Today’s Presenter Functional Expertise • Particular expertise in: - Project Design and Development - Market Research and Analysis - Client Relations and Management - Analytical Research Methods and Writing Industry Expertise Experience base covering broad range of sectors, leveraging working relationships with leading industry participants’ Senior Executives - Infrastructure Development and Mapping of Infrastructure Investment Trends in Africa James Milne - Private Equity Market and Emerging Market Developments in Sub-Saharan Africa Research Analyst - Energy Efficient Technologies Frost & Sullivan EBT What I bring to the Team Africa Cape Town • Strong analytical approach to research services • Financial background • Excellent interpersonal communications skills • Strong quantitative and qualitative analytical abilities • Good verbal and writing skills Education • B. Bus Sci Finance (Honours) CA Route, University of Cape Town, Cape Town, South Africa 2
Focus Points1 Megatrends influencing rail development in Africa2 African Rail Infrastructure Development3 Analysis of Infrastructure Development – Key Projects4 Major Regional Corridors: Sub-Saharan Africa Focus5 Major Challenges, Drivers and Restraints6 An Emerging Trend: Metropolitan Light Rail7 Case Study: Citadel Capital8 Conclusions 3
MegaTrends influencing Rail Development in Africa Urbanisation in Africa will be primarily • Infrastructure development is a primary resource driven driver of regional integration Mass migration will result in the formation of • As trade borders are increasingly mega cities, mega regions and mega opened, the potential for the establishment corridors of a unified African free trade zone exists ` • The creation of integrated trade routes • The improvement of rail infrastructure will linking countries is crucial to the concept of allow cheaper opportunities for freight and innovation to zero passenger travel • Countries will then be able to transport raw • Light rail services within major cities will also materials to particular zones in which offer alternative options to road transport beneficiation can take place Source: Frost and Sullivan 4
African Rail Infrastructure Development KEY: - Planned Projects (Number) Key profiled projects across Africa in both ongoing and planned rail - Ongoing Projects (Number) infrastructure investment amounted to a total of $48.12 billion • Morocco $14.67bn • Ethiopia 1ongoing projects $3.70bn 2 planned project 3 ongoing projects 7 planned projects • Ghana $6.40bn • Kenya 1 ongoing project • Nigeria 5 planned projects $6.40bn $405.5 million 1 ongoing project 7 ongoing projects 1 planned project 3 planned projects • Zambia • TanzaniaRail Infrastructure: Major Multi-Country Rail $93.8 million $5.37bnLinks (Africa), 2012 2 ongoing projects 3 planned projects Mega Projects (Multi-Country) • Mozambique Botswana-Mozambique- $7.00bn $3.66bn Zimbabwe 1 ongoing project Isaka-Keza-Kigali (Tanzania- $1.93bn • Namibia 4 planned projects Rwanda) $2.68bn • Botswana Source: Frost and Sullivan Analysis Namibia-Botswana $1.30bn 3 ongoing projects $1.40bn *Note projects included are key ongoing and planned projects. Base 2 planned project 1 planned project Year is 2011 5
Analysis of Infrastructure Development – Key ProjectsNORTH AFRICA: (Morocco) Rail Infrastructure: Breakdown of Key Ongoing vs Project Cost ($ Million) Planned Projects (Africa), 2012 Tangier-Casablanca High 4,000.0 Speed Rail High Speed Train Line Project 7,000.0 43.18% Strait of Gibraltar Undersea Rail 3,673.2 Tunnel 68.18%WEST AFRICA: (Nigeria, Ghana)Country Project Cost ($ Million)Nigeria Abuja Light Rail 2,179.0Ghana Western Railway I 1,640.0 Ongoing Projects Planned ProjectsGhana Eastern Railway 1,400.0 Source: Frost and Sullivan Analysis *Note: Analysis of Projects is by number of projectsSOUTHERN AFRICA: (Namibia, Botswana) EAST AFRICA: (Ethiopia, Kenya, Tanzania, Mozambique)Country(s) Project Cost ($ Million) Country Project Cost ($ Million)Botswana- Botswana- 7,000.0 Tanzania-Rwanda Isaka-Keza-Kigali 1,925.0Zimbabwe- Zimbabwe-Mozambique Mozambique Link Ethiopia Addis Ababa- 1,600.0Namibia-Botswana TransKalahari Link 1,297.6 Me’eso 6
Regional Corridors: Sub-Saharan Africa FocusRail Infrastructure: Key Trade Corridors (Africa), 2012 - 2020 •The development of regional trade corridors is crucial to the promotion of intra-regional trade in Africa •Prior analysis conducted by Frost and Sullivan indicates the development of two significant continental corridors: The ‘North-South’ Corridor The ‘East-West’ Corridor •The construction of such corridors is a long-term strategic goal, dependant on a range of factors, including regional investment and political conditions. Rail Infrastructure: Regional Corridor Development (Sub-Saharan Africa), 2012 - 2020 6 Analysis of ongoing investment in Sub- 5 Saharan Africa reveals a number of intra-regional rail 4 developments, planned for 1 implementation between 3 2012 and 2020 KEY: 1. Trans-Kalahari 2 2. Trans-Cunene 3. Beira 4. Nacala 5. Central - Key Trade Corridors Source: Frost & Sullivan 6. Northern 7
Major Challenges, Drivers & Restraints Market Drivers Key Industry Significant Ongoing Development is driving Challenges investment opportunities Massive Demand exists on the continent for improved transport possibilities Cheap Labour reduces the cost of large scale infrastructure development Current (<5 years) Future (>5 years) Market Restraints Funding Gauge Type Lack of Knowledge discourages companies from investing in Africa Rehabilitation Skills Shortages Poorly Established Supply Chains drive up Capacity project costs Poor Political Conditions Political Risk is heightened by the long term Infrastructure investment horizon of large constructionIndustry Challenges involve long and short term factors which projectsdeter potential market participants from investing Source: Frost & Sullivan 8
An Emerging Trend: Metropolitan Light Rail•A Notable emerging trend across countries in Africa is the development of urban metro rail systems, which are aimed at easing congestion and road traffic pressures in heavily built up metropolitan areas.•Metros are not to be confused with commuter or suburban railways, which operate on main line tracks unsegregated from other rail traffic.Rail Infrastructure: Key Ongoing Metropolitan Railway Developments (Africa), 2012 Country City Project Cost ($ Million) Contractors (if applicable) Nigeria Lagos Lagos Rail Mass 1,200.0 CCECC Transit System Nigeria Abuja Abuja Light Rail 2,179.0 CCECC Mozambique Maputo Maputo Electric 995.0 Unknown Railway Ethiopia Addis Ababa Addis Ababa Light Rail 400.0 CREEC • The development of urban metro rail systems reflects a shift in the sophistication of both rail infrastructure planners and users. • As cities in Africa develop into major metropolises (often housing over ten million people), the option of reducing extreme road transport pressures through the introduction of urban metro rail systems becomes more viable • Major challenges include funding and logistical planning 9
Case Study: Citadel Capital Rail Infrastructure: Timeline of Rift Valley Railways (Kenya), 2010 - 2012 2010 2011 2012 Upon acquisition, Citadel Capital developed a three point turnaround programme for the railway system, requiring investments of $287.0 million. By 2012, the following had been achieved: By September 2011, $234.0 million had been - RVR recorded its first positive monthly raised EBITDA in the company’s history - Key turnaround times had improved by In February 2010, Citadel Capital gained control of 30.0% RVR through the acquisition of a 51.0% stake - Passenger train frequency rose from through CC subsidiary Africa Railways. eight daily trains to sixteen Citadel Capital was able to raise a total of $234.0 Prior to Rift Valley Railways (RVR) acquisition by million in senior debt and equity through a number of Citadel Capital (CC), the company was a loss- large multinational funding partners: making operation running ageing rolling stock on Key Funding Participants a poorly maintained network. Travel delays were frequent, and transport costs exceptionally high. African Development Bank KfW Entwicklungsbank International Finance Corp FMO“Citadel Capital’s successful ongoing Equity Bank ICF Debt Poolventure is testament to the potential for BIO IFCinvestment in Africa’s rail infrastructure” DEG FISEA (PROPARCO) 10
Conclusions Conclusion Opportunities Investment in rail infrastructure is Major opportunities exist for significant, amounting to $48.12 construction firms, engineering billion in key ongoing and planned firms and equipment suppliers projects operating within the rail sector African governments are shifting Although political risk still persists, focus towards large-scale there is a growing opportunity for investments in rail infrastructure in multinational financiers to provide order to ease the burden on road funding to governments embarking networks on large projects in the sector Significant potential exists for Improved rail services are expected further investment in the sector, as to reduce trade costs and increase intra-regional trade grows access to Africa’s huge population 11
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For Additional Information Christie Cronje David Winter Corporate Communications Research Manager Africa EBT +27 21 680 3566 +27 21 680 3275 Christie.Cronje@Frost.com David.Winter@frost.com James Milne Research Analyst EBT +27 21 670 3297 James.Milne@frost.com 15
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