Pan-African financial institution the African Export-Import Bank (Afreximbank) and railway operator Ghana Railway have signed a project preparation facility head of terms agreement and pre-mandate letter to finance the development and implementation of an integrated 299 km standard gauge railway network.

The network connects Ghana’s western corridor to the Port of Takoradi and provides an essential link to external markets.

The heads of terms was signed by Afreximbank intra-African trade bank initiative executive VP Kanayo Awani and Ghana Railways MD Dr Michael Anyetei.

Under the heads of terms of the project preparation facility, Afreximbank will avail early-stage project preparatory funding to finance the preparation of bankable feasibility studies. The pre-mandate letter appoints Afreximbank to perform certain tasks in advance of the project attaining bankability aimed at raising the debt facility amount, currently estimated at $2.1-billion.

Under the terms of the agreements – signed during the Afreximbank yearly meetings held in Accra, Ghana, this week – Afreximbank committed to prescribe financial solutions. This includes project preparatory support, project financing, syndication and financial advisory services, as well as risk-bearing instruments to enable the project to attain a timeous financial close.

Afreximbank believes that pursuing railway investments along Africa’s trade corridors would expand existing capacities and create new routes, links and pathways for value-added goods.

This is for goods to be transported from manufacturing and processing areas to regional and global markets, thereby promoting intra-African trade in the African Continental Free Trade Area context.

This is evidenced by new mining projects and expansion of existing mining projects being planned in Ghana. These projects also stand to benefit from the railway corridor through more efficient and competitive transportation of imports and exports thereby boosting trade, regional integration and overall economic development.

“The Western Railway Corridor project is a vital transport network for Ghana, and Afreximbank’s support is in line with our commitment to help member countries address key trade-enabling infrastructure bottlenecks.

“This will be done through private sector-led investments that will unlock significant pent-up demand for Ghanaian mineral and agricultural commodities in regional and international markets,” Afreximbank president and chairperson of the board of directors Professor Benedict Oramah said.

He added that he was thrilled about this project and that Afreximbank and its partners were pioneering this innovative non-recourse project finance solution, which was premised on freight volumes and not member countries' debt-carrying capacity.

“Such novel approaches present concrete steps that Afreximbank is taking towards paving the way for member countries' economic transformation. We look forward to rolling out this solution to other member countries across Africa.”

When fully implemented, the project is expected to reduce transport costs by 30%, increase the safety and reliability of transport services, and stimulate Ghanaian trade and economic growth. 

About 5 000 jobs are expected to be created directly during the implementation phase, with another 50 000 indirect opportunities created along the railway corridor, in addition to the training of 400 Ghana citizens to participate in all levels of the project implementation.

The railway line will also facilitate the export of minerals and commodities resulting in at least $950-million of trade each year.