Senegalese travellers will now be able to reduce the hours of their journeys between Dakar and the new city of Diamniadio by using the regional express train. This major achievement in transport was financed by a consortium comprising an important element of Islamic finance.
By Mushtak Parker
In February 2022, as we remember, the impressive TER (Regional Express Train) linking Dakar to Diamniadio welcomed two distinguished guests, Akinwumi Adesina, President of the AfDB (African Development Bank) and Senegalese President Macky Sall. The AfDB is part of the consortium of several institutions that have raised the 711 billion CFA francs (1.8 billion euros) needed to finance Phase 1 of the new rail system.
The TER is the Government of Senegal’s flagship rail infrastructure project, integrated into the PSE (Plan Sénégal émergent), aimed at accelerating the transition to emerging market economy status by 2035. The TER Dakar – Diamniadio – Blaise-Diagne International Airport project is composed of two phases. The first extends from downtown Dakar to the new city of Diamniadio, and the second from Diamniadio to Diass, where the airport is located. In a second step, the TER could reach the cities of Mbour and Thiès, to the west.
Africa’s infrastructure investment gap is close to $100 billion a year, the AfDB calculates. Public-private partnerships offer an additional approach designed to increase private sector investment and achieve higher levels of efficiency in infrastructure development and operation.
It is no secret that other countries in sub-Saharan Africa are looking at the project with some envy, given that it is considered the first mass transport express train service in the region and will play a major role in reducing road traffic congestion and greenhouse gas emissions, in Dakar.
Phase I of the TER was commissioned at the end of December 2021. At the inauguration with great fanfare by President Sall and a crowd of dignitaries and representatives of the co-financiers, the train ran at 160 km/h, covering the distance of 36 km in just under 20 minutes. At its peak, it will carry about 115,000 passengers a day.
Greenlight for project funding
For President Sall, the TER project is a political triumph based on the “ambition of progress, well-being and modernity“. All passengers will benefit from air conditioning, Wi-Fi, computer shelves, e-readers and 220-volt outlets for first-class passengers. The TER is powered by electricity and thermal energy and will operate 7 days a week every 20 minutes, from 5 am to 10 pm. The four-car train will have a maximum capacity of 565 passengers. Dakar’s current public transport system includes buses, mini-buses (fast coaches), taxis and the commuter train.
Pleading for the financing of the new railway, the AfDB President recalled: “As this system will not satisfactorily meet the transport needs of about 124,000 passengers during peak hours in Dakar, the project adopted by the government is to replace the PTB by the TER to ensure service to the suburbs of Dakar. »
With a population of 3.5 million, Dakar accounts for about 20% of the country’s 17 million people and offers nearly 85% of employment opportunities nationwide. Thus, a crucial objective of the TER project, according to the AfDB, “is to contribute to the redevelopment and rebalancing of urban space in the capital Dakar with a view to achieving the level of GDP growth defined in the PES“.
The project could serve as a model of railway infrastructure for other African countries. It has three main assets: it has a unique concessional financing structure; it helps to fill the country’s infrastructure gap; and it helps Senegal achieve the targets of several UN SDGs (Sustainable Development Goals) by 2030.
A social asset
Phase I of the TER was financed by a consortium including the Islamic Development Bank (IDB), with 197 billion CFA francs (300 million euros); the AfDB, with a contribution of €191 million; the French Development Agency, with €100 million; Bpifrance, the French public investment bank, with $20 million; and the Government of Senegal, with a contribution of €182 million. The term of the development finance facilities is 25 years, with an interest rate of 2% for the conventional loan portion and a deferred profit rate of 2% for the IDB’s instalment sale facility.
Funding for Phase II of the TER has not yet been concluded. The IDB is the only multilateral to have committed €100 million (CFAF 65.6 billion) in Financing for Phase II, although the AfDB has indicated that it will follow suit. “The TER Phase II project,” says the IDB, “aims to meet the growing demand for urban traffic between downtown Dakar and Blaise-Diagne Airport by reducing travel time from 90 to 50 minutes, reducing operating costs and air pollution. »
The IDB Board of Directors also approved $17.8 million to upgrade Section II of the Dakar Highway as part of an associated infrastructure project.
Another interrelated flagship project of the PES is the creation of the Diamniadio Urban Pole as a multi-service pole in West Africa and a pole of attraction for foreign capital. As such, Diamniadio’s strategic position in the TER network becomes even more important.
An element of social inclusion should not be neglected to promote the well-being of young people through the development of organised sports activities. Hence the construction of a 50,000-seat Olympic football stadium, two training grounds and a solar energy production and storage system that will power the stadium. The project has created some 400 jobs.
The financing is made by Standard Chartered Bank of the United Kingdom, AKA of Germany and ICIEC, the Islamic Investment and Export Credit Insurance Corporation (IDB Group), providing a loan of $171 million over ten years.
AfDB opts for PPP model
At a recent public-private partnership (PPP) forum, Amadou Hott, Senegalese Minister of Economy, Planning and International Cooperation noted that “in times of pandemic, optimizing our borrowing has become a crucial exercise.” Senegal has benefited from ICIEC’s insurance to mobilize resources from private lenders given the scarcity of concessional loans.
« This reassures investors and allows them to be more flexible in extending the maturity of facilities. Thanks to these risk mitigation tools, Senegal has managed to obtain private financing for the rehabilitation of a major water collection system in Dakar.
« The financial structure was innovative because it allowed Senegal to borrow in local currency. Without ICIEC’s support, many of these investments would have been slow to complete financially and probably at a much higher cost,” explained the Minister.
Building on this convincing success of Senegal’s railway infrastructure, the AfDB Board of Directors approved its first strategic framework for PPP development in January 2022. According to the AfDB, the infrastructure investment gap in Africa is estimated at more than $100 billion per year, affecting the living conditions of Africans and the continent’s global competitiveness. PPPs offer an additional approach designed to increase private sector investment and achieve higher levels of efficiency in infrastructure development and operation.
According to Akinwumi Adesina, the new framework will form the basis of the AfDB’s commitments in the infrastructure sector. “This long-awaited strategic framework,” he explained, “will go a long way in enabling the AfDB to provide much-needed assistance for the development and implementation of PPPs in Africa.”