Chad Rail Link Supports Trend, But Financing Lacking

West and Central Africa are increasingly following in East Africa's footsteps in terms of plans to integrate the region's rail networks in order to provide greater logistics capacity for landlocked neighbours and to boost regional trade. On June 3 Cameroon and Chad signed an agreement confirming the route for an extension of Cameroon's rail network to the Chadian capital city of N'Djamena - 700km from where the current Cameroonian network ends in Ngaoundere. At a cost of CFA1.4trn (USD2.9bn), should the project be realised it will provide a major boost to Cameroon's construction industry.

The line is part of Cameroon's rail development master plan which was released in 2012, but will serve to offer Chad a major boost in terms of its capability to export goods. Around 80% of Chad's imports and exports already pass via Cameroon's commercial capital of Douala, but they travel by a road route which significantly increases costs. We have seen similar efforts in East Africa to provide landlocked South Sudan, Uganda, Rwanda and Burundi export options in Tanzania and Kenya through the development of the region's rail networks.

We note that financing for the project is yet to be arranged, posing a serious risk to the project's realisation. While the newly agreed upon route's development is to be managed by Bolloré Africa Logistics, which operates Camrail and should offer reassurances to potential investors, we note that similar projects have failed to be realised. An alternative route via the city of Moundou was floated by Chad in 2010, and in 2011 China Civil Engineering Construction Corp. (CCECC) reportedly was set to begin construction, with financing for the project in place. However, no news on the project's progression has been seen since. Even rail development projects in Cameroon which are to support the vital mining industry have stalled previously.

Boost To Chad's Export Potential
Cameroon's Rail Network and Proposed Extension

Chad Rail Link Supports Trend, But Financing Lacking

West and Central Africa are increasingly following in East Africa's footsteps in terms of plans to integrate the region's rail networks in order to provide greater logistics capacity for landlocked neighbours and to boost regional trade. On June 3 Cameroon and Chad signed an agreement confirming the route for an extension of Cameroon's rail network to the Chadian capital city of N'Djamena - 700km from where the current Cameroonian network ends in Ngaoundere. At a cost of CFA1.4trn (USD2.9bn), should the project be realised it will provide a major boost to Cameroon's construction industry.

The line is part of Cameroon's rail development master plan which was released in 2012, but will serve to offer Chad a major boost in terms of its capability to export goods. Around 80% of Chad's imports and exports already pass via Cameroon's commercial capital of Douala, but they travel by a road route which significantly increases costs. We have seen similar efforts in East Africa to provide landlocked South Sudan, Uganda, Rwanda and Burundi export options in Tanzania and Kenya through the development of the region's rail networks.

Boost To Chad's Export Potential
Cameroon's Rail Network and Proposed Extension

We note that financing for the project is yet to be arranged, posing a serious risk to the project's realisation. While the newly agreed upon route's development is to be managed by Bolloré Africa Logistics, which operates Camrail and should offer reassurances to potential investors, we note that similar projects have failed to be realised. An alternative route via the city of Moundou was floated by Chad in 2010, and in 2011 China Civil Engineering Construction Corp. (CCECC) reportedly was set to begin construction, with financing for the project in place. However, no news on the project's progression has been seen since. Even rail development projects in Cameroon which are to support the vital mining industry have stalled previously.

The Mbalam iron ore project in Cameroon is a pertinent case in point. In support of a planned 35mn tonnes per annum (mtpa) Mbarga Mine project, Sundance Resources has plans to build a 510km railway linking the mine to the coast at Kribi, where a new deepwater port is planned to be built. However, construction has stalled, as financing for the USD4.7bn project remains difficult to secure. In October 2013, the company raised USD37mn to keep the project running over. More substantial progress is expected over 2014, when a contractor is expected to be selected, with a view to bringing the project online in 2018. If a mining project is not offering the potential returns to attract investors, then we caution that the single line linking to Chad will unlikely offer the return on investment needed to easily attract financing.

The newly confirmed route does highlight a number of trends we are noting within African infrastructure. We believe that rail infrastructure in Sub-Saharan Africa (SSA) is set to be a key area of opportunity over the coming decade. In particular, projects such as the N'Djamena - Ngaoundere line which aim to connect urban centres to export destinations and boost regional trade will be an increasingly important driver of growth in the sector, as opposed to rail networks solely for the mining industry ( see ' Demand For Intermodal And Urban Rail Coming To Fore', 19 May 2014).

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