The African Development Bank (AfDB) has signed a $300 million loan agreement for the development of the Nacala Corridor.

The development, which consists of the construction of a 912 km railway and a port meant, is meant to unlock the Western region of Mozambique and landlocked Malawi at a total estimated cost of $5 billion.

The project has received further financial backing from 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 $ 2.7 billion in senior loans.

Commenting on the development the AfDB said: “The project is very complex and among the most innovative that the Bank has financed over the past 10 years of private sector operations.”

“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. Furthermore, additional capacity created in general along the corridor is expected to contribute to creating economic opportunities in the local economy, notably by increasing agricultural trade in the regions.”

Integrate Africa

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

According to Kodeidja Diallo, AfDB Director for Non-Sovereign Operations and Private Sector the project will contribute to one of the major priorities of the AfDB High5 agenda: “Integrate Africa”.

“The investment is a testimony of how the Bank intends to scale-up support to regional infrastructure, deepening regional integration and facilitating access for land-locked Malawi” she added.

“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,” she concluded.