© Simmons & Simmons LLP 2011. Simmons & Simmons is an international legal practice carried on by...

© Simmons & Simmons LLP 2011. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.

Juliet Reingold

19 July 2013

AFRICA G20 INFRASTRUCTURE INVESTMENT CONFERENCE

Transport and Logistics Infrastructure

2 / Doc ID: L_LIVE_EMEA1: 17650231v1


Introduction

Efficient transport and logistics channels are key for commodity-based economies to grow

Logistics are a very significant part of the overall cost

Often can be a bottleneck that caps investment returns and revenues

Multi-stakeholder environments add to complexity

Expectation is for a growth in demand and changes to the current transport environment

This will require:

– coordinated regional approach

– shared regional transport infrastructure

– Governments need to encourage private-sector/PPP engagement for greenfield transport logistics infrastructure



RAIL MAP OF AFRICA



Railway concessions awarded in Africa from 1990 to 2009



Current Railway Transport Landscape

47 railways in 32 African countries

Railway concessions since 1990

Some specialist mineral lines – West and Southern Africa

Total network size:

– 70,000 km

– 55,000 km in operation

– single track and little electrification

Railway standards are from when railways were built over 100 years ago:

– low axle loads and low speeds

– under capitalised

– ill suited to modern requirements

– limited upgrading

– track deterioration

– signalling systems rely on manual networks



Current African Institutional Railways Structure

Trend is to unbundle core infrastructure from transport services

– Uganda, Kenya, Ghana (SOE)

– Zambia/Tanzania (privately operated until recent concession cancellations)

Vertical integration models involving SOE’s:

– South Africa (TRANSNET)

– Botswana

– Nigeria

– Namibia

No independent railway regulatory authority

Self regulation by SOE Railway Company or Ministry

Except Tanzania – multi-sector regulator for rail, roads, ports - SUMMATRA



Current Constraints

Big volumes, big distances

No transcontinental motorway system

Road tariffs are high

Transport interchanges are complex and create blockages

15 land-locked countries

Burdensome trade regulations

Customs agencies – viewed as logistics unfriendly

Railway:

– transit times are slow

– services are infrequent

– absence of reliable cross-border interconnection services

– track infrastructure

– freight car imbalance



TRANS-AFRICAN HIGHWAY AND MAJOR PORTS



Source: Transport Prices and Cost, AICD 2008

ROAD FREIGHT PRICES IN AFRICA



Current Constraints

Big volumes, big distances

No transcontinental motorway system

Road tariffs are high

Transport interchanges are complex and create blockages

15 land-locked countries

Burdensome trade regulations

Customs agencies – viewed as logistics unfriendly

Railway:

– transit times are slow

– services are infrequent

– absence of reliable cross-border interconnection services

– track infrastructure

– freight car imbalance



Key Structural Legal Issues

Clear legislation and enforcement of law

Regional harmonisation of laws

Legal framework for PPP’s

Dispute resolution through international arbitration

Transparency and accountability

Physical and contractual inter-dependencies between host countries

Robust and legally binding concession contracts



Multi-stakeholder environment

Rail operator

Mine 2

Mine 1

Mine 3

Factory

Power station

Pipeline operator

Stakeholders

• Mines: One or several mines, competing mining houses, different commodities

• Rail operator: Multiple freight customers, sometimes passenger traffic

• Port operator / end customer: Export terminal or end customer

• Utilities provider: Power and water supply for mining operations

• Country interests: One or more countries with economic interests, regulations and political debates

Potential ownership structures: Single private owner, JV, state owned, or PPP



Multi-stakeholder: commercial models

Historic ownership model Rail and ports Government-owned

Increasing complexity, rapid Substantial deficiencies within mineral

industry expansion, emergence transport supply chain / competing and

of new stakeholders complimentary interests

Solutions beyond Government Private ownership / PPP

funding essential

Use existing infrastructure State owned / commercially-owned / concession

Private ownership Mining company preference for vertical integration?

Competition issues for smaller miners / third party access

Significant costs of dedicated infrastructure



Key Contractual PPP Issues in Transport Projects Location – minor boundary adjustments create difficulties

Securing tenure – slow, subject to legal challenge, gaps in tenure

Access Regime:– who controls access to the track?– is there shared use?– capacity allocation– management of incidents and responsibility for delays and incidents– access charges/pricing mechanisms

Safety, environment

Co-use arrangements

Crossing other infrastructure:– corridor not to become barrier to adjacent development– unfettered rights to cross not unwittingly granted– highly-regulated environment – risks of compensation imposed– continued existence of agricultural communities



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