Major challenges of existing concessions in SSA
losing the competition with road transport. In most cases these services are crosssubsidized by the freight transport, creating additional barriers for the development of freight transport. Due to unclear provisions in concession agreements and the lack of commitment of governments to pay the compensations, the concessionaires are not interested in operating passenger services. As a consequence, their quality has continuously decreased and the marked is diminishing. The passenger services currently represent only 1.7 percent of the total passenger transport services in Africa. The sub-urban services consist mainly of morning inbound and evening outbound trains with little services at other times 17. The long distance passenger trains, which were historically the only practical mode of transport in the region, are less and less competitive; the road networks are improved and the busses provide strong competition. The road networks are improved in SSA and buses provide strong competition. Passenger trains need to be operated at average speeds of 60-80 km/h in order to compete with modern buses. The costs to maintain track and signaling systems for operating passenger traffic competitively at such speeds are higher than for freight transport. The passenger services cannot produce the necessary revenues to achieve such goals; in the best cases, passenger revenues cover the costs of operations, but do not support the renewal of rolling stock and do not cover any of the costs of infrastructure. Governments control the fares for passengers on rail, at rates almost invariably below cost. In a few cases, public service obligation agreements are part of the concession, but governments rarely provide timely compensation. As a result, most passenger services are on a downward spiral of deteriorating conditions and financial losses. The compensation of public service obligations is the source of many misunderstandings between the governments, concessionaires, and the passengers. Although in most cases the passenger services represent only 10-15 percent of the total rail revenue, they are responsible for the majority of frictions between the governments and rail concessionaires. The fourth major challenge for the concessions in SSA: undercapitalization of concessions. The overoptimistic assessment of the market growth and of the costs for upgrading the infrastructure or rolling stock technical status has generated another risk in the concession process. The companies created for this purpose have been endowed with far too limited a capital base to address the operating issues. Shortly after the concession, they discovered that the estimated positive cash flows did not occur because the traffic growth did not happen as predicted, the need of investments for continuing operations are higher than estimated in the business plans, and the bur17
A completely different situation can be found in South Africa where railways operate the majority of suburban services in Africa.
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