Lilongwe: The Malawi government has commenced the review of the concession agreement between with Central East Africa Railways (Cear) for the management and operations of the Malawi Railways. Director of Planning in the Ministry of Transport and Public Infrastructure's Victor Lungu disclosed last week that the process is expected to be completed in the second quarter of 2012.
"The purpose of the exercise is to improve service delivery of Malawian Railways and to bring it in line with the Public Private Partnership Act," said Lungu.
The resumption of the review of the concession, which started in 2007, follows last year's acquisition of a majority stake in Cear by Vale Mining of Brazil. Vale Mining acquired the shares from another company called Insitec barely two years after it bought the same from an American company called RDM.
Lungu admitted in an earlier interview that the continued change of ownership in Cear has delayed the conclusion of the review of the agreement between the company and the Malawi government.
Through the review, Malawi, among other things, wants the concessionaire to be fully responsible for the operations, maintenance and development of the railway network in the country, including rehabilitation of the lines as well as acquisition of new locomotives and wagons.
The Malawi government also wants Malawian companies to be offered an opportunity to own part of the shareholding in Cear.
Privatisation Commission Chief Executive Officer Jimmy Lipunga told Business Times earlier that government had already initiated dialogue with Mozambique for Malawians to participate in the entire Nacala Corridor, and not just Cear.
"In this case, Malawians will participate in the Malawi/Mozambique rail operations and not just the Malawian side," said Lipunga, adding: "There is already provision for Malawian participation in the Nacala Railway Corridor, of which Cear is part of."
Cear won a 20 year concession in 1999 to run the operations of the former Malawi Railways Company Limited but just seven years down the line in 2007, the government ordered the review of the concession to amend some of provisions in the original deal.
The Privatisation Commission says in the 2009 annual report that the review was triggered by public concerns about the poor quality of the infrastructure and services after the privatisation. "Further, the absence of Malawians in the shareholder's list was of grave concern to the government of Malawi," says the commission in the report.
To ensure that the review and negotiation process was professionally undertaken, the commission with financial support from the Sadc Banking Association, engaged an Indian company called Crisil Infrastructural Advisory Consultants to help government in the review and re-negotiation process.
The consultant already carried out a thorough due diligence review of the rail network and identified areas that require amendment after taking into account international best practices in the sector.
"The review will ensure that the railway estate is maintained to acceptable standards. It is hoped that this will result into a well balanced concession agreement which will create an enabling environment for realising the core objective for the concession," reads the PC report.
