Source: NRZ board defies Matiza over US$400 million deal – The Zimbabwe Independent December 13, 2019
THE National Railways of Zimbabwe (NRZ) board is defying implementing Transport minister Joel Biggie Matiza’s directive to re-tender the entity’s US$400 million recapitalisation deal, citing punitive legal implications associated with the move.
Following cabinet’s decision in October to cancel the NRZ’s US$400 million tender awarded to the Diaspora Infrastructure Development Group (DIDG) in 2017, the consortium swiftly moved in to instruct its lawyers, Atherstone and Cook Legal Practitioners, to file a US$215 million lawsuit against the rail operator.
At that time, Matiza instructed NRZ board chairperson Advocate Martin Dinha, through a letter dated 0ctober 30, to terminate the DIDG bid, while inviting potential suitors to vie for the multi-million- dollar project.
“I wish to advise you that on 15 October 2019, following consideration of the memorandum by the Minister of Transport and Infrastructural Development on the status of the NRZ-DIDG-Transnet recapitalisation project, cabinet, amongst others, directed that the agreement for the recapitalisation of the NRZ involving DIDG-Transnet be terminated and a fresh tender flighted for the equity participation in the project as matter of urgency,” Matiza’s letter seen by the Zimbabwe Independent reads.
However, the NRZ board, which had already approved the consortium’s bid before it was later terminated by cabinet, has not carried out Matiza’s order.
Under the NRZ-DIDG US$400 million revival project, which had attracted the interest of various regional banks waiting with over US$1 billion in the wings, the deal can only be reversed by the board working under the minister’s instruction. At law, Matiza is not empowered to unilaterally cancel the DIDG bid, which was now being assessed by Treasury before it was subsequently overturned by cabinet.
Sources close to the botched transaction say the NRZ board, which had already endorsed critical phases of the deal, was fretting over the impending US$215 million lawsuit, if it pushed ahead with Matiza’s order to re-tender.
Atherstone and Cook managing partner Innocent Chagonda, representing the consortium, told this newspaper on November 29, that “re-tendering the deal will expose NRZ to a huge and embarrassing lawsuit …”
“The board is well aware of the legal implications of carrying through minister Matiza’s directive to re-tender the project. The board is mindful that an insolvent NRZ cannot afford to be dragged to court, in what appears to be a protracted lawsuit against the well-resourced consortium. This is why there is a lot of hesitancy on the part of the board to re-tender the project in line with the cabinet decision. However, there are other considerations apart from the legal consequences,” a source, who spoke on condition of anonymity, told the Independent this week.
The NRZ is saddled with a US$500 million debt overhang, and had pinned its hopes of recovery on the DIDG bid, taking delivery of 13 mainline locomotives, three shunting locomotives, 200 high-sided wagons and six passenger coaches on a lease agreement in 2017.
Sources told the Independent that most board members were also opposed to Matiza’s directive on grounds that the minister had acted “unilaterally to overturn the DIDG bid and was fronting for a preferred suitor”.
The board, sources said, had also taken into consideration the considerable length of time it would take to find another partner with the financial muscle to revive the moribund rail operator.
“There is informed belief that Matiza is attempting to push out DIDG for a preferred partner of his choice. But the consequences are clear, the parastatal is in shambles and it would take long before it finds an investor with deep pockets to revive it”, a source said this week.
Another source, close to the working of NRZ and the contentious DIDG transaction said the board had not moved an inch even after receiving Matiza’s directive.
Instead, sources said, the board was still waiting for Treasury’s “verdict on the DIDG bid”. Before the DIDG bid was thrown out by cabinet, Treasury was still assessing the consortium’s proposal.
“So the board has not moved. We are still where we are when the directive was made. We are waiting on Treasury to come back to us with their assessment and verdict. The Ministry of Finance is yet to give us its verdict.
It was not the decision of the board to terminate DIDG’s bid.“The board has a difficulty in handling this matter. On one hand, minister Matiza instructs the board to prepare new terms of reference (ToRs) and request for proposals (RfPs). But on the other hand (if you read his instruction to the board) he says he will invite us to a meeting to discuss implementation of the cabinet decision. So it is a difficult position,” a source said this week.
NRZ board chairperson Dinha could not comment on grounds of sickness.The consortium, as it consults its legal team, has noted that the US$215 million quantum of the looming lawsuit will take into account the rolling stock it availed to NRZ in 2017, as well as “missed opportunity costs”.
DIDG, which availed indicative funding term sheets totalling over US$1 billion to the NRZ board and Matiza, has since dismissed the minister’s claims that its bid was terminated on the grounds that the consortium had failed to provide proof of funding.
On October 1, President Emmerson Mnangagwa told parliament that funding for the recapitalisation of the embattled rail operator had been secured from DIDG, which had roped in the African Export and Import Bank (Afreximbank) as the mandated lead arranger.
The continental bank had expressed commitment to sink US$100 million into the insolvent rail operator as part of its mandate to mobilise resources required for the project to commence.