Pending Railway Corp Restructuring Envisions Private Sector Involvement

Gov’t considering railway connections to neighboring ports including Lamu

The federal government is considering an overhaul of the state-owned Ethiopian Railway Corporation that would enable it to get involved in the construction of new railway projects and onboard private railway operators.

The Ministry of Finance is conducting a study aimed at restructuring the Corporation (ERC) and plans to table it to officials from the Ministry of Transport and Logistics and ERC executives and board members for validation in the coming weeks, according to inside sources.

Ahmed Shide, minister of Finance, told lawmakers on Thursday that the study has been finalized.

“It aims at making the mandates and capacity of the Corporation more robust,” he said. “We’re also planning to explore how to include external capacities.”

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An official at the Finance Ministry who spoke with The Reporter on condition of anonymity disclosed the study is looking to create a railway enterprise that fits the logistics demands of Ethiopia’s landlocked economy.

“ERC is a strategic institution, not only a state-owned enterprise. Ethiopia’s next grand development projects are centered around railways. Ethiopia is a landlocked country and cannot grow without the wide coverage of infrastructure first. Railway is bulk transport that can have a huge impact on markets and prices,” said the official.

The officials disclosed the study considers the involvement of private railway operators in ERC.

“Private operators are needed to make EDR more competitive. We need to increase the number of railway locomotives. If we manage to grow the number of railway operatives and the frequency of wagons, then the price of logistics will drop. This in turn will have a positive impact on commodity prices, cost of production, inflation, and overall economic activity,” said the official.

The plans also include the addition of several dry ports under the umbrella of ERC via the inclusion of private operators.

“Diversifying dry ports under ERC is also critical. For instance, if Ethiopia has to utilize Lamu Port, we must develop a railway that links Kenya and Ethiopia. To link Ethiopia’s economic corridors with ports in neighboring countries, maximizing the railway networks is essential. That’s why the restructuring and additional mandates for ERC are required,” said the official.

Public-private partnership (PPP) schemes might be integrated into the Corporation’s operations to develop additional railways following the restructuring, according to the Finance official.

“The private sector might not invest in railways but can use its own wagons to engage in transporting cargo. These are the suggestions in the study,” the official disclosed.

The official noted that new proposals may be included following discussions between the ERC board and Transport Ministry officials next week.

Efforts to include comments from the Corporation and the Ministry of Transport went unanswered.