The African Development Bank (AfDB) has announced that it is taking the lead in facilitating the $5 billion (R62.8bn) Nacala corridor rail and port project. The bank will support the project with $300 million from its private sector window, it said in a statement.

The project will see the construction of a 912km railway line from Tete province in western Mozambique to the port of Nacala on the east coast of the country. The line will go through Malawi. The project includes the construction of a deep-sea port and terminal infrastructure at Nacala.

Corridor project

The African Development Bank will also invest $1 million in grants to assist small and medium-sized enterprises and developing agribusinesses along the corridor in Malawi and Mozambique. This support will ensure that small businesses benefit from the port and the rail link.

Once the railway line becomes fully operational, coal exports are expected increase by 40%, generating crucial foreign earnings for Mozambique’s economy at a time when the country is experiencing a cyclical downturn. The project expects to handle four million tons a year of freight capacity for non-coal commodities and to open up world markets for regional agricultural producers.

“By providing a rail link across Mozambique and Malawi, with a possible extension to Zambia, it will help to integrate Africa. And by opening up markets for agricultural commodities, it will help to feed Africa, This dual-use infrastructure development shows that Mozambique can put its natural resources at the service of its citizens,” says Pietro Toigo, AfDB country manager for Mozambique, who adds that the project supported two of the “high fives” that guide the bank’s contribution to sustainable development goals in Africa.

According to AfDB, it played a key role as the co-lead arranger of the financial structuring of the project. Other parties include the Japanese Bank for International Co-operation, Nippon Export and Investment Insurance and the Export Credit Insurance Corporation of South Africa. A range of commercial banks provided finance for the project, sponsored by VALE and Mitsui.

“The project will have a significant positive impact over the term of the concession. During construction alone, it is expected to create 1,500 jobs and add $88 million to the government exchequer in taxes. Furthermore, it will spur economic development in the region by providing more efficient and cost effective transport of people and goods throughout the corridor. Implementation of the corridor will also lead to a reduction of CO2 emission and less accidents by diverting some of the truck traffic to rail links,” the AfDB says.

Image credit: https://www.mitsui.com/jp/en/release/2014/1204957_6473.html


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