Risk Management in Transport PPP Projects
In the Islamic Countries
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First concession (1995-2016). In 1995, Sitarail was privatized by means of an “affermage”
contract, as foreseen in the Ivorian law on public procurement, which is a sort of leasing type of
contract: the private operator pays for the maintenance and operating costs for the track and
rolling stock whereas the state pays for major track rehabilitation and rolling stock renewal. Such
PPP scheme clearly reduces the financial burden for the private operator, and it can be used to
attract private investment in case of limited profitability, as it is the case of the railway sector.
The concession period was set initially to 15 years and later (in 2001) extended to 35 years. The
company ownership is 67% private (Bolloré Africa Logistics, now renamed in Bolloré Transport
& Logistics); 30% is owned by the Côte d’Ivoire and Burkina governments and the remaining
3.0% is owned by the employees.
Concerning rail operations, the Concessionaire operates passenger and freight train services.
Freight traffic is dominant, both in terms of traffic (currently the line operates 4 freight trains per
day and 6 passenger trains per week, considering both directions) and revenue. The
Concessionaire has the obligation to providing passenger services, but the schedule of the service
is not set in the contractual agreement. As in other cases of rail privatization in Africa, the rail is
essentially serving as the inland connection to the main Port, in this case the Port of Abidjan.
In terms of remuneration, Sitarail receives no subsidies for its share of activities. In turn, a
concession fee is paid to the government for the right to operate the service. This in principle
considers the cost to the Conceding Authority of providing assets (e.g., rolling stock, tracks,
equipment) to a Concessionaire; additionally, concession fees guarantee that governments share
with private operators the profits generated by the concession. Based on available data (World
Bank, 2006) the concession fees paid by Sitarail were around 5.8% of the net profit, in line with
other similar railway projects in the region and it is not dissimilar to the net profit for the private
operator.
In terms of competition, the freight and passenger market is competitive with respect to mode,
as road transport is available on the same route served by rail and there is no restriction in
support of rail transport. With respect to rail operations, the concession contract contains an
exclusivity period of seven years for track usage, during which no other rail operator can operate
trains on the lines included in the concession agreement. After this period, the Conceding
Authority may designate other operators to provide transport services on the conceded network.
Such provision of a time-bound exclusivity period was most likely designed to protect Sitarail’s
limited market from additional competition, presumably with the purpose of maximizing the
value of the concession transaction for the government.
With respect to tariff setting, the Concessionaire is free to decide the tariff policy; however,
tariffs for passenger transport must be communicated to the contracting authority and publicly
available at all stations. In case tariffs are imposed within the context of a public service
agreement (as it could be the case if a scheduled passenger service is introduced by decision of
the Conceding Authority), then the Concessionaire is eligible for full compensation of costs
incurred for such service. No subsidies are foreseen; hence, the concession agreement requires
that tariffs must be sufficient to cover operating costs. The concessionaire is free to negotiate
discounted tariffs with clients – which happens especially for freight transport. Also, with