FILECOPYReport No. TO-402 Copy No. To be returned to GENERAL FILES immediately after use. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEV'ELOPMENT INTERNATIONAL DEVE-LOPMENT ASSOCIATION PRELIM'INARY REPORT OF THE BANK MISSION TO REVIEW THE PROPOSED NORTITIERN RHODESIA - TANGANYIKA RAILWAY LINK February 17, 1964 Department of Technical Operations CURRENCY EQUTIVALENT Rh.L= US.A2.80 PRELIMINARY REPCRT OF THE BANK MISSION TO REVIEW THE PROPOSED NORIHTi?.N RHODESIA ThNGA.NYIKA RAIDTAY LINK TABLE OF CONTENTS Paragraphs SUMMYARY AND 3'O'CLUSIONS i v I. INTRODUCTION 1- 9 The Agreement on the Rhodesia Railways 4- 6 The Strength of Political Feeling About the Railroad 7 - 9 II. THE DEMIAD FORt THE -AIL',JAY 10 - 16 Political Arguments 10 Economic Arguments 11 Northern RhodesiaTs Viempoint 12 Tane'anyikats Viewpoint 13 Currently Available Reports nn the Project 14 - 16 III. THE MISSIONTS VIEICPOINT 17 -30 Duplication of Existing Facilities 17 - 18 The Costs of Duplication 19 The Economic Benefits from the New Line 20 Northern Rhiodesian Section 21 - 23 Tanganyikan Section 21 - 26 Through Traffic Between Central and East Africa 28 Total Traffic Esti;,'ates 29 Tentative Economic Evaluation 30 IV. CONCLUSTOI,S AND RECOITWITWDIATIONS 31 - 12 The Need for a Detailed Bank Report 32 - 33 The Need for an Improved Transport Link *Between Northern Rhodesia and Tanganyika 314 37 The Need for Cooperation with ECA 38 - 39 The Need for a Bank Transport Mis'Jion to Northern Rhodesia -40 42 PRELIMINARY REPCRT CF THE BANK MISSION TO REVIDJ THE PROPOSED NORTHERN RHODESIA - TANGANYIKA RATLIJAY LINK Summary and Conclusions i. The Mission reviewed the proposed railway link between Northern Rhodesia and Tanganyika. ii. The Mission reaches the view that with relatively small invest- ments and existing rail links between Northern Rhodesia and the ocean could cope with any increase in traffic now foreseeable. The existing railroads provide both cheap and efficient transport. The Mission finds that the proposed new rail link is unlikely to have a sufficiently great impact on the economic growth of the regions connected to make it an attractive proposition in the next few years. iii. This negative view will have to be set forth in a persuasive Bank report because feelings about the railroad run so strong that the Northern Rhodesian Government might decide to gc) ahead with the new link despite the detrimental economic effect of such a decision, if the Bankts report is to play an effective part in dissuading the Northern Rhodesian and Tangarnyikan Governments from going ahead with the railway, then it will need to be most, carefully drafted and presented. iv. The Mission encountered a widespread fear that the Bank had been brought in, not to make a detailed and objective economic evalua- tion of the project, but simply to torpedo it. The report will have, therefore, to recreate confidence in the impartiality of the Bank's position. The Mission also attaches great importance to the fact that there appears at first glance to be a number of promising alternative transport projects for investment. For this reason it is strongly recommended that the Bank undertake a two-month transport survey of Northern Rhodesia, commencing in the near future. V, The Mission also considers that a case can be made for some improvement of the transport link between Northern Rhodesia and Tanr,anyika and that the Bank should cooperate with the Economic Commission for Africa on this subject, for instance, by co-sponsoring a survey of the need for new international transport links in East and Central Africa. PRELIMINaRY REPORT OF THE BANK MISSION TO REVIJE THE PROPOSED NORTHE.RN R ODESIA - TiNGAYIKA RAIDJJAT LINK T. INTRODUCTION 1. A Bank M4ission was in East an(d Central Africa during December to gather views on a projected railroad link between NJorthern Rhodesia and Tanganyika and to see whether a detailed feasibility study was warranted. The MIission met with representatives of East African, Rhodesia and Benguela Railways, of the governments of Tan:-anyika and Southern Rhodesia and of the present and futurd (independent) governments of Northern Rhodesia. 2. The idea of a railroad link between Northern Rhodesia and Tanganyika which has been under intermittent discussion for fifty years or more came into prominence in the Spring of 1963 when Dr. Kenneth Kaunda announced hiis intention to build it. Dr. Kaunda is leader of the main African nationalist party in Northerm Rhodesia, the United National Independence Party (UNIP); he is widely considered one of the most responsible of nationalist leaders in Africa. He was Minister of Local Government in the coalition government of Norc.hern Rhodesia and has become Prime Minister following the elections of January 20-21, 1964. Independence is likely to come to Northern Rhodesia in the Fall of 1964. 3. Some felt that Dr. Kaundats announcement of his intention to build the new railway was merely a tactical move to strengthen Northern Rhodesia's position in tthe negotiations on the future of common services after the dissolution of the Federation of Rhodesia and Nyasaland. These negotiations continued through the latter half of 1963 in the hands of a body known as Committee B. The Bank was involved in the discussions about the future of Rhodesia Railways because of two loans (74-NR and 197-RN) whose proceeds had been spent on railway equipment. Until now Rhodesia Railwayst lines have formed the chief link between Northern Rhodesia and the sea, besides carrying traffic between Northern Rhodesia, Southern Rhodesia and South Africa. The projected new line would provide Northern Rhodesia with a link to East Africa and an alternative route to the sea. Since Rhodesia Railways are operated efficiently and cheaply and since they have ample spare capacity it was widely felt that the new line could not be justified economically. A group within the Northern Rhodesian Government, centering around the Ministries of Finance and Transport, was anxious to obtain support for this conclusion from a body, such as the Bank, with a reputation for objectivity. It wTas felt that this support would make it easier to persuade those in both Rhodesias who wanted the new railroad that it would be desirable to maintain the unity of the Rhodesia Railways. Preliminary studies in the Bank indicated that expected traffic was not sufficient to warrant the building of the new railway link. An urgent mission was sent out to investigatethe project so that it might give some views to the Northern Rhodesian Government before the conclusion of Committee B sessions, - 2- The Agreement on the Rhodesia Railways 4. However, by the time the i4ission arrived in the Federation, Committee B had already presented to the Northern Rhnodesian and Southern Rhodesian governments its recommendation that the Rhodesia Railways should be maintained as a single organization. It also made proposals about. the way in which this might be done. 5. These proposals establish a Higher Authority for the Railways, composed of two ministers appointed by each of the two governments. If one government desires a rwew railway line which may divert traffic from the existing system and which is opposed by one or more members of this Higher Authority, then it may nevertheless secure the construction of the new line. For this purpose it must provide the necessary capital at a reasonable rate of interest, must compensate any loss on the new line, and must compensate fully any reduction in net revenue on the existing system which can be attributed to the existence of the new competing railway line. The amounts of these compensation payments would be calculated annually by the Board. If the ne- revenue of the Railways is reduced below what it otherwise would have been as a result of the construction of any new project other than a railway line, then compensation will also be due the Railways. The amount of this compensation would be negotiated between the governments. 6. These proposals, suggested by Committee B, seem to have been satisfactory to all parties. The African members of the Northern Rhodesian Government were cm sulted and gave their consent co an agreement along the lines suggested by Committee B. Such an agreement was duly signed during the Missionts stay in the Federation. The Mission left Central Africa without meeting Committee B. The Federation was dissolved on December 31, 1963, The Strength of Political Feeling About the Railroad 7. Although it might therefore appear that a Bank report on the projected railroad link would no longer serve any useful purpose, this is not the conclusion of the Mission or of the Northern Rhodesian Government. The conclusion of the agreement on the future of Rhodesian Railways has apparently in no way weakened the strength of the desire for the new railroad. The UNIP election manifesto of December 6, 1963 describes it as one of the transport projects 'to receive priority' under the new Government. All party members who spoke with the Mission testified very strongly in favor of the railroad. It is highly likely that UNIP will win the forthcoming elections. 8. Politicians can change their viewpoints very rapidly and it is far from impossible that Dr. Kaunda's party, once in power, should reverse its stand. However, it should also be remembered that African politics can be strongly emotional, and that, despite the poverty of African states, policies which are strongly desired may be approved despite their high economic cost. Both Tanganyika and Uganda have imposed an embargo on trade with the Republic of South Africa even though the burden they thereby imposed on themselves is substantial and greater than the burden imposed on South Afric!. Nor should it be thought that Northern R.hodesia will - 3 - be unable to finance the project itself; for it has substantial reserves built up in London and a sizable annual income from the copper companies. Moreover it is not out of the question that some financing agency wouild take up the project, irrespective of its economic merits. 9. If the UNIP Government did decide to go ahead with the new railroad willy-nilly, it might keep the Agreement and pay the compensation, or it might reject the Agreement and do enormous danage to the viability of Rhodesia Railways as well as to its own financial strength. Any action that the Bank can take to forestall these eventualities would be highly desirable. II. THE DEMAND FOR TH2 RAILIWAY Political Arguments 10. As of now, all those who are likely to be in ministerial positions in the Northern Rhodesian and Tanganyika Governments in two months' time appear to be firmly convinced that the railroad is a very attractive project. This conviction is undoubtedly based partly on political grounds. Dr. Kaunda himself deemphasized the importance of the new railroad as an alternative to existing ones which run through territories which are colonies of non- African Governments. This point of view he felt to be unduly pessimistic, for it rests on the assumption that neighlboring territories will still be colonies even beyond the seven years required to build the railway. But the viewpoint is all the same widespread, partly bec;iuse the new alternative line would run through newly-independent Tanganyika, with which Northern Rhodesia is expected to have particularly good relations. It is felt that construction and use of the new line would redistribut..e income from enemies to friends. Dr. Kaunda did st ress the importance of providing a firm economic foundation for the political links he desires to have with East Africa. Economic Argurrents 11. Among the economic arguments in favor of the project some receive special stress in Tanganyika, others in Northern Rhcdesia. Northern Rhodesia, landlocked, relatively wealthy but highly dependent on copjR r, sees the railroad as an instrument to help develop and diversify its interior and as the last major link required to make Northern Rhodesia the railway transit center of all Southern Africa. Tanganyika, poor in natural resources and predominantly agricultural, sees the project as a means of getting more quickly cheap railroad transport for opening up the promising areas of the South-west. Northern Rhodesia's Viewpoint 12. Major economic objectives of the new Northern Rhodesian Government are likely to be the expansion of employment through diversification and aid to African agriculture, the expansion of trade with other African countries and the provision of more economic and social infrastructure. The railroad has received very wide attention throughout the country in news-stories and visionary articles about the effect it is expected to have upon the local economy. It would not be misleading to say that the railroad has become something of a symbol of these three major economic policies which a UNIP government would like to adopt. First, the railroad is intended to open up, develop and diversify the rather poor and neglected Northern Province (home of the Bemba people, largest tribe in Northern Rhodesia, who provide Dr. Kaunda his strongest support); here it is a symbol of the new governmentts promise to concentrate on the economic development of areas of African, as opposed to European, development. It is felt that the railroad would provide employment both in its construction and in its operation, thereby stemming the present outflow of people to joblessness and social maladjustment in the Copperbelt. And it is thought that the new transport facility would make possible cheap distribution of fertilizer (from the new plant at Livingstone) and cheap transport of arricultural produce to market centers. It is noted that much of the develonment in the country is concentrated along railway lines and it is felt that con- struction of a new line would lead almost automatically to prosperity in the areas traversed. Secondly, the railroad is spoken of as an iron bond simultaneously strengtheninrfr and symbolizing economic cooperation between Northern Rhodesia and East Africa; it would complete the system of railway links between landlocked Northern Thodesia and its neighbors; it would encourage the expansion of intra-African trade. Thirdly, the railroad is regarded as an act of faith in thle future of the country. It is frequently stressed in Africa that long distances and sparse populations necessitate early subsidization of infrastructure in the hope that such investments will eventually justify themselves by the development they induce. People are well awJare that other railways in Africa have generajlly not become financially viable until many years after construction. Dr. Kaunda sees the new line as a service to the peoples of Africa in general (for transit purposes) and to the people of Northern Rhodesia in particular. Tanganyikats Viewpoint 13. Tanganyika's economic arguments are geographically more specific. The East African Railways and the Tanganyika Government have long been interested in a gradual south-westward extension of the existing railway line inland from Dar-es-Salaam. They are elated at the prospect of getting the railway sooner than anticipated, Co that it can help to develop the South-west. They are anxious to obtain part of the copper traffic to ensure fuller use of capacity which they intend to build anyway. The 22W- mile line from Dar-es-Salaam to Mikumi is completed and a 27-mile extension to Kidatu is under construction. It is intended to carry the line through the Kilombero Valley which has been identified by an FAO reconnaissance mission as an area of considerable long-run agricultural potential. After rising some 4,000 feet out of the western end of the Kilombero Valley at Npanga, the railroad would cross broken and unstable land, difficult for railway construction. Then it would reach the relatively fertile and densely popuilated area of the Southern Highlands around Mbeya and Tukuyu. The need to i'acrease employment and expand production in these agricultural areas is also considered important by the Tanganyika Government as a means of reducing the popu'ation shift to the cities and of ensuring adequate food supplies. In addition, there are to the south of the i'4panga-Mbeya line extensive coal and iron deposits. In the past, it has been difficult to exploit these resources owing to the high titanium content of the iron ore, the unsuitability of the coal for smelting purposes, and the distance of the deposits from any sizable market. According to the Tanganyika Government, new technology may now be altering this situation, and the region is felt to be ready for a major development effort. Currently Available Reports on the Project 14. These economic arguments are strongly urged and widely supported. Of the three reports on the railroad project that are presentLy available, two appear to be emphatically in favor of it and the third is partly out of date. The most detailed study made was prepared by Sir Alexander Gibb and Partners and Overseas Consultants Inc. for the British Government and published in 19?52. It concluded that the economic justification for the project was not at that time sufficient to warrant the large expenditure involved in a railroad but was large enou: h to justifv some improvement of the road link. The two up-to-date studies were macde in 1963 - one by the London and Rhodesian Land and 11ining Company (Lonrho) for Dr. Kaunda and the other by East African Railways and Harbors (MAR) for Mr. Jamal, the Tanganyikan Minister of Transport. 15. The Lonrho report deals with the Northern Rhodesian section of the rail link only and confines itself to engineering aspects. It thus deals only with the section of the line which will probably be most cheap to build because the suggested alignment largely avoids both the need for bridging and the need for ccnstruction of access roads by closely following the Great North Road which runs along the top of the watershed. Concerned only with the section of the line in Northern Rhodesia, it also evades the difficulties which may be encountered in linking the Central and East African railway systems with theii differences in gauge, coupling and braking systems. It recommends 80 lb. rail and reaches an estimate of ; 17.4 million for the construction cost of 511 miles of line, excluding locomotives and rolling stock. 16. The EAR report deals, somewhat skimpily, with economic, financial and engineering aspects of the whole projected railway link from Kidatu through southern Tanganyika and Northern Rhodesia to the proposed junction with the Rhodesia Railways at Kapiri Mposhi. The construction estimate is based upon the alignment chosen by Sir Alexander Gibb and Partners. It recommends 60 lb. rail for the line, and advises that the break of gauge should occur at a point thirty miles inside Tanganyika, where it is thought that at some future date a rail link from Nyasaland may join the projected line. The estimate of the capital cost of construction of 1,0L2 miles of railway is b 37.h million. An additionaLi o 5;. million is allowed for purchase of locomotives and rolling stock and 1 8.5 million for interest charges capitalized during construction. The total cost is thus estimated at E 51.3 million, III. THE MISJIONIS VIEIWPOINT Duplication of Existing Facilities 17. The essential feature of the projected railroad is that it would duplicate the existing road linking Northern Rhodesia and Tanganyika (the Great North Road) for all but bulk through traffic, and it would replace or duplicate the existing railroads from the Copperbelt to the ocean for all traffic other than that generated along the route or in trade between East and Central Africa. Although there are in existence four main links between landlocked Northern Rhodesia and the ocean (Lobito, Beira/Lourenco ilarques, Kigoma-Albertville-Dar-es-Salaam, Elizabethville - Port Franequi - M4atadi) consideration of existing links can be confined to the two which are economically most attractive in present political circumstances (of good relations with all neighbours): Lobito and Beira/Lourenco Marques. It was very clearly demonstrated to the Mission that there is a large surplus capacity on these routes from the Copperbelt to the ocean. Rhodesia Rail- ways can itncrease capacity by 30% or roughly 800,000 tons a year (on the Beira/Lourenco Marques route) merely by obtaining additional wagons. They have line capacity on the relevant routes up to two or three times greater than present train densities, so that present cap&:city could be doubled or trebled with investment in extra rolling, stock and locomotives and loop extensions. Benguela Railways (Lobito route) estimate that they could carry -20,000 tons p.a. fronm the Copperbelt to the ocean and about one million tons frcrn the oceon to the Copperbelt without further investment. None of the Lobito route capacity is presently being used by the Copperbelt. The Benguela Railway can increase capacity by over one million tons in each direction with investments of about b 5 - L 8 million. 18. It is therefore correct to assurne that any foreseeable increase in Northern Rhodesian export-irmport traffic between now and 1970 could ba carried on existing lines without any extra investment except that for wag,ons (which would of course anyway be required on any new line in addition to the initial capital cost of construction of the line). The EAR report claims that i the new line was assured of getting all the increase in traffic between the Copperbelt and ocean ports over and above the level of this traffic in 1963, then this new line could become finaacially viable within five years of starting operation. BaR's estimates of the increase in through traffic to and from the Copperbelt (350,000 tons by 1970) are rather more optimistic than those the copper companies themselves would make. The EAR cost estimates for the new line are provisional and on the low side. Everyone concerned agrees that mnuch m.ore detailed engineering investigation of the proposed route is required, especially in south- western Tanganyika where there are areas which present great difficulties for railway construction. The Mission's aerial inspection of the terrain convrinces it that the final figure will be greater, rather than less, than those now presented. The cost of line construction will probrtbly not be less than & bO,000 to ; 15,ooo averare per route-mile or over E 60 million including rolling stock and capital charges. However, even on the assump- tion that cost is as low as EAR suggests arnl that 350,000 tons of Copper- belt traffic could be obtained for the new line by agreement with the Northern Rhodesian Government, EAR expects an average cist on the new line - 7 - of 2.5 pence per ton-mile in 1970. The Mission's estimat-e of the cost of the line would make a figure of 2.7 pence per ton-mile appear more reasonable for 1970. But that part of EAR's expected traffic which goes to or from the Copperbelt (i.e. the 350,000 tons) could be carried on the existing lines at a marginal cost of under 0.5 pence per ton-mile in 1970. Exclusion of Copperbelt traffic fronm the new line would raise average cost on the remainder of expected traffic to not less than 12 pence per ton-mile. The Costs of Duplication 19. Thus the economic cost of building and operating the new line would be considerably greater than that o:E using the old line in 1970. The extra costs incurred as a result of the new linets construction may be divided into three groups: the loss to Rhodesia Railways resulting from diversion of traffic, the subsidies which would need to be paid on the new line to cover its net loss for the year, and the addition to the charges to transport-consumers resulting from the fact that T.AR's average tariff is 33-1/3% higher than that on Rhodesia Railways. The effect of the above-mentioned agreement on the future of Rhodesia Railways (para. 4) would in this case be merely to lay upon the Northern Rhodesian Government the main burden of the increase in cost of transport. It would have to subsidize the new line to the extent of any difference between costs and revenue, and it would have to compensate Rhodesia.Railways for loss of net revenue. The assumptions made by EAR, whereby 350,000 tons of traffic from the Copperbelt to the ocean would be diverted from Rhodesia Railways to the new line in 1970, -could reduce Rhodesia Railways' net revenue by the following estima-ted amount for the year 1970; Table 1 Loss of Rhodesia Railways Resulting from Traffic Diversion 350,000 tons diverted Kapiri MvIposhi - Livingstone 405 miles Livingstone - P.E.A. border 771 miles Average revenue per net ton-mile 2.5 pence Avoidable cost per ton-mile 0.4 pence Net loss per ton-mile of diverted traffic 2.1 pence Total loss of net revenue to Rhodesia Railways: In Northern Rhodesia bl, 2)0, 000 In Southern Rhodesia 2,360,000 Total L3, 600,000 -8- Because the Rhodesia Rai-lways Tould have been carrying the bulk of this traffic in L969, and would thus have had capacity to carry it the year before the new line came into operation, it is reasonable to assume that in 1970 alone ; 3.5 million would be due from the Northern Rhodesian Government to the Rhodesia Railways in cornpensation. The net cost of the new line to the Northern Rhodesian Government in 1970 would therefore be b 3.5 million plus a share of the loss on the new line. This would be in addition to the increase in cost to transport-consumers in the Northern Rhodesian econormry resulting from the difference in tariffs. Economic Benefits from the New Line 20. However, the Mission was P,iven the strong impression that mere cost of the new line to the Northern Rhcdesian Government would be no object. The project is seen as a forward-looking investment in infra- structure which may not be financially self-supporting for many years. In the meantime indirect benefits of the nature described above in paragraph 12 are expected. Northern Rhodesian Section 21. Much expansion of employment and production in the Northern Province of Northern Rhodesia is expected to ensue from the construction of the railway across it; but the Mission is very skeptical. Construction itself would in fact not provide employment for more than two thousand people; many of these wJould have to be brought in from outside for their skills. But, more important, the long-run potential of the whole area seems in general to be not especially promising. Other parts of Northern Rhodesia, such as Eastern, Central and Souti-hern Provinq es and the Kafue Basin, have most likely a much higher development potential. Furthermore, it is very doubtful whether a railroad would lhelp draw out whatever potential there is in Northern Province. Therefore, e-,pansion in agri- cultural production in the area could probably not be counted a benefit induced by the railway. Any stimulus to local development that is likely to come fromr a through transport link in the area would be more likely to be due to the Great North Road which follows the route of thie projected railroad. This road was improved to good gravel standard about five years ago, but to date it has yielded no great benefit in the form of increased agricultural production. bhifting subsistence agriculture still pre- dominates, with virtually no crops available for marketing. Admittedly the climate is suitable for the production of a great number of crops, even though the May - October period is almost without rain. But the soils are so unpromising that the whole area must be considered marginal. 22. Crops which are in prospect in the area can be carried by road without difficulty and might continue to go by road even if a railway were built. About three years ago the government initiated a program to en- courage the cultivation of Turkish tobacco among farmers in the subsistence sector; this crop can be successful even in poor soils. Although production of th s tobacco may well increase quite rapidly in the near future, Govern- ment officials do not anticipate total production of more than a few thousand tons at the most. Of the small areas with good soils, Mpika appears to be the o nly one likely to produce a sizable market surplus. Intensive settled agriculture may be developed here, but eventual production for other markets could not be expected to exceed some 16,00G tons of rraize and some 7,000 tons of beans. Though there are mineral resources in the area, none of the surveys conducted by the Government, the copper companies and others suggests that there is any potential likely to be worth exploiting in the foreseeable future. The only other activity in the area which seems likely to generate significant traffic is commercial fishing around Lakes Tanganyika, Bangweulu and Nlweru. Total 1962 catch in terms of wet weight was about 15,000 tons much of which was exported to other parts of the country0 It is likely that much of this fish would continue to be shipped by road even if a railroad were built, because the proposed alignment carries the railroad too far from the Lakes. Preliminary research in the Northern Province seems to indicate that coffee may have some potential in the area, but the results cannot be kn,n conclusively for another two years or more. In fact, what is needed to bring out the limited agricultural potential in the northern part of Northern Rhodesia is not a railroad but improvement of the road-system (including feeder roads) and of the extension-services for fisheries and agriculture. 23c But any proposals for investment in the Northern Province must be treated with extreme caution. About ; 2 million spent by the Northern Rhodesian Government on roads, settlements, fisheries and game-reserves in 1958-60 have yielded very disappointing results. Now there is much talk of making the area bloom with the aid of fertilizer from the projected new factory at Livingstone; but such optimism is quite unjustified, for the feasibility of a fertilizer program is far from being established and remains in doubt because of the poor soils. There is grave danger that, once investments are made in the area, large continuing subsidies will be necessary to enable the farmers to compete on the market with production from other parts of the country. Any at-tempt to provide more employment in the area would simply itmpose an added burden on the economy because the people could be more productive elsewhere. The tobacco program, if successLul, could improve the economic posii,ion of a great number of people. But, on the whole, the Northern Province is likely to remain a problem area, in which incomes will stay near the botton of the range of African farm-incomes because of low productivity. Tanganyikan Section 2b. Although some of the areas in Tanganyika that would be crossed by the railroad show more promise for development than the northern section of Northern Rhodesia, yet here too more and better roads and extension services could make a larger contribution than a new railroad on present prospects. Furthermore, except for relatively small quantities of grains, the products of these areas are high-value crops wThich can stand the cost of highway transportation. It is? unlikely that a new railway- would generate local development that could not, be genera.ted, at lower cost, by an improve- ment of road and extension services. The region with the best immediate prospects is the part of the Southern Highlands around Mbeya and Tukuyu, close to the Northern Rhodesian border. Here, there are substantial areas of good soils and adequate rainfall. The principal cash crops - tea, coffee, - 10 - pyrethrum - which used to be grown almost exclusively by European farmers, have expanded rapidly on African farms in recent years. However, according to estimates prepared by the Tanganyika Ministry of Agriculture, which are rather more optimistic than those used in the Bank/IDA report No. TO-396, Tanganyika Highway Projects (dated December 10, 1963) the amount of agri- cultural products to be shipped by railway from the Southern Highlands may range from 38,000 tons in 1970 t.o about 60,000 tons in 1980. The agricultural areas further to the east around Ifakara cannot be expected to produce a comparable output for outside markets. The EAR report puts a figure of 6,000 tons on the exports of the area in 1970, rising to 12,000 tons in 1980. These very rough estimates do indicate the order of magnitude of what can at best be expected in the area. 25. Two possible projects in southwestern Tanganyika, of which little is presently known but much is expected by the Tanganyika authorities, could substantially affect the benefits to be anticipated from a railroad through the area. One of these projects is the large-scale investment scheme in drainage, irrigation and settlement, tentatively suggested in 1961 by FAQ for the Kilombero Valley, which is estimated to have an ultimate production potential of the order of one million tons of exportable agri- cultural goods a year. The other is the plan for development of iron and steel production and a chemical industry based on coal at Ruhuhu which has both coal and iron-ore deposits; the most advanced plan for this area contemplates starting production of iron and steel on a modest scale within the next ten years. 26. However, for two reasons, it is not at present possible to use either of these projects to help Justify the Northern Rhodesia-Tanganyika railroad link. First, they are both in very early starTes of consideration; more surveys are needed before one can be sure that the areas in question really have the economic potential attributed to them. Furthr,rmore, technical and other difficulties associated with such large-scale projects and with the requisite new settlements in both areas will require both projects to be carried out in easy stages over the coming decades. Secondly, there is no reason to expect that either project would produce goods for export along the railway link with Northern Rhodesia. Agricultural produc- tion will be expanded in Northern Rhodesia in coming years and there is also a potential iron and steel project south of the Copperbelt. In the meantime, it may be assumed that Northern Rhojesia will be able to obtain both agricultural imports and iron and steel goods more cheaply from its traditional supplier, Southern Rhodesia. 27. There are two major conclusions to be drawn from this analysis of the agriculuural and mineral potential of the area to be crossed by the railroad. First, there is no sizable amount of traffic foreseeable, over which the fixed costs of the railway might be spread. Second, the railway is not likely to generate any local development that would not have appeared in its absence. Through Traffic Between Central and East Africa 28. Trade between Northern Rhodesia and East Africa is at present very small not exceeding 10,000 tons a year in either direction, whether carried by road or by sea. A small amount of trade between Southern Rhodesia and East Africa follows the existing Great North Road, and more might be attracted to a railroad along the same route. Similarly, some increase in trade between Central and East Africa might be anticipated were transport charges to be reduced. A generous preliminary assumption might be that the total through trade between East Africa and Central Africa which would be attracted to the railway in 1970 would be 20,000 tons a year in each direction. Total Traffic Estimates 29. A preliminary and approximate assessment of traffic that might be attracted to the railroad in 1970, the first year of opening, is presented for discussion purposes only as follows: Table 2 Traffic Estimate for 1970 From To Miles Dar-es-Salaam Dar-es-Salaam Total (tons -thousands) Kapiri - Mpika* 260 LA0 25 65 Mpika -.Mbeya* 360 30 20 50 Mbeya - Makambako 125 45 39 8h Makambako - Ifakara 199 62 58 120 Ifakara - Kidatu 44 69 64 133 *Lonrho Alignment Tentative Economic Evaluation 30. The Missionts estimates of the cost of the railroad project lead it to believe that the level of traffic needed to balance revenue against cost would be about 480,OO0 net ton-miles per route-mile per annum,if the average revenue per ton-mile is to remain at the existing EAR level of 2.47 pence per ton-mile. However, the Mission's traffic estimate for 1970 (see Table 2) implies that actual traffic will reach an average of only 76,000 net ton-miles per route-mile per annum. If this proves to be the actual level of traffic obtained, then average cost per ton-mile will be ab-lut 12 pence in 1970. On the other hand, it is also noteworthy that railroad costs would not be competitive with road haulage costs for traffic less than about 250,000 net ton-'miles per route-mile per amum, This estimate is based on the actual cost of road haulage in the Rhodesias (between 3.5 and 4 pence per ton-mile) under existing road conditions and and load limitations. This cost level could be substantially reduced on first- class roads with international standards of axle-loading, and the level of net ton-miles per route-mile per annum which would equalize costs of road and rail transport would be correspondingly raised. IV. CONCLUSIONS AND RECOT'TENDATIONS 31. It is hard to over-emphasize how convinced are Northern Rhodesiats politicians of the political, social anci long-run economic value of the projected railroad link. Moreover, the project has been discussed a great deal since the Spring, receiving "requent mention in the speeches of Dr. Kaunda, so that popular pressures for the railroad have had time to build up. Yet the Missionts analysis indicates that the project cannot be justified from an economic point of view. The prospective economic benefits are not sufficient to justify the extra investment now in constructing tthe new railway line and the ccntinuing extra costs of running tthe new one as well as the two existing ones (Lobito and Beira/ Lourenco Marques). The railroad would not help significantly to mobilize presently unused resources in the areas through which it runs. The prices of goods for local markets might be reduced somewhat by the boost th.e railway would give to inter-regional trade and economies of scale, bl.t as far as can be foreseen at present, this vould not be enough to make the railroad an attractive proposition in the near future. If these long- run benefits seem small, then the diversion of a portion of the Copperbelt traffic to the new line to make it financially viable in the early years cannot be justified. The Need for a Detailed Bank Report 32, Because feelings about the railroad run so strong that the Northern Rhodesian Government might decide to go ahead with the new link, retaining or rejecting the Agreement on Rhodesia Railways as then seems most appropriate, the first need is for a persuasive Bank report. Obviously, this report cannot deal with the rnore political objectives that supporters of the railroad wish to further, but it can attempt to set out clearly and in terms of the arguments used by Northern Rhodesia's politicians the pros and cons of the project and the economic costs that will be incurred by a decision to build the railway. The report can thus clarify the choice to be made. Since the report will no lon. er play any role in Committee B negotiations the original reason for urgency has disappeared. The new government will not come into power before the end of January, and a report to that government during February would appear to be satisfactory. 33. If the Bankts report is to play an effective part in dissuading the Northern Rhodesian and Tanganyikan Governments from going ahead with the railway, then it.will need to be most carefully drafted and phrased. Many people in Africa seem to be convinced that the railway link is in the long- run economic interests of the southern part of the continent. The Mission encountered a widespread fear that the Bank had been brought in, not to make a detailed and objective eccnomic evaluation of the project, but simply to torpedo it. The report will have, therefore, to recreate confidence in the impartiality of the Bankts position. A thorough and straightforward - 13 - treatment of the railway, as we see it, would seem essential to this purpose. This treatment should not be designed only to answer the question whether the new rail-way would eventually be the cheapest way for transporting Copperbelt traffic to and from overseas, for this is not the question uppermost in the minds of the proponents of the scheme. At least two other questions must receive careful analysis: What future is there for economic development in Northern Province, as com,pared with other parts of Northern Rhodesia, and how can the realization of this future be hastened? What benefits are in prospect from trade with East Africa and what is the best way to hasten the arrival of these benefits? Thus, the report should be written in terms of the fundamental economic desires of the new government (see paragraph 12). At present, there is an opposi- tion to the railroad project within the Northern Rhodesian Government. This opposition may well be eliminated by the elections on January 20-21 so that the report will have to stand very much on its own feet against a probably hostile cabinet. The Need for an Improved Transport Link Between Northern Rhodesia and Tanganyika 34. Althoug;h the Mission feels capable of building a fairly strong case against the railroad, it is not convinced that there is no need for an improved transport link between Central and East Africa. If this link is to go up through the center of Northern Province of Northern Rhodesia, across the border near Tunduma and through the Southern Highlands to Ifakara, then the obvTious answer is an improvement of the existing road. Yet in its conversations in Africa the Mission met an almost universal assumption that a link between Tanganyika and Northern Rhodesia must take the form of a railway. To overcome the obstacle of the apparent novelty of the road improvement idea, a strong case will need to be made for a road in the Bank's report; once that case is made and if the idea of a Pan-African Highway catches popular imagination, then this will obviously !nelp to exorcise the specter of the railway link. However, the !4ission does not favor improvement of the Great North Road on the grounds that it will help to further the case against the railroad, but rather because there does appear to be an econom c case for such a project. Better highways and feeder roads would open up whatever development potential there may be in the regions studied by the Mlission. A part of the motivation for the railway was a desire to give special attention to the development of the areas of predominantly African habitation through which it would run. The conclusion of the Mission is that a larger road program would do far more to further this policy than any railroad construction. IWhether such a program is warranted in the immediate future is subject to verification by more thorough investigation. 35. The existing Great North Road has been raised to gravel standard, of varying quality. Such a surface is easily damaged and expensive to maintain. vurthermore, wet weather can make it difficult to use; it is not a reliable means of communication in an emergency. It is not suitable for heavy-duty traffic at all seasons and makes transport between Central and East Africa slow and costly. - 14 - 36. Yet inexpensive freight transport between these two areas, both characterized b1- large geographical area and small population is essential if specialization in industry and agriculture is to develop among them. Perhaps creation of thephysical conditions for wide markets and specializa- tion and economies of scale is particularly important at this stage of incipient industrialization. In the countries of the area there are two crucial forces at work at present. One is the pressure for industrialization at any cost; and there are signs that, with independence, these countries are already investing in certain industries whose minimum economic size is larger than the existing market (e.g. Tanganyikats new oii refinery)V The other is the desire for cooperation and trade with other African countries, partly based on aspirations towards Pan-Africanism and resent- ment at the way in which international trade is presently organized. Pan- Africanism is undoubtedly a potent force in the political motivations of Mr. Nyerere of Tanr-anyika and of Dr. Kaun-a who has been Secretary of the Pan-African Freedom Movement for East, Central and Southern Africa. If the physical conditions for a wider market can be created as a catalyst, then perhaps the Pan-Africanist aspiration to cooperation will have a chance to outweigh the nationalist desire for industrialization at any cost. Cooperation could mean specialization and the countries could save themselves a lot of investment in uneconomically small factories; a few large-scale industries, equitably distributed, could serve the whole market. Prospects for a continuation of the East African Common Market, let alone its exten- sion to neighboring countries, currently appear worse than they were in the middle of 1963. Yet almost all those with whom the Nission discussed this subject in Africa were optimistic about the outcome of several more yearst discussion and negotiation. Even if full common market arrangements are not secuLred, there may wellbe elimination of tariffs on specific products. It is also to be noted that the planned allocation of major industries among the countries of East and Central lfrica is currently under active study in the area. Without better transport links between the two regions this cannot be successful; the creation of such links could be an added stimulus to make it possible. 37. One final point that was urged in favor of the railroad and which the Mlission does not feel able to reject outright concerns the special problems faced by Northern Rhodesia sa a landlocked country wh-Lch is at the same time highly dependent on world trade. Copper exports are at present crucial to the economic well-being of Northern Rhodesia. The Mission feels that, quite apart from any prospect of bad relations between Northern Rhodesia and her neighbors, the fear that insurrection in the Portuguese territories might lead to destruction of Northern Rhodesia's lifelines is perfectly understandable. There is an economic risk here and some insurance against this risk, in the form of a better highway link with East Africa, might well be worthwhile. If an emergency were to arise then general traffic could travel by the highway and copper by the two longer rail routes (Kigoma - Albertville - Dar-es-Salaam and Elizabethville - Port Francqui - Matadi). - 15 - The Need for Cooperation with E.C.A. 38. Following its instructions and constrained by time, the Mission was not in a position to go into the details of a project to improve the road link between Central and East Africa. furthermore, it would be unwise to try to reach a final conclusion on this issue at the present time when the UN Economic Commission for Africa is planning an extensive survey of the whole problem of international links in East and Central Africa. A survey of alternative routes for a Tanganyika - Northern Rhodesia link would be very valuable provided that it took into account the development potential of the areas traversed. For instance, it might be that a road link between the two countries via Nyasaland would be of greater economic value to the region as a whole than improvement of the existing Great North Road. 39. The Mission therefore wishes to record its view that cooperation with ECA on this issue coi ld be of the greatest benefit to the countries of the region. ECA is very interested in the future of transport in East and Central Africa and Mr. Robert Gardiner, the Executive Secretary, intimated how anxious he is to cooperate with the Bank on this matter. Proliferation, overlapping and contradiction of reports is obviously to be avoided. A serious study of the future of international transport in the region with which the Mission was concerned could guide the countries and the .Ba.: to projects which are of highest priority in the rapidly changing circumstances of the area. Joint sponsorship of such a study by the Bank and ECA would improve the quality of the study and would in no way commit the Bank to financing of future projects. Need for a Bank Transport lission to Northern Rhodesia 4o. However, the Mission feels that the Bank w-ould not have completely fulfilled its responsibility on this issue by cooperating with the ECA study and by making tentative judgments against the railroad and in favor of a road improvement program. The Northern Rhodesian Government has requested the Bank to send out a group to survey the transport needs of Northern Rhodesia as a whole. The Mission considers that such a survey would be of the greatest value to the country at the present time and that it would present an excellent opportunity for the Bank to put the Missionts tentative recommendations on road improvement into perspective among the transport needs of Northern Rhodesia. Li. The Mission recommends that a small group (perhaps one transport economist, one agricultural economist and one highway engineer) be sent to Northern Rhodesia for a period of about two months. Such a mission would have the following purposes: a) to examine existing ideas for the future development of road, rail and river transport in Northern Rhodesia; b) to consider the transport requirement of Northern Rhodesia in the light of the changed circumstances of a dissolved Federation and forthcoming independence; - 16 - c) to relate transport needs to the development potential of the various regions of the country, thereby setting the Northern Province in a proper perspective; d) to evaluate approximately the likely costs and benefits of projects which suggest themselves under (a), (b) and (c) above, and to decide where a road link with Tanganyika ranks in urgency among these projects. Such a mission is strongly desired by the North rn Rhodesian Government and could play a most useful role at this time when a general economic mission from ECA (under Mr. Dudley Seers) is already in Northern Rhodesia to advise on immediate economic priorities, major lines of future economic policy and promising iields of fu ther investigation in the new circumstances of separation from the Federation. This group is presently without a transport economist, so that the N rthern Rhodesian Government will be in need of a transport expert's views on the recommendations made to it by ECA. Further- more, the suggestion of promising alternative transport projects for invest- ment might be the crucial element to enable Dr. KaLnda to go back on his word in favor of the railroad and thereby avoid investing in a costly white elephant. Were any of the transport projects to seem of sufficiently urgent priority the Bank might wish to provide technical assistance for engineering feasibility studies and to consider eventual financial aid, 42. A short survey of transport priorities in Northern Rhodesia would be of greatest value within the next few months. TTere such a survey to commence in the near future,then the Bank Mission would be in close liaison with Mr. Seers? group and it could be reasonably assured of forestalling any unwise transport investments thatmight be undertaken by an inexperienced new government. The Seers group is scheduled to leave Northern Rhodesia in the m ddle of March, and the special opportunity for consideration of transport priorities in relation to its general economic policy recommendations would then disappear. 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