Source: Govt paves way for NRZ $400m revival | The Herald June 1, 2017
Prosper Ndlovu Bulawayo Bureau—
Government has granted national project status to the recapitalisation of the National Railways of Zimbabwe (NRZ) to the tune of $400 million through an open tender financing process. The tender has attracted more than 50 private bidders, setting the stage for the giant parastatal’s turnaround. This emerged in Bulawayo on Tuesday when senior Government officials, NRZ board and management, workers’ representatives and key stakeholders met potential local and international investors during a highly subscribed pre-bid conference at a hotel to discuss modalities of implementing the recapitalisation project.
The move follows approval by Cabinet last month on the engagement of a technical advisor — Deloitte Touche — and the adoption of the formal tender process to raise the $400 million from the open market, Permanent Secretary in the Ministry of Finance and Economic Development, Mr Willard Manungo told the gathering.
He said the process to raise the funds, either in “the form of debt, equity or any creative combination”, was already under way with tender submission expected to close on July 4.
“On behalf of Government, I wish to pledge support for this open and formal tender approach, which will result in the raising of funds for the comprehensive recapitalisation of this strategic national utility,” said Mr Manungo.
“In order to show full support and ensure smooth implementation of the recapitalisation project, Government is granting to this project incentives such as national project status, warehousing of part of NRZ debt, conditional ring fencing of bulk freight cargo to rail and sovereign guarantees for any loan so provided.
“The NRZ owes a variety of institutions, including employees and is working with Government with a view to initially warehouse the debt off NRZ’s books and then jointly develop various strategies to deal with and liquidate the debts.”
National project status entails that Government undertakes to provide specific incentives to ensure quick NRZ turnaround such as tax exemptions on project inputs that are essential for the programme, which require importation of a lot of capital equipment.
NRZ has not been adequately capitalised over the last 20 years resulting in deterioration of equipment and infrastructure and subsequent losses, which have compromised service quality and reliability.
These have rendered the organisation uncompetitive and in the process crippled export commodities as well as domestic industrial output along the value chain.
NRZ board chairman Mr Larry Mavima admitted the deteriorating state of NRZ’s resources and infrastructure, on the backdrop of the general weak economic activity in the country, has resulted in reduced liquidity for the parastatal over several years and a drop in operational capacity to average 2,7 million tonnes volumes in 2016 from 12,4 million tonnes in 1998 compared to designed 18 million tonnes annually.
He said the recapitalisation project, which involves rehabilitation and renewal of plant, equipment, rolling stock, track signalling and telecommunications infrastructure and the supporting information technology (IT) systems, was meant to restore operational capacity and profitability.
“This is the model we have considered on the assumption that you, our partners, will provide a debt and or debt/equity financing solution while allowing us to retain joint control of the NRZ,” said the board chair.
“We remain open to further suggestions to make this marriage work. For the first time the NRZ will be open to proposals for equity participation.”
Mr Mavima said the revival of NRZ was in line with the country’s economic blue-print, Zim-Asset, where the parastatal is a key enabler of economic growth under the infrastructure and utilities cluster.
He paid tribute to Government for the support it has given to guarantee NRZ revival and assured investors of a fruitful and mutually beneficial partnership. The rest of the engagement process was to be later conducted in closed sessions.