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Abandoned Garub Railway Station in Namibia located in the Namib desert on the road to Luderitz.

Large-Scale Rail Infrastructure for Cargo

Photo by Nick Fox / Shutterstock

Large-Scale Rail Infrastructure for Cargo

Compare IOA
Country
Namibia
Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Transportation
Sub Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Land Transportation
Indicative Return
Describes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
10% - 15% (in IRR)
Investment Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Long Term (10+ years)
Market Size
Describes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
Namibia’s railway network transports 1.2 billion tonne-kilometres of cargo annually.
Direct Impact
Describes the primary SDG(s) the IOA addresses.
Industry, Innovation and Infrastructure (SDG 9)
Indirect Impact
Describes the secondary SDG(s) the IOA addresses.
Climate Action (SDG 13) Decent Work and Economic Growth (SDG 8) Life on Land (SDG 15)

Business Model Description

Upgrade existing rail infrastructure to provide improved and additional freight transportation capacity.

Expected Impact

Increase capacity and improve efficiency of freight transportation, and reduce negative impact of cargo on environment.

How is this information gathered?

Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.

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Disclaimer

UNDP, the Private Finance for the SDGs, and their affiliates (collectively “UNDP”) do not seek or solicit investment for programmes, projects, or opportunities described on this site (collectively “Programmes”) or any other Programmes, and nothing on this page should constitute a solicitation for investment. The actors listed on this site are not partners of UNDP, and their inclusion should not be construed as an endorsement or recommendation by UNDP for any relationship or investment.

The descriptions on this page are provided for informational purposes only. Only companies and enterprises that appear under the case study tab have been validated and vetted through UNDP programmes such as the Growth Stage Impact Ventures (GSIV), Business Call to Action (BCtA), or through other UN agencies. Even then, under no circumstances should their appearance on this website be construed as an endorsement for any relationship or investment. UNDP assumes no liability for investment losses directly or indirectly resulting from recommendations made, implied, or inferred by its research. Likewise, UNDP assumes no claim to investment gains directly or indirectly resulting from trading profits, investment management, or advisory fees obtained by following investment recommendations made, implied, or inferred by its research.

Investment involves risk, and all investments should be made with the supervision of a professional investment manager or advisor. The materials on the website are not an offer to sell or a solicitation of an offer to buy any investment, security, or commodity, nor shall any security be offered or sold to any person, in any jurisdiction in which such offer would be unlawful under the securities laws of such jurisdiction.

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Country & Regions

Explore the country and target locations of the investment opportunity.
Country
Namibia
Region
  • Namibia: Erongo Region
  • Namibia: ǁKaras Region
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Sector Classification

Situate the investment opportunity within sustainability focused sector, subsector and industry classifications.
Sector

Transportation

Development need
Namibia has a well-established road network of nearly 50,000 km, where road construction and maintenance adhere to international standards. However, the rail transportation system remains underdeveloped and requires significant investment (I). The share of rail cargo transport needs to increase from 12% in 2013 to 15% in 2025 with a growth rate of 4.9% (III).

Policy priority
Strengthening Namibia's position as a transport and logistics hub is one of the four goals of the Government's infrastructure development pillar of the Harambee Prosperity Plan II, which includes completing ongoing bitumen roads construction and upgrade rail infrastructure to Southern Africa Development Community (SADC) standards (I).

Gender inequalities and marginalization issues
As critical infrastructure developments, transportation projects are male dominated, with nine out of ten construction workers being men (IV). Across Southern Africa, women tend to be employed least in road and rail transport services, among others (V).

Investment opportunities introduction
Transportation is among the priority services included in the African Continental Free Trade Area (AfCFTA), offering significant regional opportunities for Namibia. The biggest expansion of exports to regional partners through the agreement, among services, is expected for air, road and rail transportation (V).

Sub Sector

Land Transportation

Development need
The Namibian railway network TransNamib has witnessed a continued loss in market share especially for freight services. Due to a combination of physical constraints, such as operating speeds limited to 15 km / hour and 40 year old locomotives and rolling stock, rail transport has become uncompetitive with road transport services (II).

Policy priority
The Government developed an integrated, multi-modal, transport plan for Namibia and the Southern Africa Development Community (SADC) region, which defines transport solutions, including the development of the four main regional corridors: Trans Cunene, Trans Caprivi, Trans Kalahari and Trans Oranje (I).

Casual labourers, including from marginalised communities, benefit from job opportunities especially in the development phase of transportation projects (X).

Investment opportunities introduction
Given the importance of mining sector exports and its potential contribution to increasing GDP, rail transport could form the backbone of Namibia’s long-distance freight transport system. The private sector can be an alternative to the poor operational and management performance of TransNamib (II).

Industry

Rail Transportation

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Pipeline Opportunity

Discover the investment opportunity and its corresponding business model.
Investment Opportunity Area

Large-Scale Rail Infrastructure for Cargo

Business Model

Upgrade existing rail infrastructure to provide improved and additional freight transportation capacity.

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Business Case

Learn about the investment opportunity’s business metrics and market risks.

Market Size and Environment

Critical IOA Unit
Describes a complementary market sizing measure exemplifying the opportunities with the IOA.

Namibia’s railway network transports 1.2 billion tonne-kilometres of cargo annually.

Namibia’s railway network transports approximately 1.2 billion tonne-kilometres of cargo annually. In 2017, Namibia's railway system moved 1.58 million metric tons of various commodities (2).

Indicative Return

IRR
Describes an expected annual rate of growth of the IOA investment.

10% - 15%

Private equity investors generally expect an IRR of 15%on infrastructure projects like rail cargo in Namibia (9).

With Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of 25-50%, freight is more profitable than passenger services, which reaches 10% EBITDA. Thus, markets such as bulk transportation, freight corridors or urban transportation will be more likely to generate projects (5).

Investment Timeframe

Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.

Long Term (10+ years)

Local asset managers estimate an investment horizon of 10-15 years (6).

Market Risks & Scale Obstacles

Business - Business Model Unproven

Poor service delivery, the other key challenge besides the lack of appropriate rail infrastructure, may negatively impact on the delivery of goods on time (5).

Capital - Limited Investor Interest

Across African contexts, the complexity and risks associated with concessions may limit private sector interest in infrastructure construction and for railway operations (7).
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Impact Case

Read about impact metrics and social and environmental risks of the investment opportunity.

Sustainable Development Need

Due to limited attention, Namibia's railway subsector has become characterised by dilapidated infrastructure and aged and obsolete locomotives (1). Since the country's independence in 1990, Namibia extended its railway lines by only 300 km, from 2,372 km to 2,687 km (15).

Namibia’s railroad system is only able to haul 15-20% of the total freight market (2). The current service is unproductive and recent annual freight volumes have not increased despite more than doubling the number of available locomotives (7).

Freight on Namibia's railroad system has an average wagon turnaround time of 10 days, which makes it slow and not competitive compared to road transport (7).

Expected Development Outcome

Improved and more reliable rail operations, which is estimated to make freight transportation 10-15% more efficient and faster with a reduced turnaround time of 7 days (7).

Reduced greenhouse gas emissions by 75%, if moving freight by rail instead of trucks, as railroads are four times more fuel efficient than trucks (7). Upgrading existing railways - rather than building new ones - further reduces environmental risks.

Enhanced employment creation, directly or indirectly, including jobs for skilled technicians on railway construction sites, livelihoods earned by the railway side communities and jobs during the operational phase after railway upgrades are complete (7).

Gender & Marginalisation

Job opportunities created also target casual workers and businesses operating along the railway lines (7).

Primary SDGs addressed

Industry, Innovation and Infrastructure (SDG 9)
9 - Industry, Innovation and Infrastructure

9.1.2 Passenger and freight volumes, by mode of transport

9.4.1 CO2 emission per unit of value added

9.a.1 Total official international support (official development assistance plus other official flows) to infrastructure

Secondary SDGs addressed

Climate Action (SDG 13)
13 - Climate Action
Decent Work and Economic Growth (SDG 8)
8 - Decent Work and Economic Growth
Life on Land (SDG 15)
15 - Life on Land

Directly impacted stakeholders

People

Direct and indirect employment opportunities for construction and maintenance of rail infrastructure.

Gender inequality and/or marginalization

Job opportunities for low skilled workers especially during the construction phase of rail infrastructure upgrades.

Planet

Environment being exposed to less greenhouse gas emissions.

Corporates

Freight transport companies and exporters benefitting from better infrastructure and reduced logistics costs.

Indirectly impacted stakeholders

People

Greater reliability and reduced prices for end consumers of cargo transported by rail.

Corporates

Businesses along the railway lines benefitting from new markets.

Public sector

Government with reduced costs resulting from highway deterioration and requirements for new costly highways with the shift to railway transportation (4).

Outcome Risks

The construction and upgrading of rail infrastructure may result in environmental degradation, such as destruction of natural habitats of wildlife.

Operating rail infrastructure may have negative environmental impact if trains are operated with fossil fuel.

Impact Risks

Freight transport companies and exporters may be hesitant to move cargo to railways given inefficiencies and challenges experienced in the past.

Impact Classification

B—Benefit Stakeholders

What

The outcome is likely to be positive, important and intended because improved rail infrastructure will lead to cargo transport efficiencies, reduced pressure on roads and less road accidents.

Who

Freight transport companies and exporters making use of better infrastructure and reduced logistics costs, and the environment benefitting from reduced impacts.

Risk

While the railway cargo model is proven, Namibia's sector lacks regulation on modern technology and institutional management, where for example safety requirements are not formalised.

Impact Thesis

Increase capacity and improve efficiency of freight transportation, and reduce negative impact of cargo on environment.

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Enabling Environment

Explore policy, regulatory and financial factors relevant for the investment opportunity.

Policy Environment

TransNamib is the sole rail operator in Namibia by legislation; it owns the rolling stock and equipment. However, maintenance of the track in the Walvis Bay corridors is performed by the private sector (2).

White Paper on Transport Policy, 1995: Outlines liberalisation plans of the rail market to introduce private sector participation (2).

Financial Environment

Fiscal incentives: For registered manufacturers, allowance is made for land-based transportation by rail of 25% deduction from total cost (3).

Regulatory Environment

National Transport Services Holding Company Act, 1998: Provides for the incorporation of a holding company to undertake, either by itself or through any subsidiary company, transport services in Namibia or elsewhere (10).

Namibian Transport Advisory Board Act, 1991: Provide for the establishment of the Namibian Transport Advisory Board and the composition and functions thereof (11).

Road Traffic and Transport Act, 1999: Provides for the establishment of the Transportation Commission of Namibia, the control of traffic on public roads, the licensing of drivers, the registration and licensing of vehicles, the control and regulation of road transport across borders (12).

Road Fund Administration Act, 1999: Establishes a Road Fund Administration to manage a road user charging system, the Road Fund (13).

Roads Ordinance 17, 1972: Consolidates and amends the laws relating to roads and incidental matters (14).

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Marketplace Participants

Discover examples of public and private stakeholders active in this investment opportunity that were identified through secondary research and consultations.

Private Sector

Investors such as EOS Capital (Namibia Infrastructure Development and Investment Fund), Old Mutual Namibia (Midina Infrastructure Fund, Expanded Infrastructure Fund) (3, 8), and the state-owned enterprise TransNamib.

Government

Namibian Transport Advisory Board, Transportation Commission of Namibia, Ministry of Works and Transport.

Multilaterals

EU-Africa Infrastructure Trust Fund, which provides operation grants and technical assistance, including for Namibia (III).

Public-Private Partnership

Walvis Bay Corridor Group (WBCG) is a service and facilitation centre to promote the benefits of using the Walvis Bay corridors through the port of Walvis Bay to and from southern Africa, including by rail (6).

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Target Locations

See what country regions are most suitable for the investment opportunity. All references to Kosovo shall be understood to be in the context of the Security Council Resolution 1244 (1999)
country static map
semi-urban

Namibia: Erongo Region

60% of Namibia's rail freight traffic is generated from the port of Walvis Bay. Given the ongoing port expansion, there will be increased demand for freight services, which can be absorbed by the upgraded rail infrastructure (2).
semi-urban

Namibia: ǁKaras Region

The Port of Lüderitz experiences the largest portion of growth, recording a total of 360,000 tonnes of cargo per annum, much of which can be transported by the upgraded rail infrastructure (3).
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References

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