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Are you interested in Africa and its opportunities with railway? Our summary today works with two blog posts titled: African Railways could go bankrupt but this is not necessarily a bad thing and It will be the best of times, it will be the worst of times: thinking about the contemporary African railway mania from 2022 by Matthew McCartney published on the Charter Cities Institute website. Matthew will be the next interviewee and this episode provides some background information on some topics we will discuss. Additionally, since we are investigating the future of cities, I thought it would be interesting to see how the African continent is progressing with railways. These articles present the contemporary situation, challenges and possible benefits of railways across Africa.

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Welcome to today’s What is The Future For Cities podcast and its Research episode; my name is Fanni, and today I will introduce a research paper by summarising it. The episode really is just a short summary of the original paper, and, in case it is interesting enough, I would encourage everyone to check out the whole paper. Stay tuned until because I will give you the 3 most important things and some questions which would be interesting to discuss.

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History shows that railway companies easily go bankrupt so financial problems and bankruptcy of African railways should be expected. Regardless, we must hope that the African Union’s vision for creating connections across the continent can manifest with the patience and financial banking. The aim is to create long-term wealth based on urbanisation, industrialisation and export-led growth that will pay for the railways afterwards.

Now there is a railway renaissance in Africa. Since the colonisation, different powers wanted to create land links over the continent but fall short for various reasons. Britain dreamed of building a railway link from Cairo to Cape Town but the other powers, France, Belgium and Germany were in the way in land. In the 1970s the Chinese tried their best and built the TAZARA railway connection between Zambia and Tanzania, but this railway by 2014 only ran with an estimated 2% capacity. In 2015, the African Union imagined the Pan-African High-Speed Train Network connecting up the major cities of the continent by 2063 in their vision for The Africa We Want.

This latest attempt is backed by the African Development Bank, the World Bank, the US Government, and the Chinese inspired Belt and Road Initiative. They are already building parts of the infrastructure, the trains have already been running between Nairobi and Mombasa, Kenya, and Addis Ababa in Ethiopia and Djibouti. Egypt contracted Siemens to build a 1800 km long electric railway connecting the Red Sea and the major cities around the Mediterranean. This all sounds great, but there is historical evidence that there will be problems with the finances, as it has been with many other railway companies and visions. In 2022, this new railway mania is questioned whether it is a result of wisdom or foolishness?

Let’s turn to those historical examples, and first let’s see the US railway mania in the 1800s. The new railways drove organisational innovation, the companies were all on the stock market. But they were all riven with corruption and malpractice and soon there were reorganisations, scandals, and the lack of ability to pay the workers. Regardless, the railway connections changed the way how the US population saw the world, broadened the horizons. They facilitated growth in many ways, and sometimes tried to direct that growth like making the distribution of news and newspaper harder jeopardising democracy itself. The companies presented the first precedents to big monopolies being less than ideal and they were tamed through policies and federal legislation.

There are other examples from Britain, France, Russia, India and even Japan. Their railways were built when the countries were poor, like rural contemporary Africa, they were built to connect continents, and were financed by global powers. All those times, rails were imagined as making profits, roaring the economy forward. However, history shows a completely different picture. Railways run on squeezed profit margins and frequently go bankrupt.

Naturally there is no mystery why so many went bankrupt. Railways require huge up-front investments and take a long time to build. They exist to create profitable investment opportunities elsewhere, to transport manufactured goods to port, or food grains to urban areas or potential workers from small towns to a capital city. Railways are the true engines of growth feeding upon to create exports, employment and income elsewhere. They can be built ahead of demand hoping to drive population, but the usage usually increases later in their lifetimes.

So will the African railways be the best or the worst of times? Practically both. When resources flow into a country, the governance suffers. Empirical evidence clearly links the higher foreign resource inflows with declines in governance quality. But the infrastructure investments in energy, telecommunications and transport address critical constraints to African economic growth. Better infrastructure will boost economic growth across Africa. As people become richer they demand better governance, better public services, more security, law and order and greater political participation. Manufacturing becomes better learning from inter and intranational connections and demanding better governance. Recent history gives many examples of such transformation in Indonesia, Malaysia, Singapore, South Korea, Taiwan, Thailand, Vietnam, Tunisia, the Dominican Republic and many others. All these governments had governance as weak as in Africa in 2022 when they began their manufacturing export induced ascent to prosperity and better governance.

There is no such thing as a railway renaissance. We should forget about the profit and loss columns of individual lines. Railways, like education, broadband internet and good governance are at best only an input into the real fundamentals of growth and development. We must expect and endure financial problems and bankruptcy of African railways. We must hope that the vision of the African Union and the patience and financial banking of the international investors are sufficient to keep building railways, to extend lines to connect ports, cities and deposits of raw materials even when railways don’t pay for themselves. It is the long-term wealth created by urbanisation, industrialisation and export-led growth that will create the national African wealth to pay for the railways. History says we should be optimistic about Africa. Railways drive economic growth and economic growth drives institutional change.

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What was the most interesting part for you? What questions did arise for you? Do you have any follow up question? Let me know on Twitter at WTF4Cities or on the wtf4cities.com website where the transcripts and show notes are available! Additionally, I will highly appreciate if you consider subscribing to the podcast or on the website. I hope this was an interesting paper for you as well, and thanks for tuning in!

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Finally, as the most important things, I would like to highlight 3 aspects:

1. Although historical evidence proves that railways are basically bad financial investments, they are important for long-term economic growth, like education, broadband internet and good governance.
2. Railways can help long-term economic growth with making urbanisation, transportation and industrialisation easier, which later lead to paying for the railways.
3. The economic growth driven by railways can lead to institutional change.

Additionally, it would be great to talk about the following questions:

1. Why do we keep comparing the financial investments for railways with other types of transportations if they drive so much economic growth?
2. Are railways as important for a developed country as for a developing one? Can it continually drive economic growth, or after a while does its driving expire?
3. How instrumental do you see railways in your country? Have you ever thought about what they give, how your country would look like without them?
4. Would you invest in railways knowing the advantages and disadvantages of such development?

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