NRZ on track for US$115m Afreximbank facility

Source: The Herald – Breaking news.

NRZ on track for US$115m Afreximbank facility
 The revitalisation of NRZ’s infrastructure is expected to enhance logistical efficiency across various economic sectors in the country while easing the strain of heavy cargo transportation on the roads (File Picture)

Oliver Kazunga

Senior Business Reporter

THE National Railways of Zimbabwe (NRZ) is making headway on its efforts to secure the US$115 million loan facility from the African Export-Import Bank (Afreximbank) after the Government approved the establishment of a Special Purpose Vehicle that will be used to service it.

NRZ board chair Advocate Mike Madiro said in an interview, “It (Afreximbank loan approval) is contingent to the establishment of an SPV and a feasibility study (on how the project will be rolled out) —  those are the two fundamental conditions, which are supposed to be in place for Afreximbank to do their internal processes for approval upon confirmation of its bankability.

“The SPV is to ring-fence the revenue generated by NRZ to be able to service the loan —  that’s what we call ‘non-recourse facility’.

“It’s the same as in some instances where parties in agreement create an escrow account, and the revenues are deposited into that account, and they cannot be withdrawn unless certain conditions are met.

“We are happy that the establishment of the SPV was approved by our shareholder (the Government) and a feasibility study is underway by the identified consultant,” he said.

Adv Madiro said the purpose of the feasibility study by an independent consultant was to confirm the bankability of the project.

“We are looking forward to confirmation of the bankability of the project.

“When that is done, the bank will now do its internal processes and we hope the bank will approve that project after which the drawdown of resources from the loan facility will ensue,” he said.

Under the loan facility, US$81 million will be used to procure rolling stock from RITES Limited of India where NRZ is expected to receive nine locomotives and 315 wagons while US$34 million would be allocated towards infrastructural rehabilitation and expansion of the rail network.

In June last year, officials from the Government and NRZ visited India where they negotiated for the line of credit for the rail operator to procure brand new locomotives and wagons to bolster the parastatal’s freight capacity and meet the country’s bulk transportation needs.

The revitalisation of the NRZ is expected to enhance logistical efficiency across various economic sectors in the country while easing the strain of heavy cargo transportation on the roads. This comes amid concerted efforts by the Second Republic to transform the economy, including through collaboration between the Government and private sector players to scale up maintenance, rehabilitation, and expansion of the entire transport infrastructure.

It is hoped that this will unlock more economic opportunities through improving linkages between new and old productive zones with key domestic and international markets.

The Second Republic’s engagement and re-engagement drive under President Mnangagwa has seen some external financiers warming up to supporting infrastructure development projects such as rail as they realise the immense potential Zimbabwe has.

On account of the level of commitment the Government has exhibited to turn around Zimbabwe’s strategic transporter, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube and officials from NRZ, met officials from China International Rail Group in Harare last week.

In the meeting, they discussed ongoing progress on the group’s partnership with NRZ towards the expansion of the country’s railway systems.

 “So, we are on the market looking for funding; we are looking at various funding options,” said Adv Madiro.

A good rail network is key to the growth of domestic, regional, and international trade as it connects all major production centres and provides transportation services for businesses and passengers.

Zimbabwe’s rail network is strategic through its interconnectedness with other regional networks along the north-south corridor.

However, the network has over the years experienced serious challenges due to its antiquated state. NRZ general manager, Ms Respina Zinyanduko is on record saying her organisation is focused on transforming and modernising its operations in line with Vision 2030 of becoming a dominant regional surface transport and logistics solutions provider. To ensure a gradual rebuilding of adequate capacity for future business demand, NRZ is pursuing a phased approach in implementing projects based on debt/equity funding, strategic alliances, Public-Private Partnerships, and/or joint ventures.

So far, NRZ is angling for expansion of its services to cater to new business requirements such as new mines and rural industries. For example, NRZ has engaged Tsingshan Mining Investment Zimbabwe who intend and plan to build a new railway line connecting four plant sites -—   Selous, Hwange, Gwanda, and Mvuma/Manhize.

To enhance national and regional competitiveness, efforts are underway by NRZ to develop shorter rail links like the Lion’s Den (Zimbabwe) to Kafue (Zambia) link.

President Mnangagwa has emphasised the need to invest more in modernising Zimbabwe’s roads and railway infrastructure amid calls for NRZ to also think outside the box and utilise its massive mechanical workshop capacity in Bulawayo to expand revenue inflows and become the hub for servicing other players within the region.

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