Sovereign Africa Ratings

Introduction

The Lobito Corridor, a pivotal infrastructure project connecting Angola, the Democratic Republic of Congo (DRC), Tanzania, and Zambia, holds immense potential to transform regional trade and economic development. With its 1,344 km railway linking the Lobito port in Angola to the mineral-rich Copperbelt region, the corridor aims to facilitate the movement of goods, unlocking the vast resources of Central and Southern Africa.

Benefits for the Countries Involved

Enhanced Export Opportunities: The Lobito Corridor will reduce transportation costs by up to 40%, according to estimates, cutting the transit time for goods to global markets by nearly 50%. This improvement is critical for exporting minerals like copper, cobalt, and other essential commodities valued at approximately $150 billion annually.

Economic Growth and Job Creation: The corridor is expected to create over 20,000 direct and indirect jobs during its construction and operational phases. The enhanced trade routes could contribute up to a 1.5% annual GDP growth rate for Angola, the DRC, and Zambia collectively.

Reduced Reliance on Traditional Trade Routes: By bypassing traditional trade chokepoints, the Lobito Corridor offers a more reliable alternative, decreasing dependency on routes such as the congested Durban port corridor, where transit times can exceed 20 days.

Regional Integration: Improved infrastructure is projected to increase intra-African trade, which currently accounts for only 15% of the continent's total trade volume, compared to 68% in Europe and 59% in Asia.

The Peril of Raw Material Exports

Africa's reliance on exporting raw materials remains a concern. Expanding local value-addition industries could increase revenue by up to 200% while creating an estimated 50,000 skilled jobs in the region.

The Looming Shadow of Political Change

The project’s future faces uncertainty as the United States anticipates a potential shift in administration. While regional stakeholders remain determined, political changes could affect its progress.

Lobito Corridor: A Credit Positive for Southern Africa

Credit Positives: Enhanced Export Capabilities, Economic Growth and Job Creation, Improved Infrastructure and Logistics, Regional Integration.

Credit Negatives: Execution Risks, Commodity Price Volatility, Environmental and Social Impact.

The United States Perspective

The US views the corridor as strategic for securing critical minerals and diversifying supply chains, aligning with green energy transition goals.

Potential Impact on South African Economy

Negative Impacts: Diversion of Trade, Increased Competition.

Positive Impacts: Stimulated Regional Economic Growth, Enhanced Regional Integration, Leveraging Complementary Strengths.

Conclusion

The Lobito Corridor presents a transformative opportunity for Southern Africa to accelerate economic growth and enhance creditworthiness. By prioritising value-added processing and diversifying export markets, Africa can secure a more prosperous future.

Contributors

• Bekithemba Ndimande | Rating Analyst | bekithemba@saratings.com

• Lomanja Malaba | Rating Analyst | lomanja@saratings.com

The analysis in this document is provided for information purposes only and should not be construed as financial or investment advice.