The Bingu dream

On a Sunday in April, scores of farmers and villagers, young and old, gathered near the Shire River in the Malawian town of Nsanje. As they looked toward the river, behind a billboard with the slogan “Nsanje Port: Gateway to the Future, The Dream Comes True”, their president, Bingu Wa Mutharika, was showing the president of Djibouti the site of the town’s soon-to-be-built inland port.

In a fully industrialised economy, the construction of a small inland port might not have pulled much of a crowd. But in Malawi, on that day in Nsanje, it did, because the port it will soon have is part of a project that has the potential to change the way the country does business with the world.   

Home to 13.5 million, Malawi is a small landlocked country in southwestern Africa. Approximately 200 kilometers away, past neighbouring Mozambique, lies the Indian Ocean, and with it, at the Port of Chinde on the mouth of the Zambezi River, the promise of access to international trade and commerce.

Four years ago, President Mutharika unveiled a plan to dredge a waterway along the Shire and Zambezi rivers to Chinde and build out its port to make it big enough for large freighters. The vision behind the enormous project was that it would free the country, one of the poorest in the world, from the exorbitant cost of transporting all its imports and exports by lorry.

Road transportation is the only viable means of getting goods into and out of the country. The South African city of Durban alone, which has a deepwater port, accounts for more than 50 percent of goods shipped to Malawi. Durban is 2,000 kilometres away from Malawi.

Ambitious and costly – at a total price tag of between $4 – $5 billion, about the size of Malawi’s entire 2008 GDP – the Shire-Zambezi Waterway has been labeled “the technicolour dream of Mutharika” by local newspapers. Infrastructure Investor takes a look at what it will take to make it a reality.

Ebbs and flows

Commercial shipping along the Shire and Zambezi rivers is nothing new. In 1859, the famed explorer David Livingstone sailed his steamer into the heart of what is now Malawi using essentially the same 238 kilometer route now being proposed for the new waterway. But over the many years since then, its use has had ebbs and flows.

According to a 2006 pre-feasibility report for the project undertaken by engineering firm Hydroplan, commercial shipping once flourished between trading posts and missions along the two rivers. But in 1895, a fall in the level of the Shire rendered parts of it inaccessible to paddle steamers north of present-day Nsanje. A transport alternative was needed. In 1935, when a bridge over the Zambezi was finally completed, Malawi acquired its first direct rail link to the Indian Ocean at the port of Beira in Mozambique. As trains hitched their wagons, steamers stopped their paddles.

Commercial activity in sizeable vessels started up again some years later, when 200-ton bulk molasses carriers began to ply the waters. Two such vessels made regular trips between Nsanje and Chinde until the outbreak of the Mozambican civil war in 1977, when the border between Malawi and Mozambique was closed off and all water transportation came to a halt.
In 1996, four years after the war ended, John Cortrill, a South African investor, financed a survey of the waterway to determine whether the waterway could be re-opened. He found that the rivers were navigable all the way to the Indian Ocean, but nothing came of his plans for a Shire River Transportation Company.

Tailwinds

Today, however, the Malawian government is considering the project commercially viable. The reason is that skyrocketing ground transportation costs are overwhelming the country, making it more important than ever to find a cheaper haulage alternative. Patrick Mphepo, first secretary for investment for the Malawi Embassy in Washington DC, estimates that about 60 percent of the cost of the country’s imports is embedded in ground transportation.

That may even be a conservative estimate. At Goods for Good, a charity that has transported 116 tons of donated clothes, school supplies and other goods into Malawi since 2004, programme director Brigitte Zimmerman estimates that 67 percent of her costs go to transport. “It would be amazing if Malawi weren’t landlocked,” she says.

Not surprisingly, political support for the project is stronger than ever.  “The government has really taken this as a very, very important, almost lifeline project for the country,” Mphepo says. So important, in fact, that oversight of the project will soon be transferred to the office of President Mutharika, says Victor Lungu, director of transport planning for the Malawi Ministry of Transport and Public Works.

The political support extends beyond Malawi – a crucial factor since over 70 percent of the waterway falls outside its border. In 2007, Zambia and Mozambique signed a memorandum of understanding (MOU) with the Mutharika government to re-open the Shire-Zambezi Waterway and facilitate the development of complementary road and rail infrastructure. And as Infrastructure Investor went to press, President Mutharika had just finished a three day trip to Mozambique to negotiate signing of an MOU for the project’s environmental impact assessment. “This is not a dream; the project will take off before the end of my term in office [2014],” he told local reporters upon his return.

An alphabet soup of multilateral organisations has also pledged support and resources toward the project. The European Union (EU) funded the 2006 pre-feasibility study for the waterway. The Common Market for Eastern and Southern Africa (COMESA), and SADC, the Southern African Development Community, are now in the process of hiring consultants for the full feasibility study, also being funded by the EU. The waterway has also been added to the list of projects to be carried out under the New Partnership for Africa’s Development multilateral accord, which gives it priority and visibility in the region.

Enter private capital

Perhaps most importantly, though, the private sector has finally waded into the waterway’s development as well. In May 2008, Portuguese engineering and construction firm Mota-Engil signed an MOU with the Malawi government to begin construction on the first phase of the project – the development of the port at Nsanje, which Lungu predicts will one day handle most of the country’s cargo. The firm broke ground on the port a year later and expects to have it finished by November, says Mota-Engil board director Gilberto Rodrigues, who is managing the project. At risk is Mota-Engil’s own capital: the firm is putting $50 million into the first phase of the port development. The reward is a 30-year concession for the port’s facilities.
For the Malawi government, which has spent the better part of the last four years trying to get the private sector to believe in the project, it must be satisfying to hear Rodrigues say: “I am sure that the project is fully viable”.
Further south, Riversdale, an Australian mining company, is investigating the feasibility of transporting coal by barge, which also bodes well for the waterway. Chinese firms have also expressed interest in the project, says Lungu.

And the US? “On the US side, we have got some inquiries, but no one wants to go in there seriously,” says Mphepo, who is actively marketing the project.

A la carte

Mphepo’s marketing message is about to get more specific. The Malawi government will soon develop an action plan of everything that needs to be done to make the waterway a reality. With this in hand, Mphepo will speak to “the whole scope of interested parties” to join the project to build warehouses, develop a rail connection, or provide barge services. Crucially, the government will not be attempting to procure a one-stop-shop solution. “You don’t have to come in and put in $2 billion,” he says.
The piecemeal approach is likely to create an à la carte menu for a range of investors willing to invest in the region. “The private sector has vast opportunities for investment in areas such as the port facilities at Chinde, river ports upstream, terminals, storage facilities, construction and maintenance of water-going vessels,” says Gilbert Maeti, senior transport economist at the COMESA secretariat in Lusaka, Zambia.

Lungu estimates the total of these and other investments to be between $4 billion and $5 billion over the next five years. This includes dredging the rivers in certain locations, procuring vessels for the freight service, rehabilitating existing rail lines to Mozambique, and building new ones between key cities in Malawi and Zambia. Roadways and airports will also have to be expanded to accommodate the additional freight traffic, he says.
About $200 million to $300 million of investment from the private sector should kick-start the project, Lungu says. The Malawi government has put in about $2 million so far for project monitoring and implementation. There may be more money coming with the next year’s budget, but Lungu admits that the government can’t afford to do the project by itself. “Public-private partnerships – that’s the way we are looking at financing this,” he says.

COMESA’s Maeti believes that the Shire-Zambezi Waterway has the potential to become a pan-regional inland shipping waterway akin to the St. Lawrence Seaway in North America or the River Rhine in Western Europe.
For his part, Rodrigues, who has spent the last eight years in Malawi, is not planning on leaving the continent anytime soon. “Africa represents the future,” he says. In Malawi, that future could come sooner than sceptics may think.