The Sunk Cost Fallacy
JF-Expert Member
- Dec 1, 2021
- 19,589
- 14,135
Habari za leo,
Gazeti la The Citizen limeandika makala kuhoji busara iliyotumika kuamua kujenga SGR Wakati tafiti za Kitaalamu zinaonesha tutapata Hasara?
Kwa mujibu wa WB Ili reli ilete faida inatakiwa mzigo angalau Tani mil.55 wakati utafiti unaonyesha Hadi kufikia 2030 EAC yote itakuwa na uwezo wa kusafirisha Tani asilia 14 tuu ya mahitaji Ili upate faida..
Kwamba Kwa nini Magufuli na Serikali yake walichagua expensive option ambayo itakuwa ni liability Kwa Taifa miaka na miaka?
My take: Hivi kwa nini tusiwe tunawawajibisha watu wanaotoa hasara Taifa kwa maamuzi yao ya Hovyo?👇
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Trucks and tracks: Will Tanzania’s SGR ever work?
Charles Makakala
6-7 minutes
Summary
The government’s gung-ho approach to SGR is commendable. At this stage of the project, developing cold feet would make no sense. Nonetheless, much more needs to be done to ensure the SGR’s future commercial and economic viability.
Tanzania continues to show strong commitment to its grand $14 billion, 1,800km standard gauge railway (SGR) project. According to recent reports, the government is pushing forward with the Tabora-Gitega and Isaka-Kigali phases, connecting the infrastructure with Burundi and Rwanda, respectively. This will, hopefully, make Tanzania a transportation hub for its many landlocked neighbours.
The government’s gung-ho approach to SGR is commendable. At this stage of the project, developing cold feet would make no sense. Nonetheless, much more needs to be done to ensure the SGR’s future commercial and economic viability.
To start with, while economic and population growth, global supply chains, landlocked countries and mining investments all call for better and more reliable transport infrastructure, the SGR was not the right solution for Tanzania. Multiple reports have made this quite clear. There is no economic justification for SGR investment anywhere in East Africa at this point.
A 2013 World Bank report observed that an SGR project requires a volume of 55 million tonnes to be viable, while EAC railways are estimated to achieve only 14.4 million tonnes in total by 2030. With such requirements, given that Tanzania Railways Corporation (TRC) achieved not even a third of that, refurbishing the Central Railway at one third of the SGR cost would have sufficed, but the powers that be chose the most expensive option possible!
Neighbouring Kenya is paying dearly for its headstrong decision to ignore the fundamentals of railway economics. Ian Taylor, author of Kenya’s New Lunatic Express, observes that the Madaraka Express was generating a loss of $7.35 million every month in 2018, operating at less than 15 percent of its planned capacity. This is the fate that awaits Tanzania unless the government has something quite special up its sleeve.
But the long list of failed or failing public projects – TRC, UDA, BRT, TTCL, NHC, ATCL, Tanganyika Packers, etc – suggests that that is quite unlikely. While the government may pull off a project here or there, it lacks the track record of successfully running considerable operations in the medium and long term. To give the SGR a chance, the government needs to show a very high degree of resolve to address its future challenges.
Firstly, the SGR will have to pass the quality of service test. In the 1990s, when the road between Tanga and Moshi was rebuilt, people abandoned the railway services fast, and they were withdrawn. People have choices today. There are 86,000 lorries and 49,000 buses crisscrossing the nation every day. If TRC will approach this challenge as casually as it did in the past, we can as well conclude today that Tanzania’s SGR will be the most expensive white elephant in East African history.
Secondly, the DRC challenge. As it stands, even though over 90 percent of goods to or from Rwanda and Burundi pass through Dar es Salaam, they comprise less than one third of goods that pass through the port. Integration of the economic region around Tanganyika Lake might improve the situation. For example, the populous eastern provinces of the DRC of North and South Kivu, Katanga, Maniema and Ituri, which are resource-rich but are forced to depend on the unwieldy railway line to South Africa, could use a solid alternative line to Dar which could very likely cut transport times by up to 70 percent.
Thirdly, the marketing challenge. In the heyday of railway transportation in Africa, people often lacked viable transport alternatives, but today, all across sub-Saharan Africa, lorries dominate tracks even in cases where tracks have very clear cost advantages.
Statistics suggests that TRC is not competitive in the transportation of fertiliser, ores and minerals, cement, and oil, the kind of deals which successful operators thrive on. Similarly, even when ticket prices were half those of buses, people still preferred the convenience that buses offered. A laissez faire approach to the market will not persuade Tanzanians to use railway transport.
Finally, Dar es Salaam Port, which deserves its own discussion.
Generally speaking, railway is a nationally strategic resource. Unfortunately, Africans have been going about the railway business in the wrong way.
In the 1870s, only two decades after the introduction of railways, Indian mechanics began to manufacture locomotives which were better and cheaper than the British ones. Today, Indians are advising the British how to manage their railway networks. Similarly, in the 1930s’ South Africa, railways were pumping skilled craftsmen to the rest of the economy, leading to the industrialisation of South Africa. At its peak in the 1970s, South Africa Railways had 230,000 employees. Such is the potential of railways in economic transformation.
Pumping billions into a project will not bring such outcomes. There must be a paradigm shift without which the thousands of lorries will continue to damage roads, congestion will continue to cost the nation dearly and accidents will continue to cut short livesas hundreds of new vehicles hit the roads every day.
In this case, will the SGR ever work?
Given Tanzania’s track record, it is difficult to see anything beyond failure here. The most likely scenario is that the network will function well below expectations for years, incurring losses that the government will struggle to subsidise. As the situation worsens, TRC will start to cut corners in maintenance, making the infrastructure degrade faster, thus reducing the network speeds and reliability. Then clients will drop en masse going back to privately owned lorries and buses, leading to exactly where we started.
That’s the Tanzania we know and love, huh?
Gazeti la The Citizen limeandika makala kuhoji busara iliyotumika kuamua kujenga SGR Wakati tafiti za Kitaalamu zinaonesha tutapata Hasara?
Kwa mujibu wa WB Ili reli ilete faida inatakiwa mzigo angalau Tani mil.55 wakati utafiti unaonyesha Hadi kufikia 2030 EAC yote itakuwa na uwezo wa kusafirisha Tani asilia 14 tuu ya mahitaji Ili upate faida..
Kwamba Kwa nini Magufuli na Serikali yake walichagua expensive option ambayo itakuwa ni liability Kwa Taifa miaka na miaka?
My take: Hivi kwa nini tusiwe tunawawajibisha watu wanaotoa hasara Taifa kwa maamuzi yao ya Hovyo?👇
=====
Trucks and tracks: Will Tanzania’s SGR ever work?
Charles Makakala
6-7 minutes
Summary
The government’s gung-ho approach to SGR is commendable. At this stage of the project, developing cold feet would make no sense. Nonetheless, much more needs to be done to ensure the SGR’s future commercial and economic viability.
Tanzania continues to show strong commitment to its grand $14 billion, 1,800km standard gauge railway (SGR) project. According to recent reports, the government is pushing forward with the Tabora-Gitega and Isaka-Kigali phases, connecting the infrastructure with Burundi and Rwanda, respectively. This will, hopefully, make Tanzania a transportation hub for its many landlocked neighbours.
The government’s gung-ho approach to SGR is commendable. At this stage of the project, developing cold feet would make no sense. Nonetheless, much more needs to be done to ensure the SGR’s future commercial and economic viability.
To start with, while economic and population growth, global supply chains, landlocked countries and mining investments all call for better and more reliable transport infrastructure, the SGR was not the right solution for Tanzania. Multiple reports have made this quite clear. There is no economic justification for SGR investment anywhere in East Africa at this point.
A 2013 World Bank report observed that an SGR project requires a volume of 55 million tonnes to be viable, while EAC railways are estimated to achieve only 14.4 million tonnes in total by 2030. With such requirements, given that Tanzania Railways Corporation (TRC) achieved not even a third of that, refurbishing the Central Railway at one third of the SGR cost would have sufficed, but the powers that be chose the most expensive option possible!
Neighbouring Kenya is paying dearly for its headstrong decision to ignore the fundamentals of railway economics. Ian Taylor, author of Kenya’s New Lunatic Express, observes that the Madaraka Express was generating a loss of $7.35 million every month in 2018, operating at less than 15 percent of its planned capacity. This is the fate that awaits Tanzania unless the government has something quite special up its sleeve.
But the long list of failed or failing public projects – TRC, UDA, BRT, TTCL, NHC, ATCL, Tanganyika Packers, etc – suggests that that is quite unlikely. While the government may pull off a project here or there, it lacks the track record of successfully running considerable operations in the medium and long term. To give the SGR a chance, the government needs to show a very high degree of resolve to address its future challenges.
Firstly, the SGR will have to pass the quality of service test. In the 1990s, when the road between Tanga and Moshi was rebuilt, people abandoned the railway services fast, and they were withdrawn. People have choices today. There are 86,000 lorries and 49,000 buses crisscrossing the nation every day. If TRC will approach this challenge as casually as it did in the past, we can as well conclude today that Tanzania’s SGR will be the most expensive white elephant in East African history.
Secondly, the DRC challenge. As it stands, even though over 90 percent of goods to or from Rwanda and Burundi pass through Dar es Salaam, they comprise less than one third of goods that pass through the port. Integration of the economic region around Tanganyika Lake might improve the situation. For example, the populous eastern provinces of the DRC of North and South Kivu, Katanga, Maniema and Ituri, which are resource-rich but are forced to depend on the unwieldy railway line to South Africa, could use a solid alternative line to Dar which could very likely cut transport times by up to 70 percent.
Thirdly, the marketing challenge. In the heyday of railway transportation in Africa, people often lacked viable transport alternatives, but today, all across sub-Saharan Africa, lorries dominate tracks even in cases where tracks have very clear cost advantages.
Statistics suggests that TRC is not competitive in the transportation of fertiliser, ores and minerals, cement, and oil, the kind of deals which successful operators thrive on. Similarly, even when ticket prices were half those of buses, people still preferred the convenience that buses offered. A laissez faire approach to the market will not persuade Tanzanians to use railway transport.
Finally, Dar es Salaam Port, which deserves its own discussion.
Generally speaking, railway is a nationally strategic resource. Unfortunately, Africans have been going about the railway business in the wrong way.
In the 1870s, only two decades after the introduction of railways, Indian mechanics began to manufacture locomotives which were better and cheaper than the British ones. Today, Indians are advising the British how to manage their railway networks. Similarly, in the 1930s’ South Africa, railways were pumping skilled craftsmen to the rest of the economy, leading to the industrialisation of South Africa. At its peak in the 1970s, South Africa Railways had 230,000 employees. Such is the potential of railways in economic transformation.
Pumping billions into a project will not bring such outcomes. There must be a paradigm shift without which the thousands of lorries will continue to damage roads, congestion will continue to cost the nation dearly and accidents will continue to cut short livesas hundreds of new vehicles hit the roads every day.
In this case, will the SGR ever work?
Given Tanzania’s track record, it is difficult to see anything beyond failure here. The most likely scenario is that the network will function well below expectations for years, incurring losses that the government will struggle to subsidise. As the situation worsens, TRC will start to cut corners in maintenance, making the infrastructure degrade faster, thus reducing the network speeds and reliability. Then clients will drop en masse going back to privately owned lorries and buses, leading to exactly where we started.
That’s the Tanzania we know and love, huh?
. 
kutaongeza kiwango cha utoaji wa huduma kupitia Bandari ya Dar es Salaam kwenda nchi za 
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