daniel chigunwe
Oliver Kazunga
Financially troubled National Railways of Zimbabwe (NRZ), says its turnaround is dependent on the speed at which the Government releases sovereign guarantees its strategic partners require before implementing various key restoration projects.
A sovereign guarantee is a Government’s guarantee that an obligation will be satisfied if the primary defaults.
In 2017, the Government granted national project status to the recapitalisation of NRZ to the tune of US$400 million through an open tender financing process.
Following the granting of the national project status, NRZ signed a US$400 million deal with the Diaspora Infrastructure Development Group (DIDG)/ Transnet Consortium with a view to revamp and rehabilitate the parastatal’s antiquated infrastructure that includes the signalling system, rolling stock and the tracks.
However, the US$400 million deal was cancelled in 2019 by Cabinet on the basis that the group lacked financial capacity to implement the project after DIDG and Transnet parted ways.
Responding to written questions from this publication, NRZ public affairs and stakeholder relations manager, Andrew Kunambura, said presently, the status of NRZ in as far as improving its infrastructure, despite the US$400 million NRZ recapitalisation deal hitting a brick wall, the railways firm, has entered into Public-Private Partnerships (PPPs) with four entities and this has kept the firm running.
“You will have to appreciate the fact that recapitalisation requires funding, national project status aside, which funding is still being finalised. “The DIDG deal was cancelled by the Cabinet and not us, after they decided there was nothing to it.
“Currently, we are in PPP arrangements with four entities namely: Zimasco, Strauss, Zimgas, Silvergill and Arc which have been very useful in ensuring our operations keep running while we finalise wagon and locomotive deals with the RITES Limited of India.
“With Zimasco, we have three locomotives and 100 wagons refurbished for the transportation of their products — ferrochrome, chrome ore, chrome concentrates. It has been a greatly beneficial initiative and the same arrangement applies with the other entities.
“An agreement is already in place for the procurement of these, of which we are awaiting a sovereign guarantee from the Government (Ministry of Finance, Economic Development and Investment Promotion). The RITES Limited of India deal was sealed in June last year.
“On the time that’s needed to completely turnaround NRZ infrastructure that will depend on the speed at which the Government gives those government guarantees required by partners,” he said.
NRZ, one of the parastatal’s under the Mutapa Investment Fund, is key to the country’s economic revival and so far due to the absence of an efficient railway system, concerns have been raised over the extent at which Zimbabwe’s road network was being damaged as bulk goods are transported by haulage trucks.
In May this year, NRZ said efforts to secure the US$115 million loan facility from the African Export-Import Bank (Afreximbank) were still in progress after the Government approved the establishment of a Special Purpose Vehicle (SPV) that will be used to service it.
The approval of the Afreximbank loan facility is contingent on the establishment of an SPV and a feasibility study (on how the project will be rolled out) by an independent consultant to confirm the bankability of the project.
The SPV is to ring-fence the revenue generated by NRZ to be able to service the Afreximbank loan from which US$81 million will be used to procure rolling stock from RITES Limited of India where the local railway operator is expected to receive nine locomotives and 315 wagons.
The remaining US$34 million would be allocated towards infrastructural rehabilitation and expansion of the rail network.
Kunambura said NRZ expects to make their first instalment for the manufacture of the first batch of wagons and locomotives by RITES of India in the fourth quarter of this year after which delivery is anticipated in 12 months. Efforts to get a comment from Mutapa Investment Fund on its plan to resuscitate NRZ were unsuccessful as the fund’s chief executive officer Dr John Mangudya, had not responded to written questions by this publication by the time of going to print.
An economic commentator, Wendy Mpofu, said NRZ is still a vital cog in Zimbabwe’s transport system and therefore delaying to recapitalise the entity has numerous negative implications that include limiting the parastatal’s ability to handle higher traffic demand leading to reduced efficiency and competitiveness.
At its peak in the 1990s, NRZ which has the capacity to move 18 million tonnes of freight per annum annually, was transporting 14 million tonnes while at present, the entity’s freight volume has plummeted to under three million tonnes.
“In addition, prolonged use of archaic infrastructure and equipment may result in higher operational costs for both NRZ and its customers, and failure to upgrade infrastructure and equipment may lead to increased safety risks, potentially resulting in accidents and derailments.
“Delayed recapitalisation is also limiting NRZ’s ability to contribute significantly to Zimbabwe economic development including reduced foreign currency earnings and diminished attractiveness for investment in mining and industry,” she said, adding that there is also lack of political will by the Government in channelling resources towards NRZ infrastructure rehabilitation.
“If the Government can show the same commitment it has shown on the rehabilitation of the road network by allocating resources towards revamping NRZ infrastructure, it is with no doubt that the turnaround of NRZ can be achieved within a short space of time.
“If we are to do a cost-benefit analysis, we will see that the same roads that we are rehabilitating today in the next few years there would have been extensively damaged by the haulage trucks, so it is prudent to bring NRZ back on track first so that we minimise the damage on the country’s roads,” she said.
Bongani Ndlovu