Manganese ore is essential to making steel—just as essential as iron. And since the steel that comprises most construction materials is critical to the growth of cities and industries around the world, any country that produces manganese ore has a ready-made export market.
Gabon is one of those countries: it is the world’s fourth-largest producer of manganese ore and has substantial untapped iron ore resources. This gives it a key role in the global steel manufacturing value chain. But moving manganese from the interior of the country to the port, where it can be shipped abroad, has been a problem for decades. Gabon’s Transgabonais railway, responsible for transporting manganese, lacked the capacity to operate as needed. That has hindered national growth.
Now, an eight-year-long, €315 million ($362 million) investment program and recovery plan supported by IFC is helping restore the transport capacity of the Transgabonais railway. The project will lower the railway’s direct operating cost while fostering national economic growth through improved, shared infrastructure. The financing was awarded to Société d’Exploitation du Transgabonais (SETRAG), the concessionaire that has run the 650-kilometer Transgabonais rail line since 2005.
The rehabilitated railway will provide an efficient, cost-effective transport solution for mining companies and general freight clients—facilitating firms’ access to markets, industrial investment, and economic growth in Gabon. The improved network will also offer a cleaner and safer form of transportation to more than 300,000 passengers who travel via train annually.
Full Speed Ahead
Over the past 40 years, Gabon’s oil wealth has made it one of the few middle-income countries on the African continent. However, Gabon’s human development indicators are well below those of countries with similar GDP per capita, and income inequality remains high. Against this backdrop, oil production is now declining. To strengthen Gabon’s economy and better serve its citizens, Gabon’s government is diversifying the sources of economic growth—and paying special attention to the development potential of its mining sector.
A better railway system will play a transformational role. By reliably transporting manganese, wood products, and agricultural products bound for export, the rehabilitated Transgabonais—a single-track, standard gauge line that links the city of Franceville in Gabon’s eastern mining region via 23 stations to its main port of Owendo—can contribute to Gabon’s economic diversification.
Once the rehabilitation of the railway infrastructure and overhaul of operating procedures are completed in 2022, the daily transport capacity of the rail line will double to 16 train roundtrips. This will effectively add the equivalent of up to 20 million tons per year of long-haul mining transport capacity.
This added capacity will be delivered at a lower cost: projected transport tariffs are expected to decrease by at least 15 percent in real terms by 2022, compared to 2015, when the project was launched. The lower tariffs will be sustainable because SETRAG achieved profitability in 2017—two years ahead of schedule.
These benefits will reach many Gabonese. Projections indicate that tens of thousands of direct and indirect jobs could be created in the mining and agricultural sectors because of the rehabilitated transport infrastructure.
Partnering to Improve Environmental and Social Standards
The IFC-arranged financing includes a €35 million loan for IFC’s account, €17.5 million from IFC’s Managed Co-Lending Portfolio Program, and a €32.5 million parallel loan from Proparco, the private sector financing arm of the French Development Agency.
Throughout the project, IFC is providing long-term capital and hedging, mobilizing for additional funding to complete the financing plan, and partnering with SETRAG to assure that environmental and social standards are aligned with IFC Performance Standards.
Join the conversation: #IFCimpact
Published in April 2019