South Africa, China Sign Railway Accord; Test Demand for High-Speed Link

South Africa signed a memorandum of understanding with China to improve the African nation’s railway services, the Department of Transport said.

The Department of Transport and the Passenger Rail Agency of South Africa plan to spend 95 billion rand ($13 billion) on buying new stock over the next 18 years, Director-General George Mahlalela told reporters in Johannesburg. The department will seek approval for the spending at a Cabinet meeting this month, he said.

“The challenge we are facing is that most of our commuter- rail system has reached the end of its lifespan,” Mahlalela said. “We believe that an ambitious program of introducing new rail stock and technology in our system is an absolute necessity and will protect our historical investment in the sector.”

From October, South Africa will investigate whether there is enough demand to justify the construction of a high-speed railway link between Johannesburg, the commercial hub, and the eastern port city of Durban, according to Mahlalela. Similar connections from Johannesburg to Cape Town and the Zimbabwean border as well as networks facilitating travel around cities will also be planned, he said.

China Railway Group Ltd., the world’s second-largest publicly traded heavy construction company, said on Aug. 24 it was in talks with South Africa’s government for a $30 billion high-speed rail link between Johannesburg and Durban. Standard Bank Group Ltd., Africa’s biggest lender, may be involved in the project’s funding, China Railway Chairman Li Changjin said.

Chinese Investment

The details and the amount of China’s possible investment haven’t been determined. Mahlalela said he and his Chinese counterpart would draw up partnership guidelines by November.

China has invested in African railways, hydroelectric power, mining and oil to feed its expanding economy. It increased commitments for infrastructure in Africa to about $7 billion in 2007 from less than $1 billion per year before 2003, according to the World Bank.

South African President Jacob Zuma tried to woo further investment from his country’s largest trading partner during a trip to China last week.

South Africa on June 8 launched Africa’s first rapid rail line, which connects Johannesburg’s main airport to the business district. The project, which will also link the centers of Johannesburg and near-by Pretoria when complete, is expected to cost 25.2 billion rand.

South Africa’s focus on passenger rail stems from a desire to improve transport for tourists and enable migrant workers to travel between cities more easily, Mahlalela said.

“These challenges can only be addressed through rapid rail systems,” he said.

Asked by reporters whether the scale of the plans is unrealistic, Mahlalela said: “It’s a dream, but a dream will be a reality.”

To contact the reporter on this story: Franz Wild in Johannesburg at fwild@bloomberg.net

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