Hopes are high that South African investment in Mozambique railways could improve trade and employment in both countries.

Under the deal, South Africa's public railways, Spoornet, can run its trains from the border to the port of the Mozambique capital Maputo.

This should offer better access to southern Africa from the Indian ocean.

South Africa's public railways Spoornet is to pay $67.7m (�47.16m) for the rail concession and will invest 200m ($17.2m; �12m) rand in the Mozambique rail network.

The track was badly run down during Mozambique's civil war.

A further $61m (�42.49m) will come from the Mozambique Port Development Company - a European funded organisation.

Mozambique hopes that the deal will increase tax and tourism revenues as well as boost investment, Khulu Phasiwe from the South African newspaper Business Report told the BBC's World Business Report.

Blue Train destination

"One of the biggest projects which they (Mozambique) are aiming to rebuild is the port of Maputo and South Africa is going to put some $10m to rehabilitate the railway line at Maputo," he said.

Spoornet's luxury Blue Train travelled from Pretoria to Maputo to mark the signing of the deal and the hope will be that the Blue Train will bring in more visitors to the country.

The deal marks the completion of projects that were part of the Maputo Development Corridor - a plan for upgrading the infrastructure, economy and living conditions for people in north-eastern South Africa and southern Mozambique.