The bank will support the project with $300 million from its private sector window.
After years of financial structuring, a ceremony in Maputo presided over by Mozambique’s Minister of Economy and Finance, Adriano Maleiane; Minister of Transport and Communications, Carlos Mesquita; and Minister of Energy and Natural Resources, Laeticia Klemens; marked the formal signing of the project.
The project will see the construction of a 912km railway line from Tete province in western Mozambique to the port of Nacala on the east coast of the country, through Malawi.
The project includes the construction of a deep-sea port and terminal infrastructure at Nacala.
Pietro Toigo, the African Development Bank’s country manager for Mozambique, said the project supported “two of the high fives” that guide the bank’s contribution to sustainable development goals in Africa.
“By providing a rail link across Mozambique and Malawi, with a possible extension to Zambia, it will help to integrate Africa. And by opening up markets for agricultural commodities, it will help to feed Africa.
“This dual-use infrastructure development shows that Mozambique can put its natural resources at the service of its citizens,” Toigo said.
The African Development Bank played a key role as the co-lead arranger in the transaction, which includes the Japanese Bank for International Co-operation, Nippon Export and Investment Insurance and the Export Credit Insurance Corporation of South Africa.
A range of commercial banks provided finance for the project, sponsored by VALE and Mitsui.
Once the railway line becomes fully operational, coal exports will increase by 40% next year, generating crucial foreign earnings for Mozambique’s economy at a time when the country is experiencing a cyclical downturn.
The project expects to handle four million tons a year of freight capacity for non-coal commodities and to open up world markets for regional agricultural producers.
The African Development Bank is also investing $1m in grants to assist small and medium-sized enterprises and developing agribusinesses along the corridor in Malawi and Mozambique. This support will ensure that small businesses benefit from the port and the rail link.
Mesquita said the project could provide wider benefits to Mozambique, Malawi and Zambia, and allow Mozambique to fulfil its ambition “to be a regional gateway to world markets”.