five times the price of maize (but with distinct variations by crop, by year, and by market, see supplemental appendix). Trade in high value crops is more attractive due to proportionately lower trade costs.

The predominantly small-scale domestic trading business in food crops is undertaken by farmers, small, medium, and large traders, wholesalers, maize processing firms, and ADMARC. The dispersion of the size distribution of trader businesses and the prevalence of many small scale businesses suggest constant returns to scale in trade (Fafchamps et al. 2005). Most “district to district” trade of maize runs from farmers to small and medium traders and occasionally to larger traders and wholesalers. Around 75% of all traders buy directly from farmers and sell as a retailer (Fafchamps et al. 2005). Trading channels vary by location, but the bulk of maize trade is in the hands of the private sector. Survey data indicate that average distance between purchase location and sale location of maize transactions is around 55 km with a maximum of 200 km (Fafchamps et al. 2005).

Although transport of agricultural produce by rail is a cheap transport alternative, transport by road is the dominant mode of transport of trade in agricultural products in Malawi. For a variety of reasons, however, domestic transport costs of transport by truck are very high: the main causes include poor (secondary) roads, high petrol prices, inefficient small loads, no backloads, no scale economies, credit constraints, and limited competition (see Lall et al. 2009, Zant 2013). The trunk road network (see appendix, figure A1) connecting cities and district towns functions reasonably well, but the lack of good secondary roads leaves many locations underserved. Cheap transport services in Malawi potentially create large welfare gains and enhance the scope for economic growth. If fully operational, the (extended) railway system in Malawi is therefore an interesting complement to the currently dominant mode of transport.

# _Railway Infrastructure, Operations and Transport Costs_

The Malawi rail network consists of a single rail line with a total length within Malawi of 797 km, running from Zambia in the west (where it runs 25 km into Zambian territory to Chipata), to the east via Lilongwe and Salima, and next to the south where—in the district of Balaka—the line splits into a line farther south to Blantyre and Beira in Mozambique, and a line to the east to Nacala in Mozambique (see figure 1). Historically, the line is operated by a government-owned railway company, Malawi Railways. However, on December 1, 1999 a 20-year concession for the operation of the network and supply railway transport services has been awarded to Central East African Railways (CEAR). This concession, an integrated part of a larger concession (with the US-based Railroad Development Corporation, as main concessionary), known as the Nacala corridor, further consists of the port of Nacala in Mozambique, a railway line that runs from Nacala to the Malawi border, and a 26 km railway line from Mchinji at the western border of Malawi to Chipata in Zambia. The Mozambique parts are owned by the parastatal Mozambique railway company CFM and operated by the joint venture Corredor de Desenvolvimento do Norte (CDN)<sup>3</sup> . Investment in railway lines in the region is driven, in the first place, by the exploration of quarrying and mining companies.<sup>4</sup>

> 3. See B.J. Knapp and H. Posner III, ‘A luta continua!,’ Railway Gazette International, June 2004, 160.6, 363. Since privatization in 1999 and up to the time of writing, several other private sector parties have participated in CDN. 4. A search on SSA railways in the archives of news sources (All Africa [www.allafrica.com], The International Railway Journal, Railway Gazette International) generates nearly exclusively articles related to mining.

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