Rail Co-Development ~ Collier on African Infra...

Thanks to my MIT colleague Ethan Zuckerman for spotting this fascinating piece by Oxford's Paul Collier in IMF Finance & Development on Building an African Infrastructure about orchestrated co-development of railways cutting across industries and polities...

"Key political decisions are needed to build critical rail networks for a continent well suited to them. [Alas] during the past half-century Africa’s rail network, never very extensive, has shrunk. [But] by radically reducing transportation costs, railways could open up vast tracts of Africa to economic opportunities, especially in agriculture and mining, which many countries are relying on for future growth. The continent needs a decade of massive investment in rail networks.

What might accelerate such investment?

The core economic challenge is to organize the rail network in a way that meets the needs both of the extraction industries and of agriculture. Mining operations require railways and ports. Were there no agricultural users, the mining companies themselves could finance the rail network from some of the high profits generated by extraction. As long as these rail links serve agriculture and resource-extraction users, agriculture need pay only the marginal cost of operation. In effect, the differential profitability of mines and agriculture creates the potential for price discrimination between them. Mining companies, eager to open up resource-laden lands, have offered to set up such railways, even though these companies are not likely to welcome or desire multifunctional use of the rail network. [...] It would be beyond the core competence and natural interest of a mining company to run a railway that prices its service for farms at their marginal cost. As a result, even if a mining company were to provide such rail service, farms would likely mistrust it because of its peripheral nature for the mining company. [...] A third-party commercial operator with core competence in infrastructure but without mining interests appears to be the most credible option."

Collier goes on to point out things are equally complicated when crossing political borders. But that ultimately...

"African governments risk missing a historic opportunity to transform the transportation arteries of the continent. [...] risks can be addressed by subregional rail authorities with decision-making power. Africa’s current generation of political leaders has the opportunity to open the physical geography of the region. The decisions they must make are complicated, and much is at stake for the economic well-being of the continent."