GM Silvestre Ilunga Ilukamba gives us a fantastic radiography of DRC’s needs and opportunities in terms of infrastructure and job creation, while explaining the short-term strategy of SNCC (La Société Nationale des Chemins de Fer du Congo) to achieve greater connectivity—a much-needed objective to generate inclusive growth and greater competitiveness.
The government of the Democratic Republic of Congo has made transportation and infrastructure development one of its main priorities. Important reforms and projects are being carried out in order to make the sector a true engine of socio-economic development. The recent transformation of the National Railway Company of Congo (SNCC) into a fully commercial company and its acquisition of 38 locomotives are just two examples. How does SNCC contribute to the country’s development and economic growth?
SNCC is the largest transporter in the country. Thus, it plays a crucial role as DRC’s backbone connecting the national territory.
SNCC services thirteen of DRC’s 26 provinces, which is very important because it reaches places where no other means of transport can possibly go. The SNCC railway is the only link that many landlocked provinces have with the rest of the country. We are therefore an important element of territorial integration.
We also contribute to inclusive growth; DRC has experienced significant growth in recent years but it is necessary that all Congolese are involved in its development, which is not always the case. In this context, SNCC played a fundamental role in instigating growth, allowing the greatest number of Congolese possible to contribute to this growth.
For instance, a farmer from the interior of the country may produce cassava, palm oil, etc.; the farmer transports its crops to sale points via SNCC’s trains, where they may be sold at the best possible price. These activities participate in our country’s development and economy; SNCC makes transport to urban centers possible, or to copper and diamond regions, where retail prices are higher.
This has enormous importance to national development. For a long time, SNCC was completely out of service, leaving farmers in the interior with no way to reach markets. In case of overproduction, excess food rotted because it could not be transported for sale.
It is a vital part of our economy. It is necessary to exploit our country’s wealth, which is why SNCC has been at the heart of the government’s development policy. DRC would never achieve emerging country status if the Congolese that produce consumer goods cannot ship their products and thereby improve their living conditions.
An intermodal transport system is required to cover a country as large as DRC, and a sign of a modern and competitive transport sector. What is the assessment you make of the sector today and what can you tell us about the importance of an intermodal system?
This is fundamental. SNCC is in itself a multimodal transport company that not only focuses on rail, but also on waterways such as rivers and lakes, and in the past we also had road-linked activities. There are parts of the country where the rail is connected to the road, and then we find the rail again; and the same happens between railways and rivers. For this exact reason SNCC is a multimodal company.
The problem that SNCC had is that at some point, the rail - like many other industries - received no investment, I would even say we were victim of divestments. At one point the sector’s infrastructures were deteriorating quite seriously and the different services we offered were becoming extremely poor.
The mining sector was the basis for the creation of SNCC. Mining operators were the principal clients for whom we felt the need to ensure the safety and speed of the transport of their products to the sea. But from the time investment was no longer made, service quality dropped. This was especially visible when the rail line to Lobito was closed more than forty years ago; it was the shortest possible way to access the sea, but it has not been used since.
It is at this point that we had to use national routes, from Lubumbashi to Ilebo and from there, another public institution, SCTP, facilitates river transport for the final leg to the capital, Kinshasa. From Kinshasa, the railway resumes transport to Matadi and to the Atlantic Ocean. Unfortunately, this section has also deteriorated.
At the time, our main customer was Mining Union, later renamed Gécamines, located in the Haut Katanga province before going bankrupt. Therefore, SNCC’s main source of income dried up. To revitalize the mining sector and attract the necessary investments, President Kabila established the Mining Code, which allowed for the liberalization of the sector.
Gécamines once dominated the iron-mining sector in DRC, and its failure was a fatal blow to SNCC. The Mining Code opened the sector to private companies, which saw an increase in imports and exports, mainly metal-shod, copper and cobalt in Katanga. This created a new clientele for SNCC, and private companies entrusted the transport of their products to SNCC. However the service was often interrupted because of social problems including strikes, which led to the products being transported, stranded and sometimes vandalized. For this reason, private companies started using road transport exclusively.
What can you tell us about the government’s strategy to boost the rail growth?
We follow a modernization plan in which the private sector plays an important role; so we must ensure that the private sector returns to rail. It should be stressed that since 2008 the government launched a major investment program for SNCC, where the management of the Company will be opened to the private sector. In this context, the government recruited Victurius, a Belgian rail management firm as a private operator. We just extended the company’s contract to include technical assistance.
It is around the same time that the government re-started the dialogue with investors and we were able to set up a multimodal transport project financed by SNCC for $380 million, which is a substantial amount.
This funding has enabled us to acquire 18 locomotives financed by the World Bank and the government itself funded 20 new locomotives. At the same time, we also rehabilitated railways and existing train cars, as they are essential tools in which goods can be transported. This will allow us to ensure rail transport. In 2008, SNCC did not own any reliable locomotives, so we had to rent refurbished locomotives from South African companies in order to operate our core business.
Today we have a renewed capacity thanks to these 38 locomotives and efforts to recover the railway sector, and thus attract mining back to rail. Efforts have been made thanks to rigorous government funding, which is why we are now able to offer a quality service. There are currently a number of mining companies for whom we ship goods to Zambia, Tanzania, South Africa, etc. We are beginning to see a trend of companies moving back to rail.
We are in discussions with several companies to see what SNCC can do for them to come back to the rail sector. They gave us their conditions and we are working on meeting them. Once this is done, we will test freight trains to allow the private companies to define the transit time of their goods. We are therefore in a frank and open discussion with operators, which will ensure that we can provide a reliable and quality service.
Considering DRC’s strategic geographic location, what is its potential as regional logistics hub?
We work with the national railway companies of neighboring countries, namely South Africa, Zimbabwe, Zambia and Tanzania, and we are starting to go through Mozambique. The Southern Africa Railways Association (SARA) combines our efforts to increase the number of clients for each of its members.
The members try to harmonize services, including tariffs, since we must be price competitive in order attract to customers back to rail travel and simplify the transport of goods from South Africa to DRC, for instance. We organize meetings to harmonize tariffs and make them more competitive compared to competing modes of transport.
DRC companies import most of the products consumed in the country. DRC’s 70 million inhabitants offer tremendous potential for doing business, and the interconnection of the region's railways ensures the smooth flow of regional trade.
What are some of the challenges SNCC faces?
We have many challenges, including tracks that are not of standard size. It's different for SNCC railways and the railways that were built a long time ago, but for Zambia, Tanzania and South Africa corridor, such an issue does not exist.
There are new railways that use a standard gauge size. In the future we will have to solve gauge harmonization across the region, which represents a significant investment.
Today, we have more pressing concerns including making profit on infrastructure, and ensuring a smooth flow of traffic. The question of the standard gauge will be addressed in the future.
What can you tell us about the new SNCC, following its transformation into a commercial company?
Before SNCC, I use to work for COPIREP, which is the state agency responsible for the transformation of public companies into commercial entities. The goal was to ensure quality services whether in the private or public sector.
We realized that DRC’s state-owned enterprises (SOEs) operated with a particular management style that did not work. The proof is that many of the country’s public companies, the exclusive providers of many services, now do not exist anymore after going bankrupt.
Essential services to the population are mainly provided by public companies. For electricity, it is SNEL (National Electricity Company), for water it is Regideso (National water company), for postal services and telecommunications, it is SCPT (Congolese Posts and Telecommunications Corporation), SNCC and SCTP (Commercial Company for Transport and Ports) for rail and river transport, etc. Thus the government decided to change the approach to managing its public companies as private organizations but owned by the state. This is the objective sought by the transformation of public enterprises and the modernization of the legal and institutional framework for companies that belong to the government portfolio.
In this new framework, the state should not interfere in the management of companies. The state sets goals, hires responsible managers and judges them on the basis of their results.
In transforming state enterprises into commercial companies, the government has also considered selling part of the shares of these companies to private investors, as the private sector is the engine of this country’s economic recovery.
It's still early to measure results, but do you believe that the stated objectives are beginning to be achieved?
I have had the luck or misfortune of first being a part of theory of the reform, and today I am on the other side in its implementation as the manager and representative of one of these transformed SOEs. I must admit that the journey ahead is a long one because changing habits takes time in any human society. The government itself must, in relation to this development, change its attitude, which is not easy, either.
The transformation of these companies is a long process that has not yet finished. Part of the legal process has been carried out. However, the opening to the private sector has not been completed yet, as the Government does not want to give the impression it is trying to sell cheaply what belongs to it; companies in difficult positions should not be sold – as is the current state of most of our transformed public companies – as they will struggle to sell at a decent price. Once we reach a certain level of activity and quality, it will be worth it to open to private capital.
How can capital-intensive projects benefit from the public-private partnership (PPP) scheme?
Public-private partnerships are a form of investment that must be implemented, especially when it comes to infrastructure. If this partnership is based on the win-win scheme, it's a perfect formula. Public infrastructure projects are expensive and the state does not have the resources to finance them, so private companies that are willing to invest in public projects are welcome.
Each of the partners in the scheme will want to get the best price. It would thus need to be a win-win situation, which is not always easy. Negotiations are not easy, and the private sector is better equipped in such cases. It would be important to develop the negotiating capacity of the public sector, since all details must be negotiated if we want to have balanced public-private partnership agreements.
The government has an obligation to improve the living conditions of citizens while allowing the private sector to operate and boost the economy. The government also has an obligation to develop the private sector, because a country cannot develop itself without a rich base of local private companies. It is a complex socio-political-economic process, and the lack of local entrepreneurship remains one of the great challenges that DRC has to overcome. PPPs would thereby enable the government to participate more in the development of local entrepreneurship, job and wealth creation, and increase national competitiveness.
Nowadays, how would you define government support towards local entrepreneurs?
We currently do not see a lot of local contractors in major projects. Some do exist but they are not always supported. A proactive policy needs to be put into place to support the growth of Congolese entrepreneurs.
Of course in the past, the government has supported Congolese, not as entrepreneurs but through socialism, leading to the nationalization of foreign property in the industrial and commercial sector. This experience totally failed because instead of creating entrepreneurs, citizens look to politicians for handouts. The current Congolese government is very aware of these past mistakes.
Currently, a significant amount of money, that the government does not have, is required to address DRC’s problems, including the lack of infrastructure. And often it is foreign investors who manage to overcome these difficulties. The mining sector was opened to private investors but no private Congolese investors took advantage of it.
Today we try to create investment opportunities. There are some Congolese who benefit from these but most are foreigners. Perhaps in finding inspiration in the experiences of other countries, we could create suitable solutions. In South Africa for example, the government through its "Black Economic Empowerment" was able, in just a few years, to create the emergence of the black South African citizens who were disadvantaged under the Apartheid. This enabled them to access wealth and a better quality of life.
What message would you like to send to our readers?
SNCC is at a crossroads. For years we experienced insurmountable difficulties, because the government had not implemented a significant recovery plan. But since 2008, the government implemented a vigorous recovery program that allows SNCC to get out of these difficulties and see the future with optimism, to offer its customers reliable and quality service.
Today, SNCC’s needs in infrastructure investment are immense, and the government wants to involve the private sector in our projects, especially through public-private partnerships.
SNCC is a good example of these partnerships. The PPP scheme in our company was first implemented with Belgian Victurius at the management level and now in technical assistance. This is an excellent example of the government’s willingness to involve the private sector in SNCC’s recovery efforts.
Through the National Agency for Investment Promotion (ANAPI), we presented an SNCC investment project at the African Global Investment Summit last year, held in London last December. Private organizations were invited to develop specific projects in order to help DRC to modernize its railway.
SNCC’s railways are the second longest in Africa, making this project very interesting. For now, the government wants to launch the rehabilitation of the Kolwezi-Dilolo line to connect with the Angolan railways to Lobito – the most profitable segment of the region – and the government envisions the development of this project as a public-private partnership.
So there are interesting opportunities for the private partners specialized in rail; and as President Kabila and Prime Minister Matata have said, Congo is still a land of opportunities representing profitable investments for the private sector.