The ability of Africa’s rail industry to unlock billions of dollars of investments from private investors and create a more vibrant and competitive industry through increased freight volumes, could lie in adopting a ground-breaking new global treaty that provides a central registry of ownership of railway assets.
A major stumbling block for private investors looking to invest in Africa has always been the need to manage the risks inherent in cross-border operations, where there is limited legal infrastructure, and no common system for tracking assets and identifying railway equipment. Cross-border operations are essential to a thriving African rail industry, but operators need to know their rights are protected.
Unlike the aviation industry there is currently no single global system relating to the ownership and identification of railway equipment. The Luxembourg Protocol to the Cape Town Convention will change that through a worldwide legal framework to recognise and regulate the security interests of lenders, lessors and vendors of mobile railway assets. A central registry, in Luxembourg, will issue unique identification numbers for all rolling stock globally at a negligible cost, ensuring that every creditor and operator can identify and track rolling stock wherever it is.
The Swiss based Rail Working Group is already engaged in discussions with African rail operators and African governments with a view to ensuring the Protocol is embraced by every country with rail operations. The ultimate goal is to have the Protocol and the central registry recognised in local legislation.
By recognising the Luxembourg Protocol, African countries with rail operations will provide certainty of ownership for potential investors, thereby reducing both creditor and operator risk – and once risks are lowered, we’ll see a greater pool of capital finance available for investment, which will lower the barriers to entry for smaller operators and ultimately result in a more competitive and dynamic African rail industry.
A study commissioned by the Rail Working Group this year, by economic consultancy Oxera, suggests that implementing the Protocol in South Africa would save the country up to R20bn in microeconomic benefits, including the reduced cost of finance and the knock-on effects of the investment in new rolling stock.
Reducing finance charges for rolling stock ultimately translates into a reduction of freight charges for customers. This means the rail industry can become more competitive. It really is one of those steps that will allow Africa to advance – and there is absolutely no downside to it.
