The 532KM Isaka-Kigali standard gauge railway has received a boost after the Development Bank of Southern Africa (DBSA) committed to financing the project seen to hold immense potential for Rwanda's trade.
In July, Rwanda gazetted a bilateral agreement with Tanzania where the railway connects to, detailing the mechanism for the construction.
The South African financial institution with a $9 billion kitty, recently expressed interest in investing in the project while in Kigali to launch a partnership with the Development Bank of Rwanda to jointly finance investments in the country.
“This project is led by President John Magufuli and it’s already in the market; Yapi Merkezi, a Turkish firm, is already at it; Standard Chartered Bank is the arranger, they have approached us and we are considering it. We are obviously looking to approve it,” said Hildabertha Kundu, the DBSA regional manager for Central and East Africa.
Initially, DBSA will commit $100 million but is open to raising the amount depending on how the project goes.
“For us it's about development and impact, we can already see that massive movement of freight and cargo on rail is going to be way cheaper than on road, and the biggest problem in East Africa is lack of seamless connectivity; we have road connectivity but it's not seamless and it's not efficient,” said Ms Kundu.
She said connecting these countries by rail will also reduce the number of cargo tracks on the roads which will eventually increase the life of the roads.
The rail project will cost up to $2.5 billion, with Tanzania paying $1.3 billion and Rwanda $1.2 billion. Rwanda will however incur an extra expense to cover the extended line to Rubavu, which connects to the Democratic Republic of the Congo.
A joint technical monitoring committee of five technocrats from each of the governments is expected to supervise the project. Line ministers from both countries will meet twice to review progress on financing, policy and regulation.
For the past few years, more than 70 per cent of Rwanda’s cargo has been coming through the Dar es Salaam port, with only 30 per cent coming through Mombasa.
However, volumes have dropped in recent times after an impasse between Kampala and Kigali escalated into border closure.