Rites buys major stake in Tanzanian rail corp

Consultancy firm to the railway ministry Rites has acquired as part of a consortium a majority stake in Tanzania Railway Corporation, which manages the railway network in that country.

The move is likely to come as a shot in the arm for Rites, which has been participating in infrastructure projects in Africa since the 1970s. It comes after Rites successfully bid for a majority stake in Mozambique Railways in December 2004.

According to railway ministry sources, the formal takeover of Tanzania Railway Corporation would happen around March 2007. The Rites consortium, which includes UTI and Mauritius-based Gapco, has formed a company called East Africa Infrastructure Ltd.

The consortium's equity holding in Tanzania Railway Corporation stands at 51 per cent.

The takeover has been done under a policy of privatisation and concessioning (P&C), wherein Rites provides advisory services and also participates in P&C projects as an equity partner.

According to the terms of the deal, the entire infrastructure of Tanzania Railway Corporation, including tracks and rolling stock, will be handed over to Rites for revamp, maintenance and management for a period of 25 years.

Ministry sources said Rites might look at the World Bank for financial assistance.

According to estimates, a total investment of $400 million would be needed to revamp the railway network in Tanzania, which is more than 2,500 km long.

Once the 25-year period is over, the Tanzanian government will have the option to either allow the concessionaire to continue or take back the management into its own hand.

This is a significant development for Indian Railways, which has strong competition from China in P&C projects in Africa.

Rites has been involved in revamping railway infrastructure in African countries since the 1970s and has now even diversified into consultancy on road and aviation projects there.