SPV to Manage TAZARA’s Freight Operations
The recently signed concession agreement between China, Tanzania and Zambia that will see the concession of the Tanzania-Zambia Railway Authority (TAZARA) to the China Civil Engineering Construction Corporation (CCECC), will see Zambia and Tanzania cede freight operations to the SPV but continue managing passenger services to serve rural communities.
Zambian Minister of Transport and Logistics, Frank Tayali, explained that the SPV is structured as a revenue-sharing mechanism, not a shareholding company, and that Tanzania and Zambia will receive a fixed annual concession fee throughout the concession period.
The agreement aims to increase TAZARA’s capacity to 2.4 million metric tonnes within two years of signing and to 5 million metric tonnes within five years. The projected growth in cargo movement is expected to create more jobs and turn TAZARA from a liability into a profitable enterprise.
As part of the revitalisation, China will supply 34 new locomotives with double the capacity of the current ones, while the 1,800-kilometre track will be fully rehabilitated. TAZARA will also receive 16 new passenger coaches.
In addition, a logistics hub will be constructed at Kapiri Mposhi in central Zambia, featuring warehousing and customs facilities capable of handling cargo for both Zambia and the Democratic Republic of Congo (DRC). The agreement is scheduled to be signed in November.
Out of the US$1.4 billion investment, about US$1.17 billion will go toward heavy rehabilitation works, while US$238 million will be allocated for periodic maintenance and the acquisition of 760 new wagons. The Tanzanian government has also set aside land exclusively for TAZARA’s expansion.
Currently, TAZARA operates with only 12 locomotives, eight for freight and four for passenger services. Tayali noted that the Port of Dar es Salaam, which now has a cargo handling capacity of 15 million metric tonnes, compared to five million in the 1970s, will support the increased cargo volumes once the railway is modernised.
Several Chinese companies operating in Zambia and Tanzania have already pledged to use TAZARA for cargo transport upon its rehabilitation. Tayali further highlighted that Zambia is also pursuing other major regional transport corridors, including the Lobito Corridor with Angola and the Nacala and Beira Corridors with Mozambique, Malawi, and Zimbabwe.
The carrying capacity of the Tanzania-Zambia Railway Authority (TAZARA) has dropped dramatically from 1.2 million metric tonnes in the 1970s to just 100,000 metric tonnes today.
According to Tayali, the railway, which began operations in 1976, started experiencing difficulties as early as the late 1970s. These challenges stemmed from growing competition from the Nakara and Beira routes following the return of peace in Mozambique, as well as from equipment failures.
Originally designed to handle up to 5 million metric tonnes, TAZARA was launched with 34 locomotives. In the 1980s, the United States government provided an additional 34 General Electric locomotives to bolster its operations, but this was not enough to reverse the decline.
Tayali attributed TAZARA’s failure to poor management, deterioration of the tracks, and financial constraints that made it difficult to meet overhead costs. Over the years, the railway suffered from underinvestment, prompting China, Tanzania, and Zambia to agree on a US$1.4 billion concession aimed at revitalising the line.
The three countries spent 18 months negotiating the agreement. Addressing rumours in Zambia that the railway was being sold, Tayali clarified that TAZARA would not be privatised. Instead, a special purpose vehicle (SPV) has been created to manage its freight operations.