Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

Railway Reform: Toolkit for Improving Rail Sector Performance
Case Study: Camrail
newal program through 2020, which would be partially funded through introducing
a RIRIF 156 payable by the concessionaire to Government in an account managed
by the concessionaire; (v) Government would finance US$27 million in passenger-only
rolling stock; and (vi) the concessionaire would finance US$290 million
in rolling stock and rolling stock-related investment through 2020.
5 Conclusion
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 commerciallyfocused
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 coun-
156 Redevance d’investissement et de Renouvellement des Investissements Ferroviaire
(charge for rail investment and renewal). This is calculated annually as 50 percent of
net income before taxes of the previous year.
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.
The World Bank Page 335