatize

rail link Limbe -

Chipoka- Lilongwe -

Chipata

rail link Limbe - Chipoka-

Lilongwe -Chipata

rail link Limbe -

Chipoka- Lilongwe -

Chipata

efficient rail services

efficient rail services

Services on the lake

Ro-Ro service

RoRo service

Lime Clinker Uranium Titanium ore Pig Iron Alumina

Quantities 2009 38.00 21.00 0.00 0.00 0.00 0.00

Existing mode Road Road+train Road none none none

Existing corridor Tazara western

Western and TAZARA none none none

Priorities for Transport Improvement and Investment

lake service Tete bridge MCC equipment

Energy Energy Rail link to Moatize

3.1.2 The immediate action plan and the domestic objectives

Some of these needs can be rapidly addressed by the Ministry of Transport and Public Infrastructure, or its partners, as shown in Table 2. Table 2: Immediate Action Plan – Phase 1

Mode Investment Cost (US$ M)

Road Dwangwa to Lake Malawi 15.6

Rail Chiromo Bridge* 45.8

Rail Immediate safeguards of the network 8 M$

Rail Balaka-Chipoka (Nyaka-Salima) rehabilitation 87.6

Road Routine, maintenance, reseal, grading 17,2 M$ (on 2 years)

Road M3 Liwonde, Mangochi rehabilitation 1,4 M$

Inland water transport

Feasibility study for the shire – Zambezi 0,6 M $

Inland water transport

Personnel training 1,5 M$

Inland Water transport

Improvement of Nkhata Bay port new wharf, crane, warehouse

3 M$

Multi-modal Equipment at Mbeya for MCCL ** 11.0

Total 191.7

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* This figure is for the immediate construction of a bridge in Chiromo, satisfying the immediate demand and our ten years projection. We consider this construction as an emergency action bridge, which will be equipped of a single track for rail transportation up to 4000 tons per train, two crossing intermediate stations on each side of the bridge, and the most modern signalization service. The bridge will be equipped to be used as a single lane road bridge for local transportation needs, when not required for trains. The consultants assumes that the important rise of traffic in the area, thanks to this bridge, will allow to build up a monumental bridge at a much higher cost in a ten years future. The emergency bridge will then be used as a diversion and occasional bridge for extended traffic periods.

** MCCL is managing Malawi cargo on the TAZARA corridor. It didn’t invest in equipment for 20 years. The

Mbeya terminal equipment was used to provide spare parts or equipment replacements to the Dar-es-Salaam terminal. This resulted in a vicious circle effect in Mbeya, where poorer services divert the users from the rail to the road, thus raising the costs for exporters and simultaneously reducing MCCL ability to invest.

This programme will represent 160 millions US$ expenses and should take place on the budget 2011-2012 or,

at last, on the 2012-2013 budget.

3.2 Investment plan phase 2: domestic intermodal corridor Once the emergency programme launched and considering the necessity for further action to take into account the future volumes, the remaining problems to address would be: International: Tete Bridge Border crossing; 77km in Mozambique to Nacala; Link with Moatize. Domestic rail: link to Moatize (in Malawi) efficient rail link Limbe – Chipoka - Lilongwe - Chipata with

improved and more frequent services; warehousing. Inland water transport: lake services in general, and Ro-Ro services on the lake in particular. General Equipments to produce cassava flour; Energy is dependant of coal transportation to Salima;

Cheaper road transport is dependant on diesel prices, which would be lower with an efficient import transport system.

This resulted in a very clear conclusion, independent from the choice of a regional corridor: which is the necessity to build an efficient domestic NORTH-SOUTH INTERMODAL CORRIDOR, which would significantly lower the costs of domestic transport and provide a new service to many producers of low value products of major importance. Producers of cassava, sweet potatoes, maize, fish, limestone and coal would immediately benefit from such a corridor, and its development would assist in alleviating poverty. But the major effect would be a medium term one: the corridor will allow the concentration of cargo at the main entrance points of the regional corridors, and therefore re-enforce the results of an investment programme aiming at bettering the efficiency of this corridor. Also independent of the choice of the corridor is the necessity of connecting as soon as possible the Mozambican Tete province to the Central East African Railways. The development of the Tete province is potentially huge, particularly in mining, energy, industry and commercial crops such as tobacco. Malawi can strongly benefit from this development (as the Malawi tobacco companies are already doing) by providing a heavy load transportation system for the Mozambican cargo, and opening a potential market to many existing or would be Malawian products. The volumes in transit through Malawi would also significantly contribute to the viability of the national railways. This new infrastructure is a crucial issue for the development of Malawi. The measures which might be taken in the plan, with their costs are set out in Table 2.

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Table 2: INVESTMENT PLAN PHASE 2: NORTH- SOUTH CORRIDOR and LINK TO BEIRA LINE by the WEST Mode From To Investment Cost

Road Transport Approx. 10 M $

M1 Nsanje Bangula Rehabilitation On-going

M1 Bangula Chikwawa Rehabilitation On-going

M1 Dedza Lilongwe Widening 3 M$

M3 Blantyre Zomba Rehabilitation/widening Public (ADB)

3 M $

M3 Liwonde Mangochi Rehabilitation/widening 3 M$

S128 Crossroad M3 Monkey Bay Widening 1 M$

Inland water Transport

Approx. 40 M $

Cargo Transport Chipoka Chilumba Dredging at Chipoka dredging barge

PPP 6M$

Night RoRo ferry Monkey Bay Chilumba RoRo vessels PPP 8M $ x 4

Night RoRo ferry Monkey Bay Nkhata Bay Beaching Slips 2x 6M$

Sugar transport Dwangwa Chipoka Dwangwa port 3Mus$

Lake Ports Itungi Nkhotakota Likoma Port floating jetty and equipments 3 x 1.5MUS$

Lake Ports Chilumba Parking and cranes 3MUS$

Shire Port Nsanje On going

Shire River Nsanje Pilot boat to destroy hyacinth islands 3 MUS$

Rail transport Approx. 237 M $

Link with Moatize Bangula Dao Construction of 52 km railway line in Malawi, 10 in Mozambique

110

link to Nsanje Port Bangula Nsanje Rehabilitation of 34 km line 55

North South Corridor

Blantyre Bangula Rehabilitation of 216 km 72

TOTAL 287 MUS$

1

Nsanje

Blantyre

Muloza

Nayuchi Nacala corridorBalaka

Lilongwe

Harare

Salima

ChipataLusaka

Beira corridor

Nkhata Bay Mbamba bayMzuzu

Karonga

Songwe

Northern corridor

Railway

Railway

Mozambique

Zambia

Mozambique

Durban

Mtwara corridor

M’Beya

Monkey BayChipoka

Figure 41 : Investment Plan Phase 2

They are all designed to transform Malawi in a homogenous country in terms of cargo consolidation, and in terms of cargo consolidation, and in the regional hub for cargo transit and distribution. Once this first step implemented, Malawi will be in the ideal situation to negotiate with other regional governments and with the main private operators of mines.The efficient domestic service will make Malawi a very attractive hob for international stakeholders.

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3.3 Choice of an integrated main regional corridor

The choice of a main corridor for international development was deduced from the unconstrained choices for a mode of transport and unconstrained choice of a corridor. The unconstrained choices allowed the consultant to affect the volumes of transport on the main links, either within Malawi or in neighbouring countries and to identify the missing links in order to have an efficient transport system. A careful study of these choices proves that some corridors might be discarded on the long term - the Mtwara and Nacala Road Corridors present few advantages. Some key destinations will remain anyway. Durban and its Southern Road Corridor, and Dar Es Salam and its TAZARA corridor will continue to capture most containerized valuable import cargo, and additionally some heavy loading products such as clinker, whose production is an economically viable distance from the Malawi consumers. The main competitors for a priority intermodal corridor will be Nacala Rail and Beira, with its three potential services: SENA rail line, road and SHIRE-ZAMBEZI water transport. After assessing these two corridors in terms of: geographical situations; to the huge volumes which would transit on them, (especially in its Malawi part); and the physical characteristic of the ports. The study concludes that the NACALA rail corridor should be chosen as the main corridor for international development. The NACALA corridor presents the major advantage to be able to integrate the WESTERN corridor to Zambia and Congo, however, Beira will still present the advantage of being more efficient and having regular links to Durban, but will be, in the long term, congested by the increases of production from the Tete province and by anticipated growth in the Zimbabwean economy. Therefore, this corridor might be regarded as a short term alternative to Nacala, and the efforts to be made should rather be to allow transfers of mode on the corridor from road to less costly transportation modes, as the water or the SENA line. Both alternative present also severe limitations: the Shire-Zambezi project should take place within some navigability limits (vegetation, sands and meanders problems); and a rail link from Bangula to Nsanje MUST be rebuilt irrespective of the navigability of the river. The SENA line connection must also be done, but, due to the projected activity on the line, should be as far north as the gradient allows. The consultant recommends an alignment along the Bangula latitude. This choice will allow interconnecting the Shire-Zambezi corridor, the Nacala Line and the SENA line in a coherent network.

Rutenga

Bulawayo

Victoria Falls

Livingstone

Mazabuka

Lusaka

Kanona

Tunduma

Mbeya

Beira

Nacala

Dar Es Salam

ZIMBABWE

MOZAMBIQUE

ZAMBIA

BOTSWANA

CONGOTANZANIA

Tete

Harare

Mzuzu

Lilongwe

Blantyre

Chipata?

Chinde

Strategic Scheme

NsanjeDoaSENA Moatize

KapongaTAZARA

COPPER Belt

Figure 42 : International Corridor Map

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127

Table 3: Phase 3: International Transport Corridor - Investment Plan

Road Transport Origin Destination Nature of works Cost

(millions US$) Observations

Southern corridor

Lilongwe Dedza M1 Widening

Nacala corridor Upgrading Feeder Roads

Tazara corridor Karonga Mbeya –

Feeder roads

Railway Transport

Nacala Port accesses 15

Nacala corridor Malangono Cuamba Rehabilitation of 77km 110 Mozambique

North-South Domestic Corridor

Limbe/ Zambia

Mozambique Rehabilitation of the line 330 km 108

Integration western corridor & Nacala corridor

Chipata Kanona Construction of 260 km linking TAZARA to CEAR

490 Zambia

Nacala Harbour Nacala Construction of a mineral terminal Construction of Sojan warehouses

23 Mozambique

Water Transportation

Lake Malawi Mbamba Bay RoRo slip 6

Shire-Zambezi Nsanje Chinde Cargo barges 8 12 Barges (385 T capacity)

Shire & Zambezi Navigability

Border Chinde Dredging 6 3 dredging barges

Shire-Zambezi corridor

Chinde Beira Cargo barges 8 4 sea Barges (1000T capacity)

Shire-Zambezi corridor

Chinde Fuel offshore terminal 3

Shire-Zambezi corridor

Chinde Wharf and floating jetty 3

Shire-Zambezi corridor

Chinde Warehouses 3

Passengers boats

Nsanje Chinde Boats hotels 6 boats – 12 guests capacity

Organizational aspects

Origin Destination Nature of works 1 Observations

Nacala corridor Nacala All inland countries

Border services in Nacala for all destinations countries

Should include financial and banking services

Nacala corridor all overseas Nacala Create sufficient volumes to have an extended shipping services and boats calling at port

Should include marketing the corridor overseas

Nacala corridor Nacala Malawi, Zambia

Facilitated border crossing, with one border point

Include banking, communication, rest facilities

Malawi entrances to Nacala corridor

Lilongwe, Salima, Chipoka, Balaka, Liwonde, Blantyre,

Limbe, Bangula, Nsanje

Creation of warehouses and custom-free facilities, consolidation facilities for both cargoes and documents, business centres. Includes trainings to international trade and logistics.

Other economic aspects

Sector Place Nature of works 1 Observations

Nacala corridor Agro-industry Nkhata Bay Equipment for Cassava flour

Should consider alimentation and pharmaceutical aspects

Nacala corridor Agro-industry Mzuzu area Development of pig-breeding industry for the by-products of cassava and sweet potato

Should include marketing abroad

Nacala corridor, TAZARA.

Energy production

Kayelekera, Kasungu, Salima, Chipoka, Kanyika, Chimwazulu, Mulanje, Mbemba. Coal power factories for mining.

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Another important aspect are the budgetary consideration constrains, which might be partially mitigated through possible Private Sector Participation in the investment programme and / or possible Private Public Partnership in the plan. This implies a real acceptation by all stakeholders of the priorities of its partners. Such understanding should be reflected in concession agreements, by the acceptance by public authorities of the necessity for the operator to make its living on the concession and by the concessionaire of the necessity to provide a regular public service. The workshop might also discuss the necessary indicators to be implemented to check the services provided by the operator and the financial conditions which might be offered through the conditions agreements. The consultant can present some example business plans for projects identified above. In any case, the investment will be justified through financial and economic parameters, including NPV (net present value) of the benefits expected and IRR (internal rate of return) on the investments.

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3.4 The Investment plan per mode

3.4.1 Road Sector Investment (2011 to 2021)

3.4.1.1 Road Sector Investment within Multimodal Sector Strategy Framework

The Malawi Multimodal Transport Sector Strategy Framework provides the framework for identification and prioritization of the transport sector investment in Malawi and provides a framework for regional cooperation in the development of key transport corridors in the region. Achieving the programme results in the road sector requires making investment in the road sector consistent with the framework. To achieve the anticipated results, the selection and prioritization of the road investments in roads would be based on the transport sector strategy of multimodal framework. Accordingly, within Malawi, key criteria for identification would be the individual road links existing (traffic) and potential investment planned in the area serviced by the road that would have positive impact on production both for domestic and export markets. The following roads links are selected and prioritized on factors noted above and originate from the following sources: A. Priority Road Links identified as necessary for the functioning of the transport sector strategy (as

already described in the 2nd part);

B. Re prioritized from among the Road Sector Investment program as contributing to improved

production and access within their sphere of influence and contribution to corridor traffic to enhance

overall cost reduction and improved competiveness both in the domestic and export markets.

C. Priority rural growth pole access- these roads are identified to improve access to planned growth

poles in rural area. Improved access is seen as enhancing production, productivity and marketing

including transport services.

D. Priority rural investment areas- improvement of the roads linking in priority development areas

identified by government agencies, donors, NGOs and the private sector are expected to enhance

production.

3.4.1.2 Road Sector Investment Program by above group and Timeframe

Below are the roads identified and selected for investment within the time period of 2011 to 2021 to realize the results anticipated with the frame of the strategy. The investment in roads can be the subject further screening and prioritization within hard budget constraints that the country may face. Further implementation of the same can sequenced depending on acceleration or deceleration of the anticipated complementary investments planned to be undertaken. Table 1: Priority Roads Necessary for the Functioning Priority Corridors5 1. Beira Corridor

(i) Mulanje – Milange but need some attention on Mozambique side (ii) Blantyre – Thyolo improving both loops via Midima and Chisitu. (iii) Mulanje –Makumba –Inchope in Mozambique (iv) Blantyre – Mwanza –Beira but need attention of Tete Bridge. (v) Lilongwe – Dedza and Calomue – Tete Bridge in Central Region

5 These roads were identified in the 2nd workshop, road group. They and other priority projects are presented

under Table 2:

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130

(vi) Lilongwe- Mchinji and then Zambia. 2. Nacala Corridor :

(i) Liwonde-Naminga, Liwonde-Mangochi-Chiponde (ii) Chiponde-Mandimba-Kuwamba in Mozambique. (iii) Liwonde-Nsipe since Lilongwe Nsipe in under improvement (iv) Thyolo-Makwasa-Makhanga also for Nchalo sugar production. (v) Nchalo-Chikwawa. (vi) Chikwawa-Blantyre. For the escarpment, Nchalo can use the rail which is cheaper and would

incentivize Nchalo to increase production.

3. The group also address the special transport infrastructure needs of key products-Sugar and coal. For the sugar from Dwangwa, the following routing was recommended:

(i) Dwangwa-Nyala Port-Nkhata Bay Port-Monkey Bay. (ii) Salima – Balaka Road (iii) Lakeshore Road i.e. Nkhotakota - Dwangwa -Salima

4. Coal Production Centres in the North such as Kayelekera and Kaziwiziwi coal mine would require

improvement of the following network:

(i) MI Karonga -Mzuzu-Kasungu-Lilongwe

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Table 2a: Characteristic Priority Roads identified in the workshop and from among the MRA: Road Investment Program (2010 to 2020)6 Table 2b: Priority Road Investment 2011 to 2021

Road Description Length(km)

Total

Motorised

Total Non-

Motorised Good (%) Fair (%) Poor (%)

Road

Condition

(IRI) Surface Type

M003 Liwonde: Jnc M8/M3 - Hoba 20.2 544 1686 0 29.3 70.7 5.28 Chip Seal

M003 Hoba - Mpale River 14.3 544 1686 0 55.6 44.4 5.13 Chip Seal

S124 Lilongwe City Hall - Chinsapo 6.1 n/a n/a 100 0 0 1.96 Slurry Seal

M001 Bua River - Madisi 21.1 1388 563 0 67.1 32.9 4.8 Chip Seal

M001 Madisi - Miti 0.8 1388 563 0 100 0 4.1 Chip Seal

M001 Nkumbe River - Madziabango 29.4 999 387 79.8 17.2 3 2.69 Chip Seal

M001 Miti - Lumbadzi River 44.4 2055 735 5.1 90.4 4.5 4.19 Chip Seal

M001 Kasungu - Bua River 34.3 1388 563 0 79 21 4.58 Chip Seal

M022

Mzimba: Jnc M9/M22 Rndabt Yesaya

Nkosi - Mtangatanga: Jnc M1/M22 24.7 148 678 100 0 0 3.19 Earth

M003 Nkulungu - Mangochi 19.3 544 1686 13.3 66.2 20.5 4.24 Chip Seal

M003 Mpale River - Nkulungu 14.3 544 1686 6.2 80 13.8 4.28 Chip Seal

M001 Madziabango - Mlombe 17.6 604 1453 99.1 0 0.9 2.22 Chip Seal

M005 Mlowe Bridge - Dwambazi River 0.3 106 231 75.9 24.1 0 3.42 Chip Seal

M005 Dwangwa River - Chia Lagoon - km 19 99.2 730 600 10 78.8 11.2 4.19 Chip Seal

M009

Chendo: Jnc M9/S100 - Kapirinkhonde:

Jnc M9/S101 69.9 21 281 59.2 29.6 11.1 5.89 Earth

M009

Kapirinkhonde: Jnc M9/S101 - Chilinda

T/Off: Jnc M9/S103 53.6 33 735 76.6 12.4 11 5.25 Earth

M001 Karonga - Songwe 46 534 1111 68.7 31.3 0 3.41 Chip Seal

M005 Dwambazi River - Dwangwa River 38.2 106 231 83.3 15.2 1.5 3.27 Chip Seal

M005 Chia Lagoon - km 21 - Chilua River 22.3 305 342 1 84.5 14.5 4.59 Chip Seal

M003 Mangochi - Mpale River 33.6 544 1686 10.3 72.1 17.7 4.26 Chip Seal

M005 Salima - Balaka 143 367 627 62 37.2 0.8 3.49 Chip Seal

M005 Mzuzu - Kwale 37.8 666 941 7.1 45.8 47.1 5.05 Chip Seal

S117 Njewa - Airwing 4 n/a n/a 100 0 0 2.29 Chip Seal

M024 Rumphi - Njakwa River 8.4 800 430 30.6 61.2 8.3 4.08 Chip Seal

M007 Lumbadzi-Dowa-Chezi 34 623 301 3.7 96.3 0 8.12 Chip Seal

S125 Bunda - Mitundu 9 215 856 17.5 82.5 0 7.34 Earth

M026 Karonga - Chitipa 109 544 916 99 0.7 0.3 4.29 Earth

M005 Msulira - Nkhotakota 33 228 2007 4.2 78.4 17.4 4.32 Chip Seal

M001 Chiweta - Mlowe 70 494 177 31.3 53.6 15.1 3.96 Slurry Seal

S113

Kakwale: Jnc M1/S113 - Start Rupasha

Bridge 44.3 18 236 90.3 9.7 0 3.44 Earth

S212/M9/S209 Jenda - Euthini - Rumphi 200 186 806 98.7 0.6 0.7 3.48 Earth

M001 Nchalo - Bangula 30 387 1453 44.3 43.2 12.5 3.29Chip Seal/Slurry Seal/Earth

M001 Chikwawa - Nchalo 50 604 1453 89.1 10.9 0 2.16 Slurry Seal

M001 Bangula - Nsanje 50 324 1047 23.1 73.3 3.6 8.13 Earth

M003 Blantyre - Zomba 47 1741 513 100 0 0 2.13 Chip Seal

M003 Liwonde - Naminga 22 246 854 100 0 0 1.92 Chip Seal

S145 Chirandzulu - Miseu Folo - Chilinga 90 48 1056 0 100 0 8.33 Earth

S150 Malowa - Goliati - Chiperoni 16.4 n/a n/a 100 0 0 1.65 Earth

S161

Thyolo - Thekerani - Makhanga -

Bangula 94 9 751 0 78.6 21.4 9.27 Earth

1 to 3 Years

6 Roads prioritized from among the Road sector Investment (2010 to 2020); see above chapter 2.1.1

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132

Road Description

Length

(km) Work

Cost

2010/11

(MWK M)

NPV

/Cost

Status of

preparation

M003 Liwonde: Jnc M8/M3 - Hoba 20.2 Rehabilitation 848 12.2 U

M003 Hoba - Mpale River 14.3 Rehabilitation 601 10.8 U

S124 Lilongwe City Hall - Chinsapo 6.1 Rehabilitation 256 10.6 D

M001 Bua River - Madisi 21.1 Rehabilitation 886 6.8 P

M001 Madisi - Miti 0.8 Rehabilitation 34 3 P

M001 Nkumbe River - Madziabango 29.4 Rehabilitation 1235 34.9 P

M001 Miti - Lumbadzi River 44.4 Rehabilitation 1865 17.7 P

M001 Kasungu - Bua River 34.3 Rehabilitation 1441 8.2 P

M022 Mzimba: Jnc M9/M22 Rndabt Yesaya Nkosi - Mtangatanga: Jnc M1/M2224.7 Rehabilitation 86 102 P

M003 Nkulungu - Mangochi 19.3 Rehabilitation 811 2.2 P

M003 Mpale River - Nkulungu 14.3 Rehabilitation 601 2.2 P

M001 Madziabango - Mlombe 17.6 Rehabilitation 739 1.8 P

M005 Mlowe Bridge - Dwambazi River 0.3 Rehabilitation 13 1.7 P

M005 Dwangwa River - Chia Lagoon - km 19 99.2 Rehabilitation 4166 1.7 P

M009 Chendo: Jnc M9/S100 - Kapirinkhonde: Jnc M9/S10169.9 Rehabilitation 245 49 P

M009 Kapirinkhonde: Jnc M9/S101 - Chilinda T/Off: Jnc M9/S10353.6 Rehabilitation 188 80 P

M001 Karonga - Songwe 46 Rehabilitation 2258 1.4 P

M005 Dwambazi River - Dwangwa River 38.2 Rehabilitation 1604 1.7 P

M005 Chia Lagoon - km 21 - Chilua River 22.3 Rehabilitation 937 1.6 P

M003 Mangochi - Mpale River 33.6 Rehabilitation 1830 1.1 P

M005 Salima - Balaka 143 Rehabilitation 2685 0.1 P

M005 Mzuzu - Kwale 37.8 Rehabilitation 1588 0.3 P

S117 Njewa - Airwing 4 Rehabilitation 169 0.3 P

M024 Rumphi - Njakwa River 8.4 Rehabilitation 353 0.03 P

M007 Lumbadzi-Dowa-Chezi 34 Upgrade 1145 U

S125 Bunda - Mitundu 9 Upgrade 207 U

M026 Karonga - Chitipa 109 Upgrade 862 U

M005 Msulira - Nkhotakota 33 Rehabilitation 374 U

M001 Chiweta - Mlowe 70 Rehabilitation 1855 P

S113 Kakwale: Jnc M1/S113 - Start Rupasha Bridge 44.3 Rehabilitation 155 U

S212/M9/S209Jenda - Euthini - Rumphi 200 Upgrade 4043 P

M001 Nchalo - Bangula 30 Upgrade 378 U

M001 Chikwawa - Nchalo 50 Upgrade 800 U

M001 Bangula - Nsanje 50 Upgrade 2950 U

M003 Blantyre - Zomba 47 Rehabilitation 2841 P

M003 Liwonde - Naminga 22 Rehabilitation 864 U

S145 Chirandzulu - Miseu Folo - Chilinga 90 Rehabilitation 2545 U

S150 Malowa - Goliati - Chiperoni 16.4 Rehabilitation 16.4 U

S161 Thyolo - Thekerani - Makhanga - Bangula 94 Rehabilitation 1396 U

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133

Road Description Length(km)

Total

Motorised

Total Non-

Motorised Good (%) Fair (%) Poor (%)

Road

Condition

(IRI) Surface Type

S116

Bowe Jnc S116/T339 - Kamsonga Jnc

S116/T340 14.1 21 37 100 0 0 5.52 Earth

S122

Mpatsanjoke Bridge - Livingstonia

Hotel 2.2 739 880 100 0 0 2.66 Chip Seal

S135 Ntcheu-Tsangano-Neno-Mwanza 140 26 94 45 54.4 0.6 6.63 Earth

S126 Linthipe - Lobi 13.5 100 1422 0 0 100 15.59 Earth

S139/T401 Lirangwe - Machinga 14.9 19 1327 46.4 24.7 28.9 9.4 Earth

S117 Lilongwe - Kasiya - Santhe 133 74 1461 12.2 39 48.8 9.96 Earth

T315

Mbowe: Jnc M1/T315 - Mazamba Hill:

Jnc S110 21.4 120 166 0 0 100 16.45 Earth

S138 Mwanza - Chapananga - Chikwawa 106 147 1453 4.3 25.7 70 11.55 Earth

T378 Monkey Bay - Cape MacLear 18 83 643 0 18.3 81.7 13.18 Earth

S149

Losa: Jnc M4/S149 - Chonde: Jnc

M2/S149 22.1 n/a n/a 61.1 38.9 0 6.95 Earth

M001/M006 Blantyre - Mwanza 104 525 145 91.3 7.7 1.1 2.17 Chip Seal

M012 Lilongwe - Mchinji 109 1084 710 80.6 18.9 0.5 3.2 Chip Seal

M001 Chikwawa - Blantyre 54 604 1453 88 3.5 8.5 3.29 Chip Seal

M010

Njolo: Jnc M5/M10 - Kapiri: Jnc

M10/S127 15.4 186 695 0 19.9 80.1 10.86 Earth

M007

Ntchisi: Jnc M7/T341 - Mwangala

Crossroads 17.8 542 1116 65.6 34.4 0 6.75 Earth

S125

Mitundu: Jnc S125/Market - Start

Diamphwe Bridge 22.1 18 1172 0.6 9.2 90.2 10.75 Earth

M009 Rumphi - Nyika - Chitipa 275 314 555 78.8 14 7.2 5.2 Earth

T319

Chinganya: Jnc M5/T319 - Sanga: At

the Court LHS 4.5 27 186 0 56 44 9.51 Earth

M020 Mqosha Customs - Jenda: Jnc M1/M20 35.1 89 932 99.6 0 0.4 3.68 Earth

S110

Mazamba Hill: Jnc S110 - Mzenga: Jnc

S110/T317 30.7 13 61 0.8 0 99.2 13.09 Earth

S133

Hoba: Jnc M3/S133 - Mbela: Jnc

S133/T383 13.8 41 1459 0 22.2 77.8 10.9 Earth

S129

Mwanjati: Start at box culvert - Chingo:

Jnc M3/S129 1 237 940 9.68 3.2 0 2.98 Asphalt

S129

Start Unga River Bridge - Mwanjati:

Start at box culvert 21.4 237 940 0 28.7 71.3 10.75 Asphalt

T415 Chiringa - Mloza 22 22 2534 18.3 73.1 8.6 8.09 Earth

S129

Makanjira: Jnc S129/T377 - Start Unga

Bridge 1 237 940 5.3 0 94.7 11.61 Earth

T418 Didi: Jnc at TC - Thunga: Jnc M2/T418 21.4 333 438 0 37 63 11.41 Earth

4 to 7 Years

More than 7 Years

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Road Description

Length

(km) Work

Cost

2010/11

(MWK M)

NPV

/Cost

Status of

preparation

4 to 7 Years

S116 Bowe Jnc S116/T339 - Kamsonga Jnc S116/T340 14.1 Rehabilitation 49

S122 Mpatsanjoke Bridge - Livingstonia Hotel 2.2 Rehabilitation 92 P

S135 Ntcheu-Tsangano-Neno-Mwanza 140 Upgrade 218 P

S126 Linthipe - Lobi 14 Upgrade 331 P

S139/T401 Lirangwe - Machinga 14.9 Upgrade 364 P

S117 Lilongwe - Kasiya - Santhe 133 Upgrade 2855 P

T315 Mbowe: Jnc M1/T315 - Mazamba Hill: Jnc S110 21.4 Rehabilitation 75 P

S138 Mwanza - Chapananga - Chikwawa 106 Upgrade 18 P

T378 Monkey Bay - Cape MacLear 18 Low Volume Seal 447 P

S149 Losa: Jnc M4/S149 - Chonde: Jnc M2/S149 22.1 Low Volume Seal 541 P

Blantyre - Mwanza

Lilongwe - Mchinji

Chikwawa - Blantyre

More than 7 Years

M010 Njolo: Jnc M5/M10 - Kapiri: Jnc M10/S127 15.4 Low Volume Seal 377 P

M007 Ntchisi: Jnc M7/T341 - Mwangala Crossroads 17.8 Rehabilitation 62 P

S125 Mitundu: Jnc S125/Market - Start Diamphwe Bridge22.1

M009 Rumphi - Nyika - Chitipa 275 Upgrade 20 P

T319 Chinganya: Jnc M5/T319 - Sanga: At the Court LHS 4.5 Rehabilitation 16 P

M020 Mqosha Customs - Jenda: Jnc M1/M20 35.1 Rehabilitation 123 P

S110 Mazamba Hill: Jnc S110 - Mzenga: Jnc S110/T317 30.7 Rehabilitation 107 P

S133 Hoba: Jnc M3/S133 - Mbela: Jnc S133/T383 13.8 Rehabilitation 49 P

S129 Mwanjati: Start at box culvert - Chingo: Jnc M3/S129 1 Low Volume Seal 25 P

S129 Start Unga River Bridge - Mwanjati: Start at box culvert21.4 Low Volume Seal 524 P

T415 Chiringa - Mloza 22 Rehabilitation 1507 P

S129 Makanjira: Jnc S129/T377 - Start Unga Bridge 1 Low Volume Seal 25 P

T418 Didi: Jnc at TC - Thunga: Jnc M2/T418 21.4 Low Volume Seal 524 P

Table 3a: Priority Roads in Support of Rural Growth Poles (see rural growth poles in annex)

Rural Growth Pole Access Roads

Road District

Groth Pole

Center Road Discription

Length

(km)

Total

Motorised

Total Non-

Motorised

Road

Condition

(IRI) Surface Type

S100/T301 Chitipa Misiku Misiku-Sokora-Kapoka 47 5 16 4.24 Earth

S101 Chitipa Nthalire Nathalire-Mpata 84 33 735 4.64 Earth

S104 Rumphi Hewe/Katowo Katowo-Nakonyola 16 27 92 3.25 Earth

7305/T306 Rumphi Nchenachena Phwezi-Nchenachena 34.8 90 195 3.74 Earth

S106 M'mbelwa Emfeni Euthinie-Eswanzini 51.9 29 98 3.08 Earth

T326 M'mbelwa Euthini Emfeni-Forest 19.4 6 147 3.2 Earth

T317 Nkhata-Bay Mzenga Mgenya-Lwazi 27 121 527 12.74 Earth

T344 Dowa Nambuma Nambama-Senga 10.4 218 755 5.66 Earth

T336 Mchinji Mkanda Mkanda-Kapiri 62.5 40 101 9.65 Earth

T342/S117 Lilongwe Kasiya Kasiya-Airwing 26.4 n/a n/a 10.67 Earth

T373 Dedza Mayani Mayani-Mijunction 23 123 1201 8.23 Earth

T409 Zomba Chinseu Chinseu-S139 junction 7.1 19 1327 6.84 Earth

S136 Mwanza Thambani Thambani-Mwanza 29.6 147 1453 8.31 Earth

S135 Mwanza Kunenekude Kunenekude-M6 Junction 20 26 94 7.99 Earth

D320 Blantyre Chikuli S137 Jnction-S138 junction 12.1 5 862 7.13 Earth

T412 Chiradzulu Namitambo Namitambo-M4 junction 17.2 71 817 6.55 Earth

S136 Chikhwawa Ngabu Ngona river-M1 Junction 76.2 147 1453 12.84 Earth

M1 Nsanje Marka Marka-Nsanje 32 216 591 7.19 Earth

Total km 596.6

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Table 4: Priority Roads in Support of Existing and Potential Development Areas

Road Road Description

length of

Road (km)

Total

Motorised

Total Non-

Motorised

Road

Condition

(IRI) Surface Type

M005 Mzuzu- Mkhata Bay 40.4 666 941 5.25 Chip Seal

S126 Linthipe-Lobi 26.3 100 1422 15.59 Earth

T378 Monkey-Bay -Cape Maclear 17.6 83 643 13.18 Earth

T401 Lirangwe-Chikwenga 29.1 19 1327 9.4 Earth

Sub-total 113.4

Table 5: On going projects

3.4.2 The rail investment programme

3.4.2.1 Technical aspects

CONSTRAINTS: A train should be loaded from origin to destination. Meanwhile the composition of the train (hopper wagons, tanks, coaches) can be changed during the journey (in main stations); the wagons characteristics cannot be changed. Today, CEAR network can afford wagons with a charge of 20 to 25T of useful cargo, and convoys are limited to 20 to 25 wagons. Network rehabilitation requires to:

Define the technical standards and requirements for o Substructure and drainage, o Permanent way, o Bridges and culverts;

Initiate survey and engineering assessment where required, in particular for all bridges and culverts with spans or diameters of ≥ 2 metres,

Define criteria as to which assets shall be rehabilitated, or must be renewed, also taking into account financial feasibility,

Expenditure planned in MWK Planned Expenditure

No. Name of Contract ContractorContract Sum (if

known)

GoM Allocation

2009/10

Donor Allocation

2009/10

Certification to Nov

09

Forecast Cash flow

Nov 09 to June

2010

Remaining

Payments2010/11 2011/12 2012/13 2013/14 2014/15

1 Nsanje - Bangula Mota Engil 7,400,000,000 650,000,000 - 2,487,039,652 1,854,000,000 3,058,960,348 1,700,000,000 485,000,000 873,960,348 - -

2 Lumbadzi - Dowa - Chezi Cilcon Ltd 3,150,000,000 750,000,000 - 619,788,706 629,461,294 1,900,750,000 800,000,000 1,022,000,000 78,750,000 - -

3 Thyolo - Thekerani - Muona - Bangula M A Kharafi & Sons 9,750,000,000 250,000,000 2,666,000,000 - 281,000,000 9,469,000,000 2,684,800,000 2,684,800,000 2,684,800,000 1,414,600,000 -

4 Chiringa - Misewu Folo - Chiradzulu Mota Engil 6,448,493,889 681,000,000 - 1,256,389,635 1,519,763,454 3,672,340,799 1,272,340,800 1,200,000,000 1,200,000,000 - -

5 Mzimba - Eswazini - Mzalangwe Fargo Ltd. 7,126,974,102 - 1,500,000,000 - 990,000,000 6,136,974,102 800,000,000 800,000,000 3,000,000,000 1,536,974,102

6 Zomba - Jali - Phalombe - Chitakale M A Kharafi & Sons 9,000,000,000 450,000,000 3,000,000,000 8,289,849,477 270,000,000 440,150,523 2,812,000,000 938,000,000 93,750,000 - -

7 Goliati - Chiperoni Mota Engil 3,637,209,231 300,000,000 - 1,676,447,748 860,761,483 1,003,761,482 800,000,000 300,000,000 - - -

8 Msulira - Nkhotakota Shire 3,140,000,000 300,000,000 - 647,665,772 850,000,000 1,642,334,228 900,000,000 78,500,000 - - -

9 New Bunda - Mitundu Plem 795,234,028 310,000,000 - - 616,359,028 178,875,000 159,000,000 19,875,000 - - -

10 Ekwendeni - Ezondweni & Ezondweni - Njakwa Fargo Ltd. 1,889,853,908 Combined with (5) 654,934,190 737,419,718 497,500,000 450,000,000 47,500,000 - - -

12 Jenda-Euthini-Rumphi New 11,000,000,000 50,000,000 735,000,000 - - - 1,418,100,000 1,418,100,000 1,418,100,000 3,245,700,000 3,500,000,000

15 Karonga - Chitipa (Phase 1) China Road 11,250,000,000 - 3,750,000,000 - - 7,500,000,000 3,750,000,000 3,750,000,000 - - -

16 Lilongwe - Nsipe Mota Engil 3,334,650,000 - 1,500,000,000 214,073,818 2,098,167,432 1,022,408,750 980,000,000 42,408,750 - - -

17 Chikwawa - Nchalo - Bangula Mota Engil 6,059,804,725 - 1,300,000,000 138,000,000 2,495,804,725 3,426,000,000 2,420,000,000 941,000,000 65,000,000 - -

18 Liwonde - Naminga M A Kharafi & Sons 3,450,000,000 - 785,000,000 433,949,883 1,129,800,117 1,886,250,000 1,800,000,000 86,250,000 - - -

23 Lilongwe-Kasiya-Santhe New 8,940,000,000 200,000,000 - - - - 64,800,000 - 1,788,000,000 2,950,200,000 4,201,800,000

24 Mzimba St., Lilongwe Mota Engil 330,000,000 200,000,000 - - 288,750,000 41,250,000 33,000,000 8,250,000 - - -

25 Chiringa-Mloza New - 70,000,000 - - - - 56,000,000 - 815,000,000 815,000,000 815,000,000

26 Ntcheu-Tsangano-Neno-Mwanza New 8,018,000,000 6,000,000 120,000,000 157,500,000 57,300,000 1,603,600,000 3,207,200,000

27 Blantyre-Zomba New 5,531,000,000 20,000,000 120,000,000 - - - 2,639,349,900 1,916,383,100 505,733,800 469,500,000 -

28 Lilongwe Bypass New 3,175,594,450 29,000,000 103,000,000 - - - 1,654,983,550 1,207,255,400 313,355,500 - -

29 South Rukuru Bridge New 1,359,375,000 906,000,000 453,375,000 - -

30 Chiromo Bridge New 5,000,000,000 - 500,000,000 1,000,000,000 3,500,000,000

31 EU Feeder Roads Spot Improvements Various 881,500,000 881,500,000 881,500,000 22,037,500

32 EU Feeder Roads Mchinji Kawere 1,505,000,000 553,000,000 236,000,000 216,000,000

33 ISP Various 50,000,000 50,000,000

Total 122,222,689,332 4,266,000,000 15,579,000,000 16,418,138,882 14,621,287,251 42,758,055,232 29,742,374,250 17,714,034,750 13,552,449,648 13,035,574,102 15,224,000,000

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Develop the quantity structure for rehabilitation and renewal,

Estimate the costs,

Develop a time frame for implementation, Using the most modern convoys for minerals whopper wagons (300 T./WW, unconstrained hypothesis) would result in rebuilding the whole network. The cost of this reconstruction would be of approximately 1.2 billion $ for a single track design. Using 50T/WW, 4 axles, WTW15T/A, would be possible with rehabilitation of tracks, station, signalling equipment, electrification equipment, and telecommunications. Earthworks, permanent way, bridges would be rebuilt on a 15T/A resistance and curbs allowing 30 WW trains only when necessary. Using 80T/WW, 6 axles, WTW 18T/A would require the reconstruction of several bridges, but would subsequently facilitate the traffic, by allowing convoys of 22 WW (and thus not modifying the curbs) and allowing enough convoys to satisfy the demand. The technical standards must allow the use of the complete net for the projected traffic, which is as follows:

Figure 43 : Expected traffic by rail in 2020

As the network should be able to receive a maximum of 10 million tons -one way trip – i.e. a daily maximum of 18 trains each way on the most loaded links, each train should include 1 locomotive and 22 whoppers wagons of 80T each. This pleads for a norm of reconstruction – rehabilitation of the entire network at granted norms of 18T/axle and curves granting the circulation of 22 HW trains circulating at 50km/h as a minimum.

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Figure 44 : Loaded Convoys 80Tx22ww per day in 2020

3.4.2.2 Nacala corridor rehabilitation

The railway operating programmes indeed apply to the entire Nacala Corridor, i.e. the lines Nacala – Nkaya – Chipata and Blantyre – Nkaya. To assess the economic viability of the railway development project within the region, cost estimates for the entire corridor were already considered. Accordingly, rehabilitation costs for the entire corridor are roughly estimated to add up to US$313.4 m, thereof:

US$222.2 m for infrastructure rehabilitation in Malawi,

US$5.4 m for network development in Malawi,

US$110.0 m for infrastructure rehabilitation in Mozambique,

US$15.0 m for loading/unloading equipment at Nacala Port,

US$1.6 m for Chipata (Zambia) extension,

US$8.7 m for signalling (entire network)

Capital costs for rehabilitation only (GOPA estimates) The investments for infrastructure rehabilitation for the entire network are summarized in the table below:

m US $

Track Network Development Bridges

Rehabilitation Renewal Infrastructure S & T Rehabilitation Renewal

Malawi 83.81 124.15 5.37 3.75 9.67 4.53

Mozambique 75.22 20.30 15.00 4.88 9.83 4.60

Zambia 1.61 0.10

Total 159.03 144.45 21.98 8.73 19.50 9.13

Source : GOPA study

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Link with Zambia A new rail link from Chipata to Mchinji (Malawi) was completed in May 2010 and gives Zambia access to the network. In phase 2 we promote the completion of a rail connexion to the TAZARA and the Zambian network, in Karonga.

Linking with Beira Though the Nacala rail route is the lowest cost route for foreign trade, the broken rail link through the south of Malawi via Nsanje and Marka represents a possible (but expensive) alternative link to Beira. Rehabilitation costs from the Southern Border – Limbe section (Beira Corridor), is up to 305.0 m US $, out of which : . 95.3 m US $ for renewal of 198.9 track kilometres and 40 turnouts, and . 209.7 m US $ for replacement / renewal of 144 steel bridges with a total length of 1,591 metres, 2,323

bridge beams and 90 rail frames. The major part of the SENA line in Mozambique is being rehabilitated by Compania dos Caminhos de Fero da Beira (CCFB) - a joint venture between CFM and two Indian companies (Arcon and RITES) - which has also the concession to operate the line; this rehabilitation is funded by the concession and with a World Bank loan. As already mentioned, the works haven’t been done yet between the Zambezi and Bangula.

The technical solution to railways linkage The Nacala rail route is a regional and national necessity, due to the demand of transport coming from the Moatize area and from Chipata. A missing link is clearly identified between the Moatize – Beira rail route and the Malawian infrastructure. This missing link can hardly be addressed between the northern part of the Mozambican network, and the Central part of the Malawi network, due to the presence of important escarpments (1st) and to the important distance between the two networks (2nd). On another hand, linking the network through the Southern border of Malawi, along the Shire River, with a connexion with the Mozambican network at the confluence of the Shire and the Zambezi restarts the Beira rail corridor for Malawi, but do not answer to the coal transport demand (from the Mozambican point of view), and clearly discards the Nsanje inland port project (from Malawi point of view). The huge cost of rehabilitation is also a major problem. The consultant suggests linking the two networks between Bangula (Malawi) and Dao (Mozambique). Between Bangula and Dao, the declivity is minimal, the distance between the two networks is reduced, the distance from Dao to Moatize is still acceptable for the mines, and this choice will clearly facilitate the economic development of the Mwanza and Lower Shire valleys (Sugar and cotton), presently aisled by the Blantyre escarpments. In this option, the rail link would also act as feeder to the inland Port at Nsanje with goods from Western Mozambique, Malawi and Zambia.

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Figure 45 : Major suggested links

In order to be coherent with the intermodal investment programme, the railway plan is phased in phase 1 “immediate action” phase 2 “domestic north-south corridor” and “opening a link to SENA line and to the Shire”, and phase 3 “Nacala corridor and linkage of all corridors”.

Figure 46 : Current situation on the railway system

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3.4.2.3 Investment phasing

Phase 1: Emergency programme

The present condition of the rail infrastructure suggests that operations may already collapse during the next rainy season. To prevent this, emergency actions are recommended to be started timely before next rainy season as follows:

To clear the structure gauge,

To repair all drainages,

To stabilise the substructure, in particular in the vicinity of bridges and culverts, and

To correct all critical and unstable sections of the permanent way. A lump sum of 8,000,000 US$ has been estimated. Also, the global condition of the network does not allow a continuous exploitation of the network itself. Reopening the two main bottlenecks and reunifying the network should be done immediately. This includes:

The integration of both operating networks: the rehabilitation will start with Section 1.

Elimination of major curves and gradients and bridge reconstruction at 18T/Axle changes in sleepers for concrete, signalization and rehabilitation of commercial stations should be conducted in two years.

Another immediate necessity: reopening the Chiromo bridge, preferably at a low cost and as soon as possible.

The consultant strongly recommends to immediately start the technical studies.

Characteristic needed: one track, with a resistance up to 4000 tons, most modern signalization, two technical stations and possibility to use the same track for local road traffic

Cost estimate phase 1: immediate investment

Emergency protection of the network 8 million

Rehabilitation of section 1 with new norms 87.6 million

Chiromo bridge reconstruction 45.8 million

Phase 2 of the investment programme (Cost summary)

Construction - Link with Moatize Bangula Doa : Construction of 62 km railway line in single track - Approx.

180 M $ - Link to Nsanje Port Bangula Nsanje Reconstruction of 34 km line in a single track

Rehabilitation of North South Corridor Nyaka - Blantyre – Bangula : Rehabilitation of 216.7 Km Approx. 72 M $

Rolling stock

Gradient Curves

Section Length

[km] ≥ 15 N/kN Max.

[N/kN] Total R≤ 201 m Rmin [m]

Nkaya - Salima 171.7 2.2% 17.54 5.8% 0.7% 141

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Total renewal of the rolling stock, including locomotives, whopper wagons, coaches. It is strongly recommended (and approved in the workshop) to lease the rolling stock, including its maintenance. Infrastructure maintenance rolling stock should be leased also. An overall time schedule has been accurately defined by GOPA. This schedule is based on the following technical assumptions:

For track renewal, performance is 6 km/month at each site,

For track rehabilitation, performance is 10 km/month at each site,

During the rainy season (months 12 - 04), performance is only 50% of the above,

Turnout renewal and bridge renewal / rehabilitation is done in course of track renewal/rehabilitation,

Not more than two construction sites are allowed simultaneously and only if o situated in different parts of the network not interfering with each other, o logistic (rolling stock and station capacity) allows, o operations can cope with.

Starting date for the emergency programme is 01.07.2011, for renewal / rehabilitation Additional assumptions for phase 2, from 2013 to 2015, are

No change of locomotives at the border – trains are operated as a whole ,

90 minutes in total for border procedures at either Entré Lagos and Nayuchi (One Stop Border Post), and

Operating time for crossings is 10 (±5) minutes at all stations.

Phase 3: 2016 – 2018

In Malawi, the first two phases allow good communication to the Nacala corridor and the Western corridor and the rehabilitation programme should be finalized through renewal of the East – west sections:

Concerning Mozambique, the investments required have been roughly estimated for

Track rehabilitation Nacala – Cuamba (533 kilometres),

Track renewal Cuamba – Entré Lagos – Border (78 kilometres),

Renewal of 95 turnouts in through lines,

Upgrading the Nacala Port with loading / unloading equipment 7,

Signalling according to norms, and

Bridge rehabilitation / renewal on basis of the average cost per kilometre in Malawi. Maintenance investments for Zambia consist of the costs for railways as estimated in the Pre-feasibility Study for the Chipata Dry Port8, and for signalling equipment on the 37 km of line.

7 The total investment for upgrading the port would amount to approx. 35 m US $, but the full amount has not

been taken into account because benefits will not only apply to the railways but also to sea traffic and local

development 8 Exchange rate used: 1 US $ = 5.65 ZMK*10

-9

Gradient Curves

Section Length

[km] ≥ 15 N/kN Max.

[N/kN] Total R≤ 201 m Rmin [m]

Salima - Kanengo 105.5 32.5% 16.63 38.5% 12.7% 131

Kanengo - Border 122.1 0.0% 14.94 24.6% 0.4% 171

Nayuchi - Nkaya 100.2 0.0% 9.09 51.6% 0.0% 241

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Construction programme phase 3: Linkage of the WESTERN & NACALA corridors

Kanona-Chipata with connection at Chipata with Nacala corridor. Entirely on Zambian territory.

260 km single track with signalization, 10 technical stations, 3 additional commercial stations in KM 90, 155, 220 from Malawi border

490 M$ approximately on years 2016- 2018. Possible PPP.

Cost estimate Phase 3

New Link Approx. 490 M $ Link with Copper belt Chipata Canona Construction of 260 km railway line in single track Nacala CORRIDOR in Malawi Approx. 108 M $ Malawi- Zambia-Salima Rehabilitation of 227.6 Km Malawi- Nkaya- Nayuchi Rehabilitation of 100.2 Km Nacala CORRIDOR in Mozambique : Approx. 115 M $ Mozambique-Nayuchi Cuamba Reconstruction of 77 Km Mozambique- Cuamba – Nacala Rehabilitation of 100.2 Km Accesses to Port Nacala Extensions of line Nacala PORT Approx. 23 M$ New equipment in existing terminals Wharehouses for sugar Dedicated terminal for minerals

Rutenga

Bulawayo

Victoria Falls

Livingstone

Mazabuka

Lusaka

Kanona

Tunduma

Beira

Nacala

Dar Es Salam

ZIMBABWE

MOZAMBIQUE

ZAMBIA

BOTSWANA

CONGO TANZANIA

Tete

Harare

Mzuzu

Lilongwe

Blantyre

Chipata ?

Chinde

The Railways net

Nsanje

Chipoka

Doa

Figure 47 : Railway network at the upper developed stage

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Figure 48 : Creation of Dry Ports

3.4.3 INLAND WATER INVESTMENT PLAN

3.4.3.1. Lake

3.4.3.1.1 Services and vessels The main improvement will be for Night Ro-Ro ferries. The potential is huge as long as the service is organized by night between Monkey bay and Chilumba, on both sides, daily, with a possible return service by day with a stop in Nkhata Bay or Mbamba bay. This would immediately divert to the lake several cargos like Carlsberg’s inputs, fuel tankers truck, cassava exports. The construction of the first RoRo ferry boat (10 lorries capacity, 75 m length, 3 m draught, 4 ships) should be started as soon as 2011. The rhythm of construction might be of a ferry every two years. A Budget of USD 34.4 million might be earmarked on 8 years (2011- 2018), i.e. 2.4 millions US$ in 2011, and 4 millions per year further on, for the creation of a RoRo fleet. Service would be effective with the first RoRo, in 2013. The service would develop in phase 3, with 3 and then 4 ferries, and participation from all three riparian states.

3.4.3.1.2. Shipyard The existing shipyard in Monkey Bay should be immediately reactivated, and prepared for the construction / assembly of three types of vessels, to be conducted simultaneously. - Big Roll-on Roll-off ferries (one at a time, 18 to 24 months works for each) - Dredging ships for both the lake and the lower Shire lower Zambezi rivers. Two at a time, 12 to 18

months for vessel building. - River and lake bulk cargo and containers barges, 385 tons. Two at a time, 6 to 12 months for vessel

building. The shipyard is a phase 1 priority and will be reactivated with a dedicated budget of 1.9 million $ on 9 years (0.6 M$ in 2011, 0.5 M$ in 2012, 0.1 M$ per year from 2013 to 2020).

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3.4.3.1.3. Lake Ports Monkey Bay: The first slip facilities should be built in phase 1 for 6MUS$ Chipoka harbour: The reactivation of Chipoka as a harbour is a necessity. This may be achieved through dredging or through the construction of a breakwater to protect the access from sandbanks. The consultant recommends conducting a feasibility study to determine the best technical and economically feasible solution. Initial operations should start after important dredging works anyway. Dredging barge construction (phase 1) 6MUS$ On the long term, complementary facilities should be built to satisfy the demand, especially warehouses. Chilumba: Improvements at Chilumba under project proposals include: - construction of parking facilities for cargo and fuel trucks, - replacement and acquisition of cargo handling equipment - Construction of a Ro-Ro strip Project costs are estimated at about € 3 million with the European Development Fund (EDF) being the expected source of finance. (phase 2) Nkhata Bay: Proposals to upgrade the port include the (i) construct a new quay to replace the old floating quay, (ii) create an additional berth, (iii) construct a RoRo facility, rehabilitate existing transit sheds, passenger facilities, workshop and offices

and (iv) acquire new port handling equipment. As an immediate action (phase 1) we recommend the installation of a 30mT mobile crane on a new additional wharf, and a pipe terminal for three different type of fuels and two for clean / used water. Storage is a necessity, with dedicated warehouses and specific ones. (phase 2) We recommend building in phase 2: cold storage for fishes, General dry storage for cassava, potatoes, vegetables; Outdoor storage for rubber and timber; Tank storages for petrol, diesel and paraffin. Under custom storage will also be built for import-export from Tanzania or Mozambique by water transportation. The construction of a slipping plan for RoRo during phase 2 will cost approximately 6MUSD. Dwangwa port Construction of a concrete jetty 20m, two warehouses, accesses, 1 crane 27mT for US$ 3 million Mbamba Bay (Tanzania, Phase 3) Construction of a RoRo slip for US$ 6 million Itungi, Nkhotakota, Likoma: Construction of a floating jetty and a warehouse, 1 crane 4 cables 8T, Floating pipeline for diesel and for water, accesses at a cost of 1,5 million US$ each

3.4.3.1.4. Other logistics 1.5 m$ (phase 1) Personnel training program for sailors Personnel training program for shipyard To invest in the marine college for more marine officers.

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3.4.3.1.5. Rail access to the lake from Liwonde dry port As a long term project (over 10 years), a rail access to the lake from Liwonde via Mangochi might be considered. The rail access might allow the rail to go to the southerner navigable place in the Lake or on the higher Shire which will be navigable by container barges or tankers.

3.4.3.2. River

Feasibility study for the Shire – Zambezi (phase 1) Construction of prototype barges in Monkey Bay, then transported by boat/train to Nsanje. (phase 2) Construction of dredges in Monkey Bay (phase 2) Dredging in the Lower Shire and Zambezi in Mozambique (phase 3) Construction of a fuel terminal and tanks in Chinde (phase 3) Construction of transhipment jetties and warehouses on the opposite bank to Chinde (phase 3) Buying 4 sea barges for solid cargo from Chinde to Beira. (phase 3)

3.4.4. Traffic projection in 2020

Figure 49 : Expected traffic on corridors in 2020

Coal Transport may be achieved through Beira Corridor first until its capacity does not allow further development. Further Moatize production might need the use of Nacala Corridor and Shire Zambezi river (technical study in course).

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A further step of comparison between current (2009) and expected transport picture will be achieved by computing the Economic Benefits for the different commodities i.e. Comparative values before and after the multimodal plan in use : . Quantities transported by the different corridors . Land leg Transport: Cost f (2.34 US$ per truck-km) and Lead time difference (in days) . Sea Transport: Cost difference (US$/tonne) and Lead time difference (days) . Benefits (in US$ per year)$ An example of this computation is presented here below (extract from GOPA Study).

Figure 50 : Economic Benefits by Commodity

9,510,000 US$ is a gross estimate of costs of commodities (excluding coal, maize and other new bulk traffic) corresponding to a development of 20% of all the commodities volumes. The reduction impact is real; indeed the figures might be more appealing with high transported volume such as Coal or Copper Bulk minerals.

Conservative estimate of Impact on Cargo traffic through the E-W Corridor as been estimated in the GOPA railway study as such:

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Consequently, in our understanding, the traffic share between corridors might take the following trends between 2012 and 2025.

These curves could be analysed during the next workshop by the attendants to ascertain the hypothesis

2012

Zimbabwe

Nacala Corridor

380 000 tons/year

1.600,000 tons/year

Moatize Coal

Zambia Copper

Moatize Coal

Beira Corridor

2015

Nsanje Port (Shire-Zambezy Corridor)

Zimbabwe exports-imports

2020 2025

Mining withinMalawi

Figure 51 : Traffic shares between corridors

At this stage of the assignment, Safege consultants have been examining a 1st attempt of phasing (among others) of the different possible links rehabilitation and a corresponding time frame… in taking in account transports needs (on demand side) and global needs on Malawian Economy such as Energy sustainability and reducing of import costs.

All the data that are available in the GOPA Railway study could be rechecked to validate a new calendar of railway rehabilitation based on transport needs and not on pure technical feasibility approach.

A slip between corridors may also occurs as some of the characteristics of corridor are considered as really not possible to correct (i.e. Shallow depth of Beira Port and dredging constraints) or shallow water in the Zambezi river that cannot allow barges exceeding 1000 tons of cargo (to be ascertain).

But in any case, a technical feasibility in accordance to define schedule is to be undertaken. GOPA proposed the following Time schedule in 2009.

Sugar : 200 000 T/year with3 barges of 1000 tons, Fertilizers : 200,000 T/year

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Steps of construction of the Multimodal transport scheme are defined in order of to better the actual import/export routes or propose interesting alternate (for Sugar mainly, Tobacco and imports of raw material such as limestone and Clinker) and indeed mining bulk cargo.

(Data from Railway study realized by GOPA in 2009)

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The “hidden” or technical constraints have still to be ascertained; some alternate options have to be identified and sharply discussed in the workshop to come (in the 2nd part of June 2010).At that time, it is indeed of sound interest to get the missing data about actualized travel time, transport costs for the main import/export products.

3.4.5. The impacts of the new multimodal transport strategy It has been thought that a comparison between the real picture transport costs and the new proposed multimodal strategy transport costs would help to get a picture of the impact on a yearly basis transport costs. Other figures stay unchanged at 2009 values … this type of computation can be considered as an appraisal of the sole effect of cargo transfer on a different set of cargo affectation on corridors. New exports cargo affectation

Products Cost per ton Tobacco Tea Sugar Maize Cotton Rice Food crops Uranium Coal Total % mode Cost in US $ Products

Package Bales Paper sacks 1000 kg bags Bags 120 kg sacks Bags Drums of 333 kgMchenga Mine Package

Final package 40' Container Container Final package

Corridors 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons Corridors

Northern Corridor Dar US$ 120 0 0,00% 0 Northern Corridor

Road Mombassa $160,7 5,25 100 105,25 16913675 Road

Western Corridor Lusaka 0 Western Corridor

Mtwara Corridor 0 Mtwara Corridor

Nacala Rail Corridor Nacala US$36 165 280 25,5 470,5 65,57% 16938000 Nacala Rail Corridor

Nacala Road Corridor Nacala 0 Nacala Road Corridor

Shire-Zambezi waterway Chinde 0 Shire-Zambezi waterway

Sena Line Beira 0 Sena Line

Road Beira US$79 36,79 11,024 47,814 6,66% 3777306 Road to Beira

Road Durban US$126,9 67 5,25 16,536 88,786 12,37% 11266943,4 Road to Durban

Road J'burg US$93 5,25 5,25 0,73% 488250 Road to Joburg

Road Zimbabwe US$50 0 0,00% 0 Road to Zimbabwe

Other US$126,9 0 0,00% 0 Other

Corridor to Walvis Bay US$1179/t 0,5 0,5 0,07% 589500 Corridor to Walvis Bay

Total 232 52,54 280 0 27,56 100 25,5 0 717,6 100,00% 49973674,4 Total New imports affectation

Products Cost per ton Fertizers Fuel CG imports Cement Lime Clinker Coal Total % mode Cost in US $ Products

Package 20 M liters/month Package

Final package Tankers Final package

Corridors 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons Corridors

Northern Corridor Dar US$ 120 28,8 38 66,8 8,30% 8016000 Northern Corridor

Road Mombassa $160,7 0 0 Road

Western Corridor Lusaka 101 101 Western Corridor

Mtwara Corridor 0 Mtwara Corridor

Nacala Rail Corridor Nacala US$36 149 9,6 158,6 19,71% 5709600 Nacala Rail Corridor

Nacala Road Corridor Nacala 0 Nacala Road Corridor

Shire-Zambezi waterway Chinde 0 Shire-Zambezi waterway

Sena Line Beira 0 Sena Line

Road Beira US$79 223,5 153,6 377,1 46,87% 29790900 Road to Beira

Road Durban US$126,9 0 0,00% 0 Road to Durban

Road J'burg US$93 0 0,00% 0 Road to Joburg

Road Zimbabwe US$50 101 101 12,55% 5050000 Road to Zimbabwe

Other US$126,9 25 0 0,00% 0 Other

Corridor to Walvis Bay US$1179/t 0 0,00% 0 Corridor to Walvis Bay

Total 372,5 192 0 0 38 202 25 804,5 100,00% 48566500 Total

Corridors 1000 tons Corridor share Transport Costs

Dar rail Corridor 66,8 4,39% 8016000

Dar Road 105,25 16913675

Western Corridor 101

Mtwara Corridor 0

Nacala Rail Corridor 629,1 41,33% 22647600

Road to Beira 424,914 27,92% 33568206

Road to Durban 88,786 5,83% 11266943,4

Road to Jo’burg 5,25 0,34% 488250

Road to Zimbabwe 101 6,64% 5050000

Other 0 0,00% 0

Corridor to Walvis Bay 0,5 0,03% 589500

Total 1522,1 100,00% 98540174,4

% of import + export costs 11,6 %

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Based on the new proposed/forecast affectation, the transport costs will amount around US$98.4 m instead of US$ 135.48 that means a reduction of about 1/3 of transport costs without any induction due to lowering of transport costs. This figure is obtained in keeping the same tariff policy for railway transport costs (infrastructure right of way tariff + transport costs associated to rolling stocks and locomotive use).

3.4.6. Forecast cargo in 2020 Assuming that all the necessary investments are realized and that transport services are set up at a satisfactory level, the NS-WE corridor could catch the major share of the total cargo.

Products Cost per ton Tobacco Tea Sugar Maize Cassava Cotton Rice Food crops Uranium Other mines Coal Copper Total % mode Cost in US $ Products

Package Bales Paper sacks 1000 kg bags Bags 120 kg sacks Bags Drums of 333 kg Package

Final package 40' Container Container Final package

Corridors 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons Corridors

Northern Corridor Dar US$ 120 500 500 1000,00 7,02% 120000000 Northern Corridor

Road Mombassa 5,25 137 142,25 1,00% 22859575 Road

Western Corridor Lusaka US$66 0,00 0,00% Western Corridor

Mtwara Corridor 0,00 0,00% Mtwara Corridor

Nacala Rail Corridor Nacala US$36 165,5 244 500 500 15 1000 5620 4400 12444,50 87,38% 448002000 Nacala Rail Corridor

Nacala Road Corridor Nacala 0,00 0,00% Nacala Road Corridor

Shire-Zambezi waterway Chinde 120 380 500,00 3,51% Shire-Zambezi waterway

Sena Line Beira 0,00 0,00% Sena Line

Road Beira US$79 36,79 15,2 51,99 0,37% 4107201,405 Road

Road Durban US$126,9 69,64 5,25 22,8 97,69 0,69% 12396840,29 Road

Road J'burg US$93 5,25 5,25 0,04% 488250 Road

Other Zimbabwe US$50 0,00 0,00% 0 Other

Other US$126,9 0,00 0,00%

Corridor to Walvis Bay US$1179/t 0,5 0,50 0,00% 589500 Corridor to Walvis Bay

Total 235,14 52,54 364 1000 1000 38,0 137 15 0 1000 6000 4400 14241,68 100,00% 608443366,7 Total

Products Cost per ton Fertizers Fuel CG imports Lime Klinker Coal G.Cargo Total % mode Cost in US $ Products

Package 20 M liters/month Package

Final package Tankers Final package

Corridors 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons 1000 tons Corridors

Northern Corridor Dar US$ 120 28,8 76 104,80 8,43% 12576000 Northern Corridor

Road Mombassa 0,00 0,00% 0 Road

Western Corridor Lusaka US$66 101 101,00 8,13% Western Corridor

Mtwara Corridor 0,00 0,00% Mtwara Corridor

Nacala Rail Corridor Nacala US$36 149 9,6 158,60 12,76% 5709600 Nacala Rail Corridor

Nacala Road Corridor Nacala 0,00 0,00% Nacala Road Corridor

Shire-Zambezi waterway Chinde 100 400 500,00 40,24% Shire-Zambezi waterway

Sena Line Beira 0,00 0,00% Sena Line

Road Beira US$79 123,5 153,6 277,10 22,30% 21890900 Road

Road Durban US$126,9 0,00 0,00% 0 Road

Road J'burg US$93 0,00 0,00% 0 Road

Other Zimbabwe US$50 101 101,00 8,13% 12816900 Other

Other US$126,9 0,00 0,00%

Corridor to Walvis Bay US$1179/t 0,00 0,00% 0 Corridor to Walvis Bay

Total 372,5 192 0 76 202 0 400 1242,50 100,00% 52993400 Total

Corridors 1000 tons Corridor share Transport Costs

Dar rail Corridor 1104,80 7,14% 132576000

Dar Road 142,25 0,92% 22859575

Western Corridor 101,00 0,65%

Mtwara Corridor 0,00 0,00%

Nacala Rail Corridor 12603,10 81,39% 453711600

Nacala Road Corridor 0,00 0,00%

Shire-Zambezi waterway 1000,00 6,46%

Sena Line 0,00 0,00%

Road to Beira 329,09 2,13% 25998101,4

Road to Durban 97,69 0,63% 12396840,29

Road to Jo’burg 5,25 0,03% 488250

Road to Zimbabwe 101,00 0,65% 12816900

Other 0 0

Corridor to Walvis Bay 0,50 0,00% 589500

Total 15484,18 100,00% 661436766,7

% of import + export costs 19,66%

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The estimate of overland leg transport cost is around US$ 661 million for a cargo of 15,48 million tons that correspond to a total cost of exports + imports of 3364 million US$ (19,66%). This high percentage is due to the much lower tonnage value that coal/copper and minerals have compared to commodities such as tobacco or fertilizer. It seems unrealistic to maintain the tariff policy at the same level, regardless of the cargo to be transported. The tariff might be lowered by 50% on the Nacala corridor that will bring a positive impact for the exporters on the transport export cost and reduce local/production commodities costs as the price of inputs (such as fertilizers and petroleum products is significantly reduced (double impact). Such a volume allows the concessionaire to refund his investments in a reasonable time frame even in taking in account a yearly operational cost of 330 US$ million for the dispositive operations and maintenance.

Figure 52 : Expected traffic on corridors in 2020

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4 The Public Private Participation

4.1 Global picture and main principles

4.1.1 Main Players

Consortium Concessionaire and infrastructures Time frame Shareholders

MCC and Mota Eng

Mota Eng., concessionaire for Lake Services

Consortium CDN Corridor de desenvolvimento do Norte

CEAR Operations and maintenance a network extending from the Zambian border in the West to connections with Mozambique's Nacala Corridor to the East and Mozambique's Beira corridor to the South Final concessioning in 2005

From 1999 20 years? From 2005 15 years

RDC, ERL (Bermuda), MANICA (Mozambique), Mozambican private investors and CFM (Mozambique's Port and Railway Administration). On September 12, 2008 RDC and ERL sold their interests in CDN to Mozambican investor group INSITEC. Now the Nacala Corridor which includes CEAR will be managed and operated entirely by Mozambican investors.

Port of Nacala

Corridor de desolvimento do Norte (CdN) 2005 15 years

Same Concessionaire and shareholders

Shire Zambezi Mota Eng., concessionaire for Shire Port

Beira Railway

CCFB Companhia Dos Caminhos de Ferro da Beira (Beira railway company) The Beira rail system comprises two rail lines:

(i) (i) a 317-km Machipanda line (Beira Railway) linking the Beira Port to the railway network in Zimbabwe (along the Beira Corridor)

(ii) (ii) a 600-km Sena line linking the Beira Port to the Moatize coal mines via Inhamitanga, Caia and Vila de Sena (along the Sena Corridor).

From 2004 25 years

Indian governmental companies of RITES (26%) and IRCON International (25%) while the remaining stocks are owned by CFM (49%)

Port of Beira

Corneder of Mozambique Port terminal Operation Handling of Cargo, Tally, Reception, warehousing and logistics

From 1998 25 years +15(option)

Port of Quelimane

Corneder – Quelimane Cargo handling and maintenance of port infrastructure

From 2005 25 years

Dutch firm Cornelder (70 %) and CFM, the state-owned Mozambique ports and railway company (30 %),

Port of Pemba Nacala railway could be extended 140 km north to Pemba

Moatize Mine Mining concession CVRD in Consortium with American Metals & Coal Inc Development of a mine with a capacity of 21 million tonnes per annum, 1,500 MW mine-mouth power plant

From 2004 CVRD in Consortium with American Metals & Coal Inc 10% of shareholders reserved for Mozambican Nationals Upfront payment of US$122.8m for the exploration rights to the Moatize Coal Deposit., 3% production tax; 5% carried interest for the GOM; US$6.5m to be spent on community and social development programmes in the region during the exploration period and a further US$50m is expected to be spent on similar programmes during the production phase.

Riverdale mine Mining Concession The Australian company Riversdale Mining plans to open its first coal mine in the western Mozambican province of Tete by the end of 2010.

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4.2 Life of the different concessions

02/2010: Differing fortunes for Mozambican transport Despite the sharp decline in global trade volumes during the year, the volume of cargo handled by Mozambique’s ports increased by 4.2% in the first 10 months of 2009 in comparison with the same period in 2008 According to figures from the state owned port and rail company, Portos e Caminhos de Ferro de Moçambique (CFM), the country’s ports handled 10.Mt of cargo over the period, although the rail network suffered a fall in demand, with turnover declining from 599 M.T-km in the first 10 months of 2008 to just 528.8 M.T-km one year later. The chairman of CFM, Rui Fonseca, commented: "The economic recession was mostly felt in our railway system, particularly in the south, which is the only one of the systems that is directly operated by CFM, and which did not meet the established targets for the first half of 2009.” However, turnover at Maputo container terminal increased from 7800 TEU/month at the start of last year to 13,700 TEU/month by November, as more shipping lines began to serve the port. The differing fortunes of rail and port traffic in the south appears to be the result of falling South African demand but increased local demand for container traffic. Terminal operator Mozambique International Port Services (MIPS), which is led by DP World, stated that Maersk, Safmarine, Ocean African Container Lines, MSC, Ignazio Messina, MOL, Delmas, MACS, Gulf Africa Line, PIL and United Africa Feeder Lines now all provide regular services to Maputo. Recovering trade volumes in South Africa could provide further business for Maputo. In addition, dredging and other harbour improvements this year should boost container turnover at the terminal by allowing access for Panama vessels.

Sena Line - CCFB The main shareholder of CCFB is the Indian governmental companies of RITES (26%) and IRCON International (25%) while the remaining stocks are owned by CFM (49%) RITES has an extensive track record of technical assistance and consulting in Mozambique for more than 20 years. The concession contract includes upgrading and operation of the Beira Railway (Machipanda line) and rehabilitation and reconstruction of the Sena Railway. Operations and maintenance of the Beira Railway was taken over from December 2004 and several improvements on this line have already been bought into the system. It is reported that the concession seems to be headed to a successful operation. The rehabilitation of the whole line will be completed within a period of four years according to clearly defined standards and schedules specified in the Concession Agreement. The concession fees will comprise: (a) an entry fee of US$2.00 million payable on takeover; (b) an annual fixed fee of US$1.0 million from year 11 to 25 (included); and (c) an annual variable fee assessed as 3.0% of CCFB’s gross revenue for traffic up to 300 million net-ton-kilometres and 5% between 300 million and 1 billion net ton kilometres, and 7.5% for traffic over 1 billion net ton-kilometres. The Concessionaire shall ensure that the railway infrastructure is developed in such a manner that it has the capacity to handle the potential coal traffic subsequent to the opening of the coal concession, through appropriate contractual arrangements with the coal

15 January 2010 by Railways Africa Editor Reconstruction work on the 574km Sena line from the central Mozambican port of Beira had reached a point only 24km from the Moatize coal basin in the western province of Tete by the end of December 2009. The Maputo daily “Noticias” quoted Tete provincial transport director Paz Catruza saying that, despite a slight delay caused by a number of “technical and material constraints”, the reconstruction teams would reach Moatize municipality during January 2010. Rehabilitation of the stations at Nyamawabue, Sinjale, and Doa in Mutarara district, as well as Cambulatsitse, Cateme, and Moatize itself, in Moatize district, is included in the project. Early resumption of both passenger and goods traffic is expected.

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The revised deadline for completion of the line was extended from December 2009 to the end of January 2010. According to Director of the Sena Line Reconstruction Brigade Candido Jone, quoted in “Noticias”, the contractors – Indian consortium Rites and Ircon International – ran out of material and the target of 1,400 metres a day was not met for some time. The production of reinforced concrete sleepers in factories at Dondo and Sena fell behind because of a shortage of steel, which is imported from India. After the re-laid line reaches Moatize, finishing touches to track alignment, the drainage system and the rehabilitation of bridges could continue throughout 2010, Jone explained. Since the 6mta capacity of the rehabilitated Sena line will be insufficient to meet export coal requirements in the near future, a connecting link from Moatize to Malawi is planned, to provide access to the northern port of Nacala by 2015. An additional new railway is envisaged from Mutarara to the Nacala line, bypassing Malawi.

CdN and CEAR In May 1999, a consortium led by RDC was awarded the concession for Malawi's railway, a network extending from the Zambian border in the West to connections with Mozambique's Nacala Corridor to the East and Mozambique's Beira corridor to the South (the Beira corridor has been closed since the mid 1980's as a result of Mozambique's civil war). Principal markets served are the capital city of Lilongwe and the main economic centre of Blantyre. The consortium Corredor de Desenvolvimento do Norte ("CDN") included RDC, ERL (Bermuda), MANICA (Mozambique), Mozambican private investors and CFM (Mozambique's Port and Railway Administration). CDN formed the concessionaire company Central East African Railways ("CEAR") and began operations on December 1, 1999. With the final concession of Mozambique's Nacala Port and Railway to the same consortium in January 2005, commercial and operational integration of the corridor will provide a more efficient and competitive outlet for landlocked Malawi. On September 12, 2008 RDC and ERL sold their interests in CDN to Mozambican investor group INSITEC. Now the Nacala Corridor which includes CEAR will be managed and operated entirely by Mozambican investors.

RDC pulls out of Mozambique (October 2008) US-based Railroad Development Corporation (RDC) has announced the sale of its stake in the Corredor de Desenvolvimento do Norte (CDN) consortium, which operates the Mozambican port of Nacala and the railway linking the port with Malawi and Zambia. CDN originally comprised RDC, ERL of Bermuda and Mozambican companies including Manica and the state owned port and rail company, Caminhos de Ferro do Moçambique (CFM). Equity held by RDC and ERL was sold to Mozambican investment group Insitec, a subsidiary of the Commercial and Investment Bank (BCI), on 12 September for an undisclosed fee, leaving CDN entirely in Mozambican hands. Prior to the sale, Maputo had expressed its disappointment at the slow pace of infrastructural and performance improvement, and also at the low level of wages paid to CDN workers, but RDC insists that it acted entirely within the terms of the concession. CFM is now expected to take the lead in operating both the railway and port, and has already agreed to increase wages. It is not yet known whether RDC’s withdrawal will affect the US$29.6M financing that CDN has received from the United States Overseas Private Investment Corporation (OPIC). CDN currently runs eight locomotives and 595 wagons on the 872 km railway, carrying fuel, fertiliser, grain, sugar and tobacco. The chairman of RDC, Henry Posner III, commented: “The sale of our economic interests to local investors represents a major development in the evolution of the Nacala Corridor. Having restructured and stabilised a patchwork of publicly owned assets, the foreign investors have at this point created most of the value that we were in a position to achieve.

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“This has ranged from equity investment and the arrangement of third party debt financing to the streamlining and integration of the management of the infrastructure involved. Full integration of the Nacala Corridor into the local private sector represents the next logical step.” CDN also holds the concession to operate the Malawian railway network, known as Central East African Railways (CEAR), so in effect RDC has withdrawn from its only two African markets. Given that CDN’s current 15 year operating concession began as recently as 2005, it may seem odd that RDC should sell its stake at this stage. However, the US firm also sold its interests in Estonian Railways (Eesti Raudtee) last year, when the Estonian network was renationalised. As a result, RDC’s overseas operations are now restricted to Latin America. The president of RDC, Bob Pietrandrea, said: “This transaction will help to bolster *our+ war chest for future opportunities in Africa, and comes at a strategic time as economic opportunities on the continent, which have been perceived as challenging to say the least, are likely to come from both increased interest in “concessioning” and the inevitable restructuring of some existing concessions.” In short, the breakdown in relations with the Mozambican government that appears to have triggered the sale has not deterred RDC from reinvesting in the African continent.

Posted on 28 August 2009 by Railways Africa Editor Central East African Railways (CEAR), the concessionaire operating the railways of Malawi, reports good traffic levels in recent months. CEAR chief executive Henry Chimwaza told Thom Khanje of the Malawi Daily Times that appreciable amounts of imported fuel, wheat and fertiliser are being moved inland from the Mozambican port of Nacala, and in the other direction, significant export traffic from Malawi comprising tobacco, sugar and pigeon peas. “There is a lot of support from industry,” Chimwaza explained to Khanje, “because of the increased confidence they have in us as we are now able to move their cargo as required”. CEAR’s major clients currently include Farmers World, Export Trading Company, Bakhresa Grain and Milling, Petroleum Imports Limited, Illovo Sugar and the tobacco exporting companies. On the Mozambican side, repair work along the problem 77km of track west of Cuamba has enabled a reduction in transit time from five hours to three. Trains are now able to move at 25km/h compared with the previous maximum of 15. It is hoped to double the speed to 50km/h by the end of 2009. Malawian Privatisation Commission spokesperson Chimwemwe Matonga is quoted saying that government, following the recommendations of consultants, is renegotiating the concession agreement with Cear, “to take into consideration new developments in the railway business and to yield more benefits”. The agreement, signed in 1999, gave Cear a 20-year concession to operate the former Malawi Railways. However, according to the commission’s 2008 annual report, eight years after granting the concession, “there has not been any significant improvement in either operational or financial performance”, compared to the situation when government operated the services. The report continues: “It is hoped that by reviewing and successfully renegotiating the concession, government and Cear will identify areas that require attention and mutually seek to find ways of addressing the situation

Corelder-Quelimane 2005: A public private partnership (PPP) officially took over the management of the port of Quelimane in Mozambique. Cornelder-Quelimane, jointly owned by Dutch firm Cornelder (70 per cent) and CFM, the state-owned Mozambique ports and railways company (30 per cent), was awarded a 25 year contract that includes cargo handling and maintenance of port infrastructure. The company will also be required to improve port infrastructure and capacity over the lifetime of the contract, with the help of €23 millions in funding provided by the German development agency, Kreditanstalt für Wiederaufbau....

Port of Nacala August 2008: The government of Mozambique is taking control of Corredor de Desenvolvimento do Norte (CDN), the company that operates the Port of Nacala and the associated railway under a 15 year concession.

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The government seems serious in its threat to withdraw port and rail concessions from consortia that it deems to be providing a sub-standard service. It has purchased the shares in CDN owned by two US firms, Edlow Resources and American Railroad Corporation (ARC).... April 2009: Mozambican rail and port operator Corredor de Desenvolvimento do Norte (CDN) has revealed that it is competing with Mauritius and the Comoros to develop a new container transhipment terminal for the southern Indian Ocean. The company hopes to develop the terminal at the northern port of Nacala, which has rail links with western Mozambique and Malawi and which has the deepest natural harbour in eastern Africa. Although no details of the likely investor or scale of the project have been given, the chief executive of CDN, Fernando Couto, believes that his company has a good chance of securing the investment....

October 2009: A total of US$150M of new investment has been promised for the Mozambique port of Nacala and the railway connecting it to Malawi, to serve both container and dry bulk traffic. Corredor de Desenvolvimento do Norte (CDN), which holds a concession to operate the port and railway, is to use the money to modernise both facilities over the next five years in an effort to fulfil its concession obligation to boost trade and encourage economic development along the Nacala Corridor....

Port of Pemba May 2008: CFM has revealed that it hopes to develop a new container terminal at the port of Pemba in Cabo Delgado province. The port lies in the far north of Mozambique, beyond even Nacala, and so is hundreds of kilometres from the main centres of Mozambican industry, mining or export led agriculture.

It also lacks rail links with other countries in central/southern Africa, so it seems likely that new road or rail links will be required in order to make the project viable. Reports in Mozambique suggest that the Nacala railway could be extended 140 km north to Pemba....

CVRD – Moatize Mine . License to explore the Moatize Coal Reserves . 2 year feasibility study . Feasibility risks assumed by bid winner . Bid winner granted a mining concession after 2 years if: At least 5 million tons per year of saleable coal found Proven technical and economic viability of the project

. Mozambique government involves bid winner in all infrastructure related projects

. Government failure to comply: Contract termination and compensation for bid payment and all feasibility costs

. Bid offer of US$122.8 M . Consortium with American Metals & Coal Inc. . Feasibility study cost US$34 M . 3% production tax once mine is operational . 5% carried interest for the Mozambique government . 10% of shareholding reserved for Mozambique nationals . Community and social development programs

o During exploration period US$6.5 M o During production phase US$50 M

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3.4 Analysis of the global situation and recommendations

Our view about encountered difficulties

About the puzzle of concessions The different concessions are actually set up as a puzzle along the corridors and competition between railway lines and ports is at an utmost stage without any coherence attempt. Each concession is setting “key conditions” regarding downstream concessions, without any possibility of implementation of a correction action plan. Downstream is governing upstream possibilities (Mining, exports/imports of commodities) instead of been naturally in the opposite rationale.

Figure 53 : Puzzle of concessions

Regarding the different basic elements of a determined corridor, infrastructures are defined without taking fully in account the upstream requirements; operations are on a “per se” rationale instead of taking/gathering all the potential needs. Apparently, at the time the bids for tenders for concessions were launched, (1st piece of understanding) strategic options were not deeply enough discussed with the 2 governments or (2nd piece of understanding) possible impacts had not been explained at a sufficient level of detail. About competition between corridors Furthermore, Beira Corridor, Nacala Corridor and Shire-Zambezi waterway are all competing between themselves due to the uncertainties of volume production time frame, each of corridor is playing “who is winning get all “ of the transport share. About choosing or allowing a good set (efficient) of shareholders The main users (either commodities transporters or mining companies) are not involved in the railway concessions. In many cases of good practices, the mining industry is involved in dedicated terminals at Ports, which until now is not yet the case in Mozambique. Coherent duration of concessions In the case of Nacala Corridor, choosing a 15 years period starting in 1999 do not allow a satisfactory time frame to reimburse necessary investments … This 15 years period explains (partly) why private companies were so reluctant to invest in the different sections (to improve, rehabilitate or erect from scratch).

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The Consultant recommendations

Considering the global malfunctioning, it seems of some interest to redefine the different possible set/scenarios of attribution of responsibilities at all the levels (Governments, Railway operators, Rolling stock companies, Port operators, Importers/exporters, Shipping companies) in order to choose a strategy of concessioning in accordance with global country strategy. In order to do so, it is suggested to pursue the work that have been initiated by Workshop Group B (railway operations) in answering to the different questions about attribution of responsibilities based on core competences of different partners either public or private and risk accepted exposure. This task should be enlarged at all the different elements of each corridor or preferably multimodal scenario (corridor plus gathering points and adjusted services) Problem of short fall at the port … Need to invest in equipment to be able to load/unload 6 million tonnes (starting from 1 million tons today) Necessity of building a new coal terminal and general Cargo Terminal . 16 trains per day in each direction . 12000 trains in 2 years time

3.5 Concession analysis. Indicators and guarantees

3.5.2 Actual concession agreements

General Poor condition and performance as described above primarily evolved from deficiencies and shortcomings that occurred during the privatisation process. The present agreement between the Government and CEAR lacks a clear structure and concept in general. The target of the agreement is not defined at all, and responsibilities of the contracting parties are not sufficiently distinguished. Some of the key issues and weaknesses are analysed below.

Legal environment The agreement has been drafted without any sound legal basis since the Railway Act dates back to 1907 when privatisation surely was not an issue. As several concessions are to be considered, a framework is necessary. This should be build through coordination with neighbouring countries, and after perfect evaluation of indicators guarantees. On both sides of the agreement.

The agreement leaves application and development of standards and regulations extensively with the concessionaire, only suggesting that “rules generally accepted by railway industry” be used, and allows alterations and modifications of even safety-relevant regulations without requiring any approval (items 32, 33 of the agreement). For continuous monitoring and control of the execution of concession agreement(s), it is common practice worldwide to install a regulatory body that is also responsible for the development and approval of standards, rules and regulations, as well as for the regular inspection of assets. At present, there is no provision for that, neither in the law nor in the concession agreement.

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Definition and management of assets Concession of a railway means also to transfer managerial responsibility of assets representing a tremendous value at least partly to the concessionaire. Since the usual lifetime for railway assets is generally beyond the intended concession period, e.g.

20 - 25 years for signalling and telecommunications,

30 - 35 years for permanent way,

30 - 50 years for rolling stock,

50 - 80 years for buildings,

100 years and more for substructure, bridges and tunnels; The concession agreement must unambiguously define for each asset

The ownership,

The condition at the time of hand-over,

The minimum condition to be maintained during the concession period,

The remaining life time, and

Responsibilities for and means of rehabilitation and / or renewal.

Except for a listing of some of the assets and their value according to an inventory compiled several years before its introduction, the present agreement contains nothing of the above, neither any strategy concerning further development of assets. Rehabilitation is assumed as the concessionaire’s overall responsibility but no budgetary provision is made for the purpose.

A depreciation fund for re-investments as suggested by TERA in 2004 has not been established so far.

Concessionaire’s capabilities Because of the scope and technical and managerial complicacy and complexity, any railway concession must consider and monitor the concessionaire’s

technical and managerial qualification and experience,

its staffing, and

its financial capability and

Stipulate minimum levels for these items in the agreement. Except for an amazing clause stating that another service provider if sub-contracted must be qualified, the present agreement seems to tacitly assume concessionaire’s sufficient capabilities, and does not provide for any monitoring on the subject.

Maintenance and repair There is no proper definition of maintenance (as outlined in para. above) in the present agreement. The agreement also leaves the quality level (see also 0) open, and just assumes “repair and rehabilitation” as concessionaire’s responsibility. The agreement also mentions cases of force majeure but does not explicitly define the term, and contains no unambiguous clauses about responsibility and handling, financing and compensation whatsoever. This led for example to the unacceptable delay in restoring the Rivi-Rivi Bridge after the collapse in 2003. There are basically three options for the financing of rolling stock investments:

Private financing by the concessionaire (assuming that CDN and CEAR merge),

Public financing through the Governments (with leasing agreements with the concessionaire), or

Private financing by a separate rolling stock company.

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Institutional framework

Tasks and responsibilities of the Government in general The Government has to ensure adequate supply to population and economy through appropriate means of transport. This has to be achieved through

Legislation

Planning, monitoring and control At present,

The legal framework for the transport sector is fragmentary and largely outdated

There are neither a comprehensive Transport Master Plan nor adequate tools for monitoring and control

In the scenario of privatisation, matters are dealt with on contractual basis rather than legislation This is resulting in:

Government’s inability to effectively control the transport sector

Poor performance and high costs of transportation

Severe deterioration of infrastructure and equipment Accordingly, it is recommended that the Government

Establishes an adequate legal framework

Elaborates a Transport Master Plan defining the role of the various modes of transport

Defines a conveyance obligation for basic goods and passengers

Sets up Regulatory Bodies to monitor and control for the various modes of transport

Defines responsibilities for further development of the Master Plan and co-ordination between the various modes of transport

It is, therefore, recommended that MOTPI - rather than pursuing the review of an agreement that lacks both structure and clear provisions -

Drafts a new Railway Act (including a clear separation of operations from infrastructure) and submit to the Cabinet at the earliest

Passes the by-law required for general standards, rules and regulations, this also to provide the possibility to have several concessionaires

Sets up a Regulatory Authority

Only then elaborates a fresh concession agreement on basis of samples proven successful elsewhere Consequently, the legal framework would take precedence over the contractual provisions, and the latter had to be confined to issues specific to the actual agreement, particularly

Share holder’s financial capacity and expected investments

Concessionaire’s operational and technical capability

Concessionaire’s staffing, experience and know-how

Network access fees, accounting and audit, penalties

3.5.3 Concession architecture Concession duration The terms of concession have to be changed in adding ten more years maybe more to the current duration of the concession, depending on the necessary time/delay to reimburse the new suggested investment plan. Some computation has to be done properly in taking in account money returns constituted by cargo fees.

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Cargo forecasts Indeed, a conservative redefinition of cargo and traffic forecasts has to be ascertained … contractual commitments and buying of shares by private users in the CdN may bring some confidence in reaching the cargo forecasts in line with time table/frame. Realisation of new investments Investment plan has to be approved by all the parties and a non respect of the new investments road map is to be considered as a severe failure in the concession. In case of occurrence of non observance of contract requirements regarding investments, an extraordinary meeting is set up with all the shareholders. It is a contract requirement for the concessionaire to contract a good insurance company in case of destruction of railway links. Performance of maintenance Indicators of good maintenance are to be set up in the concession with the rolling stock company and controlled such as availability of rolling stocks, age of locomotives and wagons The proposed institutional structure is shown in the chart below.

3.5.4 Review of attribution of responsibilities for investments and operations for the CdN Selection of an independent operator… Instead of CEAR that was formerly a Malawian Company. Government of Malawi/Government of Mozambique/Government of Zambia might keep the ownership of permanent infrastructures based on their respective territories… This point has not been clearly defined in the actual CdN-CEAR concession agreement. The actual situation in which shareholders are obviously serving the Mozambican interests – as a 1st priority - is not satisfactory … it adds up some new motives of mistrust of Malawi toward Mozambique. Railway operations should be controlled by a multinational regulatory agency (Zambia, Malawi and Mozambique). Table of responsibilities attributions set up during the 2nd workshop

Responsibilities GOV Railway Infrastructure

Operators

Rolling stock operator

Rolling stock

owner

Comments

Permanent infrastructures Strategic missing links

X x

x

GOMalawi/GOMoz owners of permanent infrastructures based on their respective territories Another possibility is to select a private investor/concessionaire (Vale, Riverdale,)

Railway Operations x Run by private operator Must take care of all the players

Tariffs x x Each 6 months, reappraisal of the tariffs policy Different prices for different commodities

Right of way x

Rolling stock . locomotives . wagons

x x

x x

. Leasing or ownership

. Different operators : transporters, cargo owners

Rolling stock Maintenance

x x Private rolling stock companies

Port Terminal X or

X or

Private operator … could be different of the 2 others (participation of the big players … Riverdale, Copper stakeholders…)

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SADC protocol is to be taken care of. An independent concessionaire could operate seamless all the line from Zambia to Nacala, making operations as efficient as possible.

I

Rolling Stock Owners (might be the RS operator

Or a specialized Cy) Provide maintenance for RS only

Figure 54 : Architecture of Concessions

3.5.5 Coordination between governments

The consortium Corredor de Desenvolvimento do Norte ("CDN") including actually Insitec, Manica (Mozambique), Mozambican private investors and CFM (Mozambique's Port and Railway Administration) do not present a sufficient level of independence regarding GOM and Mozambican Interests. It is really urgent to reassemble a new set of private investors with new partners from the demand side (Importers/exporters and Mining companies). This injection of new blood might reinsure the Shipping Companies and indeed Importers/exporters. The three Governments (Mozambique, Malawi, and Zambia) must keep the ownership of railway infrastructures (parts on respective territories) in case the duration of the concession is not extended in order to reimburse a complete rehabilitation of the network. An international agency could be set to define tariffs of use of infrastructure and rule “right of ways” as RFF is doing in France. We give at continuation a complete description of the European institutional management of railways. It perfectly illustrates what might be done in Central Eastern Africa....

Mozambique Zambia Zimbabwe

Infrastructures Concession Rolling stock operating companies (Cargo owners or transport companies)

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The EUROPEAN RAIL EXAMPLE Relationships between TOCs (Train Operating Companies) and IMCs (Infrastructure Management Companies)

This brief is based on a comprehensive report issued by the UITP Regional and Suburban Railway Committee. Its scope ,therefore, covers the vision of operators on infrastructure access principles and pricing, infrastructure design and operational quality.

The new European railway landscape gives a paramount importance to financial and technical relationships between infrastructure managers and operators. In this document, the train operating company is referred to as “the operator” Background In order to increase the rail market share, which has been constantly declining in Europe over the last decades, and to control the amount of public subsidies paid to the rail industry, the European Union has issued a Directive which require strict separation of train operation and railway infrastructure. The aim of this is to open up European railways to regulated competition and to allow train operators to run on infrastructure owned by third parties. The implementation of this separation principle has been applied differently in different countries: • Separate accounting within the national company, • Autonomous divisions for operation and infrastructure within a large holding (former national

company) • Complete corporate separation between operator(s) and infrastructure manager. Both may be public or private. Principle Infrastructure should be open to operators using their own rolling stock or vehicles leased from a Rolling Stock Company (ROSCO). They should be able to have fair and non-discriminating access to the rail infrastructure under the conditions set out by the infrastructure manager and subject to the payment of track access charges. This charge is levied to cover the cost of infrastructure ownership, maintenance and management. If an operator feels unfairly treated, he can lodge an appeal to an independent regulatory body. Infrastructure pricing : level and structure Track access fees paid by operators to infrastructure managers are generally based on train-kilometres operated. The fees charged are, however, very different from one country to another. As infrastructure costs can amount to 50 % of the total fixed costs of a operator, the level and structure of track access charges are essential questions for railway enterprises, and are ruled by Dir 2001/14, art. 6-12. Fee level There are several philosophies for track access fee levels: • Marginal costing, where the infrastructure manager charges the operator only those costs directly

incurred by the operation of its trains. In this case, the fixed costs are not covered and resulting deficit has to be covered by the public authorities. Dir 2001/14 art 7 retains this formula as the reference basis.

• However, “if the market can bear this”, art 8 does not exclude full cost recovery, when infrastructure managers may charge all fixed and variable infrastructure expenditures to the various operators using a specific infrastructure,

Operators are of course in favour of the former level option, which enables them to compete on fairer basis with other modes, especially road transport, where infrastructure is mostly free of charge.

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Fee structure

Line by line vs. whole network cost recovery The following question arises when setting a fixed fee either to recover partly (marginal costing) or totally (full recovery) the fixed costs: should this cost recovery be calculated line by line, or should it be calculated for the whole network?

Additional and ancillary charge In addition to the charges described above, operators may have to pay for other services: traction energy (either electricity or diesel, if supplied by the infrastructure manager), access to the telecommunication network or the right to call at stations, which results in additional fees being charged by the infrastructure manager. What operators expect from infrastructure managers? Operators have several legitimate demands to infrastructure managers: • Quality of infrastructure, essential for the quality of service to the end-customers. As an incentive to

quality, Dir 2001/14 Art 11 imposes performance schemes, which may include compensations for undertakings suffering from disruptions.

• Stability of fee levels, essential for long-term service and investment policies • Flexibility, • Non-discriminatory treatment for different operator profiles (small/large, public/private) and service

types (long distance, suburban and regional passenger transport, freight etc.). • Fee strategies giving incentive to operators for additional services, thus favouring a fee structure with a

high proportion of fixed fee. Dir 2001/14 art 9 gives the infrastructure manager the possibility to non-discriminating, time-limited discount to encourage the development of new rail services, or the use of under-utilised infrastructure.

Whatever the fee level, the fee structure may be either: • A fixed fee, giving access to the infrastructure regardless of

traffic, • Proportional fees reflecting actual trains operated on that

infrastructure. In reality, the above argument against excessively high infrastructure fees only applies to proportional fees. If infrastructure managers charge a fixed fee, the operator’s decision to operate one more train is not distorted, provided that the variable fee (see below) reflects marginal cost.

Optimisation of railway system objectives and fair competition objectives are partly conflicting. The former should be favoured with charging systems including a large part of fixed fees. Limitations to competition should be minimised through new formulas taking into account the differing size of new entrants.

Railway track tariff systems are usually divided into different track categories according to track quality (speed, capacity, standard of signals etc.).

If the principle of full cost coverage is chosen, the infrastructure manager should target a balanced economic result for the whole network and not for each line separately.

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Role of operators for infrastructure design

In order to avoid conflicts with the infrastructure manager, operators should: • Present a clear and detailed statement of rules and recommendations, • Make a traffic assignment for each project as a basis for further planning of the infrastructure

manager, • Participate in the planning stages with the infrastructure manager, also involving the authorities

responsible for local transport. Risk sharing and incentives In order to achieve infrastructure quality, infrastructure pricing needs to be linked with traffic viability and volume parameters, such as passenger (freight) revenues, patronage or quality of service delivered by the infrastructure manager. They certainly have an interest in providing increased capacity to meet the needs of the rail market, and this should be encouraged. Similarly some mechanisms force operators to make extra efforts to increase patronage, e.g. subsidies decreasing over the years. Infrastructure investment risk can be shared as follows: • Should the investment financed by the infrastructure manager allow a better service and thus have a

high probability of commercial profitability, the operator accepts an increased fixed track access charge and takes 100% of the risk,

• Should the commercial results of an investment be uncertain and dependant on public reaction, the infrastructure manager and the operator can agree on a certain level of revenue above which the variable fee can be increased,

• Should there be a very low probability to reach a financial balance following the investment, the latter must be financed by the public authority and justified by externalities benefits.

Infrastructure managers have the main responsibility for the design of railway infrastructure. However, as operators are the exclusive users, and they should be associated closely with the planning, design and building of infrastructure in order to make sure that their needs and commercial interests (i.e. also the interest of passengers) are taken into account. Again, Dir 2001/14 art 11 leaves it to infrastructure managers AND operators to cooperate to minimise disruption and improve the performance of the railway network. These aspects cover: safety, quality, capacity, cost-efficiency, speed, track slots, accessibility and customer-friendliness of stations etc.

Fair competition between road and rail Railways should be charged only those costs that are also borne by its competitor road transport, and this message should be addressed in the first instance on a political level. There are opportunities, either by reducing the charges on railways or by increasing those on road transport (see EU White Paper ‘Fair Payment for Infrastructure Use’ or ‘European Transport Policy for 2010: time to decide’). Dir 2001/14 art 10 explicitly foresees the possibility for member states to grant compensation schemes to operators for environmental, accident and infrastructure costs remaining unpaid by competing modes. Rail infrastructure charges should be reduced as much as possible, and this demand is legitimately addressed to the infrastructure managers. By reducing their capital and maintenance costs (without any compromise on safety), they should lower the track access fees for operators, enabling the latter to face the competition from road transport on a fair basis.

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Incentive mechanisms Three techniques are currently available. • Targeted revenue

This is a solution where the infrastructure manager and the operator agree on a certain level of revenue, above which the variable part of track access fees paid by the operator to the infrastructure manager are increased and under which they are reduced.

• Performance regime This is a system where the fees paid for the paths allocated by the infrastructure manager depend on the quality of the infrastructure provided by the infrastructure manager. Good performance of paths allocated with a few minutes delay means a high level of track access fees. Every failure to deliver quality performance means penalties to be paid to the train operator by the infrastructure manager.

• Occupancy level The price of the path depends on the level of patronage on the train and grows with the number of onboard passengers (or tons of freight). This can be checked by the number of reservations booked on the train, by the number of tickets sold, or by suspension based systems to measure the train load. Such a system, may appear fair, but is subject to high levels of potential conflict and therefore requires a detailed procedure between infrastructure manager and operator.

Conclusions The new European railway landscape gives a paramount importance to the financial and technical relationships between infrastructure managers and operators. The level and structure of infrastructure charging should not impede the development of regional and suburban railway services, as their environmentally friendly qualities are widely recognised and they benefit at present from a declared political priority. Their level should be harmonised with that charged to bus services. The variable part should not exceed the marginal cost and stability of the level of the fees should be guaranteed for a reasonable period of time into the future. The quality of the infrastructure directly impacts the quality of railway services. Guarantees should be given to operators that their concepts and needs are taken into account when planning, building, and maintaining the infrastructure. This could be achieved by agreements or contracts between infrastructure managers, operators, regional or national authorities, setting standards for technical characteristics of the investment in the infrastructure, defining the regional and national subsidies, and, the fixed part of track access charges. Infrastructure managers should be encouraged to deliver good services, and not delay the trains. Incentive mechanisms should impose penalties on them when failing to reach quality targets.

3.5.6 Coordination Sea Ports – rail- inland water

A new contract as to be signed between the MCC and the new CdN; this contract mentions clearly the investment plan in RoRo Ships, ferries and proposes a definition of Lake services and corresponding tariffs policy. As the Lake link is a feeder for the Nacala Corridor, contract links have to define between the 2 operators. Each change in tariffs has to be advocated based on evolution of prices of gasoil, manpower and taxes of the GOM. If some controversy arose between the 2 operators, an extraordinary meeting is due within 2 months to reach a common agreement (in a respect of economical factors).

3.5.7 Revision of prices and performances

The revision has to be decided on a yearly basis by a committee constituted by all shareholders namely investors and users of the railway (commodities exporters/importers and mining companies). Different prices can be set for different commodities.

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3.6 Bid for tenders in concession

3.6.2 Work to be achieved

A concession contract has to be well prepared; the bid for tenders includes annexes regarding traffic/cargo forecasts, tariffs policy, and investment plan. It is necessary to train GOM people to be able to control the setting up of the concessioning frame (BOT, BOOT, Equipment Contract (EOT), discuss arrangements with possible private partners in due course of tender, writing of a good contract … taking in account in a fair manner both interests of public and private operators.

It is our understanding that a global strategy has to be 1st accepted fully at the Malawi’s level and implemented in the successive phases: . Phase 1: Implementation of the urgency program, . Phase 2: Reinforcement of a Regional Integration by the implementation of a rehabilitated domestic

North-South corridor feeding the East-West Nacala Corridor in order to clearly demonstrate the interest of the role of Malawi as an Hub at the very barycentre of 4 countries regarding transport concerns and infrastructures,

. Phase 3: Negotiate continuously with the neighbouring countries ….

3.6.3 Concession agreement General Poor condition and performance as described above primarily evolved from deficiencies and shortcomings that occurred during the privatisation process. The present agreement between the Government and CEAR lacks a clear structure and concept in general. The target of the agreement is not defined at all, and responsibilities of the contracting parties are not sufficiently distinguished. Some of the key issues and weaknesses are analysed below.

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Legal environment

The agreement has been drafted without any sound legal basis since the Railway Act dates back to 1907 when privatisation surely was not an issue. Taking into account that the Government requires a tool to enforce adherence to the agreement if need be on one hand, and that uniform regulations are required if several concessions are considered on the other hand, a legal framework must be regarded indispensable. The agreement leaves application and development of standards and regulations extensively with the concessionaire, only suggesting that “rules generally accepted by railway industry” be used, and allows alterations and modifications of even safety-relevant regulations without requiring any approval (items 32, 33 of the agreement). For continuous monitoring and control of the execution of concession agreement(s), it is common practice worldwide to install a regulatory body that is also responsible for the development and approval of standards, rules and regulations, as well as for the regular inspection of assets. At present, there is no provision for that, neither in the law nor in the concession agreement.

Definition and management of assets

Concessioning a railway means also to transfer managerial responsibility of assets representing a tremendous value at least partly to the concessionaire. Since the usual lifetime for railway assets is generally beyond the intended concession period, e.g.

20 - 25 years for signalling and telecommunications,

30 - 35 years for permanent way,

30 - 50 years for rolling stock,

50 - 80 years for buildings,

100 years and more for substructure, bridges and tunnels;

The concession agreement must unambiguously define for each asset

The ownership,

The condition at the time of hand-over,

The minimum condition to be maintained during the concession period,

The remaining lifetime, and

Responsibilities for and means of rehabilitation and / or renewal.

Except for a listing of some of the assets and their value according to an inventory compiled several years before its introduction, the present agreement contains nothing of the above, neither any strategy concerning further development of assets. Rehabilitation is assumed as the concessionaire’s overall responsibility but no budgetary provision is made for the purpose.

A depreciation fund for re-investments as suggested by TERA in 2004 has not been established so far.

Concessionaire’s capabilities

Because of the scope and technical and managerial complicacy and complexity, any railway concession must consider and monitor the concessionaire’s

technical and managerial qualification and experience,

its staffing, and

its financial capability; and stipulate minimum levels for these items in the agreement. Except for an amazing clause stating that another service provider if sub-contracted must be qualified, the present agreement seems to tacitly assume concessionaire’s sufficient capabilities, and does not provide for any monitoring on the subject.

Maintenance and repair

There is no proper definition of maintenance in the present agreement. The agreement also leaves the quality level (see also 0) open, and just assumes “repair and rehabilitation” as concessionaire’s responsibility.

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The agreement also mentions cases of force majeure but does not explicitly define the term, and contains no unambiguous clauses about responsibility and handling, financing and compensation whatsoever. This led for example to the unacceptable delay in restoring the Rivi-Rivi bridge after the collapse in 2003. There are basically three options for the financing of rolling stock investments:

Private financing by the concessionaire (assuming that CDN and CEAR merge),

Public financing through the Governments (with leasing agreements with the concessionaire), or

Private financing by a separate rolling stock company.

Tasks and responsibilities of the Government in general

The Government has to ensure adequate supply to population and economy through appropriate means of transport. This has to be achieved through

Legislation

Planning, monitoring and control At present,

The legal framework for the transport sector is fragmentary and largely outdated

There are neither a comprehensive Transport Master Plan nor adequate tools for monitoring and control

In the scenario of privatisation, matters are dealt with on contractual basis rather than legislation This result in

The Government’s inability to effectively control the transport sector

Poor performance and high costs of transportation

Severe deterioration of infrastructure and equipment Accordingly, it is recommended that the Government

Establish an adequate legal framework

Elaborate a Transport Master Plan defining the role of the various modes of transport

Define a conveyance obligation for basic goods and passengers

Set up Regulatory Bodies to monitor and control for the various modes of transport

Define responsibilities for further development of the Master Plan and co-ordination between the various modes of transport

It is, therefore, recommended that MOTPW - rather than pursuing the review of an agreement that lacks both structure and clear provisions -

Draft a new Railway Act (including a clear separation of operations from infrastructure) and submit to the Cabinet at the earliest

Pass the by-law required for general standards, rules and regulations, this also to provide the possibility to have several concessionaires

Set up a Regulatory Authority

Only then elaborate a fresh concession agreement on basis of samples proven successful elsewhere Consequently, the legal framework would take precedence over the contractual provisions, and the latter had to be confined to issues specific to the actual agreement, particularly

Share holder’s financial capacity and expected investments

Concessionaire’s operational and technical capability

Concessionaire’s staffing, experience and know-how

Network access fees, accounting and audit, penalties

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Conclusion

The consultants determined through data analysis that the transport demand for heavy cargo in Malawi was weak. The high transport costs themselves are the result of thin transport demand characterized by seasonality, which in turn is the result of the low economic sectors activities. The consultant conducted in depth analysis of the main economic sectors, and studied for each commodity the supply chain and the distribution system. The research allowed the identification of a strategic concept aiming at the realization of an efficient and economically viable transport scheme for important cargo volumes. This addressed one of the key constraints Malawi is facing: marketing existing or potential productions which represent important volumes. Through successive workshops and many interviews, the consultants tried to elaborate a transport scheme which would allow Malawi to get out of this vicious circle, and to benefit from an efficient cargo transportation system. The transport logistics being different for each product, the consultant studied the sensitivity of each product to different parameters within the transport chain: flexibility, cost, time, regularity, availability of service and safety being the main ones. Tonnage projections for each commodity ten years hence (2020) are made, and the most effective transport mode and corridor are identified for each product. Four main axles of development were identified: - The necessity of offering to the potential economics an efficient domestic transportation system,

built up around a new concept, the “North-South domestic corridor”, with a Road- Lake – Rail – River intermodal system.

- The necessity to provide other fundamentals to the Malawi economy and notably to produce much higher levels of energy, through imported energy sources. The rail connexion to the Mozambican Zambezi Valley is therefore a solution.

- The necessity to develop cheap routes to markets, not only at an intercontinental level, but also regionally. This, basically, signify having an East-West rail corridor crossing the country.

- The opportunity for Malawi of developing as a “hub” of intermodal transportation for Central Africa, and notably Western Mozambique, Southern Congo, Southern Tanzania and Zambia. This opportunity would grant important cargo movement and finance the development and maintenance of an efficient system.

For Malawi to benefit from low transport cost, it needs to organize and prioritize its transport sector within a regional and multimodal framework.

On this base, the consultant built up an investment programme, coherent, multimodal, and phased in three steps to be conducted in the following ten years. The Consultant’s draft conclusions for this investment programme were presented to the stakeholders in a workshop on the 29th of July 2010. The workshop validated most of the recommendations made by the Consultant, and completed the investment choices proposed. A conceptual leap from a local orientation to regional one is the core of the new transport strategy. The proposed strategy provides a framework to allow Malawi to be a regional model (phase2) and to integrate the transport demands/ traffic /flowing on Nacala priority corridor for the neighbouring countries (phase3). The investment programme in the present report is consequently phased in three steps: - phase 1: immediate action programme (years 2011/2012 and 2012/2013) for 192 millions US$ - phase 2: north south domestic corridor and link to Moatize (years 2013 to 2015): 287 millions $ - phase 3: rehabilitation of the main corridor (NACALA) and links between the corridors, in Malawi

and abroad (years 2016 – 2019) for 756 millions US$

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Most of the investment programme is realized in the rail, notably through two important extensions of the network, in Malawi Shire Valley and Mozambique (link to Moatize and SENA line, 110 M$, and in Zambia (link with TAZARA, 490M$). But roads and much more lake and river transportation are participating to the global scheme, as crucial elements of the domestic consolidation of cargo and the international linkage of the corridors. 45% of the investment programme would be in Zambia, 37 % in Malawi and approximately 18% in Mozambique. The Malawi multimodal transport strategy framework balances regional investment with domestic complementary investment, which would result in growth of domestic production, exports and imports. Further, transport service cost and travel and custom processing time would decline. More important, the transport system will be more reliable making possible to plan expansion of production and commerce and sustainable supply which stabilize domestic prices: The impact of the plan would be impressive, at a macro-economic level. The consultant’s estimates for the value of the cargo transported in 2020 figures more than 3 billion dollars, which represents more than 50% increase in the Malawi GDP. The main benefit of the proposed transport sector strategy based on multimodal and regional coordination is improved competitiveness of the economies of the cooperating countries resulting in reduced transport service costs; reduced delay time on the corridors and at custom posts; and, above all reliable transport services at reduced fixed investment cost. The long distance land transportation tariffs would drop by 50%, and the share of the total transport cost in products would drop from 30% to 18% approximately. It is important to acknowledge that any major investment program to better the transportation system should be completed by important institutional and organizational changes, and notably at a regional level, a harmonization of standards, norms and procedures, and the necessary build-up of some international concessions program. A sincere and long lasting cooperation with neighbouring countries, notably Zambia and Mozambique, but also Tanzania and Zimbabwe is a compulsory part of the programme. The consultant identified PPP partners and proposed guidelines for the revision of concessions, and for the global organization of the transport scheme.

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Annex A: Method and stakeholders meetings

1. Description of the assignment (from TOR)

1.1 Global Objective of the assignment

The global objective of the assignment is to design an overall strategy for multimodal development in transport sector in Malawi, with emphasis on private sector participation on regional and international corridors with an aim of reduce import/export costs.

1.2 Specific Objectives

The specific objectives and the outcomes are the following: i) Assessment of the current status of all components of the Malawi multimodal transport system, ii) Review of all regional transport corridors, in multimodal fashion, with respect to their capacities,

economic values and benefits, iii) Assessment of the main economic sectors in Malawi, dependant on transport services and their

present and forecasted growth, iv) Assessment of the potential for engaging in PPP or PSP operation in the above mentioned transport

sub-sectors including road, rail, water and air transport, focusing on transport corridors. v) Preparation of Malawi Multimodal Transport Sector development strategy.

The strategy should list the potential investment plans, indicate whether there is possibility for engaging PPP or PSP components in these investment plans, and assess the scale of private investment if PPP or PSP is considerate to be possible.

vi) Prioritization of potential investments plans and their components for Malawi. The prioritization will be made under the unconstrained and constrained budgetary considerations. The consultants will use all available data obtained from the existing studies, with updated information from various ministries and institutions, concessionaires, neighbouring countries and will carry out the most important visual inspections and verifications as deem to be necessary as to take the liability for the final product under this assignment.

1.3 Description of the different phases of the assignment

Phase 1: Data Collection and Review of Related Programs and other donor activities from the perspective of identifying the gaps in the data base necessary for subsequent analytical review; Data collection is achieved by the Ministry of transport under the supervision of an expert financed by the World Bank. Safege Multimodal Consultant - Olivier Crouzier - under this framework contract had been mobilized at the beginning of the study in Malawi to agree with the Government, the World Bank and the expert paid by the World Bank - Ephrem Asebe - about the data to be collected. Phase II: Data Processing, analysis and assessment of alternative multimodal transport Sector investments and their response to export /import costs scenarios; At the beginning of the phase, it had been suggested to implement a survey of the various studies collected along phase 1 either by Ephrem Asebe or Olivier Crouzier Phase III: Preparation of Malawi multimodal Transport Sector Development Plans, strategy, multimodal transport Policy and action plans;

2nd workshop

Phase IV: Production and Dissemination the investment plans, strategies, policies reforms and action Plans to stakeholders including government counterparts, representatives of industrial and commercial groups.

2. Required outputs, overall strategy and corresponding methodology

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2.1 Required outputs

Based on the TOR, the consultant must assess and approve the data matrix and the

methodology for collecting the data. TOR suggested method The World Bank will be working on the review of secondary data as well as collecting some additional primary data with help from the Ministry of Transport of Malawi. One international consultant (Ephrem Asebe) will be mobilized by the World Bank and will prepare the data matrix. The World Bank will bear the cost for data collection outside Malawi. The World Bank will assess and approve the data matrix, the methodology for collecting the data and draft a working programme for the data collection. The team leader of the present framework contract under phase 1 will have to assess and approve the data matrix and the working programme proposed by the WB international consultant.

Data Collection Report

The report will be submitted within two weeks from the mobilization of the team leader in Malawi. The report will summarize the methodology and working programme for the data collection. It will provide a list of all material obtained and required for the carrying of the study. This data collection report will be used by the World Bank expert and the Government of Malawi for collecting the data in the country and the neighbouring countries

2.2. Overall strategy and corresponding methodology

The consultant’s team (EU and WB consultants) had to assess first and overall strategy and corresponding methodology, identifying among various parameters which are the more sensitive ones when dealing with comparison of efficiency and effectiveness of corridors. Based on identified data treatments and modelling of multimodal transport systems, a data matrix and data collection methodology had been then suggested Based on various studies regarding transport in Malawi and neighbouring countries, it appears that the different imports (fuel, fertilizers …) and exports (tea, coffee, crops, cotton) from and for Malawi don’t use the same routes (including regional and international routes). Choices of the clients (importers) and exporters seem to be related to the main following parameters (areas of production or use of import products, road and railway infrastructure conditions, existence and efficiency of intermodal transfer, capacity of the port (with or without shipping constraints), overall travel time, cost, distance, service providers flexibility and indeed volumes to be dislocated/carried out). Influence of transit companies (block in grey) appears not to have been investigated deeply enough as these companies are often in the position of deciding which route they might prefer.

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6

Services providers(truck companies, railway companies,

Production/Imports-exports and supply/value chain

Multimodal Offer

Infrastructures(rail, road, Water transport,

Air transport)

8 possibles internation al Corridors + domestic routes

Mining

Agriculture Products (coffee, tea,

cotton, crops

for coffee

InternationalMarket for cotton

Export price < world price

Productor selling Price depending

on productivity

Within Malawi. Roads : 24929 km. Railway : 810 km. 4 major lake harbours. 3 major airports. 33 aerodromes

Transport costs = 2-3 times > average for Africa

Efficiency of the logistics system. Mode or the combination of modes chosen. Main parameters (volume/weight,cost, time, distance, intermodal transfer, border crossings, service level)

Imports-exportsagents strategiesand conve ntions

Figure 1 - PwP Presentation – 12.01.2010

10

3 7

1. W estern corridor (Lusaka –

Malawi via Mchinji

2. Southern corridor (Tete corridor)Main link to Beira, Durban, Port

Elisabeth

3. Nacala corr idor

4. Northern corridor : the route

through the Songwe bor der is cos t effec tive for Northern Malawi

5. Shire-Zambezi waterway : GOM vision : Reopening of the

Shire route to the Indian Ocean = End of « Landlocked s tatus » of

Malawi.

6. Sena line : Possible rail link

through the south of M alawi vi a Nsange and Mar ka to

Beira.

7. Nacala Road corridor : ++

Shortest road route to sea port from Malawi

8. Mtwara corridor : alternate

northern export route (road link onl y with no

railway) and not seal ed over its

length

Western corr idor1

Nacala corr idor /ra il /roa d

2 Southern (Tete)

Sena Line6

Shire Za mbezi waterway5

Chinde

20%

50%

20%

Durban

Figure 2 – PwP Presentation – 12.01.2010

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17

Zambia Malawi

Mozambique

Zimbab we

South Africa

Moatize Mine

Namibia

Tanzania

Nacala

Beira

Chinde

Dar Es Salam

Uranium mine

Transhipment

Maputo

Durban

The TOR mentioned 8 principal corridors but we might add 3 maritime links (for regional transport or transhipment) from Nacala and Beira to South African Ports such as Durban, Port Elisabeth and Cape Town or to Dar Es Salam)

The study must take in account not only transport data within Malawi but also transport needs of neighbouring countries (Zambia, Zimbabwe, Mozambique, Tanzania …). Transport of bulk minerals such as coal from Moatize Mine, uranium from northern Malawi …) may add complementary transport charge for increase interest for the rehabilitation of main railway corridor (Nacala or Beira).

3. Data matrix and methodology for collecting the data.

3. Data matrix and methodology for collecting the data.

Vila Nova

Lichinga

Tete

Mbeya

Port of Dar es Salaam Catchment

Mzuzu – Dar es Salaam = 1300km, Nacala 1358km, Beira 1315km

Port of Nacala Catchment

Lilongwe – Nacala = 989km, Beira 948km

Port of Beira Catchment

LImbe – Beira = 568km, Nacala 815km

TERA 2556-14 – bg-Sept 2004

Malawi Corridors - Indicative Corridor Catchment Areas

Indicative corridor catchment areas , if of some use to get rid/evacuate unefficient routes regarding global chain (areas of production or areas of import use), do not explain the reasons why a definite combination of transport modes is finally selected.

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3.1 Global Database and Methodology (read following scheme) A 1st set of data is related to the Products demand (imports/exports data base (Malawi, Mozambique, Zambia and Tanzania) with data about export production, imports/inputs, importers/exporters list, global market clients and production/market prices. 2nd step (green boxes): imports/exports traffic generation These imports/exports generate an imports/exports/transit traffic generation At this point, it is necessary to obtain a description of the actual multimodal routes for the different products (green boxes). A model could be gradually ascertained by adjustments between computations and border counts. 3rd step (blue boxes): Description of actual corridor and possible rehabilitation plans with corresponding costs. 4th step (zebra green boxes): Description of potential multimodal routes Operators, traders will react (through interviews) about operating capacities of newly rehabilitated corridors (travel time, operating costs, flexibility) and give reasons of their corridor’s choice. A description of facilitation measures can be done Traffic affectation can be made at this stage that allows computation or qualitative appraisal of impacts (financial rate of return or socio-economic impacts). 5th step: Appraisal of the different corridors and multimodal plan definition

At 5th step, corridors will then be appraised on the base of a multi-criteria list (example of multimodal criteria)

Corridors Data Base (by mode)

--- Physical data

within, between and outside the borders

--- International

corridors Infrastructure

Mapping

Investment

costs . Reabilitation . Maintenance

Institutional

aspects

Imports inputs

Imports/exports Data Base Malawi and Neighbouring countries (Mozambique, Zambia, Tanzania)

Supply/value chain of imported/exported Products Global market Price Data Base

Appraisal of the different corridors

Operators interviews . railway/trucks, . water transport, . air transport)

Importers Exporters list

Global market Clients and Prices

Export Production

Operating Costs ( ton-km per mode)

Description of potential multimodal routes for different products

Description of the actual multimodal routes for different products

Imports/exports Traffic Generation

Comparison beween computation and Border counts (commodity,

tonnage, OD, value, taxes)

Traders interviews, . Retailers . Wholesellers . Exporters/importers

Multimodal Transport Plan (technical, institutional, budget)

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3.2 Data matrix and staffing plan

During the « kick off meeting » and later on during Mr. Ephrem Asebe last days of assignment were

identified « study counterparts » in charge of the different range of data collection.

23

Data Collection Implementation

Min istry of Transp ort

and Pub lic infrastructure

(MTPI)

GOM + EU + WB

Consultants :

E.Asebe : [email protected]

O.Crouzier : [email protected]

Min istry of P lann ing

and co operatio n

WorldbankEU

Name : ……

position, e-mail

Needed : Budget forcasts,

Expenditures, develop ment

plans and sta tistics

Min istry of Loca l

Govern ment

and rural deve lop ment

Min istry of Natural

Resources,

Energy , Env iron ment

Participating Ministries

Agencies/ departments

Road author ity

Name : …… , posi tion, e-mail

Maritime Autority

Name : …… , posi tion, e-mail

Airline Auth ority

Name : …… , posi tion, e-mail

Railway Authority

Name : … .. .. , posit ion, e-mail .

National statistical office

of Mala wi

Name : … ., position , e-mai l

Interviews

Truck o perators

Inla nd water operators

Name: ……… .

Position , e-mai l

Needed : …………… .

Name: ……… ……. .

Position , e-mai l :…. .

Needed : …………

Name : …… ……… ..

Position , e-mai l : … …… .

Needed :

Counterparts

Name : …… ……… ….

Position , e-mai l

Needed :

Min istry of Trade and

Industry

Name : ……

position, e-mail

Needed : Impor ts/exports

Chamber of co mmerce

Name : … ., position , e-mai l

Interviews

Association of ex porters,

importers

Manufacturers

Min istry of Finance

Civil society

Figure 4 - PwP Presentation – 12.01.2010

3.3. Description of data base collection (including recommendations of Malawi cost Study)

One of the recommendations included in some of the earlier studies reviewed was the establishment of a transportation database within the MOTPW to assist the Transport Planning Unit (TPU) and other departments in carrying out their responsibilities more efficiently; Consultants conceived a 1st set of Excel tables data sheet that listed information (in correspondence with the global database) that have to be gathered.

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Corresponding Excel Tables Description

Study Management . Contact list, . Study counterparts

Existing data bases . List of studies . Indicators and sources of data (from studies)

Some data may be exported from existing studies

Malawi agriculture producers . List of small producers, list of estates

Importers/exporters data base . List of importers/exporters

Supply/value chain of imported/exported products in Malawi Malawi Exports Data Base

. (Malawi) Cotton exports

. (Malawi) Tea exports,

. (Malawi) Coffee exports,

Arable land, yield/ha, share of exports, wholesale towns, via route, border town, corridor, final client (localization)

. (Malawi) Mining exports (uranium) Description of corresponding table to be completed

Malawi Imports Data Base . (Malawi) Fuel imports . (Malawi) Fertilizers imports

Imports/exports from neighbouring countries with transit through Malawi

. Zambia imports/exports,

. Zimbabwe imports/exports,

. Mozambique imports/exports (including coal from Moatize Mine)

Collection of data using the WB agencies in these countries Question: Did some of these products will possibly use any of studied corridors?

Border counts . Malawi Border counts data 1st

Modelling attempt

Actual multimodal routes .Description of the actual multimodal routes for various products

Identification of reasons to use one route (travel costs, travel time, risks) Interviews with operators, traders

Corridors physical data base . Nacala corridor . Beira’s corridor . Western corridor . Northern corridor . Zimbabwe-Shire corridor

Use of existing data to get basic data . Actual infrastructure conditions . Investments necessary for rehabilitation . Operating conditions (rolling stocks, …)

. Railway network within Malawi . Description (from existing studies)

Appraisal of different corridors

. Ranking of corridors Weight of different parameters /multi criteria comparisons

Potential multimodal routes Description of potential multimodal routes for various products

To be achieved by consultants with Malawi counterparts

Multimodal transport Plan Strategy, Multimodal Transport Policy, Action plans, dissemination via 3 workshops

Preparation of Malawi multimodal Transport Sector Development Plans, strategy, multimodal transport Policy and action plans

TABLE 5: EXCEL TABLES AND DATA CONTENT

Even though much had been achieved during the 1st assignment, the EU work continued in parallel with the World Bank data collection and interviews. Understanding the issue at a deeper level may help EU to get from the World Bank and local counterparts necessary data for the study which may not have been captured in the data matrix prepared during the 1st mission. This task had been realised in parallel to the data collection by the World Bank and includes:

Review and understanding of the various modal studies;

Incorporating into the Input data matrix, missing data or updating of data;

Ensuring whether the proposed methods are coherent or not with present purpose of the Study;

Ensuring that the outputs of the review of the modal studies, the main conclusions and lessons are within the scope of present multimodal study;

Further, there is work to be done to ensure that identified points of weakness in the collected data may lead to further steps of review of method; and,

Feeding all the results of O. Crouzier’s findings to the World Bank and government data collecting field team so that in the end, the analysis phase will not face problems.

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Page 180

Given by Year Title Organization Consulting Co.

Macro-economics

CL 2004 National Transport Policy

EA 2006 Malawi Production mineral domestic traffic Source: The Malawi Exporters' Handbook

OC A PPP approach to the development of the Moatize

CL 2006-2011 Malawi Growth and Development Strategy Minister of Finance, Economy and Development

EA 2007 Malawi in figures (2007)

JC 2008 MW Census Report Republic of Malawi

WB 2008 Malawi Atlas Republic of Malawi

CL Medium and Long Term Strategic Framework NEPAD

missing Rails Concession Agreement

missing Inland Waterway Concession Agreement

missing Air Transport Study

missing Multi-Sector Regulatory Study to Establish TransRA TRC Global Solutions

Public Private Partenership (PPP) International structures WB, IP3 Washington

Road sector

CL 1st Quarter 2007 Road Sector Program EU

CL October 2009 Draft revised Road sector Programme EU

OC

Implementation of Bilateral Road Agreements between Mozambique with

Zimbabwe, Malawi and Zambia

EA 8 April 2005

Road Maintenance and Rhabilitation Project (Romarp) - Malawi Transport Cost

Study

Mlawi Ministry of Transportation and Public works

and IBDR - IDA Credit 3239 MAI TERA International Group

OC PwP

Projectos de corredores nas zonas centro e norte do pais (Seminario sobre os

corredores 1ANE final) Ministério das Obras Publicas e habitaçao

EA November 2007

Preparation of a Synthesis Report and Guidelines on Overload Control (Trust Fund

# 052640)

World Bank/Sub-Saharan Africa Transport Policy

Program

InfraAfrica (Pty) Ltd, Africon Limited

Pretoria South Africa, CSIR (SA), TMT

Projects (SA)

Railway studies

EA

February 26, 2009

(PwP)

Technical Assistance to Rail sector Development-Malawi - Project introduction and

Preliminary Findings, Presented at the Task Force Meeting on February 26, 2009 GOPA

EA May 04, 2009, (PwP)

Railway Master Plan, institutional Framework, Further Technical Assistance,

Presented at the Task Force Meeting on May 04, 2009

EU - Beneficiary Framework Contract Lot 2 -

Transport and Infrastructures GOPA

EA November 2009

Dar Corridor - Final Report - Study on Development and Establishment of a

Corridor Performance Monitoring System for the Dar Es Salam Corridor - Annexe VI USAID and Dar Corridor Committee (DCC)

EA 26.11.2008 (PwP)

Beira Corridor Project- Approval Request-Presentation to the Project Financiers

Group EU - Africa Infrastructure, Trust Fund (EIB)

OC 15 Decembro 2008 Plano de accao do transporte rodoviario

CL January 2007 Rail Condition Survey

CL January 2007

Annexes : Demand Model, capacity considerations, assets management and

developmentEA 2007 (Excel) Mwanza corridor imports (2005, 2006, 2007) World Bank

EA ?? (PwP) Nacala and Beira Corridors (PwP) Ministry of Transport and Public works

EA July 2005 Progress report for Nacala & Mtwara Development corridors in Malawi

Nacala & Mtwara Development Corridors - Ministry

of Transport & Public Works

OC 28.12.2000 Business case for the Nacala Development Corridor

30.07.2005

A Conceptual Overview Of The “Anchor Projects” Supporting The “Business Case”

For The Development Of The Mtwara Development Corridor

Mtwara Development Corridor C/O National

Development Corporation

March 2003 to February

2006 Final Report - Inception Report - A strategic Perspective on the MrDC in Malawi

Ministry of Trade and Industry (Government of the

RSA) in association with Ministries of Commerce

and Industry/Transport of Malawi, Mozambique,

Tanzania and Zambia) Imani Development Malawi

24 de Agosto de 1996

Implementaçao dos acordos rodovarios bilaterais entre Moçambique com

Zimbabwe, Malawi e Zambia

Studies Shire-Zambezi Waterway

JC 2006

Prefeasibility study for the Reopening of the Shire Zambezi Waterway Malawi-

Mozambique Europaid/119860/C/SV/multi-Lot n°2 Hydroplan

CL Prefeasibility study and other studies for Shire Zambezi Waterway

JC Data Sections CD -Sections of Shire Zambezi Waterway : Chikwawa to Chinde Port

JC Dredging volumes- Zambezi - CD (xls)

JC Dredging volumes- Shire - CD (xls)

JC Investments & Maintenance CostsJC Scenarios- CD

JC Scenarios 2-CD

EA Malawi Lake traffic data (1989-1999)

Multimodal

missing April 2007 Multimodal Transport Study JICA

EA PwP Field Study on Corridor Development in Southern Africa

JICA Africa Regional Office, JICA Malawi, JICA

Mozambique, JICA Zambia

EA Dec. 2009 Southern Africa Integrated Regional Program Formulation Study - Progress Report JICA

PADECO Co., Ltd, Mitsubishi UFJ Research

and Consulting

CL Sept.2004; April 2005 Malawi Transport Cost Study MOPW and IBRD TERA International Group

IDA Credit 3239 MAI

OC July 2009 Draft African Maritime Transport Charter

OC Nov. 2008 Presentation to the Project Financiers Group, Beira Corridor Project BEI - Africa Infrastructure Trust Fund

OC sept-00 Nacala Development Corridor - Lancement officiel 28 Septembre 2000.

OC The Business Case for the Nacala Development Corridor 

OC 2004

Corridor Uganda Kenya : Investment opportunities in the Northern Corridor with

emphasis in Transport Infrastructure

TTCA Secretariat, COMESA Business Summit,

Kampala, Uganda

OC Oct. 2008

Improving Trade and Transport for Landlocked Developing Countries, mi-term

Report

WB Contributions to implementing the Almaty

Program of Action

OC 2007

Sub-Saharian Africa Transport Policy Program, SSATP Working Paper n°86,

Institutional Arrangements for Transport Corridor Manangement in Sub-Saharan

Africa

OC 2003 Réformes et place du secteur privé dans les ports Africains CNUCED

OC Zimbabwe to gain from Beira CorridorInstitutional Arrangements for Transport Corridor Management in Sub-Saharan

Africa

Sub-Saharan Africa Transport Policy Program SSATP

Working Paper N°. 86

March 2008 Establishment and Implementation of Multi-Sector Regulatory Authorities Privatisation Commission TRC Global Management Solutions, LP

Others

The most important studies had been read through in keeping in mind study objectives and trying to help further data research in a very simple approach: “Where to find what”

Page 181: Final report Malawi

Page 181

Objectives Region and countries covered by the study

Imports & exports

Traffic surveys

Infra. Rehab.

SDI

Infrastructure develop. plan

Southern Africa integrated Regional Program formulation Study (JICA) 2009-March 2010

Global infrastructure strategy Progress report

10 countries (Southern Africa Region)

Imports exports (10 countries)

12 border crossings counts

16 corridors

Potential develop. along the corridors

Proposed projects

Transport Cost Study (IBRD, ROMARP) TERA international Group

Reduce transport cost (road, rail, water air transport)

Malawi and from/to Malawi

Imports and exports from/to Malawi

(++) Costs and logistics but to be updated (2003 figures)

no 4 corridors

Technical assistance to Rail Transport development (GOPA) May 2009

Railway Transport development

Railway in Malawi and adjoining countries

Moatize mine mentioned

Rehab. of railway

no Railway development plan

The Malawi Railway concession experience (CEAR)

Railway concession Malawi Moatize link to be described

CEAR traffic survey 2005- 2009 (total and product figures)

CEAR Statistics Exports and imports moved

Total traffic moved

no No

Dar Corridor imports-exports

Tazara Statistics Exports and imports moved

Total traffic moved

no No

Road Sector Programme 2010-2020 (December 2009) MOTPI

Investment Programme for the Road Sector in Malawi 2010 to 2020

Malawi no Traffic on road sections

no Investment and rehabilitation programme

Prefeasibility study for opening the Shire Zambezi waterway

Feasibility study Malawi and Mozambique

Potential cargo

Dredging and facilities, vessels

no Investment and rehabilitation programme

Note on the Air Transport Sector May 2007, World Bank

Examination of the infrastructure, regulatory capacity, service provision

Malawi Traffic figures (2000-2008) Cargo and passengers

Proposed improvement plan and infra. rehabilitation

Mining … Coal in Moatize

Production data

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Annex B: Data on Mining (Mulanje and Moatize)

PROJECT PROFILE BY GRAIN W.P. MALUNGA

EXECUTIVE SUMMARY

MET-CHEM Canada Inc., on behalf of MIDCOR, carried out a feasibility study on the techno-economic evaluation of the feasibility of setting up an integrated alumina/aluminium plant based on Mulanje mountain bauxite. The study was undertaken in 1993 through funds from African Development Bank.

The results of the 1993 feasibility study show that:

1. The probable and indicated reserves of bauxite amount to 25.6 million tonnes using a cut off grade of 30% Al2O3.

2. 580 thousand tonnes of bauxite will be mined per year to produce 200 thousand tonnes of alumina which in turn will produce 100 thousand tonnes of aluminium through the use of Bayer process in Alcan P-180 cells.

3. The capital cost estimate for the project is estimated at US$ 820 million. 4. Using all assumptions for the base case, the project will generate an Internal Rate of Return, in

constant dollars, of 6.2 %, before tax for the smelter and 7.4% for the alumina plant alone. The corresponding payback periods are 17 and 15 years respectively.

5. The project will provide direct employment opportunity to 1,265 people 6. The project will contribute to Gross Domestic Product (GDP), foreign exchange earnings, Balance of

Payment (BOP) support and provide a reliable revenue generation base for the Government.

1.0 INTRODUCTION

Mulanje mountain bauxite is situated about 70 kilometres east of Blantyre city. On its foot is situated Mulanje Boma (district headquarters). A Tarmac road connects Mulanje Boma to Blantyre and a rail line from Blantyre to Beira passes through Luchenza township about 30 kilometres west of the massif. A 66 Kv electric line is available from Nkula Hydroelectric Power Station. Telecommunication system is very good.

The low lying areas around Mulanje massif experience warm to hot and humid weather with annual mean temperatures of about 220 C. Annual mean maximum temperatures reach as high as 350 C in November in the Phalombe plain. The coldest month is July when temperatures reach as low as 10.8 0 C at Mulanje Boma.

2.0 DEPOSIT DESCRIPTION

Mulanje bauxite is a residual product which resulted from the weathering of syeno-granitic rocks that form Mulanje massif. Six extensive bauxitic areas have been identified, but the best deposits are found on Lichenya and Linje plateaux.

The bauxite is mainly a trihydrate gibbsite which lies over kaolinite and has free quartz and geothite as the main contaminants. Some of the quartz is semi precious.

A feasibility study conducted by LONRHO showed that the two deposits on Lichenya and Linje amount to 28.8 million tonnes within an average depth of 4.5 metres. Below is the average analysis of the bauxite:

Al2O3 Free Quartz Combined Silica Fe2O3 TiO2 Kaolinite LIO

43.3 13.3 2.2 14.2 1.8 <5.0 28.8

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3.0 PROJECT DESCRIPTION

The bauxite deposit exists in form of lenses which are located on the plateaux at an elevation between 1800 and 2000 metres. The bauxite will be mined through the use of a front end loader and a backhoe hydraulic shovel will load it into articulated trucks.

The bauxite will then be hauled to a loading bay where it will be transported by a ropeway to an alumina plant about 600 metres below.

The proposed mining output has been set at 580 000 tonnes of bauxite (on dry basis) to produce 200 000 of alumina tonnes per year to meet an annual production of 100 000 tonnes of aluminium.

The processing methods will be employed to produce alumina and aluminium. The Bayer process will be used to transform the bauxite into alumina. Before the Bayer process the bauxite will be beneficiated to reduce the quartz content as well as reduce the quartz size to an undersized product below a 65 mesh size. The second process will be alumina smelting using an aluminium smelter with a capacity of producing 100 000 tonnes of aluminium sows per annum based on the Alcan P-180 cell. The aluminium smelting will depend on the availability power from Cabora Bassa which will be in the region of 15.3 kWh per kg of aluminium produced. The present power supply in Malawi cannot meet this demand.

The main waste from the bauxite processing will be the tailings from beneficiation plant and the red mud from the Bayer process. The red mud will be washed in high capacity wash thickeners to remove chemicals derived from the Bayer process. The red mud and the tailings will then be pumped to a mud disposal area.

4.0 LABOUR AND INFRASTRUCTURE

The proposed labour for Mulanje bauxite is divided into mine and ropeway, alumina plant and alumina smelter as shown in the table below:

DEPARTMENT STAFF HOURLY CONTRACT TOTAL

Mine and Ropeway 14 77 91

Alumina plant 236 326 143 705

Smelter 169 300 46

Total 419 703 143 1265

The above table includes 26 expatriates in the alumina plant and 29 in the smelter. They are expected to be in Malawi for a period of up to 4 years.

The plants and residential areas will be supplied with water from a dam in the Likabula river.

There is enough electricity to supply the alumina plant, but for the smelter more electricity will have to be sourced elsewhere. Suggestions have been made to import electricity from Cabora Bassa through Electricity Supply Commission of Malawi (ESCOM).

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5.0 PROJECT SCHEDULE

The project schedule indicates a project length of 41 months after the approval process. The approval process includes finalization of ownership and financing arrangements and granting of licences by regulatory bodies. In some cases this can take up to six months. Engineering design and detailed drawings will be produced within 24 months. Procurement of major equipment will be done in the early stages of the engineering phase. The construction period will take 11 million man hours using an average workforce of 1100 men and basing on a 60 hour work week. There will be a 24 month training programme for key plant personnel prior to production. The technology suppliers will conduct this course in order to cover all aspects operations in the alumina plant and smelter. The commissioning period will be approximately 4 months. Trial production runs will be affected by the 40th month.

6.0 MARKET

Mulanje bauxite project starts with alumina production, and then its market will either be ALUSAF Smelter at Richards Bay in South Africa or the MOZAL Smelter in Mozambique. The world aluminium consumption has been projected to grow at a rate of 3 % in the 1994/95 period and grow to a stable growth of 2 % per annum afterwards. Mulanje aluminium will find its way to the world market through the London Metal Exchange (LME).

7.0 COSTS AND REVENUE

The capital cost estimate for the whole integrated project to produce 100,000 tonnes of aluminium is US$ 820 million. If options for construction of a rail extension, power line and port are considered, a total addition of US$ 50 million will be required. Full capacity operation in the fifth year will put operating costs of alumina and aluminium at US$122.03 per tonne and US$ 1003.49 per tonne respectively. The following tables summarize the capital costs required to establish a bauxite industry in Malawi:

DIRECT AND INDIRECT CAPITAL COSTS

ITEM Local Import Install Freight Total

Mine 523,524 17,796,540 3,431896 1,779,654 25,531,614

Alumina plant

23,605,029 105,262,384 70,092,908 6,499,864 205,460,185

Smelter 56,798,736 327,204,081 182,443,260 24,484,008 590,932,085

TOTAL 80,927,289 450,263,005 255,968,064 32,765,526 819,923,884

OPTIONS

Rail extension 10,000,000 - inclusive 10,000,000

Power line 28,700,000 - inclusive 28,700,000

Port 153,920 7,200,000 3,151,680 720,000 11,225,600

TOTAL 38,853,920 7,200,000 3,151,680 720,000 49,925,600

Financial analysis was made with the purpose of evaluating the financial viability of the whole project. COMFAR software model and MET-CHEM's software model were used to analyze the project for a period of 23 years (including 3 years of construction). On the basis of these projections it was found out that the internal rate of return before and after taxes was 7.38 % and 5.67 % respectively for the alumina production and 6.16 % and 4.35 % respectively for the smelter.

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The payback period established before and after taxes is estimated at 15.5 years and 17.4 years for alumina production and 17 years before tax and 19 years after tax for aluminium. Under all estimated scenarios the internal rate of return on equity is positive and the project will generate enough funds to cover operating expenses and debt servicing.

8.0 ENVIRONMENTAL ASPECTS

Environmental considerations have been included right from mining to smelting stage. Within the mine itself, there will be no blasting as the ore is soft and friable. There will be no mining benches as the average thickness of the bauxite is 4 to 5 metres. The top soil (0.2 m) will be scraped and conserved for later mine rehabilitation in form of reforestation and replanting grass. Mulanje mountain is a sensitive area, therefore it has been decided that the alumina plant and smelter will be located on the plain at Mangani village. These processing plants have the potential to pollute air and water. Air quality will be affected by dust emission from excavation, loading and hauling activities. Roads will be sprayed with water to avoid airborne dust. Pot grass emissions will be reduced by 99 % using dry scrubbing systems in the smelter chimneys. Dust collection systems and ventilation systems will be installed in the plants. Paved chutes and sediment traps will be used to avoid water pollution from the mine. Original Vegetation cover will be used, wherever possible to control suspended solids. Flora and fauna will be protected as much as possible. The mining area is covered by grass and some bushes. This will reduce loss of flora. Occasional tree thickets found in the mining area will be kept intact wherever possible. Construction of the aerial ropeway from the mountain to the foot of the mountain and a railway from Luchenza to the plant site is expected to cause no impact on the flora. Movement of fauna on the mountain will be less affected through avoiding the use of high flood lights avoiding the use of explosives during mining and through the use of the ropeway instead of constructing long distant roads. An environmental specialist will control an on site environmental surveillance and monitoring team.

9.0 EXISTING OWNERSHIP The development of Mulanje mountain bauxite is being promoted by this Malawi Government. The Government is looking for a strategic partner and finance for the project up to alumina production for sale to MOZAL Smelter. Contact: The Director of Mines, P. O. Box 251, Lilongwe, Malawi

Tel. (265) 754 777 FAX No. (265) 754 793, mailto:[email protected]

10.0 INVESTMENT AND TECHNICAL SUPPORT REQUIREMENT

The development of Mulanje mountain bauxite deposit depends mainly on major contribution by Multilateral companies through joint venture agreement with Malawi Government appointed parastatal... The first four years of operation will require the provision of management and technical expertise in the field of aluminium industry. Training of local staff is expected to take place in alumina and aluminium smelters outside Malawi by the technology supplier at his own aluminium facilities.

A total of US$300 million is required to launch the project to alumina production. This includes mining, bauxite processing and optional infrastructure provision.

11.0 AVAILABLE REPORTS

1 Anglo American Corporation. 1956. Reports on Mulanje Bauxite. Unpub. Rep. Geol. Surv. Malawi, T238.

2 Aitken, W. G. 1964. Notes on the Mulanje bauxite deposits. Unpub. Rep. Geol. Surv. Malawi,T238.

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3 Austroplan, 1990. Integrated Exploitation and Processing of Mulanje/Manica Bauxite and Establishment of Alumina/Aluminium industry in the SADC Region.

4 British Aluminium Company, 1957. Malawi Bauxite, Alumina and Aluminium. Unpub. Rep. Geol. Surv. Malawi, T239.

5 Garson, M.S. 1969. The Geology of the Mulanje area.Bull. Geol. Surv. Malawi, No. 21. 6 LONRHO (MALAWI), 1969. Mount mulanje bauxite Project: Feasibility study, Unpub. Rep.

Geol. Surv. Malawi, T659. 7 LONRHO (Malawi), 1973. Mount Mulanje Bauxite Project: Feasibility Study, Phase II. Unpub.

Rep. Geol.Surv. Malawi, No.659. 8 MET-CHEM, Canada Inc. 1994. Feasibility study for Mulanje Mountain Bauxite in Malawi.

MIDCOR, Malawi.

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Annex C: Inland water ports equipments and multimodal facilities

No. Type Area Condition

CHILUMBA PORT

QUAYS

1 Concrete Block Quay(100m x 25m) Good

1 Fixed Concrete Quay (70m x 15m) Good

MACHINERY AND EQUIPMENT

No. Type Condition

1 45 – ton Gantry crane Working order

1 15-tonne Coles Crane Working order

1 6- ton Hyster Forklift Truck Out of order

4 3- ton Hyster Forklift Truck Out of order

1 25 – ton ML Douglas Tow Tractor Fair – requires major overhaul

1 20FT –Container trailer Working order

1 5 – ton vehicle Lift Unit Out of order

1 50 – ton Hydraulic/electric Press Out of order

1 25 –ton Hydraulic Press Out of order

5 275KVA – Generator Sets(Cummins- Diesel) Two working. Three lack of spares

1 Fire station Unit (Diesel Engine) working

1 Domestic Water Pump Unit(Elect) Working

2 Portable fire pump (petrol) working

1 Mobile Battery Charger Fair

1 Battery Tester Fair

4 Work Benches Good

5 Tool Cabinets Good

1 Cupboard Good

1 Mobile Air Compressor unit Fair

1 Pillar Drilling Machine Good

1 Workshop Grinding Machine Good

1 Arc Welding Machine Good

1 Oil Skimmer Pollution unit Out of order

BUILDINGS

1 Port Administration/Customs Offices 108m² good

1 Toilet Building 40m² good

1 Gate House 12m² good

1 Cargo Shed 875m² good

1 Passenger Waiting Building 195m² good

1 Workshop 200m² good

1 Generator/Pump Shed 40m² good

1 Diesel Storage Facilities(1400 L) good

CHIPOKA PORT

QUAYS

No. Type Condition

1 Concrete Block Quay 150m x 40m Good

1 Steel Sheet Jetty 50m x 50m No longer in use – acts as a breakwater

MACHINERY AND EQUIPMENT

1 45 – ton Container Gantry Crane Working Buffers require replacement

3 3 – ton Hyster Forklift Trucks Working order

1 Trolley Jack Workshop Crane Working order

3 15 – ton Locatelli Mobile Crane Working order

1 Oil Skimmer Pollution Unit Out of order

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1 Workshop Grinding Machine Working order

1 Lathe Machine Working order

1 Pillar Drilling Machine Working order

1 Roller Truck Pallets Working order

1 Arc Welding Set Out of order

2 Battery Chargers Good

1 Hydraulic Press Unit Good

1 Steam Cleaner Unit Good

1 Portable Fire fighting Unit Fairly Good

1 Petrol driven air compressor Fairly Good

1 Stand-by Diesel driven/elect Fire Pump Working order

2 169 KVA Diesel driven Generator sets Not working

1 290 KVA Diesel driven Generator Working order

2 275 KVA Diesel driven Generators Working order

BUILDINGS

No. Type Area Condition

1 Port Administration/Customs Office 65m² Good condition

1 Staff Toilet Building 20m² Fair – requires renovation

1 Goods Shed 820m² Good condition, except roof, numerous leaks.

1 Carpenter’s Shed 16m² Good condition

1 Passenger’s waiting hall 260m² Good condition

1 Workshop 205m² Good condition

1 Generator/Pump Building 40m² Good condition

1 Gate House 12m² Good condition

1 Diesel Storage Depot – Capacity 16,000L Good condition

NKHATA-BAY PORT

JETTY

1 Uniflote Jetty with Bailey Bridge Fairly good

MACHINERY AND EQUIPMENT

1 15 – ton Coles Mobile Crane Fair – working order

1 Massey Ferguson Tractor – 275 Working order

1 5 – ton Flat Bed Trailers One working; 3- not working

BUILDINGS

1 Port Administration/Customs Offices 40m² Part of the cargo shed. Condition good

1 General Cargo Shed 385m² Condition good

1 General Cargo Shed 275m² Condition good

1 Gate house 4m² Condition good

1 Passenger Waiting Shed 80m² Good

1 Staff/Passenger Toilet Building 15m² Fair – needs attention

1 50 KVA Diesel driven Generator Not Installed

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Chipoka multimodal facilities

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Monkey bay facilities

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Annex D: Main data on Shire Zambezi (from the prefeasibility study written by TERA)

Scenario 1

The safe navigation of 700t barges requires a continuous water depth of about 3 m on the whole extension of the foreseen waterway of about 325 Km from Nsanje to Chinde during the whole year. A 700t barge is approximately 40m long and 14m wide and would have a max. draft of 2.10m. This barge could carry a maximum of 60 TEU containers equivalent to a maximum of 720 tons. This scenario requires extension of port facilities in Nsanje for the handling and storage of containers and assumes that new port facilities will have to be built in Chinde to allow for the necessary transhipment of the incoming and outgoing cargo, interconnecting this new transport route with international trade. The Hydroplan Consultants recommend the port in Chinde to be located on the northern bank of the Chinde canal although the city of Chinde is on the other side of the Zambezi. At the proposed location the water depth is more than 8m at all stages of tide, whereas in the vicinity of Chinde town the water is very shallow. The choice of the port location is not of a local concern as the port will act as a transhipment place rather than for regional cargo handling. The preliminary feasibility study estimated the quantities of capital dredging required to create various sizes of navigation channels in the Shire-Zambezi waterway. The calculations have been carried out for channel depth of 2m, 3m and 4m, each with the option of a minimum channel width of 20m, 30m, 40m and 50m to establish a data base for different scenarios and the magnitude of dredging required for different options. Minimum requirement for the navigation channel in this scenario is:

Water depth = 3m

Channel width = 30m

Landing facilities The operation proposed under this scenario requires port facilities to be built in Nsanje and in Chinde with the option to construct landing sites at different locations on Mozambican territory along the way between the ports, e.g. at Megaza, Chipanga, Chindio, Caia ferry crossing, Mopeia, Marromeu/Valente and Luabo for the operation of landing crafts. In Nsanje the port would comprise a mooring basin, quay wall, container storage and handling yard, container crane and pavement works. The same facilities would be required in Chinde but on a larger scale as the transhipment of containers has to be facilitated here to seagoing vessels. An access channel at –6m CD, bottom width about 70m and approximately 6.3km long, has to be constructed and maintained to allow seagoing vessels to enter Chinde Port at all tidal stages

Investment Cost This scenario foresees the construction of ports at Nsanje and Chinde and the construction costs are very roughly estimated at US$ 2.7 Millions (US$ 0.9 Millions for Nsanje and US$ 1.8 Millions for Chinde). Moreover, the acquisition of a vessel to the tune of US$ 1.4 Millions is planned, independent of its technical outlay (self-propelled barge or tug and barge combination). Finally US$ 0.1 Millions are estimated for ancillary assets (e.i. head office, cars, office equipment, etc). It all sums up to an investment volume of US$ 4.2 Millions. Other important items are the development costs, which include the necessary capital costs for training measures and dredging of the rivers Shire and Zambezi. In this basic version they are estimated at US$ 4.25 Millions and are due before the actual beginning of the shipping operations under this scenario.

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All this implies an outflow of about US$ 8.5 Millions during the first 2 years, independent of operations. In order to cover this volume, a meagre capital cover by US$ 5 Millions is planned, which would entail a negative cash flow during the first years, absorbed subsequently. As with all other scenarios, equity to liabilities ratio of 40% to 60% is assumed. The equity of US$ 2.0 Millions will have to be raised by the all those parties interested in the project. The financing of the US$ 3.0 Millions liabilities is foreseen by two loans, one "commercial" one over 5 years at 10% p.a. with 1 year grace period and a long-term "development" loan over 20 years at 8% p.a. with 2 years grace period.

Maintenance Cost The main item of the maintenance costs is the maintenance dredging necessary to keep the river system in navigable state. It is assumed that it will amount to 10% of the initial capital dredging volume, being included in the regular operational expenses and thus devalued every year by 3.5%. The maintenance of the vessel is taken into account with an annual volume of 4% on the initial assets value.

Transport cost As to the transport costs, they depend of the actually handled cargo volumes and thus of the capacity utilization. The "Comparative table of all scenarios at breakeven" shows the financial results of all scenarios calculated over a period of 20 years. As the name indicates it shows the point, where all expenses are covered by the revenues and from where on an economically sustainable operation is possible. The t/km rates at this point reflect the true transport cost of the system, which obviously increase with decreasing capacity utilization. In the case of scenario 1 the transport costs start at US$ 0.086 /TKm at an unrealistic 100% capacity utilization and amount to US$ 0.107 /TKm at a more viable 80%.

Scenario 2: Sea Vessel to Nsanje

The safe navigation of coastal vessels requires a continuous water depth of about 4 m on the whole extension of the foreseen waterway of about 331 Km from Nsanje to the Indian Ocean during the whole year. The average vessel in this scenario is approximately 82.5m long and 12.6m wide and would have a max. draft of 2.5m. This vessel could carry a maximum of 120 TEU containers equivalent to a maximum of 1400 tons. The minimum requirement for the navigation channel in this scenario is

Water depth = 4m

Channel width = 40m The Consultants estimate the quantity of capital dredging under this scenario to be in the magnitude of 4,225,000 m³.

Investment Cost This scenario foresees the construction of a port only at Nsanje as at the destination the existing port facilities of Beira are used. Thus, only US$ 0.9 Millions for Nsanje are calculated. The acquisition of a special sea-going fluvial vessel to the tune of US$ 8 Millions is planned in this case. The same US$ 0.1 Millions are estimated for ancillary assets (e.i. head office, cars, office equipment, etc.). It all sums up to an investment volume of US$ 9 Millions. The most important item in this scenario are the development costs, which include the substantial capital costs for training of the rivers Shire and Zambezi, which mean deepening and widening of the navigation channel. They are estimated at US$ 19 Millions and are also due before the actual beginning of the shipping operations under this scenario. The outflow of about US$ 28 Millions during the first 2 years are covered by capital over US$ 30 Millions, of which US$ 12 Millions are equity. As with all other scenarios, equity to liabilities ratio of 40% to 60% is assumed. The maintenance dredging necessary to keep the river system in navigable state is assumed to amount to an annual 10% of the initial capital dredging volume, being included in the regular operational

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expenses and thus devalued every year by 3,5%. The maintenance of the vessel is taken into account with an annual volume of 4% on the initial assets value.

Transport cost In the case of scenario 2 the transport costs start at US$ 0.114 /TKm at 100% capacity utilization and amount to US$ 0.142 /TKm at 80%.

Scenario 3

This scenario assumes the establishment of a regional hinterland fluvial transport link between the bridge at Chikwawa, where the road from Blantyre to Nchalo crosses the Shire river and Nsanje in the south. The rationale behind this scenario are on one side the a complement to the presently poor transport conditions down south and on the other the creation of a basic shipping system, upon which the first two scenarios could be built. Proposed Transport System VESSEL TYPE A typical flat bottom (pontoon-type) barge with an approximate payload capacity of 350t would have the average dimensions

Length (LOA) = 30 m

Beam B = 12 m

Max draft d = 1.40 m. This barge would be capable of carrying a maximum of 26 TEU containers (in two layers) with an average gross weight of 13 tons each. The barge, being self-propelled or tug assisted, will require about 10 hours steaming time from Chikwawa to Nsanje and about 12 hours for the return passage. Assuming a period of 12 hours for unloading and loading operation at each landing point the roundtrip Nsanje – Chikwawa –Nsanje takes 46 hours, say 2 days. The Shire River at present does not allow for safe navigation of the vessel configuration proposed under this scenario and, although the river seems to provide sufficient water depth for the vessel type proposed under this scenario, it needs to be widened in those stretches, which are to narrow for safe passage. The minimum requirement for the navigation channel in this scenario is Water depth = 2m Channel width = 30m The quantity of capital dredging under this scenario to be in the magnitude of 48,000m³.

Investment Cost This option, which is an extension of the basic scenario 3, foresees the construction of a port at Nsanje and at Chinde in a volume of US$ 2.7 Millions. The vessel will be the same fluvial vessel to the tune of US$ 0.5 Millions, whatever its type. US$ 0.1 Millions are estimated for ancillary assets (e.i.headoffice, cars, office equipment, etc.). It all sums up to an investment volume of US$ 3.3 Millions. In this sub-scenario, minimal river training is assumed necessary, for which a volume of US$ 550,000 is earmarked.

Maintenance Cost A minimal maintenance dredging is deemed necessary to keep the river system in navigable state is assumed to amount to an annual 10% of the initial capital dredging volume, being included in the regular operational expenses and thus revised every year by 3.5%. The maintenance of the vessel is taken into account with an annual volume of 4% on the initial assets value.

Transport cost In the case of scenario 3, the transport costs start at US$ 0.079 /TKm at 100% capacity utilization and amount to US$ 0.099 /TKm at 80%.

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TERA experts came to the conclusion that: “River transportation for Malawi traffic of sugar, tobacco, and cotton in any reasonable quantity would be considered less attractive than either rail or road transportation. Even if it could be shown that river transportation is financially and economically viable and environmentally more attractive, it is likely to be ruled out on the basis of unacceptably high operational risks. River transportation can be a viable option in circumstances or areas where the alternative rail or road services do not exist, as was the case a hundred years ago. Road transportation has, over the past years, expanded at the cost of railway transportation mainly because road haulage is considered quick and reliable, and, for the same reasons, river transportation on a large scale is likely to be uncompetitive.“

Data on the river system Recent data as to the use as a waterway are understandably next to non existent. The study team received statistical data regarding water levels, water level variations and discharge quantities for the Zambezi and the Shire and tidal data for Chinde.

Political will In Malawi During their many discussions with officials the TERA consultants felt that the Malawi government is firmly committed to the project "Shire-Zambezi-Waterway". It is seen as a relatively easily feasible alternative to traditional transport links, which have the dubious distinction to be counted among the most expensive worldwide. For a land-locked country the question of the transport links is of central and strategic importance and thus enjoys a high degree of public attention. However, this specific project is not politically undisputed. The opposition parties apparently are against it and many letters to the press reflect the awareness of the public of the issues at stake. Considering some figures traded in the debate ("10 billion Kwacha" = 72 m US$) one can indeed muse whether it is wise to commit such amounts to a single project in a country which has to face many small problems all over its extension. It has to be considered however, that the waterway project is just one of several perspectives, through which the government wants to transform Nsanje into a development pole for the whole underdeveloped southern region. Under development aspects this makes sense, even without the waterway perspective. The land speculation around Nsanje, which apparently has been sparked off by the government's declaration of the planned port site, shows that there is some public confidence in the government's planning. On the other side, potential private customers apparently find it difficult to believe in the reimplementation of the waterway project proper. They argue that shipping will never be as flexible as modern trucking, that the railway lines to Nacala and Beira, which are under reconstruction, will be an unbeatable, direct competition and that the rivers will not be suitable to modern navigation. Thus, they prefer to wait on the sidelines to see what happens next. It is clear that in this political contest the government has to focus strongly on the waterway project and the regions potentially affected by it in order to overcome the resistance to the project. Thus, it became a political issue before proper surveys and analyses were conducted. This was not conducive to a cool discussion of the actual facts.

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In Mozambique On the other side, the Mozambican government appears to have a different set of priorities, in which the Zambezi and the Shire are just two areas of minor concern among the many in their vast territory. They are aware that the waterway project will need their full cooperation and as good neighbours they are prepared to give it as long as their purposes are served too. For the time being, they concentrate on projects which target the most convenient transport line for the export of the Moatize coal. Presently, there are planned complementary options, namely the Sena-Line under reconstruction by the Indian consortium Rites and the extension of the Nacala Corridor through Malawi to Moatize, proposed by the Brazilian concessionaire CVRD. Malawi would benefit from both options. Concerning the Sena Line, Mozambique actively supports an extension spur into Malawi, which would connect to the Malawi railway system on the old track through Nsanje and Bangula. A connexion would give Malawi a direct railway link to its main trade port Beira, which crosses the Zambezi on the Dona Ana Bridge at Sena. Still, the reconstruction of the last kilometres of railway, south of Nsanje, is not supported by geographical conditions, the area being subject to floods. The other option would be an extended and improved Nacala Corridor railway with the added advantage to offer Malawi an up to now non-existent railway link to the west into Mozambique. The main concessionaire of the Moatize coal, CVRD from Brazil, apparently prefers the Nacala line, for which it pretends to obtain a complete long-term (25 years) concession. This however raises fears among present Malawi users of the Nacala line, that their transport needs may be disregarded or down rated, despite the provisions which the government is actually negotiating with CVRD. This last remark has been taken into account by SAFEGE consultants, who strongly recommend building up a unique link between the SENA line and the CEAR, West of Bangula, thus facilitating Malawi cargo. Another applicant for the Moatize coal makes a stand for a solution of transport by barges on the Zambezi down to Chinde, where the coal would be transhipped by an offshore transponder to large bulk vessels (Cape-size). It is feared however that their solution will entail important interventions on the Zambezi, which would transform the river's character. Apparently, this option is presently considered only the second-best one in Maputo. Finally, Mozambique also plans a new road starting at Quelimane towards Malawi, which would give Malawi the shortest land connection to the sea and to a new port for its trade. These last options might deprive Malawi from its historical chance of having the Mozambican coal crossing its territory, thus providing the investment resources for a modern transportation system. SAFEGE team underline the danger of neglecting a truck allowing Malawi to dramatically rise its productivity and have its industry blossom through the opportunities given by Moatize coal.

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Section 1: Chikwawa to Elephant Marsh (North) • Country: Malawi • River: Shire • Aerial distance: 30.7 km • River Length: 38.5 km • River width: 187 m (mean value, max. 280, min. 100)

Section 2: Elephant Marsh (North) to Chiromo (Elephant Marsh South) • Country: Malawi • River: Shire • Aerial distance: 40.2 km • River Length: 63.9 km • River width: 66 m (mean value, max. 140, min. 20)

Section 3: Chiromo to Nsanje Port • Country: Malawi • River: Shire • Aerial distance: 42.9 km • River Length: 63.1 km • River width: 110 m (mean value, max. 190, min. 70)

Section 4: Nsanje Port to Ndinde Marsh (North) • Country: Malawi • River: Shire • Aerial distance: 12.2 km • River Length: 18.6 km • River width: 91 m (mean value, max. 140, min. 60)

Section 5: Ndinde Marsh (North) to Mozambique border • Country: Malawi • River: Shire • Aerial distance: 9.4 km • River Length: 12.6 km • River width: 72 m (mean value, max. 100, min. 40)

Section 6: Mozambique border to Ndinde Marsh (South)

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• Country: Mozambique • River: Shire • Aerial distance: 24.2 km • River Length: 40.3 km • River width: 51 m (mean value, max. 100, min. 10)

Section 7: Ndinde Marsh (South) to Conjunction Zambezi • Country: Mozambique • River: Shire • Aerial distance: 39.4 km • River Length: 52.9 km • River width: 158 m (mean value, max. 320, min. 80)

Section 8: Conjunction Zambezi to Merrimu Port • Country: Mozambique • River: Zambezi • Aerial distance: 94.2 km • River Length: 115.4 km • River width: 607 m (mean value, max. 1070, min. 70)

Section 9: Merrimu Port to Chinde Port • Country: Mozambique • River: Zambezi • Aerial distance: 6.4 km • River Length: 85.1 km • River width: 735 m (mean value, max. 2090, min. 47) The Shire river bed is rather distinct and no meanders have been found along the entire course of the river, except for the two large marsh areas, which are crossed by the river. Although a swamp area, the Ndinde Marsh shows a remarkable depth of 3.5 m. According to flow data from the years 1952 to 1995 the Shire river is submitted to two major sources of fluctuations: (i) the annual differences in flow originating from precipitation in January to April and (ii) the water level fluctuations in lake Malawi. In the upper part of the river course the existing falls are used for the generation of electric energy (Liwonde, Kampuchea). Almost the entire river banks of the Shire, even far away from settlements are used as arable lands. Often the fields are in direct contact with the waterline of the river. For larger agricultural enterprises (sugar cane plantations) the water of the river is abducted for irrigation purposes. At present only the lower reaches of the Zambezi river are used for ship traffic by the Sena Sugar Estate Company at Marromeu. According to information given by the responsible ship operators within the company they do the distance between Marromeu and Quelimane north of Chinde 4 times per month with one barge (draft 1.5 m) carrying up to 40 20ft containers loaded with molasses. They can only go during February and April when the river waters rise higher due to the rainfalls and very often they report groundings due to temporary sandbanks. The shipping often gets easier after the route has been navigated several times and the main shipping lane has been found. A fluvial vessel is estimated to take a day to go from Nsanje to Chinde. Assuming the prompt - but unrealistic - availability of on-going cabotage / feeder tonnage, the cargo can be in Beira in 2 days at best. From there to Durban the already operating feeder vessels take 3 days.

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Thus, considering the usually 7 days a truck takes for the direct trip between Malawi and South Africa, the gain of time is not significant, but still a properly functioning waterborne option may offer to shippers a time advantage of 1 to 2 days. The project success will depend of the availability of either Mozambican cabotage or international feeder tonnage The project itself has different possible levels. - A huge project, canalizing the Shire and the Zambezi is valued 6 billion $. It seems a bit oversized for

the purpose of transporting Malawi cargo. Building an entirely new railways system linking Beira, Lusaka, Kolwezi, Lilongwe, Blantyre, Nacala and Dar would cost half this price, with virtually unlimited capacity and no environmental impact…

- At the opposite, the use of natural rivers, with services facilitating the navigation, is indeed fitted for an existing cargo transportation demand, approximately 500 000 mT capacity each side.

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Annex E: Containers at Durban

A breakdown of the latest container handling volume at Port of Durban is shown in the following table.

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Annex F: Potential rural growth centre

Table of Potential Proposed Rural Growth Centres

Sr. No. District First Site Second Site Remarks

Northern Region

1 Chitipa Nthalire Misuku The two sites were part of the NPDP – Kameme and Chinunkha are however emerging as viable centres too.

2 Likoma Benefitted under the RGCP

3 Karonga Chilumba Kaporo Both sites were identified under the NPDP and the district considers these vital

4 M’mbelwa Euthini Emfeni Emfeni was included in the NPDP. However, Mbalachanda benefited under the RGCP. Jenda Trading Centre has strong potential

5 Nkhata Bay Mzenga Usisya Usisya and Chikwina were the NPDP centres. Only Chikwina benefited.

6 Rumphi Katowo Nchenachena Katowo was one of the NPDP sites but no investment was made. Bolero benefited though.

Central Region

7 Dedza Mtakataka Mayani Lobi already benefited under the RGCP. Mtakataka was also earmarked for RGCP

8 Dowa District Nambuma Bowe Nambuma was included in the NPDP

9 Kasungu Nkhamenya Chisemphere Santhe benefited under the RGCP. Though Chisemphere and Chamama were included. Nkhamenya emerges as the more appropriate centre.

10 Lilongwe Kasiya Nkhoma Kasiya was identified under the NPDP in addition to Nsaru, Namitete, Sinyala, Mitundu, Nathenje, Chimutu and Lumbadzi

11 Mchinji Mkanda Kapiri Kapiri and Kamwendo are possible centres

12 Nkhotakota Msenjere Dwambazi Mwasambo and Dwangwa were the identified and only Mwasambo benefited

13 Ntcheu District Lizulu Senzani Lizulu was identified under NPDP in addition to Bwanje, Bilira and Tsangano. Tsangano benefited under the RGCP

14 Ntchisi Malomo Khuwi Malomo was the only centre identified under the NPDP

15 Salima Thavite Chagunda Khombeza and Chipoka were identified under NPDP

Southern Region

16 Balaka Phalula Ulongwe Phalula and Ulongwe both benefited under the RGCP

17 Blantyre Linjidzi Chikuli Lirangwe and Nkula were the then viable centres

18 Chikwawa Chapananga

Ngabu Both centres in addition to Nchalo were the viable centres under the NPDP

19 Chiradzulu Namitambo Mbulumbuzi Namadzi was the centre to be developed under the NPDP

21 Mangochi Malindi Namkumba Makanjira, Malindi, Namwera, Namkumba and Chilipa were recommended. Only Makanjira benefited

22 Mulanje Nkando Chinyama Muloza was the only centre included under the NPDP

23 Mwanza Thambani Kunenekude Thambani was included under the NPDP

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Sr. No. District First Site Second Site Remarks

24 Nsanje Bangula Marka Bangula was identified as Sub-Regional Centre because it was a transport node linking Thekerani, Chikwawa, Nsanje by rail. Its influence would go beyond to Mozambique in view of the port on Shire

25 Phalombe Migowi Chitekesa Phalombe was part of Mulanje. The two sites are vital much as the other is a Boma

26 Zomba Chinseu Jali Malosa, Kachulu, Mayaka and Chingale were the recommended centres under the NPDP. None has benefited to date.

27 Thyolo Goliati Bvumbwe Thekerani and Lunchenza were the centres included under the NPDP. Both centres benefited under the RGCP and SCDP respectively.

28 Neno Neno Lisungwi Neno then was part of Mwanza and therefore benefited under the RGCP. It is now a District Centre and the need for more infrastructures is even more pronounced now.

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Annex G: Roads

Annex G1: Minute of the Malawi Multimodal Transport Sector Development Program: Workshop II Malawi Multimodal Transport Sector Development Program Second Workshop Summary of Discussion of Group D: Road Sector The group had the assignment to discus on the Roads Subsector. The task for the group was to identify the critical road links in the Malawi road network that would be included in the Malawi Multimodal Transport Sector Investment Program (MMTSIP). Characteristics: The group noted the following characteristics of Malawi transport service as a backdrop to guide it in identifying the road links to be included in the investment program: (i) Malawi exhibits high cost per ton- kilometre for transportation of goods compared to its regional

neighbours. (ii) Traffic volume is low due to limited domestic production, volume of export and imports for Malawi

to gain from economies of scale of transport operation to realize reduction in transport costs. (iii) The high Transport costs per ton-km which is relatively high generally, reduces as one moves from:

(a) centres of production through (b) local markets, (c) regional, (d) ports and finally (e) international markets, due to increasing economies of scales of freight.

The group came up with following criteria for selection of the Roads to be considered under MMTSIP The constraints regarding the routes and ports specifically in terms of:

- Capacity for handling cargo at port; - Frequency of ship calling at port; - Delays in processing consignments; - Relative costs of transportation; and, - Reliability of the corridor; The group identifies specific ports for specific areas of production for exports i.e. of sugar, tea, tobacco and their exit routes. Regarding export ports the following were ranked in order of their importance according to the volume of cargo, especially exports of tobacco, and sugar. (a) Beira (b) Nacala (c) Durban (d) Dar-es-Salaam During the medium term, improvement in the road network serving Malawi’s imports and exports, within and outside the Malawi, were identified by corridor. Evaluating the competing ports, the group identified Nacala Port as the one with the highest growth potential for handling more cargo from Malawi and other neighbouring countries in the near future. The groups selected the road network that would increase volume of cargo while continue to improve the efficiency of the rail line. The group also noted based on the presentation at the workshop that Beira would shortly experience congestion. Upon these considerations the following roads were recommended by corridor:

4 Beira Corridor

(i) Mulanje – Milange but need some attention on Mozambique side (ii) Blantyre – Thyolo improving both loops via Midima and Chisitu. (iii) Mulanje –Makumba –Inchope in Mozambique (iv) Blantyre – Mwanza –Beira but need attention of Tete Bridge. (v) Lilongwe – Dedza and Calomue – Tete Bridge in Central Region

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(vi) Lilongwe- Mchinji and then Zambia.

5 Nacala Corridor :

(vii) Liwonde-Naminga, Liwonde-Mangochi-Chiponde (viii) Chiponde-Mandimba-Kuwamba in Mozambique. (ix) Liwonde-Nsipe since Lilongwe Nsipe in under improvement (x) Thyolo-Makwasa-Makhanga also for Nchalo sugar production. (xi) Nchalo-Chikwawa. (xii) Chikwawa-Blantyre. For the escarpment, Nchalo can use the rail which is cheaper and would

incentivize Nchalo to increase production.

6 The group also address the special transport infrastructure needs of key products-Sugar and coal. For the sugar from Dwangwa, the following routing was recommended:

(iv) Dwangwa-Nyala Port-Nkhata Bay Port-Monkey Bay. (v) Salima – Balaka Road (vi) Lakeshore Road i.e. Nkhotakota - Dwangwa -Salima

7 Coal Production Centres in the North such as Kayelekera and Kaziwiziwi coal mine would require improvement of the following network:

(ii) MI from Karonga -Mzuzu-Kasungu-Lilongwe

8 The group agreed that there is need to improve the roads serving key rural markets to the road corridors. The roads are to be selected by paying special attention at reducing transport costs and enhancing production and export and delivery of import inputs.

Overall, the priority from districts centres would be to improve Rural Feeder Roads and Main Roads linking market centres to the corridor roads while from Regional centres the emphasis would be improving main trunk roads along the corridor.

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Annex G2: Priority Lists of Rural Growth Poles Potential Proposed Rural Growth Centres

Sr. No.

District First Site Second Site Remarks

Northern Region

1 Chitipa Nthalire Misuku The two sites were part of the NPDP – Kameme and Chinunkha are however emerging as viable centres too.

2 Likoma Benefitted under the RGCP

3 Karonga Chilumba Kaporo Both sites were identified under the NPDP and the district considers these vital

4 M’mbelwa Euthini Emfeni Emfeni was included in the NPDP. However, Mbalachanda benefited under the RGCP. Jenda Trading Centre has strong potential

5 Nkhata Bay Mzenga Usisya Usisya and Chikwina were the NPDP centres. Only Chikwina benefited.

6 Rumphi Katowo Nchenachena Katowo was one of the NPDP sites but no investment was made. Bolero benefited though.

Central Region

7 Dedza Mtakataka Mayani Lobi already benefited under the RGCP. Mtakataka was also earmarked for RGCP

8 Dowa District Nambuma Bowe Nambuma was included in the NPDP

9 Kasungu Nkhamenya Chisemphere Santhe benefited under the RGCP. Though Chisemphere and Chamama were included. Nkhamenya emerges as the more appropriate centre.

10 Lilongwe Kasiya Nkhoma Kasiya was identified under the NPDP in addition to Nsaru, Namitete, Sinyala, Mitundu, Nathenje, Chimutu and Lumbadzi

11 Mchinji Mkanda Kapiri Kapiri and Kamwendo are possible centres

12 Nkhotakota Msenjere Dwambazi Mwasambo and Dwangwa were the identified and only Mwasambo benefited

13 Ntcheu District

Lizulu Senzani Lizulu was identified under NPDP in addition to Bwanje, Bilira and Tsangano. Tsangano benefited under the RGCP

14 Ntchisi Malomo Khuwi Malomo was the only centre identified under the NPDP

15 Salima Thavite Chagunda Khombeza and Chipoka were identified under NPDP

Southern Region

16 Balaka Phalula Ulongwe Phalula and Ulongwe both benefited under the RGCP

17 Blantyre Linjidzi Chikuli Lirangwe and Nkula were the then viable centres

18 Chikwawa Chapananga

Ngabu Both centres in addition to Nchalo were the viable centres under the NPDP

19 Chiradzulu Namitambo Mbulumbuzi Namadzi was the centre to be developed under the NPDP

21 Mangochi Malindi Namkumba Makanjira, Malindi, Namwera, Namkumba and Chilipa were recommended. Only Makanjira benefited

22 Mulanje Nkando Chinyama Muloza was the only centre included under the NPDP

23 Mwanza Thambani Kunenekude Thambani was included under the NPDP

24 Nsanje Bangula Marka Bangula was identified as Sub-Regional Centre because it was a transport node linking Thekerani, Chikwawa, and Nsanje by rail. Its influence would go beyond to Mozambique in view of the port on Shire

25 Phalombe Migowi Chitekesa Phalombe was part of Mulanje. The two sites are vital much as the other is a Boma

26 Zomba Chinseu Jali Malosa, Kachulu, Mayaka and Chingale were the recommended centres under the NPDP. None has benefited to date.

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Sr. No.

District First Site Second Site Remarks

27 Thyolo Goliati Bvumbwe Thekerani and Lunchenza were the centres included under the NPDP. Both centres benefited under the RGCP and SCDP respectively.

28 Neno Neno Lisungwi Neno then was part of Mwanza and therefore benefited under the RGCP. It is now a District Centre and the need for more infrastructures is even more pronounced now.

Source: Government of Malawi, Ministry of Local Government, August, 2010

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Annex G3: Millennium Corporation Compact – roads identified by the MCC9

1. Mzuzu – Nkhata Bay Road

The road passes through an important agricultural area where different types of crops are grown. These include coffee, tobacco, maize, cassava, rice and bananas. It also forms part of the main corridor connecting the northern region to the Dar-es-Salaam corridor. The road is situated in Nkhata Bay district which has a population of 213,779 and a population density of 53 per square kilometre. The rural population in Nkhata Bay has the highest poverty rate of 54% whilst 23% are ultra poor (Welfare Monitoring Survey, 2007).

2. Lirangwe – Machinga Rural Feeder Road

This road is situated in Zomba district with an estimated rural population of 583,167 and a population density of 230 per square kilometre. This is mainly an agricultural area that grows crops such as tobacco, cotton, maize, sorghum sweet potatoes, pigeon peas, rice and cassava. The average number of people below the poverty line is currently estimated at 50% while 20% are ultra poor (Welfare Monitoring Survey, 2007). The lack of appropriate road infrastructure encourages smallholder farmers to cultivate subsistence crops in order to sustain themselves during periods of need (usually from November to February).

3. Linthipe – Lobi Rural Feeder Road

The road is located in Dedza district which has an estimated population of 623,789 and a population density of 172 per square kilometre. The main agricultural crops grown within the project area include tobacco, maize and millet. About 44% of the rural population is poor and 14% ultra poor (Welfare Monitoring Survey, 2007).

4. Cape Maclear – Monkey bay Rural Feeder Road

The road is located in Mangochi district which has a population of 803,602 and a population density of 128 per square kilometre. The main economic activities for the rural population are mainly fishing but in other parts they grow agricultural crops such as tobacco, groundnuts and cotton. The area is also a key tourism site that includes sanctuaries, safaris, game lodges and wildlife tours. About 48% of the population in the district is poor while 19% are ultra poor.

4.2.1. Economic Activities for Rail Transport Projects

The railway infrastructure in Malawi passes through key agricultural areas (see figure 5) connecting two major cities of Blantyre and Lilongwe. The central region is mainly the backbone of tobacco growing whereas tea, coffee and cotton are mainly grown in the southern region. Malawi used and still uses the railway to transport bulky commodities to the sea. Malawi usually exports, among others, tobacco, tea, sugar, coffee, cotton and pigeon peas through Nacala (rail) and Beira (road) ports and imports fertilizers, fuel and general cargo through Nacala. Currently Beira handles over 60% of Malawi’s cargo and it is expected that traffic will be diverted to Nacala once the route is functional.

Rail transportation is also an important mode of transport for rural farmers who usually use the train to move their farm produce to main markets in the cities or trading centres. Such commodities include tomatoes, pigeon peas and other vegetables. In 2006, CEAR recorded approximately 480,000 passengers moved largely from smallholder farmers. Since 2000, CEAR moved over 250,000 tons of local products to main markets locally but has been experiencing reduced usage by the locals to transport their commodities using rail transportation.

5. Road Transportation

9 Source:: This annex is from the Millennium Challenge Corporation: Malawi program Development (2011-

2016).

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Table 1 is a summary of the calculated ENPV and EIRR for road transportation. All road projects have significant economic net present values (ENPV) and economic internal rates of return (EIRR) above the 12.5% hurdle rate for Malawi. The Mzuzu – Nkhata Bay high volume road has an ENPV of US$150.8 million and an EIRR of 57.2%. The Lirangwe - Namatunu – Machinga rural feeder road has a calculated ENPV of US$57.7 million with an EIRR of 43.5%. The Linthipe – Lobi rural feeder road has a calculated ENPV of US$8.6 million with an EIRR of 29.2%. Lastly, the Cape Maclear – Monkey bay rural feeder road has an ENPV of US$5.6 million with an EIRR of 29.4%.

Table1: Calculated ENPV and EIRR for Road and Rail Transportation

Project Type

Certainty Equivalent

100% 90% 85% 75%

Mzuzu - Nkhata Bay Road

Calculated ENPV (12.5%) $150,811,998 $134,020,860 $125,625,292 $108,834,154

EIRR 57.2% 53.9% 52.2% 48.5%

Lirangwe – Machinga RFR

Calculated ENPV (12.5%) $57,699,344 $50,945,385 $47,568,405 $40,814,447

EIRR 43.5% 40.9% 39.6% 36.8%

Linthipe - Lobi RFR

Calculated ENPV (12.5%) $8,555,313 $7,342,580 $6,736,213 $5,523,481

EIRR 29.2% 27.4% 26.4% 24.4%

Cape Maclear RFR

Calculated ENPV (12.5%) $5,649,229 $4,842,865 $4,439,682 $3,633,317

EIRR 29.4% 27.5% 26.5% 24.4%

EIRR 25.5% 24.1% 23.4% 21.9%

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Annex G4 : List of roads for the Transport Investment Program

District Access Roads

Main

Co

rrido

r

Prim

ary

Seco

nd

ary

Desig Km Desig Km Desig Km Kms

Northern Region & Gowth Centres

Chitipa

Nthalire M9 10S101 30,5 20

Misuku M26 S100 8,4 T301 13,4 15

Kameme James M9 T300 13,2 15

Chinunkha M26 T302 21,3 15

Chisenga M26 M9 97,3 15

Lufita M26 15

Mwamkumbwa M9 T301 8,6 15

Sub-Total Chitipa including other EPAs 10 179,3 13,4 110

Karonga

Chilumba M1 S102 5,4 10

Kaporo M1 15

Kayelekera M26 20

Sub-Total Karonga including other EPAs 0 5,4 0 45

Rumphi

Bolero M24 D38 11,7 25

Katowo M9 S104 15,1 20

Ntchenachena M1 T306 6,9 T305 27,0 15

Mhuju M1 T306 6,9 T305 26,0 15

Sub-Total Rumphi including other EPAs 0 40,6 53,0 75

Nkhata-Bay

Mzenga M5 T317 27,0 15

Usisya M5 S108 55,5 15

Chikwina M5 M11 18,3 10

Chintheche M5 15

Sub-Total Nkhata-Bay Including other EPAs 0,0 100,8 0,0 55

Mzimba

Jenda M1 25

Mbalachanda M9 S105 29,4 25

Euthini M9 15

Emfeni M1 T326 19,4 15

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District Access Roads

Main

Co

rrido

r

Prim

ary

Seco

nd

ary

Desig Km Desig Km Desig Km Kms

Central Region

Kasungu

Nkhamenya M1 15

Chisemphere M1 15

Mkhota M18 S117 6,1 25

Santhe M18 20

Sub-Total Kasungu including other EPAs 6,1 75

Lilongwe

Mitundu M1 S125 7,2 15

Nathenje M1 15

Nsalu M12 S117 23,2 15

Namitete M12 20

Kasiya M12 S117 46,4 T342 13,4 20

Sinyala M1 S125 7,2 T345 11,4 15

Lumbadzi M1 10

Sub-Total Lilongwe including other EPAs 84,0 24,8 110

Mchinji

Nkanda M12 S118 35,3 15

Kapiri M18 15

Kamwendo M12 20

Sub-Total Mchinji including other EPAs 35,3 50

Nkhota kota

Dwangwa M5 10

Mwasambo M5 D94 23,1 15

Msenjre M5 10

Dwambazi M5 10

Sub-Total Nkhotakota including other EPAs 0 23,1 0 45

Salima

Khombeza M5 10

Chipoka M5 T326 2,1 15

Thavite M5 10

Chagunda 10

Sub-Total Salimaincluding other EPAs 2,1 45

Dowa

Nambuma M1 S115 10,7 T344 13,3 20

Bowe M1 S116 21,6 15

Sub-Total Dowa including other EPAs 32,3 13,3 35

Nchisi

Malomo M7 25

Khuwi 20

Sub-Total including other EPAs 45

Dedza

Mtakataka M5 15

Mayani M1 T373 10,2 T374/T371 39,0 15

Lobi M1 S126 27,0 20

Sub-Total Dedza including other EPAs 37,2 39,0 50

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Ntcheu

Lizulu M1 20

Senzani M1 15

Sub-Total Dedza including other EPAs 35

Mangochi

M3 S129 95,0 25

Malindi M3 S129 80,0 20

Namwera M3 25

Chilipa M10 25

Nankumba M10 25

Sub-Total Mangochi including other EPAs 175,0 120

Balaka

Phalula M1 15

Ulongwe M8 20

35

Machinga

Ngokwe S131 T390 18,5 T391 19,6 15

Nayuchi M3 T393 49,0 15

Chikweo S131 T390 18,5 10

Nsanama S131 15

Sub-Total Machinga including other EPAs 86,1 19,6 55

Zomba

Chinseu M3 D288 11,5 10

Jali S144 10

Malosa M3 10

Kachulu S144 S143 25,4 15

Mayaka M3 T405 22,9 15

Chingale M3 S142 8,5 S139 3,2 15

Sub-Total Zomba 68,3 3,2 75

Phalombe

Migowi S144 S147 21,0 15

Chitekesa S145 T405 25,0 15

Sub-Total Phalombe 46,0 30

Mulanje

Muloza M2 15

Nkando M4 15

Sub-Total Mulanje 30

Thyolo

Thekerani M2 S151 72,9 15

Luchenza M2 15

Sub-Total Thyolo 72,9 30

Chiradzulu

Namitambo M4 T412 10,0 15

Mbulumbuzi M3 10

Namadzi M3 10

Sub-Total Chiradzulu 10,0 35

Blantyre

Linjidzi M1 S139 10,0 15

Chikuli S137 14,4 10

Lirangwe M1 15

Nkula S137 4,4S138 30,1 40

Sub-Total Blantyre 18,8 40,1

Mwanza

Thambani M6 S136 30,3 15

Kunenekude M6 S135 15,0 15

Sub -Total Mwanza 45,3 30

Chikwawa

Chapananga M1 S136 76,0 20

Ngabu M1 15

Nchalo M1 15

Sub-Total Chikwawa 76,0 50

Nsanje

Bangula M1 20

Marka M1 20

Sub-Total Nsanje 40

Totals 166

Makanjira

1 205 1 425

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Annex H: Rail

Construction of 260km of rail Business Case

Basic case:

Km 260 Transport demand: 10millions tons/year on the 4th year and for 42 years. Construction period: 2 years 2015-2016 and 2016-2017 Cost of investment 497 millions TOTAL NET INCOME ON 40 YEARS of exploitation: 22 706 millions $

CHIPOKA

LIWANDE

LIILONGWE CHIPATA

REHABILITATION

CANONGA

CONSTRUCTION

260 KM

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Derived case:

Km 62 + renewal of 34 km Transport demand: 6 millions tons/year on the 4th year and for 42 years. Construction period: 2 years 2013-2014-2015 Cost of investment: 165 millions TOTAL NET INCOME ON 40 YEARS of exploitation: 2 103 millions $

MOATIZE MINE

LINK BANGULA NOD

SUGAR FACTORY

BRIDGE RECONSTRUCT

ION

MULANJE ALUMINUM ORE FACTORY

NSANJE INTERMODAL STATION & PORT

Rail RECONSTRUCTION

CONSTRUCTION 30 km ?

PROJECTED CONSTRUCTION

12 km in Mozambique 50 km in Malawi

CONSTRUCTION

20 km ?

CONSTRUCTION

27 km

CONSTRUCTION

30 km

SENA LINE

NKAYA

LIMBE

BALAKA

Single track + signalization

Double track

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Present situation

(source GOPA study and consultant’s workshops and interviews)

Network details and inventory

General standards and parameters The network in Malawi has been designed, or is operated respectively, according to the standards as follows: Track gauge Standard 1067 mm In Curves with 242 m < R < 403 m 1076 mm In Curves with R ≤ 242 m 1086 mm Maximum including sidewear 1092 mm

Curves Minimum radius on existing lines 111 m Minimum radius on new running lines 244 m Transition curves parabolic Maximum cant 76 mm Maximum ramp gradient 1 in 480

Maximum gradients Existing lines 1 in 44 New lines (from 1969 onwards) 1 in 60 compensated (=including curve resistance) Stations 1 in 400

Permissible axle load on permanent way and structures Design load 13 tonnes Operated at 15 tonnes

Track Distance and clearance Structure gauge see Annex 0 Track distance ≥ 4572 mm

Speed Maximum section speed 50 km/h Lines The network under review consists of the following railway lines:

Line Code

Operator Relation Chainage

from km to km

0001 - (Vila Nova de Fronteira -) Border - Nsanje - Makhanga 0.000 80.400

CEAR Makhanga - Limbe - Nkaya - Kanengo - Mchinji (-Chipata) 80.400 696.460

1000 CEAR (Entré Lagos -) Border - Nayuchi - Nkaya 0.000 100.218

2000 CDN Nacala - Nampula - Cuamba -0.446 533.473

3000 CDN/CEAR Cuamba - Entré Lagos - Border (- Nayuchi) 0.000 78.620

4000 CFM/CCFB Beira - Dondo 0.000 28.000

5000 CCFB Dondo - Sena - Dona Ana 0.000 291.000

- Dona Ana - Vila Nova de Fronteira - Border (- Nsanje) 291.000 328.000

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Stations and terminal facilities The network comprises 45 stations in Malawi, out of which 5 are on the section presently not operated 32 stations on the Nacala - Entré Lagos line in Mozambique 23 stations on the Beira - Vila Nova de Fronteira line in Mozambique In Malawi, only 16 stations serve for commercial purpose (loading / unloading); the other stations are kept for operations (crossings) only. For the lack of traffic, many of the latter are unmanned and used from time to time only (“Kilometre Loop Line Points”). At commercial stations, there are only basic terminal facilities such as side ramps, goods sheds and some cranes, most of the latter being out of order. Loading and unloading containers is performed by the customers. This results in the problem of holding wagons thereby increasing the dwell time at the drop/load zones.

1. INFRASTRUCTURE

1.1 The infrastructure includes earthworks, permanent way, tracks, station, signalling equipment, electrification equipment, telecommunications, depot, workshops and buildings.

1.2 Earthworks, permanent way, tracks, signalling equipment and telecommunications have been established

on the base of 260 kilometres from the TAZARA railways to the Chipata station. Capital expenditures have been optimized to allow an optimal train organization and limited track expenditure, on the base of 6 million tons of traffic both sides, starting on the 4

th year of operation (2021). The approach also reduces

the number of signal interlocks needed on the alignment, which might represent a significant investment in special track works and signal systems.

1.3 Earth structures are, at this stage, little known, and the draft financial model provided for high physical

risk on them, altogether with a high price risk. Permanent way and track are at lower risk. Track way replacement has been provided for according to the number of years of operations.

1.4 TRAIN CONTROL SYSTEMS are provided for through signalization and telecommunications. HIGHWAY

GRADE CROSSINGS are not included in the plan, as no highway is actually operated through the planned train route. Nevertheless, it is very likely that the railway construction and operation will generate the apparition of roads, and therefore the need for highway grade crossing. We assumed they will be financed along through the road construction budgets.

1.5 STATIONS are of two types: major permanent stations are able to provide loading downloading

permanent services, minor stations provide train operating services only. 1.6 On Zambian case, as an approximation of the demand the number of permanent stations might be from 0

to 3 (for the plan needs a number of two has been used) and operating stations would be simultaneously reduced from 5 to 4 (including the two specific terminal connexions in the existing stations). Note that additional services will be provided for in dedicated stations: fuel station, electrical substations. No passenger station is provided for, as no passenger services are presently projected. Note that passengers’ services require very specific stations and accompaniment services.

1.7 On Mozambican case, major station would be one (Illovo connection) and operating station two (at the

border and at connexion with the SENA line. 1.8 MAINTENANCE FACILITIES and WORKSHOPS: Maintenance facilities and workshops have been provided

for, except for the rolling material which would be maintained by the lending company or by the private operator. It is assumed that this company will make its own arrangements for rolling stock maintenance.

1.9 DEPOT has been planned at the TAZARA connexion for the basic case.

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1.10 CARGO STORAGE has not been provided for. It is assumed that copper ore (or coal and alumina if the model is transferred to the Mozambican- Malawian junction) will be stored in the wagons. The absence of storage might be a problem in case of significantly valuable return cargo. The return cargo to Zambia would apparently be mainly Cassava flour, bulk sweet potatoes, bagged potatoes and maize. We assumed that the cargo will be protected by dedicated guards paid by the cargo owner.

1.11 BUILDINGS have been provided for workshops, training, administration and housing.

1.12 ELECTRIFICATION would take place in 2019 (for capital expenditure) and 2020 (for completion and operation). The rationale for postponing electrification is to allow the mines and the agricultural exporters to raise or transfer their production, and, therefore, to allow the railway to generate cash flow. This generated cash will be crucial part of the electrification financing scheme.

Technical requirements for infrastructure in Zambia

TAZARA-CHIPATA: KM 292+708 – KM 33+000 = KM 259.708

Infrastructure

Infrastructure connection between Tazara Line and Chipata only.

Earthwork and Permanent Way

CAPEX and OPEX taken from recent experiences in USA, Europe, India and Mongolia.

Replacement of Track Work considered according to load on track and International Rules

Electrification fixed Equipment

Basis on European Budget Prices considering two substations with 2x30MVA Transformers,

ten (10) Auto Transformer Stations, and feeding lines (wire) along the railway line

According to the number of pantograph passes no renewal of the Overhead Wire has been foreseen in the period to 2047

On the basis of European Equipment 1% Maintenance Costs on the total investment per year considered.

Station

Tracks included in Earthwork and Permanent Way

Intermediate station with one passing track on a single track line, with interlocking and signalling, and any other equipment

Signaling

Including the Operation Control and Display System

Including Interlocking system

Including axle counting based Track Vacancy Detection System

Including wayside equipment point machine S 700 K and signal.

Telecommunication

GSM – R considered as operational telecommunication system

Depot, Workshop, OCC (CTC)

Depot Diesel Locomotive

Workshop Diesel Locomotive

Depot and Workshop Wagons

Wheel Set Workshop

OCC (CTC)

Fueling Station

CAPEX considered as a function of the number of Rolling Stock in 2016 coping with all options and considering all necessary equipment and installations for the shops,

OPEX considered as the averaging life span of all equipment

In case of leasing it is assumed that the leasing company takes care of the maintenance

Workshop Earthwork, Permanent Way, Structures

CAPEX considered as a function of the value of the installed equipment to be maintained considering all necessary

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equipment and installations for the shops,

OPEX considered as the averaging life span of all equipment

Workshop Signalling Equipment

CAPEX considered as a function of the value of the installed equipment to be maintained considering all necessary equipment and installations for the shops,

OPEX considered as the averaging life span of all equipment

Workshop Telecom Equipment

CAPEX considered as a function of the value of the installed equipment to be maintained considering all necessary equipment and installations for the shops,

OPEX considered as the averaging life span of all equipment

License Fee for Land (per km per year)

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2. ROLLING STOCK

2.1 The investment would be dependent on freight operating needs, which determine capacities. These will

depend of the number of trains operated. The consultant fixed these factors in relation to the transport demand. Consequently, the number of trains and locomotives will not be the same in the first years of operations.

2.2 It has been assumed that locomotives would be rented for the whole project, starting with 4500 HP diesel locomotives, maintained by the lender. (Cost at 2009 price: 1000 US$ per operating day)

2.3 It is assumed that leased electric locomotives would be used further on. We used the characteristic for double electric Chinese Locomotive BoBo - BoBo DJ4 with regenerative braking power. (Cost at 2009 price: 1058 US$ per operating day)

2.4 We determined leased wagons would be more operational. (Cost of leased wagon with maintenance: 102 US$ per day)

2.5 Maintenance of both locomotives and wagons would be assumed by the lender. 2.6 The Railways Company or private train operators will order the number of locomotives and wagons to

lease according to the evolution of the demand. The draft model includes these figures for both conservative and optimistic options.

Diesel Locomotives (assuming two per train)

Diesel Locomotives Price (new, in US$)

2 700 000

Diesel Locomotive Structure

1 900 000

Diesel Engine

800 000

Maintenance of Diesel Locomotives

1,875

Diesel Consumption (litres per 1000km)

3

Price for one Litre Diesel =

1,068

Cost of diesel fuel: UB Railway procured 2008 one ton of Diesel at 1,335 US$ (VAT deduction has not been reported), thus translate to approximately 1250 litres and therefore into 1.068 US$ per litre,

Increasing diesel prices considered as stable for 2010, increase of 3% per annum to 2012, and at 6% per annum subsequently.

Leasing of one 4500 HP Locomotive including Maintenance = (US$ per day)

1000

Electric Locomotives

Electric Locomotives Price

3 020 000

Budget Price Eloc for double electric Locomotive BoBo-BoBo DJ4 =

6 039 563

Maintenance of Electric Locomotives =

0,6

Electric Consumption

16

Price for one KWH =

0,057

Cost of electrical power:

0.065US$

According to our study the net electricity generation for non - OECD countries will increase by 4.0 percent per year

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from 2005 up to 2030,

subsequently an increase of price per year or 4 % has been considered.

Leasing of one Locomotive including Maintenance =

1058

Hopper Wagon

Hopper Wagon Price

100 000

Maintenance of Hopper Wagon =

0,07

Second Hand Wagons: Principle

25000

Leasing of one Hopper Wagon including Maintenance =

102

3. OTHER INVESTMENTS

3.1 STAFF TRAINING. Apart from granting attractive wages, and necessary social welfare insurances, it is

assumed that appropriate training will take place for all staff, starting as soon as 2015. Staff assumptions have been that the company would certainly prefer to train its workers rather than hiring professional railway workers.

3.2 ENGINEERING & ENVIRONMENTAL SOFT COSTS Standard factors were applied to the above rolling stock and infrastructural costs to account for the anticipated "soft costs" associated with project development, including:

3.2.1 Contractor Mobilization 3.2.2 Design Engineering 3.2.3 Environmental Assessment 3.2.4 Construction Management

Staff Costs (average per person per month)

720

OPERATIONS MANAGEMENT

4.1 Amortization and CAPEX replacements: INVESTMENTS Life Expectancy Earthworks 100 Permanent Way 25 Structures 50 Signalization 30 OCC (CTC) 30 Workshops& depots 35 Substations 50 OCS 30 SCADA 15 Telecom 15 Fueling Station 15 MIS MMIS 10 Diesel Locomotives - Structure 30 - Diesel Engines 15 Electric Locomotives 30 Wagons procured 30

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Terminal Stations 50 Intermediate Stations 50 4.2 Costs would vary depending upon the method ultimately selected for service delivery. Direct

operation is not the preferred service delivery approach taken by most cargo rail private companies. Most rail services are operated under contract either by an independent freight carrier or a third-party, private or public contractor, such as DBI in Germany, SNCF in France. There is a further trend in the industry to parse operating and maintenance contracts, with the vehicle supplier (such as Bombardier in Canada) often filling that role. Another alternative is to let the construction planner manage the capital expenditure phase and to start operations.

Contracting would be a rational service delivery approach for the railway. 4.3 The pool of potential contractors could include: 4.3.1 Private, rolling stock provider (e.g.: Bombardier); 4.3.2 Private, third-party contractors (e.g.: Vale, Rio Tinto…); 4.3.3 Freight railroad carriers (e.g., East Penn Railways or CSXT); and 4.3.4 Public entities that contract for service (e.g.: DBI, SNCF or Amtrak). Tariffs 4.4 Tariff to train operators has been calculated at 0,015 $ / T-Km. 4.5 The tariff to the cargo owner is at current 2010 value, proposed at 0,027 $ / T-Km, which is half the

best price practiced on existing network today. 4.6 Existing mines in the projects area include several other major production locations. For not

participating in the project, a higher price might be asked for. Attracting them will be one of the most important challenges of the railway operator. In fact, attraction of the project will be different for each and every cargo.

4.7 Copper of the belt valley is the most important potential client for Zambia, and Vale for Mozambique

project. 4.8 Other important stakeholders for the Mozambican link might be the Mulanje bauxite mine project

and the Illovo sugar estate. In a first stage, it had been considered to build an extension of the railway to the mine. Such option has been discarded as it would be difficult, at the project level, to be sure of the immediate implication of Mulanje operators. Consequently, the additional cost for extending the line was at high risk.

4.9 The copper belt is producing copper. With such high valued output, the security offered by the train

gives an advantage the existing road net cannot compete with. Transportation costs are not the most determining factor. The consultant used a price of 0,027 $ / T-Km. which, indeed, might easily be much higher and still attractive.

4.10 But on the Zambian link, return cargo will mainly be food crops, wich are very sensitive to transport

prices. It is important the cassava marketers can transport Cassava or potatoes at a low cost. 4.11 Illovo would benefit from a terminal facility. Our price results in a saving on present transportation

costs of approximately 18 $ for each transported Ton from origin to destination (not counting for the benefits of cane recollection through light rail and lower costs in inputs transportation).

4.12 The link would make possible the bauxite exploitation in Mulanje

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5 Recommendations Although operations should be managed by an operator (being or not the vehicle supplier) the Company should keep in mind its very fundamental responsibilities, which condition the profitability of the project: 5.1 Concession agreement with real commitment on price revision and residual value 5.2 Clear commitment from the Zambian Authorities and Malawi + Mozambique Authorities to achieve

the link on due time, to assume the wagons transit to destination, and, if possible, to provide return cargo, notably through lake service (Zambia) and Bauxite.

5.3 Good marketing of the line to the mining companies in the copperbelt, with an as-soon-as-possible agreement on quantities to be transported, with mutual commitment on tariffs, volumes, distances, and schedules.

5.4 Real organization of an efficient and at low cost lake service for food crops and cassava flour. 5.5 Good marketing of the line junction to the coal mining companies in Tete province. 5.6 Senior loan agreements at interesting cost, and, if possible, acceptation of the possibility to obtain

short term loans in bankable limits.

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Annex I: Logistic performance index The World Bank’s Logistics Performance Index uses a comprehensive approach in measuring critical factors of trade logistics performance such as the quality of infrastructure and logistics services, security of property from theft and looting, transparency of government procedures, macroeconomic conditions, and the underlying strength of institutions. The LPI is based on a web-based questionnaire completed by logistics professionals, i.e. operators or agents of the world’s largest logistics services providers. Respondents rate country performance using a 5-point scale on the following seven areas:

• Efficiency of clearance by customs and border agencies;

• Quality of transport and information technology infrastructure for logistics;

• Ease and affordability of arranging international shipments;

• Competence of the local logistics industry;

• Ability to trace and track international shipments;

• Domestic logistics cost; and

• Timeliness of shipments in reaching destination.

Each respondent also provides time and cost data, including the following:

• Rate of physical inspection (%);

• Customs clearance (days);

• Lead time for export and import (days);

• Number of border agencies for exports, for imports;

• Possibility of a review procedure; and

• Typical charge for a 40-foot container (export and import US$).

The data gathered through the surveys are synthesized or aggregated as weighted average on the seven areas in a composite index to allow for comparisons across about 150 countries.

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Annex J: The present situation of the passenger transport system Domestic passengers’ transportation A number of new bus operators, with the purchase of new fleet have improved public transport situation to such an extent that bus travel with varying degrees of comfort, depending of the route and the pocket of the traveller is now becoming once again a viable, safe and reliable form of personal transport to most popular destinations. Intercity coaches provide non-stop and fast services. The fastest and more flexible form of transport remains the minibus, both within the cities and on inter-city routes. Taxis come in all the shapes, sizes and conditions. Bicycle taxis are available in many places in Malawi. The bicycle has a passenger pillow on the baggage rack.

Nsanje

Blantyre

Muloza

NayuchiBalaka

Lilongwe

Tete Corridor

Salima

ChipataLusaka

Beira

Nkhata Bay

Monkey bay

Mzuzu

Karonga

Songwe

Tazara corridor

Dar

Zanzibar

Nairobi

Railway

Railway

Mozambique

Zambia

Mozambique

Harare

Jo’burg

Durban

Maputo

Beira

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Examples of Intercity coaches’ timetables AXA Timetables

There are no intermediate stages between Blantyre and Lilongwe, the coach is direct

Other Stages for Luxury Coach include Zalewa, Chiingeni, Dedza, Mponela, Madisi, Jenda and Mzimba

Other stages for City Trouper include Liwonde, Balaka, Dedza, Mponela, Kasungu, Jenda, Mzimba, Phwezi and Chiweta

There are other services for Country Commuter throughout the Country connecting almost every district in Malawi

Very little has been studied related to passengers’ transportation, either by rail or on the lake. In fact, travel by train is not presently a viable option except for the desperate: unreliable services and low frequency are common public beliefs.

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CEAR passenger traffic performance for the past 3 years averaged about 680,000 passengers per annum.

This is below the budgeted annual levels. The reduction from year 2008 level to that of year 2009 is

partly due to reduced frequency of services owing to washes-away and flooding on the Limbe –

Makhanga route, low locomotive availability and limited number of coaches.

THE CENTRAL EAST AFRICAN RAILWAYS COMPANY LIMITED

PASSENGER STATISTICS

Year 2005 TO 31 December 2009

Year 2005 2006 2007 2008 2009 TOTALS

Month Pass Pass Pass Pass Pass Pass

déc-99 -

Jan 12 357 35 238 39 744 23 731 111 070

Feb 12 902 14 082 22 174 54 645 26 013 129 816

Mar 16 953 20 551 18 258 95 898 34 404 186 064

Apr 21 578 37 788 36 660 96 754 44 860 237 640

May 22 620 44 352 48 610 111 021 49 420 276 023

Jun 27 440 51 690 59 628 69 443 53 973 262 174

Jul 31 260 52 629 61 211 76 685 62 077 283 862

Aug 34 091 53 756 70 420 51 087 60 169 269 523

Sep 3 637 52 285 67 620 46 625 53 528 223 695

Oct 54 591 79 248 51 374 71 997 257 210

Nov 49 286 75 700 65 170 45 326 235 482

Dec 61 397 77 539 55 601 46 994 241 531

Total 182 838 492 407 652 306 814 047 572 492 2 714 090

PASSENGERS

Year 2005 Year 2006 Year 2007 Year 2008 Year 2009 TOTALS

Passengers 182 838 492 407 652 306 814 047 572 492 2 714 090 What should be underlined is the total absence of “business trips” transportation offer on either mode. It is amazing that most people at CEAR or at CRR consider passenger transportation as a social service, and never as a profitable potential market.

At a domestic level, providing a commercial passengers service by rail necessitate first a Copernican revolution in the role of rail. If it is quite obvious to anybody that trips above 3 to 4 hours might preferably be done by a more comfortable mean than road, train does not appear today as a credible alternative.

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In order to be competitive in such rides like Blantyre-Lilongwe, which represent a potential of several hundreds passengers daily, the train must provide as a minimum service: - Daily frequency; - Respected time schedules; - Acceptable and market adapted time schedules (i.e. night service); - An average speed over 50 km/hours (which makes the trip twice longer than the road trip); - Security against potential thieves (which might be granted by velocity and non-stop trains); - Safety (train might be much safer than road); - Comfort (it would be quite easy to provide comfortable wagons, including sleeping coaches); - Available information and high level waiters’ services (everything is to be done). Regarding the lake services, passengers’ transportation is even lower than train.

Years Passengers

2003 66,902

2004 66,008

2005 62,037

2006 58,656

2007 68,309

2008 72,095

2009 71,545

When comparing these figures to demographic data in Malawi, it appears that inland water passengers’ transport is anecdotic. Domestic transport at Chileka Airport for the past three years. Domestic Air transportation has been declining in recent years:

2006/07 2007/08 2008/09

Domestic Aircraft 4,190 4,009 4,100

Domestic Passengers 59,562 46,054 47,331

Domestic Cargo (Kg) 349,466 524,644 437,055

The aircraft movement, passenger traffic and cargo tonnage registered negative growth rates in addition to negative rates in the years 2001 to 2004. Reduction of domestic flights is due to operational challenges being faced by the domestic airline. International passengers’ transport

At an international level, two aspects of passengers’ services have been neglected: business travel and tourism development. This is true either for the road mode or for air transportation.

Business trips along the corridors are only by road today, except for Dar es Salaam and Lubumbashi, which are linked to Lilongwe by air.

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Statistics for KIA for the past three years.

2006/07 2007/08 2008/09

International Aircraft 5,203 5,181 4,394

International Passengers 231,352 256,072 246,795

International Cargo (Kg) 5,979,588 6,369,800 6,111,262

The Aircraft movement, passenger traffic and cargo tonnage all declined significantly in 2009. It is at least partly due to the second round effects of the global recession.

Still, one can wonder whether the routes are adapted to the demand, either for business trips or tourism needs.

Lusaka

Zambia

Blantyre

Mozambique

Harare

Zimbabwe

Jo’burg

South Africa

Moatize Mine

Tanzania

Nacala

Beira

Chinde

Dar Es Salam

Lilongwe

Transhipment

Maputo

Durban

Businessmen

needs.

Lubumbashi

Congo

Missing air link

Existing air link

Possible air link

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To Nairobi & Arusha

Victoria Falls

To RSA

NO DIRECT LINK TO

EUROPE & THE UK

Domestic Transportation System Distribution in 2006 (last data obtained)

Domestic Traffic Distribution by Transport Mode

2001 2002 2003 2004 2005

Freight (000 tons)

Rail 257 184 115 106 103

Road 229 279 236 234 230

Lake 5 8 4 6 7

Air (international) 3,9 9 3,5 1,9 2,6

Passengers ('000)

Rail 599 603 532 381 321

Road 74 888 92 610 75 335 71 640 70 347

Lake 70 76 78 82 88

Air (international) 307,8 282 283,7 239,5 244

Vehicle registration (000) 14,1 9,7 7,4 7,8 8,1

Source: Ministry of Transport and Public Works

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Annex K: OTHER TRANSPORTATION PROJECTS: AIR The projects in the airways fields are the following:

1. The Upgrading of Chileka Airport; 2. The Rehabilitation of Kamuzu International Airport 3. The Construction of the Hotel, Airport and Golf Course at Cape Maclear; 4. The Construction of New Mzuzu Airport; 5. The Construction of the New Mangochi Airport;

Although the air transportation system has not been studied at that stage by the consultant, the effectiveness of many airports with low traffic and poor links, especially East-West are characteristic of the Malawian air services. A draft question should then be: Wouldn’t it be more effective to concentrate new international activities in one airport, which might ideally be located in a place attractive for international tourism and altogether not so far from major population centers? As such, the idea of developing a unique and very effective international airport in Mangochi or Liwonde might prove an excellent development for the country economy, facilitate tourism development altogether with regional integration, through the opening of airlines to important business centres like Beira Harare Maputo Lusaka and Nampula (Nacala). Such airport might work as a hub for a wide “Nacala-Beira-Lusaka corridor”

32

New internatioanl airport close to tourist sites (Liwonde- Mangochi ?)

To Harare To Maputo

Importance of getting a passengers train between new

airport and existing ones

Karonga

Proposal for new connections and positionning a new international airport

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Chipoka

Salima

Nacala

Chipata

Dar Es Salam Mbeya

Bangula

Beira

Moatize

Canona

Chinde

Tete

Mtwara

Liwonde

Chilumba & Karonga

Lilongwe

Blantyre

Durban

Passengers services in 2020

Islands & Mozambique Mzuzu

Mwawa

Nkhata Bay

Monkey Bay

Lusaka

Nsanje

Zomba

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Annex L : 1st Workshop in Blantyre

Government of Malawi

Ministry of Transport and Public Infrastructure

Transport Sector Investment Programme (TSIP)

Stakeholders’ Workshop 18th June 2010

Workshop Report

June 2010

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1. INTRODUCTION 1.1 Objectives The Ministry of Transport and Public Infrastructure is developing a Multimodal Transport Sector Programme, with the assistance of the European Union and World Bank. The objectives of the study are to design an overall strategy for multimodal development in the transport sector in Malawi, with emphasis on the private sector participation on regional and international corridors with an aim of reducing export and import transport costs, i.e. reduce costs of exporting raw materials and importing inputs and final goods. Consultants to the World Bank undertook a data collection exercise, and Safege, contracted by the European Union, are currently analysing the data, and developing the multimodal transport strategy. As part of the strategy development, the Ministry of Transport and Public Infrastructure and Safege organised a workshop designed to validate the study methodology, and to identify key constraints the consultants proposed interim transport strategy. Logistic support for the workshop was provided by Scott Wilson, the INSTAP Technical Assistants. 2. WORKSHOP ORGANISATION 2.1 Location The workshop was held at the Mount Sochi Hotel in Blantyre. Blantyre was chosen as the workshop location, as it provided a convenient venue for a number of private sector participants, particularly those involved in agriculture. As Shaun Saunders, Logistics Manager for Illovo Sugar pointed out: “If the workshop had been in Lilongwe, I doubt very much if I could have afforded the time off to attend.” 2.2 Programme The workshop was arranged with a starting plenary session that included the main presentation of the Safege consultants. This was followed by four parallel discussion groups, which were each tasked with addressing separate issues. The groups reported back to the main plenary at the end of the day, in line with the planned programme, shown in Appendix A. The discussion groups allowed all workshop attendees to participate fully in discussions and make their points of view. Shaun Saunders again : “I was not sure if I would stay for the whole day, but once I got involved in the discussion group I found it very well organised and it allowed us all to get our ideas across.” 2.3 Attendees Invitations were extended to the following organisations: Government Ministries and Parliament Ministry of Transport and Public Infrastructure Ministry of Finance Ministry of Industry and Trade Ministry of Development Planning and Cooperation Ministry of Local Government and Rural Development Ministry of Information and Civic Education Ministry of Foreign Affairs Ministry of Tourism, Wildlife and Culture Ministry of Gender, Child Development and Community Development Parliamentary Committee on Transport and Works Government Agencies and Departments Roads Fund Administration Roads Authority

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Malawi Police Road Traffic Directorate Department of Civil Aviation Marine Department Airports Development Limited Privatisation Commission Private Sector Road Transport Operators Association Minibus Owners Association Malawi Confederation of Chambers of Commerce and Industry Central East African Railways Illovo Sugar National Construction Industry Council Blanmil Limited MCCL ECAMA Combine Cargo Standard Bank Farmers World Development Partners European Union World Bank Embassy of Japan JICA African Development Bank Millennium Challenge Account Chinese Embassy Consultants Safege Scott Wilson Others University of Malawi Press Virtually all the organisations listed above were represented at the workshop, as shown in Appendix B.

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3. WORKSHOP PRESENTATIONS The Workshop was introduced by the Director of Transport Planning, Ministry of Transport and Public Infrastructure, who drew attention to the fact that the recent joint Transport Sector Review, held in Lilongwe, had identified the need for a multi-modal transport system for Malawi, and that it was the intention of the present study to prepare this. As Chairman of the workshop, Dr Magwira, Permanent Secretary of the Ministry of Transport and Public Infrastructure said that the Government, in pursuit of economic growth, placed a high priority on infrastructure, with a focus on transport. Now, the Government, with development partner support was developing a multi-modal study to determine the investment requirements. The study would provide an overall strategy for multi-modal development; would review transport corridors, assess the main economic sectors for growth, and assess the potential for private-public partnerships in transport projects. Francis Kasaila, Deputy Minister for Transport, pointed out that the Government fully supported this study, whose aim was to reduce transport costs. He welcomed the dialogue between Government, the private sector and development partners. He requested participants to come up with constructive ideas that could be used in the preparation of a robust TSIP. Thierry Molinier, on behalf of Safege, said that the first aim of the workshop was to validate the study methodology being presented, and that the second was to identify constraints to the development of the multi-modal strategic being proposed. His presentation is reproduced in Appendix C. Discussion It was pointed out that corridor names using should be consistent with the Designated Names for Corridors. The consultants’ report would benefit from an executive summary. It was pointed out that the consultants had shown data in their report which was often out-of-date. The consultants said that up-to-date data were not readily available from Government sources, but the data trends and key commodity statistics had been verified by informal discussions with mainly private sector stakeholders. They felt that the general conclusions would not be changed by including newer data, but nevertheless, appealed to Government to make new data available if this were at all possible. It was observed that air transport (both domestic and international) was not given sufficient weight in the report. The consultant responded that demand for air transport, especially domestic, was very low. It was pointed out that there was a need to integrate national plans of this kind with Regional Masterplans, e.g. those developed by AU or SADC. Sight should not be lost of previous studies in the sector, and co-ordination was required.

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4. DISCUSSION GROUPS 4.1 Discussion Group Organisation Four discussion groups were established to cover: Inter-Government Dependant Issues Government fostering trade facilitation Cargo Management; and Inter-modal passenger transport Each group was invited to consider obstacles, potential solutions, and possible impacts of a range of sub-issues as shown in the briefing material shown in Appendix D. Group members are listed in Appendix E, and the results of the deliberations given below. Discussion Group Reports

Group 1: Inter-Government Dependant Issues

Inter-Government Agreements Obstacles Implementation of agreements Process of developing agreements Outdated agreements Lack of monitoring mechanisms Enacting them in the laws failure to enforce Potential Solutions Regular meetings to review agreements specifically on rail, air and water transport Enacting the agreements in the laws for proper enforcement Implementing agencies to be fully aware of agreements Proper consultation with stakeholders on the agreements Impacts Increase consultation of stakeholders

Group 2: One Stop Customs/Immigration Facilities

Obstacles No one stop facilities in Malawi (Chirundu on Zambia/Zimbabwe border has one) Too much time taken in clearing cargo; negative social impacts Different documentation between countries results in cargo delays Potential Solutions Reduce and harmonise clearance documents and system Speed-up implementation of 1-stop facilities at all border posts (agreements, legal instruments and infrastructure) Impacts Lack of 1-stop facilities can result in higher HIV infection due to longer stays at borders Better business environment and reduction in corruption

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Transit Obstacles Non tariff barriers- laws differ by country eg axle loads Taxes – transit fees, bonds required to transit fuel, increased risk of bribes/corruption Lack of resting places for truckers Language problem Potential Solutions Harmonisation of laws, working procedures, Databases for tracking cargo Creating rest places on corridors Impacts Reduce transport costs Positive impact on social issues eg HIV, trafficking Malawi Customs in Seaports Obstacles Protective laws of sea countries Lack of confidence in destination countries regarding dumping cleared goods Potential Solutions Multi-lateral and bi-lateral agreement Harmonised database, tracking and seals System of common penalties for defaulters Impacts Reduce transport costs and times Government Role in Fostering Trade Facilitation Credit Facilitation to Assist Import/Export planning Obstacles Insufficient Forex for imports (manufacturers have scaled down operations) Lack of import/export guarantee schemes Lack of development banks for long term projects eg mining Un-coordinated release of cargoes at ports esp. Beira, some commodities given priority Potential Solutions Enhance control of Forex management measures Increase exports to get more Forex Introduce Export Credit Guarantee schemes Establish development banks and or Exim banks Impacts Increase opportunities for private sector participation in economic development Forex will be more available for strategic investment to spur economic growth Export growth Cost reductions in transport

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Electronic Banking Obstacles Lack of and poor infrastructure and services at borders Poor communication facilities eg telephone networks Potential Solutions Provide adequate investment in energy and telecoms Strengthen banking security regulations Impacts Smooth flow of cargo at borders Databases on Trade and Cargo, other than ASCUDA Obstacles ASCUDA system is very limited (AP-plus used in France is better) Un-coordinated data collection systems, Min of Trade does not have full statistics Potential Solutions Establish and institutionalise transport sector statistics database Carry out regular data surveys Impacts Improved cargo flow

Group 3 : Cargo Management

Consolidation, Warehousing and Storage Sugar : Bangula Warehouses isolated due to Chiromo washaway Strategy to move sugar direct to port (Nacala 70%, Beira 30%) and store there Need staging facility to link Lake to Dwangwa mill Handling issue – Dwanga sugar packaging (balers) needs special handling Tobacco : green leaf has limited access by rail to warehouses, some old stations have been converted Cotton: Bangula ginnery – no rail access, quantities have gone down Fuel : Beira to Nsanje fuel line is big improvement, rail and road should be internal transport Fuel : Facilities at Chipoka and Chilumba, and MV Ufulu underutilised Clinker : from Ndola to Blantyre by road, could use rail from Mchinji if there was storage there Bangula could be intermodal hub for consolidation etc – links to Nacala, Beira, Nsanje, Mchinji New Products Uranium – why is there no safe port closer than Walvis Bay Mozambique Government needs to commit more to safety Lower Shire – green belt initiative – high level canal could be used by cane, cotton and new agricultural products Need for rail line into Chikwawa – cane and sugar expansion (additional 1 M tonnes per year of cane)

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Strategic Nodes

Chipoka

Chilumba

Lakeshore

Bangula

Liwonde

Nsanje

Mbeya

Stop clearing customs on rail line at Liwonde – allow trains to run to Blantyre or Lilongwe and have 2 centres

Time management for containers MRA should have a fully computerised system that works One rail management Infrastrasture improvements required Mulanje to Nacala road Tete Bridge Nsanje – Mutara road and rail Beira dredging Chikwawa-Mwanza road short-cut to Beira (upgrading) Government database on quantities and commodities movements Satellite tracking of cargo on trains Railway tracking website Improved turnaround of rolling stock needed Dedicated trains for major commodities (eg sugar) without changing locos

Group 4 : Inter-modal Passenger Transport

Within country Obstacles Lack of finances (national budget limitation) Lack of capacity in local authorities to plan, implement, monitor service delivery Lack of critical mass Limited availability of land for transport infrastructure expansion Lack of physical infrastructure eg no parking facilities and limited bus bays, port facilities, railway stations and airport facilities. Poor transport mode linkages No mechanisms to monitor service provider to ensure that the facilities are user friendly to the physically challenged Solutions Adequate funding: Explore other sources of funding to complement govt funding e.g. User fees; Explore PPP & BOT potentials Facilitate capacity development in local authorities to enable them perform their responsibilities. However, devolution of some functions under transport is a priority in improving their capacity Provide appropriate transport infrastructure services to meet the available demand and provide appropriate transport inter-linkages to utilise the demand in the neighbouring countries Encourage efficient land use e.g. multi story buildings, no encroachment in the road reserve

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Impacts Increased user cost Better service provided Improved service Increased development able to attract private sector investment Business travel within the corridors Obstacles ICT Power Language Limited capacity infrastructure Varying priorities between governments No formal transport providers e.g. Malawi to Nacala/Beira Varying priorities between governments e.g. No administrative arrangements at Nampula to accommodate Malawi air passengers Poor services at the borders Solutions Improved transport mode linkages Provision of physical infrastructures e.g. Bus bays & ports Put proper mechanism to monitor the service providers operations and facilities Impacts Better services provided Coordination with tourism development Obstacles Lack of capacity to provide appropriate services in order to meet development No information desk at most the entry points Poor transport networks to tourist sites (including poor transport linkages with other neighbouring countries) Solutions Provision of ICT facilities and transport infrastructure facilities Harmonisation of government priorities

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Left to right : Victor Lungu, Dr MP Magwira, Thierry Molinier

Comments on Group Discussion It was noted that Nkhata Bay port should be the strategic node for the Mtwara corridor, rather than Chilumba Nearly all the groups reported on the need for government databases in the sector to be improved. Dr Charles Kaira, (INSTAP TA) reported that part of the technical assistance programme was preparing new databases for transport sector monitoring indicators. The issue of the language barrier could be addressed by having better facilities at borders such as banks, restaurants etc, whereby languages would necessarily be exchanged and informally learnt. 4. WAY FORWARD The consultants said that they had found the workshop extremely useful, and would take the issues raised into account in developing the transport sector investment plan. They said that a second workshop would be organized in around one month’s time at which the consultants would present specific projects for investment. At that workshop it would be important to ensure that all potential investors are encouraged to attend.

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Appendix A: Programme

PROGRAMME FOR TRANSPORT SECTOR INVESTMENT PLAN WORKSHOP AT MOUNT SOCHE HOTEL, BLANTYRE 18TH JUNE, 2010 08:30 Registration 09:00 Administrative Arrangements for Workshop - Victor Lungu, Director of Transport Planning 9:10 Study Objectives and Methodology, Dr. M.P. Magwira – Ministry of Transport and Public

Infrastructure 9:20 Opening Remarks – Deputy Minister of Transport, Honourable Francis Kasaila M.P 9:30 Presentation on main concepts of the TSIP, Thierry Molinier, Consultant, Safege 10:15 TEA BREAK 10:45 Questions and clarifications on the presentation 11:15 Modalities for the Group Discussions, Dr Charles Kaira – INSTAP Team Leader 11:30 Break-out Group Discussions (Continued) 13:00 LUNCH BREAK 14:00 Break-Out Group Discussions (Continued) 15:30 TEA BREAK 15:45 Reports back to Plenary Session 16:30 Conclusions from the Workshop - Chairman 16:45 Remarks and Way Ahead, Consultants 16:55 Closing Remarks 17:00 End of Programme

Transport Sector Investment Programme

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Appendix B : Workshop Attendees Name Organisation

Hon. Francis Kasaila, MP Deputy Minister for Transport

Hon. G.C. Munthali, MP Parliamentary Committee on Transport and Public Works

Dr M.P. Magwira Permanent Secretary, MoTPI

Victor Lungu Director of Planning, MoTPI

Owen Nalivaka MoTPI

Wyson Kamala MoTPI

Thaf Mlebe MoTPI

Patrick Lapukeni Corridors Development Manager, MoTPI

Chimwemwe Kanda MoTPI

Geoffrey Magwede Railway Transport Division, MoTPI

Laston Makuzula Marine Department

A.B. Moyo Malawi Police Service

Ralph Malikebu Roads Fund Administration

John Ndola Roads Department, MoTPI

Grant Mbellah Plant and Vehicle Hire Organisation

Simon Manuthuwa Plant and Vehicle Hire Organisation

Steve Siwande Roads Authority

M. A. Malonje Airports Development Limited

James Chirwa Road Traffic Directorate

Charles Thupi National Road Safety Council

Misheck Longwe Ministry of Industry and Trade

Solomon Chirambo Ministry of Local Government and Rural Development

Jameson Salima Ministry of Information and Civic Education

Grace Gondwe Ministry of Planning

Noel German NAO Support Unit, Ministry of Finance

Jack Thabwa ESCOM

Dr Ignatius Ngoma T2 Centre, Polytechnic, University of Malawi

W.Maloya Road Transporters Association

Shadreck Maloya Road Transport Operators Association

Hendry Chimwaza Central East African Railways

Abdul Rashid Osman Blanmil Limited

GM Banda Malawi Economic Justice Network

Shaun Saunders Illovo Sugar (Malawi) Ltd.

Chimwemwe Mtegha National Construction Industry Council

Rehema Mvula Malawi Confederation of Chambers of Commerce and Industry

PA Christie MCC Limited

Christopher Chisesele Minibus Owners Association of Malawi

Susan Banda Millenium Challenge Account

Penjani Kayira Millenium Challenge Account

Godfrey Kapalamula JICA

Cecile Leemans EU

Thierry Molinier Safege

Olivier Crouzier Safege

Dr Charles Kaira Scott Wilson, INSTAP TA

Dr Sion Haworth Scott Wilson, INSTAP TA

Lawrence Maganga Malawi News Agency

Clement Gawani Guardian Newspapers

Robert Kumwenda Big Issue Magazine

Charles Chataza Star FM Radio

Secretariat

Sophie Chakana MoTPI

Martha Malota MoTPI

Zione Nkhoma MoTPI

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Appendix D : Issues for Discussion by Groups General What are the obstacles to development of strategic transport infrastructure and services, both passenger and freight? What potential solutions can be put forward to overcome these obstacles? How do potential solutions impact on other stakeholders? Groups 1. Inter-Government dependent Issues

o Inter-Government agreements o customs, one-stop facilities o transit cargo o potential for Malawian customs in seaports

2. Government role in fostering trade facilitation

o Credit facilitation to assist import/export planning, e.g. timing of containerised cargo o Electronic banking at borders o Databases on trade and cargoes in addition to ASCUDA

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3. Cargo Management

o Consolidation and warehousing for commodities and inputs o Storage – management and efficiency o Strategic transport nodes where processing activities can add value o Time management for containers, trucks, rail wagons, ports

4. Inter-Modal Passenger Transport

o Within the country – long distance (lake for north-south, rail for north-south, and east-west) o International business travel through the corridors o Tourism - Co-ordination with tourism development

Appendix E : Discussion Group Members Group 1 Patrick Lapukeni James Chriwa A.B. Moyo W. Maloya Mishek Longwe Susan Banda Owen Nalivaka Cecile Leemans Jameson Salima Lawrenace Maganga Group 2 Rehema Mvula Hon G.C. Munthali Laston Makuzula Ralph Malikebu Grant Mbellah Penjani Kayira Simon Namuthuwa Victor Lungu Noel German Group 3 Jack Thabwa Dr I Ngoma Shain Saunders P.A. Chitsime Hendry Chimwaza Abdul Rashid Osman Geoffrey Magwede Chimwemwe Kaunda Godfrey Kapalamula Robert Kumwenda Group 4 Steve Siwande

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Misheck Chisi Chimwemwe Mtegha Grace Gondwe M.A. Malonje Solomon Chirambo Christopher Chisesele Charles Thupi Thaf Mlebe Clement Gawani

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Annex K: 2nd Workshop in Lilongwe

Government of Malawi

Ministry of Transport and Public Infrastructure

Transport Sector Investment Programme (TSIP)

Stakeholders’ Workshop 29th July 2010

Workshop Report

July 2010

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Presentation of the future Transport Demands, criteria for mode and corridor choice, forecasts of expected cargo by mode and corridor, identification of the missing links -Thierry Molinier, consultant

E.Asebe : From a general diagnostic of insufficiencies, review possible solutions within and out of Malawi and select “win-win” solutions for Malawi and neighbouring countries JICA : Time line for Chiromo Bridge ? THM : As soon as possible starting in 2011 JICA : Study about missing link with Beira/Sena Line is due by October 2010 JC : Impacts of the consultants proposals on economy and on environment (EIR) ? Affordable transport prices = Efficient transportation system … Workers in the Copper Belt may prefer to make a better living in working at mines as they might import Cassava or maize from Malawi (Malawi = Maize and Cassava belt) Cargo crossing the country = cheaper return cargo that means cheaper fertilizers, cheaper diesel/paraffin, … New Transport Organization means efficiency for exporting cotton/sugar/maize/Cassava SDV (Joseph Chavula): Interest of linking the CEAR railway to Sena Line by a 70 km link It is answered by Thierry Molinier that: This link is first difficult to built (crossing of the Zambezi river and a lot of marshes to deal with) It could add a non necessary rail competitive pressure on Nsanje Port and the Shire-Zambezi waterway Possible development of Port of Chinde : Why not erecting breakwaters to allow deap sea ships to load heavy bulk fret (coal from Moatize using barges) ? The example of Le Havre Port has been mentioned … Breakwaters are about 1km of length ThM remember the assistance that Chinde is a small fishermen cove but nothing else. O.Crouzier answered that the investment of such infrastructure is (unfortunately maybe) at the good will of Mozambicans and they have a deep concern regarding shrimps farming in that precise zone. The attendants validated that a feasibility study regarding the creation of a deap water port is to be launched to validate/unvalidate(for good) this option. About Shire-Zambezi Corridor Beira limitations : No further possibility of exiting huge quantities in excess of 6 millions tons/year … so even if Chinde would technically allow a transhipment to Beira, Beira would not be in a position of accepting extra cargo from Zambezi waterway Connexions between the rest of the country and Nsanje are actually inexistent => necessity of building the Chiromo Bridge and get a railway link to the Nsanje Port (35 km from Bangula ?) A connexion between Moatize/Tete (52 km) through sugar/cotton estates would allow some coal to be send to Nsanje (limitations in quantities: 500,000 tons) and be loaded on barges to be down streamed to Chinde and then Beira. Navigability of Shire and Zambezi : Pb of vegetation in the meanders (sugar canes debris that are thrown downstream and grow again in the water banks constituted from clay. Dredging in Shire and Zambezi is necessary … but it could be assumed that 400 tons barges with 1,5 m draft might go downstream in shallow waters in avoiding sand banks.

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DOMESTIC INTERMODAL CORRIDOR INVESTMENT PLAN Proposed priority plan: Domestic North – South Corridor PRIORITY PLAN (2013-2015): NORTH- SOUTH CORRIDOR and LINK TO BEIRA LINE by the WEST.

Mode From To Investment Cost

Road Transport Approx. 10 M $

M1 Nsanje Bangula Rehabilitation On-going

M1 Bangula Chikwawa Rehabilitation On-going

M1 Dedza Lilongwe Widening 3 M$

M3 Blantyre Zomba Rehabilitation/widening Public (ADB) 3 M $

M3 Liwonde Mangochi Rehabilitation/widening 3 M$

S128 Crossroad M3 Monkey Bay Widening 1 M$

Lake Transport Approx. 40 M $

Cargo Transport Chipoka Chilumba Dredging at Chipoka dredging barge

PPP 6M$

Night RoRo ferry Monkey Bay Chilumba Beaching Slip RoRo vessel PPP 14M $

Sugar transport Ngala Chipoka Dwanga floating jetty Barges Private or PPP

Night Ferry MONKEY B Kaponga Vehicle ferry Public or PPP

Rail transport Approx. 200 M $

Link with Moatize Bangula Doa Construction of 52 km railway line New PPP

link to Nsanje Port Bangula Nsanje Rehabilitation of 34 km line

Cear south Liwonde Bangula Rehabilitation of 200 km

1

Nsanje

Blantyre

Muloza

Nayuchi Nacala corridorBalaka

Lilongwe

Harare

Salima

ChipataLusaka

Beira corridor

Nkhata Bay Mbamba bayMzuzu

Karonga

Songwe

Northern corridor

Railway

Railway

Mozambique

Zambia

Mozambique

Durban

Mtwara corridor

M’Beya

Monkey BayChipoka

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CHOICE OF AN INTEGRATED MAIN REGIONAL CORRIDOR The choice of a main corridor for international development was deduced from the unconstrained choices for a mode of transport and unconstrained choice of a corridor. The unconstrained choices allowed the consultant to affect the volumes of transport on the main links, either within Malawi or in neighbouring countries and to identify the missing links in order to have an efficient transport system. A careful study of these choices proves that some corridors might be discarded on the long term - the Mtwara and Nacala Road Corridors present few advantages. Some key destinations will remain anyway. Durban and its Southern Road Corridor, and Dar Es Salam and its TAZARA corridor will continue to capture most containerized valuable import cargo, and additionally some heavy loading products such as clinker, whose production is an economically viable distance from the Malawi consumers. The main competitors for a priority intermodal corridor will be Nacala Rail and Beira, with its three potential services: SENA rail line, road and SHIRE-ZAMBEZI water transport. The study assessed these two corridors in terms of: geographical situations; to the huge volumes which would transit on them, (especially in its Malawi part); and the physical characteristic of the ports. The study concluded that the NACALA rail corridor should be chosen as the main corridor for international development. Additionally, the NACALA corridor presents the major advantage to be able to integrate the WESTERN corridor to Zambia and Congo. However, Beira will still present the advantage of being more efficient and having regular links to Durban, but will be, in the long term, congested by the increases of production from the Tete province and by anticipated growth in the Zimbabwian economy. Therefore, this corridor might be regarded as a short term alternative to Nacala, and the efforts to be made should rather be to allow transfers of mode on the corridor from road to less costly transportation modes, as the water or the SENA line. Both alternative present also severe limitations: the Shire-Zambezi project should take place within some navigability limits (vegetation, sands and meanders problems); and a rail link from Bangula to Nsanje MUST be rebuilt irrespective of the navigability of the river. The SENA line connection must also be done, but, due to the projected activity on the line, should be as far north as the gradient allows. The consultant recommends an alignment along the Bangula latitude. This choice will allow interconnecting the Shire-Zambezi corridor, the Nacala Line and the SENA line in a coherent network. International Corridor Map

Rutenga

Bulawayo

Victoria Falls

Livingstone

Mazabuka

Lusaka

Kanona

Tunduma

Mbeya

Beira

Nacala

Dar Es Salam

ZIMBABWE

MOZAMBIQUE

ZAMBIA

BOTSWANA

CONGOTANZANIA

Tete

Harare

Mzuzu

Lilongwe

Blantyre

Chipata?

Chinde

Strategic Scheme

NsanjeDoaSENA Moatize

KapongaTAZARA

COPPER Belt

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International Transport Corridor Investment Plan

Road Transport Origin Destination Nature of works Observations

Southern corridor Lilongwe Dedza M1 Widening

Nacala corridor Upgrading Feeder Roads

Tazara corridor Kaponga M’beya –

Air Transport Business Flights

Short distances Carriers

Necessary for business development

Lilongwe Maputo

Blantyre Nampula

Blantyre Maputo

Railway Transport (Cargo)

Nacala corridor Malangono Cuamba Rehabilitation of 77km Mozambique

North-South Domestic Corridor Limbe Bangula Rehabilitation of the line Chiromo bridge already rebuilt

Integration western corridor & Nacala corridor

Chipata Canona Construction of 260 km linking TAZARA to CEAR Zambia

Construction of a mineral terminal in Nacala

Nacala Mozambique

Water Transportation

Shire-Zambezi Nsanje Construction of 2 quays of 100 m

Already in construction

Shire-Zambezi Nsange Chinde Cargo barges 12 Barges (385 T capacity)

Shire Navigability Nsanje Border Pilot boats for vegetation cleaning

2 boats

Shire & Zambezi Navigability Border Shinde Dredging 3 dredging barges

Shire-Zambezi corridor Shinde Beira Transfer of cargo in the delta or barges going to Beira ?

Passengers boats Nsange Chinde Boats hotels 6 boats – 12 guests capacity

Organizational aspects Origin Destination Nature of works Observations

Nacala corridor Nacala All inland countries

Border services in Nacala for all destinations countries

Should include financial and banking services

Nacala corridor all overseas Nacala Create sufficient volumes to have an extended shipping services and boats calling at port

Should include marketing the corridor overseas

Nacala corridor Nacala Malawi, Zambia

Facilitated border crossing, with one border point

Include banking, communication, rest facilities

Malawi entrances to Nacala corridor

Lilongwe, Salima, Chipoka, Balaka, Liwonde, Blantyre, Limbe, Bangula, Nsanje

Creation of warehouses and custom-free facilities, consolidation facilities for both cargoes and documents, business centres. Includes trainings to international trade and logistics.

Other economic aspects Sector Place Nature of works Observations

Nacala corridor Agro-industry Nkhata Bay Equipment for Cassava flour

Should consider alimentation and pharmaceutical aspects

Nacala corridor Agro-industry Mzuzu area Development of pig-breeding industry for the by-products of casssava and sweet potato

Should include marketing abroad

Nacala corridor, TAZARA. Energy production

Kaleyekera, Kasungu, Salima, Chipoka, Kanyika, Chimwazulu,Mulanje, Mbemba.

Coal power factories for mining.

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2nd Part : the debate E.Asebe : From a general diagnostic of insufficiencies, review possible solutions within and out of Malawi and select “win-win” solutions for Malawi and neighbouring countries JICA : Time line for Chiromo Bridge ? THM : As soon as possible starting in 2011 JICA : Study about missing link with Beira/Sena Line is due by October 2010 JC : Impacts of the consultants proposals on economy and on environment (EIR) ? Affordable transport prices = Efficient transportation system … Workers in the Copper Belt may prefer to make a better living in working at mines as they might import Cassava or maize from Malawi (Malawi = Maize and Cassava belt) Cargo crossing the country = cheaper return cargo that means cheaper fertilizers, cheaper diesel/paraffin, … New Transport Organization means efficiency for exporting cotton/sugar/maize/Cassava SDV (Joseph Chavula) : Interest of linking the CEAR railway to Sena Line by a 70 km link south of NsanjeIt is answered by Thierry Molinier that: This link is first difficult to built (crossing of the Zambezi river and a tropical forest to deal with) It could add a non necessary rail competitive pressure on Nsanje Port and the Shire-Zambezi waterway. ThM thinks that the interest of Malawi would be to facilitate the diversion of traffic to Beira by using the Shire-Zambezi corridor. About Shire-Zambezi Corridor Beira limitations: No further possibility of exiting huge quantities in excess of 10 millions tons/year … so even if Chinde can technically allow a transhipment to Beira, Beira would not be in a position of accepting a lot of extra cargo from Zambezi waterway. ThM thinks that the real opportunity for Shire-Zambezi is to use relatively small barges (385T) and have a total capacity of 1MT/year in Nsanje. (500 000 each way). The barges from Chinde to Beira should be small enough to enter the Zambezi mouth. Thus they cannot travel to Nacala in safe conditions. Possible development of Deep Sea Port of Chinde : Why not erecting breakwaters to allow deep sea ships to load heavy bulk fret (coal from Moatize using barges) ? The example of Le Havre Port has been mentioned … Breakwaters are about 1km of length ThM remember the assistance that Chinde is a small fishermen cove, and building harbour facilities on the sand would be justified for much bigger cargo only. Le Havre is the harbour of Paris, and the volumes handled in these facilities are 200 MT per year. O.Crouzier added that the investment of such infrastructure is (unfortunately) at the good will of Mozambicans and they have a deep concern regarding shrimps farming in that precise zone. The attendants validated that a feasibility study regarding the creation of a deep water port is to be launched to validate/invalidate (for good) this option. Connexions between the rest of the country and Nsanje are actually inexistent => necessity of building the Chiromo Bridge and get a railway link to the Nsanje Port (35 km from Bangula ?) A connexion between Moatize/Tete (52 km) through sugar/cotton estates would allow some coal to be send to Nsanje (limitations in quantities: 500,000 tons) and be loaded on barges to be down streamed to Chinde and then Beira. Navigability of Shire and Zambezi : Pb of vegetation in the meanders (sugar canes debris that are thrown downstream and grow again in the water banks constituted from clay. Dredging in Shire and Zambezi is necessary … but it could be assumed that 400 tons barges with 1,5 m draft might go downstream in shallow waters in avoiding sand banks.

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Part 3 : the Groups work Group A: Rail major investment programme. Discussion of the choices presented. Group B: Rail operations. Discussion of possible modalities of operating the infrastructure, the rolling stock, the transport services both for cargo and passengers. Group C: Inland water transportation. Discussion of recommended investments and of possible modalities of operating ports and vessels. Group D: Road links to intermodal facilities. Identification of necessary road links to border points or intermodal facilities, discussion of physical characteristics and maintenance constrains.

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Remarks of Group A : Railway Major Investment Program within the Region (Mr Magwede, MoTPI)

Validation of the following hypothesis: Capacity to bay back for the necessary investments (haulage for goods or passengers is too low) Big expectations on Green Belt initiative and Coal Transport Missing rail links (by order of urgency) (1) Chiromo Bridge (2) Bangula – Nsanje (3) Doa – Bangula (4) Chipata – Kanona (5) Moatize – Lirangwe Complementary investment (1) Stations buildings (2) Loop lines on the line from Chirom Bridge to Sugar Wharehouse and Blantyre (3) Communication systems (4) Dry port at Chipata

- Loading and off loading equipements - Good sheds (wharehouses)

Sections to be rehabilitated (1) Chipoka – Balaka (2) Nayuchi – Cuamba (3) Nkaya – Nayuchi Upgrading bridges and rail tracks Equipement Signaling systems, Railway track maintenance equipement Port handling facilities at Nacala Port warehouses development at Nacala Complementary Energy investment for future electrical trains Rolling stocks Locomotives Wagons for various cargo transportation Coaches for passengers transportation Feasibility of leasing locomotives and wagons

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Group B : Railway Operations, group report through Joseph Chavua (SDV)

1. Efficiency of railway line Independent operator GOMalawi/GOMoz owners of permanent infrastructures based on their respective territories Railway operations controlled by the state (Rail agency)

GOV Railway Operators

Rolling stock operator

Comments

Permanent infrastructures Strategic missing links

X

x ?

x

GOMalawi/GOMoz owners of permanent infrastructures based on their respective territories Another possibility is of a private investor/concessionaire (Vale, Riverdale, ..)

Railway Operations x Run by private operator Must take care of all the players

Tariffs x x Each 6 months, reappraisal of the tariffs policy Different prices for different commodities

Right of way x

Rolling stock . locomotives . wagons

x?

x x

. Main operator ? . Different concessionaires

Rolling stock Maintenance

x x Private rolling stock

Port Terminal Private operator … could be different of the 2 others (participation of the big players … Riverdale, Copper takeholders, …)

SADC protocol is to be taken care of. An independent concessionaire could operate seamless all the line from Zambia to Nacala, making operations as efficient as possible. Pb of short fall at the port … need to invest in Equipement to be able to load/unload 6 million tonnes (starting from 1 million tons today) Necessity of building a new coal terminal and general Cargo Terminal . 16 trains per day in each direction . 12000 trains in 2 years time Necessary Control (to be written in the railway concession contract) Performance of maintenance Realisation of new investments Good insurance company in case of destruction of railway links OC : A concession contract has to be well prepared; the bid for tenders includes annexes regarding traffic forecasts, tariffs policy, investment plan. It is necessary to train GOM people to be able to control the setting up of the concession frame (BOT, BOOT, Equipment Contract, discuss arrangements with possible private partners in due course of tender, writing of a good contract … taking in account in a fair manner both interests of public and private operators.

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Group C : Lake and Waterway, group reporter : Felipe Martins, Mota Eng.

1. Cargo Transport between Chipoka and Chilumba

– Type of cargo/vessels

Cargo ships (bulk and/or containers)

Tanker barge for fuel using Dar Es Salam corridor

Sugar Barges from Dwangwa

Ro Ro vessels : rejected as a long slip would be necessary (increased cost)

– Harbours and intermodal facilities

Chipoka – Dredging maintenance (annually ?) versus breakwater Full feasibility study to evaluate costs/benefits between the two options at Chipoka – Rail Connectivity (requires investment to be fully operationnal – Enough warehouse capacity (staging areas) for 250,000 tonnes per annum

Chilumba – No problem of draft (6 meters) – Rehabilitation/refurbishment (new machinery)

2. Cargo Transport between Nkhata Bay and Chilumba/Chipoka

– Type of cargo/vessels

o Cargo ships (bulk and/or containers) o Tanker tankers for fuel using Dar Es Salam corridor o Sugar Barges from Dwangwa o Ro Ro vessels : rejected as a long slip would be necessary (increased cost)

– Harbours and intermodal facilities

Nkhata Bay (no jetty or storage facilities) o Jetty in concrete ( 250,000 €) o Storage (150,000- 200,000 tonnes) o Handling facilities

3. (Night) Ro- Ro ferries

Considerable potential, appeals all stakeholders (Road Haulage – Lake Services – Consumers with cheaper transport costs) – Type of cargo

o Southern Bottlers & Carlsberg o Fuel Tankers o Aomarc – Maize, Cassava o Commodities such as tea, coffee, sugar o Mining products and general cargo

– Type of vessels o 2 to 8 ships able to carry 5 to 10 trailers and small trucks for regional trading o Dimensions : 45 m to 75 m, 2.5 to 3 m keel, budget : 10 to 20 millions US$ per ship

– Harbours and intermodal facilities o Monkey Bay slip (Produces from Blantyre will prefer Monkey Bay compared to Chipoka) o Chilumba Port (provides adequate depth)

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4 . Sugar Port and intermodal facilities

• Dwanga Harbour : Develop a small port facility o Ngala requires road haulage and additional transhipment o Dredging carried out by Ilovo o 4 km from warehouse

• Possible imports by barges of Lime, fertilizers, chemicals • Domestic sugar cargo to Chipoka, Chilumba, Nkhata Bay

5. Shire-Zambezi Waterway

Objectives Short term : Shire – Zambezi – Beira Long term : Develop Chinde Port (evaluate project viability) Harbours and dredging works - Port Nsanje (500,000 tons expected)

o Rail siding, o Storage and handling equipement, o Shipyard for barges (service repairs) … invite private sector concession to build and repair

barges (BOT scheme) o Dredging of Shire River o Issues with marshes (sedimentation problems and vegetation blocking waterways) o Land Management Practise Investment (sensitize local communities for better land useage,

agricultural sector using river to dispose of by products) - Type of ships

o Barges (molasses, fertilizers, …) o Ferries for passengers not viable : Low customer purchase power,Low pessenger numbers,

Efficiency of roads, mini buses

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Summary of Discussion of Group D: Road Sector The group had the assignment to discus on the Roads Subsector. The task for the group was to identify the critical road links in the Malawi road network that would be included in the Malawi Multimodal Transport Sector Investment Program (MMTSIP). Characteristics: The group noted the following characteristics of Malawi transport service as a backdrop to guide it in identifying the road links to be included in the investment program: (i) Malawi exhibits high cost per ton- kilometer for transportation of goods compared to its regional

neighbours. (ii) Traffic volume is low due to limited domestic production, volume of export and imports for

Malawi to gain from economies of scale of transport operation to realize reduction in transport costs.

(iii) The high Transport costs per ton-km which is relatively high generally, reduces as one moves from: (a) centers of production through (b) local markets, (c) regional, (d) ports and finally (e) international markets, due to increasing economies of scales of freight.

The group came up with following criteria for selection of the Roads to be considered under MMTSIP The constraints regarding the routes and ports specifically in terms of:

- Capacity for handling cargo at port; - Frequency of ship calling at port; - Delays in processing consignments; - Relative costs of transportation; - reliability of the corridor; The group identifies specific ports for specific areas of production for exports i.e. of sugar, tea, tobacco and their exit routes. Regarding export ports the following were ranked in order of their importance according to the volume of cargo, especially exports of tobacco, and sugar. (1) Beira (1) Nacala (2) Durban (3) Dar-es-Salaam During the medium term, improvement in the road network serving Malawi’s imports and exports, within and outside the Malawi, were identified by corridor. Evaluating the competing ports, the group identified Nacala Port as the one with the highest growth potential for handling more cargo from Malawi and other neighboring countries in the near future. The groups selected the road network that would increase volume of cargo while continue to improve the efficiency of the rail line. The group also noted based on the presentation at the workshop that Beira would shortly experience congestion. Upon these considerations the following roads were recommended by corridor: 1. Beira Corridor

(i) Mulanje – Milanje but need some attention on Mozambique side (ii) Blantyre – Thyolo improving both loops via Midima and Chisitu (iii) Mulanje –Makumba –Inchope in Mozambique (iv) Blantyre – Mwanza –Beira but need attention of Tete Bridge. (v) Lilongwe – Dedza and Calomue – Tete Bridge in Central Region (vi) Lilongwe- Mchinji and then Zambia.

2. Nacala Corridor

(i) Liwonde-Naminga, Liwonde-Mangochi-Chiponde (ii) Chiponde-Mandimba-Kuwamba in Mozambique. (iii) Liwonde-Nsipe since Lilongwe Nsipe in under improvement

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(iv) Thyolo-Makwasa-Makhanga also for Ntchalo sugar production. (v) Ntchalo-Chikwawa. (vi) Chikwawa-Blantyre. For the escarpment, Ntchalo can use the rail which is cheaper and would

incentivize Ntchalo to increase production. 3. The group also address the special transport infrastructure needs of key products-Sugar and coal.

For the sugar from Dwangwa, the following routing was recommended:

(i) Dwangwa-Nyala Port-Nkhata Bay Port-Monkey Bay. (ii) Salima – Balaka Road (iii) Lakeshore Road i.e. Nkhotakota - Dwangwa -Salima

4. Coal Production Centers in the North such as Kayelekera and Kaziwiziwi coal mine would require improvement of the following network:

(i) MI from Karonga -Mzuzu-Kasungu-Lilongwe

5. The group agreed that there is need to improve the roads serving key rural markets to the road corridors. The roads are to be selected by paying special attention at reducing transport costs and enhancing production and export and delivery of import inputs.

Overall, the priority from districts centres would be to improve Rural Feeder Roads and Main Roads linking market centres to the corridor roads while from Regional centres the emphasis would be improving main trunk roads along the corridor.

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Government of Malawi

Ministry of Transport and Public Infrastructure

Transport Sector Investment Programme (TSIP)

Stakeholders’ Third Workshop 01th October 2010

Workshop Report

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1. INTRODUCTION

1.1 Objectives

The Ministry of Transport and Public Infrastructure is developing a Multimodal Transport Sector Investment Programme, with the assistance of the European Union and World Bank. The objectives of the study are to design an overall strategy for multimodal development in the transport sector in Malawi, with emphasis on the private sector participation on regional and international corridors with an aim of reducing transport costs. Consultants to the World Bank undertook a data collection exercise which constituted the first phase. In the second phase, Safege Consultants, who are contracted by the European Union, have been analysing the data, and developing the multimodal transport strategy. As part of the strategy development, the Ministry of Transport and Public Infrastructure and Safege have so far organised three workshops. The first one which took place on the 18th June 2010 was designed to validate the study methodology, and to identify key constraints the consultants proposed in the interim transport strategy. The second workshop was held Lilongwe on the 29th July 2010 whose main objective was to consider the concrete investment options in the transport sector. This third workshop, which took place on the 1st of October 2010, had an aim of consolidating final inputs from stakeholders; looking at various Public Private Arrangements, and; mapping a way forward on the Transport Sector Investment Program.

2. WORKSHOP ORGANISATION

2.1 Location

The workshop was held at the Ryalls Hotel in Blantyre. Blantyre was chosen for the third workshop location as it provided a convenient venue for key players in the private sector. Being the commercial city of the country it also provided the opportunity of attracting various important stakeholders in the private sector and business community.

2.2 Programme

The workshop was arranged with a starting plenary session that included the main presentation of the Safege consultants. This was followed by three parallel discussion groups, which were each tasked with addressing separate issues. The groups reported back to the main plenary at the end of the day, in line with the planned programme, shown in Appendix A. The discussion groups allowed all workshop attendees to participate fully in discussions and make their points of view.

3. WORKSHOP PRESENTATIONS

The Workshop was introduced by the Director of Transport Planning, Ministry of Transport and Public Infrastructure, who invited the chairman onto the podium. As Chairman of the workshop, Dr Magwira, Principal Secretary of the Ministry of Transport and Public Infrastructure said that the Government, in pursuit of economic growth, placed a high priority on infrastructure, with a focus on transport. Now, the Government, with development partner support was developing a multi-modal study to determine the investment requirements. The study would provide an overall strategy for multi-modal development; would review transport corridors, assess the main economic sectors for growth, and assess the potential for private-public partnerships in transport projects. Hon. Mc Jones Mandala Shawa, Deputy Minister for Transport and Public Infrastructure, who graced and opened the workshop, pointed out that the Government fully supported this study, whose aim was to reduce transport costs and boost the economy. He also indicated the importance of mainstreaming

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cross-cutting issues such as HIV&AIDS, gender, human rights, etc and that all transport modes need to be reviewed from time to time so that they are demand driven. He welcomed the dialogue between Government, the private sector and development partners. He urged participants to speed up on concretising the TSIP study, more particularly on infrastructure development. In his remarks, the EU representative, Jocelin Cornet, said this workshop concretises the full commitment of the Ministry of Transport and Public Infrastructure to initiate a balanced multimodal transport sector policy in Malawi and that the sound and reliable document produced thereof will enable government to approach the development partners with clear and justified priorities. The World Bank representative, Emmanuel James, among other things said this study comes handy at a time we need to improve corridors like Dar-es-Salam Corridor. He also said the study will help improve domestic and international routes. Thierry Molinier, on behalf of Safege, highlighted the aims of the first, second and third workshops. In the presentation he mentioned that the country had huge economic potential but lack of a proper transportation system was a big setback. His presentation is reproduced in Appendix ... Discussion and Comments

i. Malawi should not consider itself as landlocked, but land linked. Malawi should exploit opportunities in the regional markets besides overseas markets. Malawi should exploit various opportunity that availed through various corridors and that is should fully integrate with its neighbours.

ii. Is integration an assumption? Malawi is integrated through the regional bodies it is affiliated to

such as SADC and COMESA, beside the many protocols and bilateral agreements.

iii. Synchronisation of programs? As regional programmes (SADC, COMESA, AU) they are linked and implemented simultaneously.

iv. Guidance from the Government on how Malawi shall engage itself with other countries. Malawi

has Joint Technical Committees with its neighbours and meet at various forums. Malawi is also in continuos consultation and dialogue with other countries.

v. Involvement of development partners. Development partners need to be involved in various

consultation and dialogue, and Donor Conferences are vital for the funding of programmes. There is also need for high level forum to dialogue on matters of aid coordination.

vi. Cluster initiatives also look at funding mechanism on a regional front. The process is already there and inputs from this programme shall be incorporated.

vii. Assessment of road maintenance vis a vis national budget, and how it could be incorporated into the study. More work to be done, especially in the road sector. There are huge gaps in funding such that state of roads that can be classified as good are at 30%. The total road network is increasing, yet there is no corresponding increase in maintenance funds.

viii. There is need for a thorough cost-benefit analysis and analysis on economic rate of return. More importantly is to answer the question whether Malawi stands to benefit in the final analysis.

ix. Transportation of fuel through the pipeline. According to the consultants, the current volumes of fuel the country need do not justify such a project. Another problem that they observed is that since we are talking of products that are not mixable, the project would need more than two pipes.

x. Need to move with speed in finalising this study and develop necessary infrastructure.

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4. DISCUSSION GROUPS

4.1 Discussion Group Organisation

Three discussion groups were established to cover:

1. Sovereign and International Agreements

2. Permanent Infrastructure Investment and maintenance; and

3. Liberalization of Transport Operations on the Different Modes

4.2 Discussion Group Reports

Group 1: Sovereign and International Agreements

Recommendations : Concession Contracts & Regulation of PPP Terms of reference for a regulatory agency to include:

1) Encourage the development, review and implementation of an applicable regulatory framework. 2) Coordination and harmonize with other state agencies. 3) Scrutinize sovereign laws (as applicable) and international and bi-lateral agreements. 4) Play an advisory role to government and other stakeholders. 5) Monitor and evaluate implementation of concession contracts. 6) Monitor and evaluate transport operational matters. 7) Arbitrate and mediate in any stakeholder disputes. 8) Ensure fair competition between all operators and modes. 9) Provide a conducive environment for investment in transport infrastructure and operations. 10) Ensure and enforce compliance with e.g., safety standards and other operational standards. 11) Examine and evaluate investment procedures and concession contracts. 12) Monitor and evaluate tariffs and advise Government on tariff and pricing issues.

Comments and Questions Clarification was sought from the group on:

How to ensure fair access to the transport infrastructure

How to ensure conducive environment

Group 2: Permanent Infrastructure Investment and Maintenance

Recommendations for the new “heavy load cargo transportation system” Phase I

Should include the list in Table 3.1.2 and all the on-going projects in the RSP for the period 2011-2013

The costs should be revised

On personnel training, it should be mainly capacity building (e.g., in PPP, etc.)

Road S128 MH crossroads – Monkey Bay to be completed Phase II

Only Liwonde – Mangochi in Table 2 and all the roads in RSP for period 2013-2015 should be in Phase II of the TSIP and the rest go to Phase I, since they are already on-going projects

For rail investment it should be reconciled with the GOPA report

The budget for Phase II should be revised

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Phase III

Nacala corridor: the consultant should provide a list of the rural feeder roads which are to be rehabilitated.

TAZARA corridor: should be from Lilongwe-Songwe and not KA-Mbeya

Phase III should also include the 2015-2019 projects in RSP

The budget should be revised. Shire-Zambesi corridor A ‘missing link’- namely procurement of barges – should be in Phase II and not Phase III Comments and Questions Suggestion was made to include PPP on the legal framework under barriers. Comments were also made on capacity building issues as well as PPP arrangement on the Nsanje Port. It was learnt that the Nsanje World Inland Port is indeed an example of PPP through the BOT arrangement. Clarification was sought from the group on:

How the issues of maintenance would be undertaken.

Harmonization of regulatory and legal frameworks. It was learnt that intention are there to have one regulatory unit in the transport sector to regulate all the modes under one roof.

Accessibility of a new operator on the railway infrastructure, for both domestic and international track. It was leant that there are territorial obligations that obliges accessibility for both domestic and international infrastructure.

Group 3: Liberalization of Transport Operations on the Different Modes

Recommendations: a) Railway Regulation & Operation Principal barriers or obstacles in rail transport to be overcome:-

Legal framework for the Railway Authority and for PPP.

A long term commitment must be made.

Inter-country (regional) commitment.

Diagram of future railways institutional structure

GOM

Rolling Stock Owners (RSO) and

Maintenance

Railway track and transport

Shippers >>>>>>>

Rail Regulator - PPP issues

Track CompanyInfrastructure: track & signals

Operating companies A, B, C, etc.

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b) River & Lake Transport

Diagram of lake & river transport operations

GOM

All river & lake ports …

Operators A, B, C, etc.

River & lake transport

5. ROAD MAP

The ministry’s Chief Economist outlined the road map that will lead to adoption of TSIP by Government by 31st March 2011. The Road Map is attached as Appendix C. 6. WAY FORWARD

The EU Representative thanked the government officials, the private sector, workshop organisers and all for their fruitful contributions. He commended the study as a very good tool that is supported not only by EU but other development partners such as World Bank and JICA. He further stressed the need for the European Union to continue supporting Malawi in various areas including the strengthening of the legal framework, to which the EC has committed some €2.3m by July next year.

7. CLOSING

On behalf of the Honourable Deputy Minister, who officially opened the workshop, the chairman thanked the development partners, transport gurus and all for their active participation and support towards the Transport Sector Investment Programme. He was delighted to note that the benchmarks the Honourable Minister mentioned had been met which included the need to be as open as possible during deliberations and the need to look at all the modes as complementing each other. He indicated that the ministry shall strive to implement the road map that would lead to the finalization of the study and that the ministry shall take all the comments brought forward which would ensure ownership by all Malawians. The chairman also alluded to another workshop and urged all to continue their commitment in participation and support which, indeed, is the vital way to assist the government to move forward.

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Appendix A: Programme

PROGRAMME FOR TRANSPORT SECTOR INVESTMENT PLAN WORKSHOP AT MOUNT SOCHE HOTEL,

BLANTYRE 01st OCTOBER, 2010

08:30 Registration

09:00 Administrative Arrangements for Workshop -Victor Lungu, Director of Transport

Planning

9:10 Study Objectives and Methodology, Dr. M.P. Magwira – Ministry of Transport and

Public Infrastructure

9:20 Opening Remarks – Deputy Minister of Transport.

9:30 Presentation on main concepts of the TSIP, Thierry Molinier, Consultant, Safege

10:15 TEA BREAK

10:45 Questions and clarifications on the presentation

11:15 Modalities for the Group Discussions

13:00 LUNCH BREAK

14:00 Break-Out Group Discussions

15:30 TEA BREAK

15:45 Reports back to Plenary Session and discussion

16:30 TSIP Road Map

16:45 Way Forward

16:55 Closing Remarks

17:00 End of Programme

Transport Sector Investment Programme

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Appendix B: Workshop Attendees (incomplete)

Nr.

Name Organisation

1. Hon. Mc Jones Mandala Shawa, MP Deputy Minister for Transport and Public Infrastructure

2. Dr M.P. Magwira Principal Secretary, MoTPI

3. Victor Lungu Director of Planning, MoTPI

4. Geoffrey Magwede Railway Transport Division, MoTPI

5. Idrissa Mwale MoTPI

6. Wyson Kamala MoTPI

7. Henox Mazengela Roads Fund Administration

8. Steve Siwande Roads Authority

9. Solomon Chirambo Ministry of Local Government and Rural Development

10. Zione Nkhoma MoTPI

11. Thaf Mlebe MoTPI

12. Dr Charles Kaira Scott Wilson, INSTAP TA

13. Noel German NAO Support Unit, Ministry of Finance

14. Grace Gondwe Ministry of Planning

15. Grant Mbellah Plant and Vehicle Hire Organisation

16. Hendry Chimwaza Central East African Railways

17. Shaun Saunders Illovo Sugar (Malawi) Ltd.

18. Godfrey Kapalamula JICA

19. Thierry Molinier Safege

20. ... ...

21.

22.

23.

24.

25.

26.

27.

28.

29.

30.

31.

32.

33.

34.

35.

36.

37.

38.

39.

40.

41.

42.

43.

44.

45.

46.

47.

48.

49.

50. Secreatariat

51. Zione Nkhoma MoTPI

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APPENDIX C: ROADMAP FOR TSIP PREPARATION AND ADOPTION BY MARCH 2011

S/n Issue Timeframe Expected Activities Remarks Responsible

1. Institute a Taskforce to oversee preparation of TSIP

6-10 October 2010 Prepare Budget for activities of the Taskforce by 17

th October

2010

Hold meetings with stakeholders in Blantyre to present road map for data collection by drivers

Members of the Taskforce will come from Ministries, Departments & Agencies (MDAs) as follows: Ministry of Transport & Public Infrastructure (MOTPI): DTP, DR, Marine Department, Directorate of Civil Aviation, Directorate of Roads traffic, Rail Regulatory Unit, Roads Authority (RA); Local Government and Rural Development, Road Fund Administration (RFA),Ministry of Finance (MoF), Ministry of Economic Planning and Development, Police Traffic, CEAR, INSTAP TA Team Leader

CE Transport Planning (Idrissa Mwale)

2. Appointing a Short-Term Expert to prepare the Transport Investment Program from the sub-sector investment programs and inter-modality Study

1-18 October 2010

Stakeholders review TOR by 6th

October 2010

Submit request to NAO/EU by 8th

October

Mobilise STE by 1st

November 2010

Key reports are:

Road Sector Program (April 2010)

NAO / EU /INST AP TA Team Leader

3. Preparation and adoption of Inception Report

1 - 10th

November 2010

Submission of Inception Report by STE by 8

th November 2010

Review and adoption by Taskforce by 10

th November

2010

Invite Taskforce members in good time.

CE Transport Planning (Idrissa Mwale)

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S/n Issue Timeframe Expected Activities Remarks Responsible

4. Preparation and adoption of Draft TSIP Report

10th

November – 22

nd December

2010

Submit Interim Draft TSIP Report for review by Taskforce by 8

th

December 2010

Submit Draft TSIP for Review by Taskforce members by 20

th

December 2010

STE to review prioritise and consolidate sub-sector investments into one program

Government to provide a Medium Expenditure Framework funding the TSIP

STE to liaise with Development Partners and firm committed to funding for various components of the TSIP

STE to determine financial gap in the program

CE Transport Planning (Idrissa Mwale) / INSTAP TA Team Leader

5. Finalization of TSIP 23 – 31st

December 2010

Submission of Final TSIP incorporating Taskforce comments by 31 December 2010

STE / INSTAP TA Team Leader

6. Review of Final Draft of TSIP by Taskforce for Government adoption at a retreat

12 - 14 January 2011

Circulate Final Draft of TSIP to Taskforce members by 3

rd

January 2011

Objectives of Retreat is to:

Review the Final draft and transform it into a Government document taking into consideration all requirements for adaptation by Government

CE Transport Planning (Idrissa Mwale) / INSTAP TA Team Leader

7. Ministry of Transport to Present TSIP to the JTC meeting for Development comments

28th

January 2011

DTP presents TSIP to JTC meeting

CE Transport Planning (Idrissa Mwale) / INSTAP TA Team Leader

8. Finalisation of TSIP incorporating Development Partners comments

1-9 February 2011 DTP / INSTAP TA finalises the TSIP by 11

th February

DPs provide detailed comments to INSTAP TA for finalisation of TSIP

CE Transport Planning (Idrissa

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S/n Issue Timeframe Expected Activities Remarks Responsible

raised at the JTC Mwale) / INSTAP TA Team Leader

9. Directorate of Transport Planning briefs PS and Ministers on TSIP for Government adoption

24 -28 January 2011

DTP facilitate meetings for adoption of TSIP

DTP / CE Transport Planning (Idrissa Mwale)

10. Adoption of TSIP by 31 March 2011 1 – 31 March 2011 Preparation of brief by Minister to Higher authority for adoption of TSIP by1 March 2011.

DTP / CE Transport Planning (Idrissa Mwale)

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Annex L : List of study contacts Entities Responsibilities/Title

EUDelegation of the European Commission to MalawiHead of the Infrastructure Section Jocelin CORNET [email protected] of the European Commission to MalawiAttaché - Infrastructure Cécile LEEMANS [email protected] of the European Commission to MalawiProject Manager - Infrastructure Aubrey SIMON CHIRAMBO [email protected] of the EU to the Republic of MalawiAttaché Ferenc NAGY [email protected]

World BankWorld Bank Sector Leader (AFCS2), Sustainable Development Department, Africa RegionBoris UTRIA [email protected] Bank Economist, Africa Region Fang XU [email protected] Bank Senior Consultant Ephrem ASEBE [email protected] Bank Agricultural Economist, AFTAR Hardwick TCHALEWorld Bank PhD, PCIT, Environmental Economist, International Trade Specialist, Private Sector ConsultantKenyi SPENCERAFTWR, The World Bank Africa Disaster Risk, Management Team Paulo CAPUTO [email protected]

JICA Senior Programme Officer Godfrey KAPALAMULAUNHCR (United Nations High Commission)Associate Field Officer (Protection) Mikael RASMUSSEN

MOTPIMOTPI Director of Planning Victor LUNGU [email protected] Principal Economist (Head of Programmes Development, Budgeting, Monitoring and EvaluationWyson KAMALA [email protected] Principal Economist Owen NALIVAKA [email protected] Senior Economist Thaf MLEBEScott Wilson Deputy Team Leader Sion HAYWORTH [email protected] Wilson Team Leader, Institutional Suport to Public Sector Bodies Programme (INSTAP)Charles Kisala KAIRA [email protected] Support to the Transport Public Sector Bodies Programme (INSTAP)Advisor of the roads Authority James O. AGINGUMarine Department Deputy Director Laston MAKUZULA

Other MinistriesMinistry of Agriculture and Food Security, Department of Agricultural Planning ServicesChief Economist Frank Mbewo KAMANGADepartment of Mines, Natural Resources and Environment Charles KAPHWIYOMinistry of Energy and Mines [email protected]

National Statistical Office Chief Statistics Derick ZANERAMalawi Confederation of Chambers of Commerce and IndustryEconomist Rehema MVULAMalawi Confederation of Chambers of Commerce and IndustryPPD Economist Hope CHAVULAMinistry of Local Government & Rural Development, local government Strenghening and Investment ProgrammeData Specialist Steven ZULU [email protected] Export Promotion CouncilSenior Manager Trade Development Stella PHANGAMalawi Investment Promotions AgencyInvestment Promotion Excecutive Wanangwa NTHARA [email protected]

[email protected] sectorsFarmers World Director Dimitri GIANNAKISMalawi Leaf Company Ltd General Manager Jimmy KASAMALE

Limbe Leaf Company Shipping Manager KUWALI [email protected]

Tobacco Association of Malawi Regional Manager R.W MANJAKAISIIlovo Sugar (Malawi) Limited Finance Director Wesley COWDEN [email protected] Sugar (Malawi) Limited Commercial Manager Geoff MKANDAWIRE [email protected] Sugar (Malawi) Limited Logistics Manager Shaun SAUNDERS [email protected] Sugar (Malawi) Limited General Manager- Marketing Rhys DAVIES [email protected] Sugar (Malawi) Limited Finance Manager/Company Secretary Gerry GARSON [email protected] Sugar (Malawi) Limited Ian PARROTT [email protected] Agriculture David PANKOMERA [email protected]

Alpha Milling CompanyNational Food Resource Agency

Suppliers (equipement --> General Cargo)Hisco House C.E.O Malesh KOTECHA mahesh@hisco house.comRajani Suppliers - Dealers in hardware - Electrics - Bicycles and spares Paresh TANNA [email protected]

Mines and MineralsVale Moçambique Lta (Minas e Minerais) [email protected] Moçambique [email protected] de Moatize Director [email protected] de Moatize Director NATUSSE [email protected] - Alumina DirectorEland Coal Mining Company Consultant Graham SMITH [email protected] MiningShayara Cement CorporationLafarge

EnergyElectricidade de Moçambique EP Presidente and CEO Manuel CUAMBE [email protected]

Hidroeléctrica de Cahora Bassa SarlDirector [email protected]

Transport service providersCentral East African Railwys Company Ltd (CEAR)Managing Director, BsC, MSc (Electrical Eng.)Hendry CHIMWAZA [email protected] East African Railwys Company Ltd (CEAR)Director of Infrastructure and Safety Kondwani MKONDA [email protected], Bolloré Africa Logistics Commercial Manager Joseph CHAVULA [email protected], Bolloré Africa Logistics Edouard KALWA [email protected] of Nsanje PortDAMCO Country Director Karl CHOKOTHORoad Transport Operators AssociationDirector Shadrek MATSIMBEMCC Limited Operations/marketing Manager Lyton KUMWENDA [email protected] ex MCC Transport and Logistics Consult Stallard MPATA [email protected] Global Customer Field Support Andy HAILESELASSIEAxa Coach Service

Engineering companies

MOTA-ENGIL (Engenharia) Site Agent Nuno RODRIGES

MOTA-ENGIL (Engenharia) Financial Director Rui CAETANO [email protected]

MOTA-ENGIL (Engenharia) Bng MSc DIC Filipe MARTINS [email protected] Construction and Carriers Managing Director Aslam DIAS

Embassies or ConsulatesRepublic of Zambia, Zambia High CommissionSecond Secretary (Economics) Nebart MATATIYOMozambican Embassy Second Secretary Fernando CHOMARConsulate of Mozambique Second Secretary Raul KUYERI [email protected]