Cameroon



Conclusions

Camrail plays, and will continue to play, an important role in Cameroon’s economy. At the start of the concession, the company faced substantial tasks in improving all areas, from operations to labor, management, investments, rehabilitation, security, and environmental issues. Camrail’s financial performance was positive but fell short of the margins anticipated by the financial projections at concessioning. The substantial investment program Camrail has undertaken on its own account will take a long time to generate adequate financial returns.

However, Camrail is a success story in terms of meeting Government objectives for privatization. Now the railway is recovering a greater share of operating costs, and it relieved Government of almost a decade of significant capital expenditures until the 2008 concession amendment. Major investments have been made, traffic volumes have increased, and the concessionaire, as a major railway user, has created a much-improved service for its own traffics. Both the Government and the operator have therefore benefitted. So have other freight shippers, as far as can be judged, with improvements in service quality, security, and reliability and, although Bolloré is a shareholder and a major railway user, there is little evidence of favoritism at the expense of other shippers. However, more still needs to be done; in 2008, prior to the crisis, it was reported that capacity was becoming a constraint.

The most significant development, offering the most promise for long-term network sustainability, is that this concession was restructured to address two fundamental issues that are by no means unique to Cameroon.

First, most passenger rail services do not cover their costs; even covering routine above-rail costs is a serious challenge. Therefore, without specific third-party payments, passenger rail services will never be a priority for commercially-focused concessionaires, who typically make only cosmetic investments in these services. The Cameroon press regularly levels heavy criticism at Camrail passenger services, although service levels have changed little from pre-privatization, and average fare levels are similar in real terms. Media criticism partly signals nostalgia for Regifercam, but the public also expected Camrail to significantly upgrade passenger services,157 and believed that upgrades were affordable for the company. This is unlikely without specific government funding and was made more so when Government failed to pay the passenger public service obligations (PSOs) for the first three years of the concession. As is common in many countries, concessionaires are convenient government scapegoats when the public is unhappy with services.

Second, as a result, freight traffic must earn enough to cover the full cost of infrastructure maintenance and renewal. Most functioning railways carry enough freight traffic to cover routine maintenance, but few have sufficient funds to pay for major periodic maintenance or upgrades. Infrastructure will thus steadily deteriorate unless external funds are found. Even for Cameroon’s relatively busy railway, traffic levels are too low for any operator, private or public, to generate surpluses sufficient to finance replacement infrastructure to a standard that would provide high-quality freight and passenger rail services.

In addition, unlike investment in rolling stock, infrastructure investment is not portable and must be abandoned if the concession is terminated. This problem is common to many concessions and, much as governments may wish to think that infrastructure funding problems will disappear once a railway is privatized, this is only possible for railways with reasonably large traffic volumes and a concessionaire committed to the long-term.

The 2008 amendment is a milestone in the development of African concessions. First, the Government established a specific program of passenger-related investment to replace the previous generalized commitment. Second, the original agreement required the concessionaire to fully cover infrastructure renewal, and the Government to provide only partial financing for initial rehabilitation (through IFI loans, which the concessionaire was responsible for repaying). This proved financially infeasible; the 2008 amendment transfers responsibility to the Government for infrastructure renewal and the concessionaire retains responsibility for maintenance. The concessionaire contributes renewal costs through fees based on concessionaire profitability. Similar arrangements will need to be established in most concessions that now require the concessionaire to be responsible for passenger services and infrastructure renewal to ensure a long-term future for the rail system.

References

Blanc, Aymeric and Gouirand, Olivier, La concession du chemin de fer du Cameroun: les paradoxes d’une réussite impopulaire, Document de travail 44, Agence Française de Développement

Bullock, R., 2005, Results of Railway Privatization in Africa, Report for the World Bank, Washington, D.C.

di Borgo, Pozzo P, and others, 2006, Review of Selected Railway Concessions in Sub-Saharan Africa, World Bank Report, Washington, D.C.

International Union of Railways, 1990-2010, Railway statistics (annual publication)

Murdoch, Jill, 2005, Assessing the Impact of Privatization in Africa—Case study of Camrail

Strong, John, 2004, The Development of Railway Concessions in West and Central Africa, The Journal of Structured Finance, Winter 2004

    


157 At the time of concessioning, Government planned to phase in all-weather road access to the villages that had only rail, which would have allowed the ‘omnibus’ services to be phased out. But ‘omnibus’ services are still being operated.
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