African development bank loan to Mozambique Rail and Port Authority to buy rolling stock for the Ressano Garcia railway line

The African Development Bank approved a $40 million corporate loan to Mozambique's state-owned enterprise, Portos e Caminhos de Ferro de Moçambique EP (CFM), on January 31, 2024. This loan, part of CFM's strategic plan for 2021-2024, will finance the acquisition of essential rolling stock, including 10 diesel-electric locomotives, 300 wagons, and 120 tank containers, for the Ressano Garcia railway line. Additionally, the Bank aims to mobilize an extra $30 million from other lenders to support the project. The funding also covers a three-year maintenance program and training for CFM maintenance staff.

The project focuses on the Ressano Garcia railway line, an 88-kilometre corridor between the port of Maputo and the South African border, which accounts for over 90% of CFM's rail traffic volume. By enhancing logistics and reducing transportation costs, the project aims to improve the competitiveness of this corridor as a vital logistics route. Expected outcomes include increased rail transport service access for households, reduced road congestion and fatalities, and enhanced efficiency and cost-effectiveness for private companies utilizing freight services.

The development outcomes of the project are multifaceted, including trade facilitation, job creation, and skills transfer. The initiative is projected to significantly boost foreign earnings, with an increase from $225 million in 2022 to $360 million in 2036, and generate a cumulative total of $1 billion in tax revenue for the government during this period. Moreover, the project is expected to achieve net carbon savings of 744,511 kilotonnes of CO2 between 2023 and 2035, contributing to environmental sustainability.

Mozambique's strategic location in southern Africa makes it a key logistics gateway for inland countries such as Zimbabwe, Zambia, Malawi, and Eswatini. The Maputo corridor, where the new rolling stock will be deployed, is crucial for exporting mineral commodities from northeastern South Africa. The project will enhance regional integration and intra-African trade by increasing transport capacity and efficiency, benefiting local communities along the corridors and improving their access to markets for trading goods and services.