Dakar Declaration supports adoption of Luxembourg Rail Protocol

The UIC Africa Rail Finance Forum held in Dakar, Senegal, in October issued a key declaration that included unequivocal support for the Luxembourg Rail Protocol to the Cape Town Convention:

“…….. some African countries are in the process of adopting the Luxembourg Protocol into their national legislation to secure and finance rolling stock. These ownership efforts are encouraged by the African Union. It is therefore strongly suggested that African countries support the Luxembourg Protocol ratification process.”

As pointed out by RWG Chairman Howard Rosen, who presented at the Dakar Forum, it costs governments nothing to ratify the Rail Protocol – indeed 26 governments across Africa have already adopted the Cape Town Convention and the Aircraft Protocol. However, the results of adopting the Rail Protocol will be immense, as it will liberate governments and operators from the need to access public funds to finance the billions of dollars of railway equipment Africa so desperately needs. Indeed, governments will even be able to refinance existing rolling stock fleets through sale and leasebacks. In addition, the new common security system will make it easier to move rolling stock across borders and will facilitate collaboration between rail operators in different countries, bringing to life the vision of an African integrated rail network.

The Dakar Declaration is the latest in a line of important statements out of Africa supporting adoption of the Luxembourg Rail Protocol:

• In 2021, ministers and delegates to the Sixth PIDA Week in South Africa recognised the Protocol as an important component of the future PIDA projects and the AU Agenda 2063 for continental integration, prosperity and peace.
• In September 2023, African transport ministers meeting in Zanzibar adopted a resolution urging all AU member states that have not already ratified the Protocol to move forward as quickly as possible with its adoption.

The Luxembourg Rail Protocol has the full support of the African Union, the UN Economic Commission for Africa, and other multilateral institutions around the world, as well as many leading private sector lenders and lessors.

The Protocol has already been ratified by Gabon, and is in the process of being ratified by South Africa. Many other African states are looking to move forward with the adoption of the Protocol, which will be working for the benefit of governments, creditors and operators in contracting states from early 2024.

For the African rail community, the Luxembourg Rail Protocol is a game changer. As a common transnational security system for private lenders and lessors, it will bring an integrated rail network across the continent much closer in the coming decades. It represents a huge new opportunity to achieve the goals of an African Continental Free Trade Area where it will be the railways that, literally, deliver the goods in the most cost effective and sustainable way. The RWG joins the African Union and the United Nations Economic Commission for Africa in urging African governments to ratify the Rail Protocol as soon as possible.

Export Credit Agencies (ECAs) urged to treat rail fairly by applying the Cape Town Discount – especially given rail’s green credentials

The RWG is pressing ECAs to do more to support the railways, the most environmentally friendly means of mass transport today. In particular, ECAs should apply the Cape Town Discount of 10% on risk premiums, currently awarded for aircraft financing under the Aircraft Protocol, to rolling stock transactions when the Luxembourg Rail Protocol comes into operation next year. 

The genuinely enhanced security that the Aircraft Protocol to the Cape Town Convention provides to creditors was the impetus for the OECD to formalize the Cape Town Discount, a significant reduction in financing costs for related transactions.

With the imminent entry into force of the Luxembourg Rail Protocol, the same reduction in financing costs must be provided for rolling stock. Particularly as railways are dramatically more climate friendly and sustainable than aircraft.

“We welcome the OECD’s decision to include some railway rolling stock under the remit of the Climate Change Sector Understanding,” said RWG Chairman Howard Rosen. “However, we believe that this move does not accurately reflect the improved position of the creditor when the Luxembourg Rail Protocol applies. Indeed, the Cape Town Discount of 10% on risk premiums, which already applies to aircraft financings, should logically be extended to rolling stock transactions. In fact, given rail’s superior ‘green’ credentials, an even higher discount would be both justifiable and beneficial for the environment.”

The RWG’s latest publication focuses on improving ECA financing practices for railway equipment. For African nations, which have an enormous need for more trains due to rising urbanization, and are united in planning to build rail networks across the continent, financing discounts can ‘make or break’ the economic case for more investment in the railways. Once the Rail Protocol is in operation, a solid ECA discount on rolling stock financing costs will be hugely beneficial in supporting the vast economic, social, developmental and environmental advantages that railways deliver.

African Transport Ministers call for the adoption of the Luxembourg Rail Protocol

African transport and energy ministers spoke out last month in support of the Luxembourg Rail Protocol to the Cape Town Convention at the Specialized Technical Committee on Transport, Transcontinental and Interregional Infrastructure, and Energy (STC-TTIIE) of the African Union (AU). The high level meeting took place in Zanzibar, Tanzania, and the declaration, addressed to the 55 AU member states, issued after the high level meeting and now published, urged “[a]ll remaining Member States to complete the ratification process for ….. the Luxembourg Protocol on railway rolling stock”. The statement from ministers, now being referred to as the Zanzibar Declaration, is part of a call to action to strengthen Africa’s infrastructure in the air, at sea, and on land.

For the Rail Working Group and stakeholders in the railway industry, the Zanzibar Declaration is a major step forward for the development of the rail sector in Africa; the AU has thrown its weight behind the Luxembourg Rail Protocol, alongside a push to implement several other measures to modernise, streamline and strengthen African transport networks. Since over 50 nations on the continent have neither signed nor ratified the Protocol, this declaration provides a powerful impetus for positive change while also recognising the Protocol as a critical part of the Programme for Infrastructure Development in Africa (PIDA).

“We welcome the inclusion of the Luxembourg Rail Protocol in the Zanzibar Declaration as a key part of PIDA and in support of  the AU flagship project, the African Integrated Railway Network and the African Continental Free Trade Area,” said RWG Chairman Howard Rosen. “Better rail transport across Africa will power the next phase of African growth in a cost-effective and environmentally sustainable way, but this will require massive investment in rolling stock from the private sector, which will be driven by the Luxembourg Rail Protocol delivering more security and cheaper funding for rail operations domestically and across borders in Africa,” he added.

NOTES FOR EDITORS

The Luxembourg Rail Protocol to the Cape Town Convention on International Interests in Mobile Equipment is a new global treaty under the auspices of UNIDROIT, the International Institute for the Unification of Private Law. The Protocol will make it much easier and cheaper for the private sector to finance railway rolling stock. It sets up a new system for recognition, priorities and enforcement of creditor and lessor rights, which will be registered in an international registry based in Luxembourg, accessible to everyone over the internet 24/7. The Protocol is expected to enter into force in contracting states in early 2024. The European Union (in respect of its competences), Luxembourg, Sweden, Spain and Gabon have ratified the Protocol, and South Africa and Paraguay are about to adopt it. France, Germany, Switzerland, Mozambique, Italy, and the UK have already signed the Protocol and many other African states, including Kenya, Eswatini, Namibia, Senegal, Ethiopia, and Mauritius, are looking at adoption of the Protocol. The Protocol is endorsed by many international rail organisations (including OTIF, the Intergovernmental Organisation for International Carriage by Rail, and the UIC, the Union of International Railways) and actively supported by the African Union, the European Union, the UN Economic Commission for Africa, the UN Economic Commission for Europe,  and UNIDROIT. According to a recent UN ECA study about 170,000 new freight wagons alone, costing about $36 billion, are required by 2030 for realization of planned infrastructure for the AfCFTA. The Cape Town Convention and the protocol applying it to aircraft is already in force in 26 African States.

The African Union was established in 1999, as the successor to the Organisation of African Unity, is based in Addis Ababa and represents 55 states across Africa. The Specialized Technical Committee on Transport, Transcontinental and Interregional Infrastructure, and Energy is organised by the African Union Commission (AUC) in collaboration with the African Union Development Agency (AUDA-NEPAD), the African Development Bank (AfDB), and the United Nations Economic Commission for Africa (ECA) to consider policies and strategies for accelerating infrastructure to deliver on the AU Agenda 2063. For more about the Zanzibar Declaration, please click here

The Rail Working Group is a Swiss-based not-for-profit association focused on the adoption and implementation of the Luxembourg Rail Protocol. It has over 80 direct members and hundreds of additional rail stakeholders represented indirectly by various industry organisations that belong to, and support, the objectives of the RWG.

For more on the Luxembourg Rail Protocol and the Rail Working Group see www.railworkinggroup.org.   

Further information from the Rail Working Group:

Tel. +41 41 760 28 88

Email: info@railworkinggroup.org

LinkedIn: https://www.linkedin.com/groups/8944744/

Africa Contact: Mesela Nhlapo

EU Contact: Irene Fucà 

ENDS