NRZ’s $460m deal under threat

National Railways of Zimbabwe's $460 million re-capitalisation deal hangs in the balance unless government gives in to the financier’s conditions.

Obert Mpofu
Obert Mpofu

The Zimbabwean has been informed that the Development Bank of Southern Africa (DBSA) has raised concerns over the hype given to the deal before a formal agreement has been reached and refused to give a guarantee before demanding the government works with a South African company of its choice.

This is in direct contravention of the country’s procurement procedures, which demand that government to go to international tender for the retooling exercise.

DBSA argues that it cannot give NRZ funds to splash on a firm from another country.

The pressure is already mounting on government, which might be forced to arm-twist the law as several ministries are desperate to breathe life back into the railways as the backbone of economic transformation.

“In terms of procurement procedures we have to go for international tender and these guys are saying this is our money you can’t come to South Africa, get our money and give it to a Chinese company. If you want to do that go and get money from that end (China),” said Engineer Munesushe Munodawafa, the permanent secretary in the Ministry of Transport and Infrastructure Development.

“So it’s a real issue. They have identified key technical partners and they are saying you choose one of these and there is no government guarantee. We will get the money through these companies, some of which are public enterprises in SA.”

Government started engaging DBSA late last year and the deal has not yet been signed as the two parties are still holding talks. “The $460 million is adequate to bring back NRZ back on its feet except the re-electrification of the Harare to Gweru line. We need to focus on first things first. We will power the trains with diesel and run them. When we are able to run them we can then think of re-capitalisation along the lines of re-electrification,” said Munodawafa.

NRZ has been saddled with a myriad of challenges, including a deteriorating rail-line measuring 1,900 kilometres, ageing signaling infrastructure, locomotives and wagons. It has 168 locomotives – the youngest aged 45 years (life expectancy 20 – 25 years) and 8,600 wagons, of which a mere 3,500 are still in use. The wagons have also doubled their life expectancy as they are now 50 years old.

Minister of Transport Obert Mpofu told a Parliamentary Portfolio Committee on Transport that NRZ was making $17 million in monthly losses and owed its workers $36,1 million, a figure that has since shot up to $55 million.

Munodawafa attributed the loss to NRZ’s huge fixed costs and strong labour movement that forced it to keep its workforce. The system is designed to move 18 million tonnes per year and managed to reach 12 million tonnes in 1999 with a workforce of 9,000.

Today it is managing a mere 3 million tonnes with a workforce of 8,000 as it cannot meet the huge retrenchment packages demanded by the Labour Court.

“The basic retrenchment package cost so much that the money is better utilised for recapitalization,” said Munodawafa.

Minister of Industry and Commerce Mike Bimha recently revealed that NRZ is stuck in financial distress as its operations where heavily dependent on the viability of New Zim Steel formerly known as Zisco Steel.

He said 60 percent of NRZ’s cash inflow was generated from the now defunct steel company.

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