CAPE TOWN // Transporters moving goods across Africa put up with a lot: bandits armed with AK-47s, elephants using a fender to ease an itch and thieves who run alongside slow moving vehicles to siphon diesel out of the tank into Coca Cola bottles.
Then there are border posts, police checkpoints and various other forms of bureaucracy that can hold up lorries for days. Often, bribes and spurious fines also need to be paid before cargo can move.
It is hardly surprising that according to the African Development Bank it costs twice as much to transport goods across many countries on the continent than it does anywhere else in the developing world.
Transport is a perpetual problem in Africa. Potholed roads and missing rail links get in the way of economic growth. Intra-regional trade accounts for just 13 per cent of total commerce, compared with 53 per cent in emerging Asia, according to The Economist.
Landlocked countries suffer the most. Transport costs can make up 50 to 75 per cent of the retail price of goods in Malawi, Rwanda and Uganda.
Shipping a car from China to Tanzania on the Indian Ocean coast costs US$4,000, but getting it from there to nearby Uganda can cost another $5,000.
The China-led surge in demand for commodities gave hope that Africa’s infrastructure deficit would be eroded.
Now, with the cost of minerals and other commodities on the floor, it is unclear whether the enthusiasm to build, build and build will continue. Especially hard hit are locations dependent on mining, which is in even worse shape than the oil and gas industry.
“Many good mineral deposits are in remote locations and getting them to market requires rail and port infrastructure – this can cost up to $3.5 billion alone to build, just for one operation,” says Haaris Zafar, the principal mining adviser for Africa at Johannesburg’s Nedbank. “I can’t see this happening in the current commodity climate.”
One example is a giant iron ore mine planned by the Australian company Sundance Resources. The project straddles the border of Cameroon and the Republic of Congo in Central Africa in a remote, inland jungle area. The mine would be an enormous lift to the economies of both countries – if it is ever built.
Two years ago, Sundance announced a partnership with China Gezhouba Group to finance and construct a 510-kilometre railway and a dedicated mineral export terminal.
The project had the backing of the Chinese premier, Xi Jinping, following a state visit to Ghana last year. But this January, Gezhouba said it would put the project on hold indefinitely after the collapse in the iron ore price.
The project had seemed a good prospect when iron ore reached the giddy heights of nearly $188 a tonne in 2011, and the almost $4bn price tag for transport infrastructure seemed justified. Today, iron ore struggles along at $40 a tonne and the port and railway line are unlikely to be laid down anytime soon. As China slows, project finance will be harder to come by.
“The emergence of an Africa-wide railway network is a dream that will be difficult to fulfil,” John Welborn, the chief executive of Resolute Mining, said this month in Cape Town at the annual African Mining Indaba, the world’s largest mining investment platform.
Mr Welborn has been active in rail developments in west Africa, a region that could potentially rival Australia’s iron-rich Pilbara area in potential for iron ore. He said that the cost of developing rail and port facilities from scratch, however, made it unlikely this would happen soon.
Even if funds were to be found, laying down railway lines that cross multiple borders is a formidable undertaking. At the same time, mining companies are reluctant to share lines with other users, fearing it could harm ore shipping schedules.
In Australia, where iron miners are king, rival producers have built their own tracks running parallel to each other to carry ore from up to 1,300 kilometres inland to coastal ports.
“Two companies in the Pilbara have two railways running side by side, and third wanting to get in had to build its own,” Mr Welborn says.
African countries have naturally fought this idea and insist that lines must be multi-use, not reserved exclusively for individual mining companies. Where governments have stood their ground, cooperation has worked.
An example is the Nacala Corridor railway line in southern Africa, which links mining areas of Moatize Mozambique’s western province of Tete with the east coast port of Nacala 1,200km away.
The line goes through Malawi, which in a quirk of colonial map-making, cleaves through Mozambique, almost splitting the country’s south in two. The railway has now become the centrepiece of a development corridor that has had agriculture as well as other mining projects appearing in Malawi – one of the world’s poorest nations – and Mozambique, now one of Africa’s fastest-growing economies.
“The Nacala Corridor has ended up going through two different countries carrying several commodities, and that makes it bankable,” says Sujoy Bose, the director and global head of infrastructure and natural resources at the International Finance Corporation in Washington DC. “The idea of one country, one railway line and one resource is not practical.”
While Nacala was largely financed by the Brazilian mining group Vale, which is developing vast coal mines in the east, other rail projects will need to look elsewhere to find funding. One that still enjoys China’s support is the Tazara railway that connects landlocked Zambia with the port of Dar es Salaam in Tanzania.
Tazara was built in the 1970s as part of the late chairman Mao Zedong’s desire to spread China’s own brand of socialism.
The line helped Zambia export its copper, giving it an alternative to the sea other than using routes though white-ruled South Africa and Rhodesia.
In a post-Cold War world the line fell into disrepair, but in 2014 the Chinese government decided to help revitalise the 1,800km route.
New locomotives and coaches were delivered last year and the line is now becoming increasingly popular with tourists, who can watch wildlife from the comfort of their cabins as the train winds its way through reserves.
The Chinese have also committed to helping develop a network of lines that will eventually connect Kenya’s north with Ethiopia and South Sudan. The network, known as the Silk Corridor in local media, will eventually connect some of the most remote parts of the continent with eastern coastal cities.
Even South Africa, which has more railway capacity than the rest of the continent combined, is looking to expand its existing network. The country’s state-owned operator Transnet plans to build new lines to the north, crossing into Botswana.
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THE BIO
Age: 30
Favourite book: The Power of Habit
Favourite quote: "The world is full of good people, if you cannot find one, be one"
Favourite exercise: The snatch
Favourite colour: Blue
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
More from our Neighbourhood series:
England ODI squad
Eoin Morgan (captain), Moeen Ali, Jonny Bairstow, Jake Ball, Sam Billings, Jos Buttler, Tom Curran, Alex Hales, Liam Plunkett, Adil Rashid, Joe Root, Jason Roy, Ben Stokes, David Willey, Chris Woakes, Mark Wood.
Killing of Qassem Suleimani
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The specs: 2018 BMW X2 and X3
Price, as tested: Dh255,150 (X2); Dh383,250 (X3)
Engine: 2.0-litre turbocharged inline four-cylinder (X2); 3.0-litre twin-turbo inline six-cylinder (X3)
Power 192hp @ 5,000rpm (X2); 355hp @ 5,500rpm (X3)
Torque: 280Nm @ 1,350rpm (X2); 500Nm @ 1,520rpm (X3)
Transmission: Seven-speed automatic (X2); Eight-speed automatic (X3)
Fuel consumption, combined: 5.7L / 100km (X2); 8.3L / 100km (X3)
Company profile
Company: Verity
Date started: May 2021
Founders: Kamal Al-Samarrai, Dina Shoman and Omar Al Sharif
Based: Dubai
Sector: FinTech
Size: four team members
Stage: Intially bootstrapped but recently closed its first pre-seed round of $800,000
Investors: Wamda, VentureSouq, Beyond Capital and regional angel investors
Keane on …
Liverpool’s Uefa Champions League bid: “They’re great. With the attacking force they have, for me, they’re certainly one of the favourites. You look at the teams left in it - they’re capable of scoring against anybody at any given time. Defensively they’ve been good, so I don’t see any reason why they couldn’t go on and win it.”
Mohamed Salah’s debut campaign at Anfield: “Unbelievable. He’s been phenomenal. You can name the front three, but for him on a personal level, he’s been unreal. He’s been great to watch and hopefully he can continue now until the end of the season - which I’m sure he will, because he’s been in fine form. He’s been incredible this season.”
Zlatan Ibrahimovic’s instant impact at former club LA Galaxy: “Brilliant. It’s been a great start for him and for the club. They were crying out for another big name there. They were lacking that, for the prestige of LA Galaxy. And now they have one of the finest stars. I hope they can go win something this year.”
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The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Mohammed bin Zayed Majlis
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
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Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
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