At the recent Southern African Railways Association (SARA) Conference, a high-level panel explored one of the sector’s most pressing challenges: how to mobilise sustainable financing for railway expansion and modernisation across the region.
Moderated by Cleo Shiceka-Ntshingila, the session brought together representatives from the Finance community: Brian Dlamini - Development Bank of Southern Africa (DBSA), Portia Dube - Export Credit Insurance Corporation of South Africa (ECIC), Dirk van den Berg - UK Export Finance (UKEF). Collectively, the discussion highlighted the intricate balance between infrastructure needs, project preparation, and the financial requirements of long-term railway development.
Funding Challenges in the Railway Sector
The panel acknowledged that the cost of building and maintaining rail systems is immense, extending far beyond track construction to include signalling, rolling stock, maintenance, and supporting technologies. Theft, ageing infrastructure, and deferred maintenance were cited as factors that complicate both financing and repayment models.
From the financiers’ perspective, a central issue lies in assessing and pricing risk. Lenders and insurers must determine whether projects can generate sufficient, reliable cash flow to service debt over 15- to 30-year horizons. Poor maintenance, weak governance, or operational inefficiencies can quickly undermine financial sustainability.
The Bankability Gap
While the demand for rail investment across Africa is undeniable, the panel stressed that many opportunities fail to progress because they are not sufficiently developed into bankable projects. Both DBSA and ECIC pointed out that project preparation is often underfunded, leaving financiers with proposals that lack the detail required for investment decisions.
Governments frequently prioritise energy and water infrastructure ahead of rail, given competing national imperatives and limited fiscal space. As a result, many railway projects remain underprepared, despite their clear potential to unlock trade and regional integration. Institutions such as Afreximbank, DBSA, and the African Development Bank do provide funding for project preparation, but the scale of need exceeds current resources.
International Finance Perspectives
From an export credit perspective, both ECIC and UKEF emphasised that their support is tied to domestic content requirements, though with differing thresholds. UKEF requires only 20% UK content, creating flexibility for structuring cross-border projects.
However, the reality is that railway projects must compete with other national priorities for sovereign guarantees. Ministers of finance and debt management offices must weigh rail against hospitals, power plants, or schools. Even when railway investments are recognised as vital to economic growth, they are subject to complex considerations, including jurisdiction, applicable laws, currency risks, and multi-country coordination for cross-border corridors.
Structuring for Sustainability
DBSA highlighted the importance of structuring projects to balance financial sustainability with development imperatives such as trade facilitation and regional integration. Detailed due diligence is essential, ranging from commodity flows and environmental risks to operational governance and workforce capacity.
The panellists agreed that infrastructure maintenance should not fall solely on rail agencies. Instead, costs should be recovered through long-term user agreements, ensuring that operators contribute to sustaining the networks they depend on. Clear allocation of responsibilities—particularly around services and maintenance contracts—was identified as a non-negotiable for viability.
Non-Negotiables for Investors
For UKEF, the key conditions for backing rail projects include project viability, sovereign support where state-owned enterprises are involved, and compliance with UK government policy. Fossil fuel-related corridors are excluded, while UK content is mandatory. Similarly, ECIC requires South African content and prioritises commercially sound projects, while DFIs such as DBSA must ensure repayment certainty over extended loan terms.
Towards a Cohesive Approach
The panel concluded that Africa’s rail future depends on stronger coordination across borders, improved project preparation, and broader engagement with diverse funding sources, including export credit agencies. A fragmented approach, where countries pursue separate priorities, undermines regional integration ambitions such as interconnected corridors.
Key takeaways included the urgent need for better-prepared, bankable projects; cohesive regional cooperation; and innovative financing models that balance commercial viability with development outcomes. The session reinforced that securing the future of African rail requires not just investment, but also collaboration, alignment, and long-term vision.
