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The AfDB signs US$300mm loan agreement for Nacala Corridor project

The project aims to support growth along a regional corridor shared by Mozambique and Malawi. (Image source: jbdodane/Flickr)

The AfDB has signed an agreement worth US$300mn for the Nacala Corridor project, which consists of a 912km railway and a port to unlock the western region of Mozambique and landlocked Malawi

The total cost of the integrated and transformative infrastructure project is estimated at US$5bn. The project is complex and among the most innovative that the bank has financed in the past 10 years of private sector operations.

Through the project, the sponsors, companies from two member countries of the AfDB, Vale and Mitsui & Co made the win-win collaboration.

The project is expected to have a catalytic effect in the region and create economic benefits for the various stakeholders, including sponsors, governments and the local population.

“It will enable a significant reduction in transportation costs and increase coal export volumes. Increased mine production volumes will also create employment opportunities in the region of Tete where the mine is located. Furthermore, additional capacity created in general cargo and passenger trains, along the corridor, is expected to contribute to creating economic opportunities in the local economy, notably by increasing agricultural trade in the regions,” said the bank reporting to the press.

The project has brought together four core lenders, including the AfDB, the Japanese Bank for International Cooperation (JBIC), Nippon Export and Investment Insurance (NEXI) and the Export Credit Insurance Corporation of South Africa (ECIC) for an overall package of US$2.7bn in senior loans.

In addition to this US$300m senior loan, the AfDB also approved technical assistance through the Fund for African Private Sector Assistance (FAPA), a Japan-Austria multi-donor trust fund, aiming to assist in strengthening business linkages and supporting SMEs and cooperatives in Mozambique and developing agribusiness along the corridor in Malawi.

Kodeidja Diallo, director for non-sovereign operations and private sector in the AfDB, said, “The financing of railway and port infrastructure in Mozambique and Malawi will add competitiveness to regional exports and provide an important demonstration effect for forthcoming private sector infrastructure projects in the region.”