NRZ pins hope on DBSA deal

Source: NRZ pins hope on DBSA deal | The Financial Gazette October 11, 2016
THE beleaguered National Railways of Zimbabwe (NRZ) has once again dusted off the shelves its on-off negotiations for lines of credit with the Development Bank of Southern Africa (DBSA) and South Africa’s Transnet.

The struggling railway giant, which is stewing in debt, is hopeful that a deal would be sealed by the end of this year.
Talks on the DBSA loan had almost ground to a halt following a shake-up at the railway operator last year, which claimed the scalp of Alvord Mabhena, NRZ’s then chairman, under unclear circumstances.
Mabhena had been more like a lone figure in talking up the DBSA loan and when he left, no one really wanted to pursue the negotiations for fear of ruffling feathers in the political corridors.
It had been disclosed then that the ruling ZANU-PF apparatchiks were unhappy with Mabhena’s insistence on closing a deal with DBSA and Transnet, which would have seen the neighbouring country’s locomotive giant come in and supply railway infrastructure, as opposed to the parastatal receiving hard cash.
Some in government are said to have then orchestrated Mabhena’s ouster to pursue their own preferred arrangement, which was to engage investors from the Far East, in particular from China, which enjoys cordial relations with Zimbabwe.
Nearly a year following Mabhena’s exit, the former NRZ chairman’s tormentors seem to have come to the end of their tether.
Having scurried the financial markets for options, there seem to be consensus among them that the DBSA model was the most appropriate for NRZ.
Speaking to the Financial Gazette this week, Lewis Mukwada, the NRZ general manager, confirmed that talks were presently underway with the DBSA and Transnet.
“We are still discussing with DBSA and Transnet and they are trying to understand our exact requirements and our term sheet,” he said.
The NRZ is saddled with a US$70 million debt in salary arrears; while it also has other debts amounting to US$144 million.
Its aged railway equipment, locomotives, wagons and railway signs are in dire need of replacement.
According to Mukwada, the locomotive giant is looking for a credit facility of up to US$600 million.
“We are looking at anything between US$400 million to US$600 million from DBSA. It could be released in phases, but before end of year we could have a firm proposal in place,” he said.
It is also understood that NRZ is courting other potential suitors to step in, should the talks with DBSA and Transnet fail to yield the expected results.
Mukwada said the parastatal had been getting offers from “others as well”, but refused to share the identity of the other potential suitors.
“We have been getting unstructured proposals here and there. Our terms of reference are the same, it is for the supply of locomotives, wagons and railway infrastructure,” he added.
Meanwhile, the much-awaited forensic audit into the affairs of NRZ is expected to be complete at the end of this month.
The findings of the auditors, Ernst & Young, are set to be closely monitored and would be used by naysayers to press government to consider the privatisation of the railway giant, which for years has been in the doldrums.
A forensic audit is an examination and evaluation of either a firm’s or individual’s financial information for use as evidence in court.
It can be conducted in order to prosecute a party for fraud, embezzlement or other financial claims.
NRZ’s forensic audit, to cover the past five years since 2011, would, among other things, look into NRZ’s procurement system, revenue collection mechanisms at its properties and estates and the current staff levels with the view of weeding out ghost workers.
A 2014 auditor-general’s report pointed to some possible sleaze at the rail transporter after establishing that the parastatal was generating annual revenue of US$91,2 million, but incurring costs of US$103 million.
The passenger transport unit had annual revenues of US$3,2 million, with costs at over three times at US$10,9 million.
Mukwada said the forensic audit process was on course and would be completed at the end of this month.
“The audit is underway, but it is the chairman (Larry Mavima) who will be able to articulate in detail because it came about as a recommendation of the board. The audit is supposed to be completed on 31 October, unless if a postponement has been sought for some reason,” said Mukwada.
Mavima has since said the forensic audit would result in a staff reshuffle at the parastatal and if corruption was unearthed heads would certainly roll.