NRZ GT2LC-2 number 1006 at Victoria Falls, Zimbabawe
It finally looks, through recent events, like the country’s railway system is going to get to witness
the start of a very long overdue overhaul. In early June ten potential NRZ investors inspected the
parastatal’s assets in Bulawayo, Sawmills, Dete and Gweru to familiarise with the organisation as
the proposed recapitalisation programme gathered momentum. In Bulawayo there was a visit to
the large NRZ workshops; the trip up the North Line to Dete facilitated seeing the old CTC
infrastructure and the need for rehabilitation of this railway route. In Gweru, the visitors inspected
what lasts of the electrification infrastructure.
By early July only six bids had been unveiled. Of the six, only three appeared to have met the
tender requirements. The three were a Swiss firm, Crowe Horwath Chartered Accountants, which
said it could secure funding amounting to $2,5 billion; a Zimbabwe firm Croyeaux Private Limited
which proposed to inject about $700 million; Transnet partnered with a local firm, Diaspora
Infrastructure Development Group, submitted a tender in which they said they could provide $400
million. China’s Sino Hydro only submitted what was referred to as a “regret”, while China Civil
Engineering asked for a late submission. The sixth firm, SMH Rail of Malaysia, said it could re-
manufacture some of the infrastructure with a funding proposal of about $101 million. Transnet
and Diaspora Infrastructure Development Group (DIDG) had been the successful bidder. DIDG is
fronted by Johannesburg-based Donovan Chimhandamba and involves non-resident, well-heeled
Zimbabwean professionals mostly based in South Africa. Transnet is the technical partner. The
recapitalisation project will involve kick starting the rehabilitation and renewal of plant, equipment,
rolling stock, track, signalling and telecommunication infrastructure and the supporting
Information Technology systems.
The deal, embracing Transnet and DIDG, was subsequently blocked by cabinet. Competing
business and financial interests among ministers and other officials seemingly muddied the
waters. What appeared a simple and straightforward project became a chaotic and complicated
affair. The deal did appear sound and viable, although vested political and business interests in it
could not be ruled out. Some ministers were pushing for the involvement of China Railway Eryuan
Engineering Corporation (CREEC), which did not participate in the bidding process and Sinohydro,
which took part in the tender, but lost out. CREEC had signed an agreement with NRZ for railway
network planning and rehabilitation of four corridors, including the supply of traction and rolling
stock and other equipment in May 2015. Government needed to jump around to assess and
analyse the project and arrive at a professional decision, not influenced by factional politics,
personal squabbles or other self-seeking interests.
By mid-October, the deal with South Africa was back on track following Zimbabwean cabinet
approval – why the turnabout one might well ask? The Chinese deal was more expensive and not
as comprehensive in its proposed conditions. CREEC’s proposal was silent on the source of funds
and therefore NRZ would have to apply for a loan from China Exim Bank. A 15% deposit would be
required for the loan to be accessed, meaning the broke government would have had to provide
US$125 million as a deposit for the US$836 million loan. According to reports, the China Exim
Bank closes its books of accounts for the year in November, meaning if it were to provide funding
for Zimbabwe, the processes would only start in 2018. Other Chinese financial institutions such as
Sinosure have been reluctant to lend or guarantee Zimbabwean loans as the country has a
reputation for delaying on payments. While the CREEC deal was more costly, its feasibility study
covered the rehabilitation of Victoria Falls-Bulawayo-Harare-Mutare railway lines which is 1 247
kms or 45% of the network. The DIDG/Transnet project covers the entire network of 2 760km and
all other aspects of railway operations. CREEC would only provide rolling stock (wagons and
locomotives) of US$29 million while DIDG/Transnet will cover as indicated already procurement of
rolling stock, plant and equipment, rehabilitation of track infrastructure, signalling and
telecommunications as well as Information Communication and Technology (ICTs).
Government ministers are therefore convinced that the financing model and project operation of DIDG-Transnet is more viable when compared to the CREEC one. The DIDG-Transnet proposal is a public-private partnership (PPP) arrangement with joint venture for operations and loan repayment and has a life of 25 years. DIDG-Transnet also complies with the country’s indigenisation policy. The Zimbabwean ownership of the deal is effectively 67% in the joint venture since DIDG and NRZ have 32% and 35% respectively. In the joint venture of NRZ and DIDG-Transnet, the parastatal has 35% while the consortium has 65%.
South African banks – Standard Bank, Nedbank, Rand Merchant Bank (RMB) – and the Industrial
Development Corporation (SA) had put up funding letters worth $1,2 billion for the project, of
which $400m is earmarked for initial investment in capital expenditure. The US$400 million is not
going to be distributed in one big chunk. Spanning a three-year period, the first year there is to be
US$159 million that was to be spent on procurement of locomotives and rolling stock. NRZ was
talking of purchasing 24 mainline locomotives and 13 shunt locomotives. It is also looking at
about 1 000 brand new wagons that would come in the first year and the refurbishment of 700.
There is also an amount of US$40 million that is to be allocated towards fixing the permanent
way and the removal of speed restriction sections. The signalling system is up for addressing too.
The second year would see another US$100 million going into fixing infrastructure, information
communication technology and further refurbishment of wagons and locomotives. While NRZ
waited for new locos to arrive the refurbishing of 20 existing ones is expected to be put in place
and the hiring of motive power exercised, incurring further financial overheads. The rest of the
money is going towards refurbishing other infrastructure, such as buildings and workshops.
Reduction in passenger fares
NRZ was starting in July to reduce fares for passenger trains on major routes by up
to 30 percent. In a statement at the time, the railway company said it would cut fares for the
Bulawayo to Harare, Bulawayo to Victoria Falls and Bulawayo to Sango Border with
Mozambique routes.
Passenger rolling stock burnt
Vagrants have been blamed for allegedly causing the fire which burnt and destroyed 21 saloons in
Bulawayo station yard in June. The coaches were a source of shelter and a fire obviously got out of
control. The rolling stock was not in regular use but served as a source of spares.
Government places money at NRZ’s disposal
In early July, it was reported that NRZ had secured a $5 million loan from a local bank to repair
a small element of its fleet and was also negotiating with a Russian firm to supply it with 100 new
wagons. Parliament was mulling the cancellation of the parastatal’s debt during the same month.
NRZ had moved nearly two million tonnes of freight by August and was hopeful that it would
meet its 3,5 million tonnes target by the end of the year on anticipated improved performance of
the mining sector.
Bulawayo Workshops open to others
The National Railways of Zimbabwe is opening up its massive workshop facilities in Bulawayo for
outside commercial jobs. As a result of the initiative, NRZ Engineering Workshops have been
rebranded to Inter-Rail-Tech with the motto “Engineering Drive for Success”. The workshops are
among the largest Integrated Engineering Workshops in Southern Africa and are geared to a
provide a one-stop solution to the mining and engineering industries. Inter-Rail-Tech is primarily
geared for general mechanical, electrical and structural Engineering, offering designing,
fabrication, manufacturing, reconditioning, repairs, rewinding, servicing and consultancy as well as
boiler and wire rope maintenance inspections. Inter-Rail-Tech has qualified engineering staff
comprising engineers, technicians and artisans from the three NRZ divisions – Mechanical,
Electrical and Structural. Inter-Rail-Tech services will be targeting mining, production,
manufacturing and agricultural sectors as well as individuals, as it believes no job is too small.
The decision to open up NRZ workshops came courtesy of its excess capacity in the form of idle
machinery and accommodating outside jobs will unlock value and increase the capacity utilisation
of the workshops. There is also a gap in the market for services offered by Inter-Rail-Tech as a
number of companies, which used to offer these services mostly in Bulawayo and the Midlands,
have closed down. Inter-Rail-Tech boasts of a wide range of industrial machinery and equipment
including CNC-Computerized lathe machine; balancing machine for balancing rotors, turbines and
armatures; pressing machines, which can press up to 150 tonnes; a foundry; jackhammers for
civil works; a vacuum pressure impregnation plant; mobile cranes and bulldozers. The Inter-Rail-
Tech project seeks to adopt a Total Quality Management and is working towards ISO Certification.
One can only hope that contemporary events and developments prove to uplift this Southern
African railway system, which is – and always will be – so vital a conduit within the SADC
transportation fabric.
Post published in: Business