Malawi gave both sides of the Nacala corridor to one operator — freight rose 30%

Malawi's shortest, cheapest trade route — the railway to Mozambique's port of Nacala — was barely used. Of Malawi's 650,000–750,000 tons of overseas freight, the route carried only about 100,000; most cargo trucked to Durban, 1,500 km away. Malawi Railways was an overstaffed parastatal that could not fund maintenance, and past investments in parastatals had been shown not to be valued by future bidders.

The 1995 Railways Restructuring Project (IDA US$16.16M, USAID US$11.98M) deliberately avoided long-lived investments. Instead it made restructuring a condition of effectiveness: the old company was split into Malawi Railways (1994) Ltd and a lake services firm, and of 3,600 staff only about 1,200 moved to the new companies — under 50% for the railway. Surplus land and locomotives were sold, performance contracts signed, and management was selected on merit.

The concession closed on December 1, 1999: Central East African Railways (CEAR) took over — the same consortium independently selected by Mozambique for its side of the line and the port itself. A pre-existing Operations Agreement let CEAR run cross-border trains from day one. Slimmed down, the railway posted its first net surplus in FY1998/99; in the concession's first five months international freight rose about 30% year-on-year.

The ICR's sharper lesson: investments made by parastatals are rarely valued by bidders, so avoid long-lived investments ahead of concessioning — restructuring and retrenchment, not rehabilitation, is what creates value buyers will pay for.

Concession the whole corridor to one operator

Concessioning both sides of the border plus the port to one operator aligned incentives across the whole corridor.

A pre-negotiated cross-border Operations Agreement removed the transition gap that stalls most rail handovers.

Retrenchment and asset sales before privatization removed the excuses — debt, surplus staff, surplus assets — that let parastatals underperform.

Skipping heavy pre-sale investment avoided spending that bidders would not pay for.

A corridor is one system: privatizing both sides of a border route to a single operator removes the interface where parastatal rail concessions usually fail.

CEAR continued operating the Nacala corridor from both sides, and the institutional mechanism coordinating Malawi's railway, Mozambique's line, and the port remained in place. The ICR rated the outcome satisfactory — it would have been highly satisfactory on the strength of the rail privatization alone, but the lake services concession was still pending and pre-concession traffic targets had been missed. The lake services concession process was expected to complete by end-2000.