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Economics of Kazungula bridge

BY TAFARA MTUTU

The Kazungula Bridge was officially commissioned on May 10, with Presidents Edgar Lungu of Zambia, Felix Tshisekedi of the Democratic Republic of Congo, Mokgweetsi Masisi of Botswana, Filipe Nyusi of Mozambique, Emmerson Mnangagwa of Zimbabwe, Namibian Vice-President Dr Nangolo Mbumba, and Eswatini acting Prime Minister Senator Themba Masuku present on the day.

The Kazungula Bridge had long been a project that was set to become the solution to many of the infrastructure impediments in intracontinental trade, specifically along the north-south traffic corridor.

The north-south traffic corridor is the largest of 18 major traffic corridors in sub-Saharan Africa. The corridor comprises seven member states, namely South Africa, Botswana, Zimbabwe, Mozambique, Malawi, Zambia and DRC.

It stretches over 8 600km of road, from Durban to Dar es Salaam through Zimbabwe, Botswana, and Zambia. However, with the commissioning of the Kazungula bridge comes a newly feasible alternative route in the north-south traffic corridor that bypasses Zimbabwe.

The alternative route along the north-south traffic corridor that uses the Kazungula bridge circumvents several issues within Zimbabwe and at the Beitbridge border.

The Beitbridge border is the busiest border post in Africa and facilitates the movement of 25 000 people and 500 trucks daily.

In addition, over R150 million worth of goods passes through the border daily. However, both the Zimbabwe and the border post have failed to keep up with the growing number of people and goods passing through the entry point.

The challenges faced by the border in December 2020 alone resulted in delays of up to 24 hours in South Africa and up to seven days in Zimbabwe, and queues as long as 15km on both sides of the border.

Mike Fitzmaurice, the executive director of the Federation of East and Southern African Road Transport Associations (Fesarta), expressed potential combined losses of over R1 billion in South Africa and Zimbabwe because of these challenges in the few weeks that the border post was clogged during the festive season.

The route through Zimbabwe is 150km shorter than the alternative route that passes through the Kazungula Bridge, but poor infrastructure, outdated and inefficient systems, high cost of fuel, poor service delivery to freight operators, and corruption have been some of the issues that have rendered the former unattractive over the years.

We note that Afreximbank approved a R1 billion loan to upgrade the Beitbridge border post in response to the persistent inefficiencies at the border earlier this year, bringing the total commitment for the project to R4,3 billion.

However, if the six years it took to construct the Kazungula Bridge is anything to go by, this upgrade is likely to be completed only after 2022, much to the disadvantage of Zimbabwe.

It is also worth mentioning that the Kazungula bridge will support the ACFTA agreement in increasing intracontinental trade. According to a Cross-Border Road Transport Agency report, intra-regional trade in the Sadc region has for a long time revolved around 12-14% level, compared to about 40% in North America and about 60% in Western Europe.

Although the Zimbabwe route remains in use, the country stands to lose a considerable amount of economic value to the Kazungula Bridge. We opine that this serves as a wake-up call to Zimbabwe to rise to regional standards.

This includes (but not limited to) modernisation and digitisation of border post systems, improved road infrastructure, and resuscitation of rail infrastructure as an alternative that will reduce stress on the local road network. According to the National Development Strategy (NDS 1), around 93% of Zimbabwe’s 84 000 km road network needs attention.

This significantly falls short in matching the 80% of the road infrastructure of both Botswana and Zambia that is in good condition. Fortunately, the government has been proactive in addressing this through a three-phased Emergency Road Rehabilitation Programme.

The programme will have access to ZWL$33,6 billion and run for 36 months from March 2021 with a target to bring the country’s major roads to world standards by 2025.

The project is currently contracted to four privately-owned firms Tensor Systems, Fossil Contractors, Exodus Company and Bitumen World, and one Zimbabwe Stock Exchange-listed firm Masimba Holdings. Under this programme, 26 000km of road will be rehabilitated in 2021 and routine maintenance for 9 600km will be in place by 2025.

This programme is expected to support the order book for these contractors and Masimba, in particular, is expected to continue recording strong financial figures until completion. The group recorded a 243% in inflation-adjusted revenues in FY2020 and a 63% increase in quarter-on-quarter revenues in Q1 2021.

The ZWL share price has also moved by 3 489,2% (967.1% in USD) over a 52-week period ending May 24, 2021 to ZWL$26,00 per share as investors incorporate the bright future prospects of the business at least until 2025.

However, the country’s rail infrastructure continues to lag as the National Railways of Zimbabwe hunts for suitable partnerships that can recapitalise the parastatal with 41 modern locomotives, 300 wagons and 300 modern coaches, in addition to measures to curb theft of copper cables.

Rail transport is considered to be cheaper and cost effective. It would also serve as an apt alternative considering that over 60% of goods transported (mainly hard and soft commodities) along the north-south traffic corridor are bulky and better transported by rail compared to road transport.

Mtutu is a research analyst at Morgan & Co. He can be reached on +263 774 795 854 or tafara@morganzim.com

 

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