NRZ: So rich, yet so poor

via NRZ: So rich, yet so poor – DailyNews Live 1 June 2015 by John Kachembere

HARARE – Dilapidation, incessant strikes and failure all aptly describe the rot and demise of Zimbabwe’s sole rail transport services provider — the National Railways of Zimbabwe (NRZ).

The struggling parastatal, which used to employ over 18 000 workers in 1980 and currently has less than 6 500 employees on its contract, requires at least $400 million in the short-term to improve operations and replace its archaic infrastructure, including rail tracks, telecommunication signals and wagons, which have outlived their life-span.

According to Treasury figures, the State-owned transport company needs $2 billion to fully recover in the long-term.

Louis Larose, World Bank group executive director, last week said the rail transport’s old equipment had to be replaced so that locally-produced goods could be transported efficiently and cheaply.

“It’s important that the rail transport system be modernised so that it will be more effective and allow Bulawayo and Zimbabwe to become much more competitive.

“I believe NRZ should be assisted because they stand on a very important corridor that will help the neighbouring countries,” he said.

This comes after a recent report by a British Trade Mission recently noted that significant investments could help NRZ to regain its lost status in the region.

The parastatal — operating at eight percent capacity utilisation — is currently transporting six million tonnes of goods per annum out of 80 million tonnes the system was designed for due to a depressed market and reduced capacity.

In 2013, it moved 3,6 million tonnes of goods against a target of six million tonnes. Comparatively, in 1998, the NRZ moved 18 million tonnes.

The company is saddled with a $144 million debt raked up since dollarisation in 2009 and registered a $17 million deficit in the first five months of 2014, generating $44 million revenue against $61 million expenditure.

The report, however, noted that investment, particularly from the private sector, was highly unlikely as NRZ is “not quite bankable”.

Over the past 10 years, the parastatal has received very little funding from the State and has been able to undertake very few upgrade or rehabilitation projects.

Only 151 out of 309 passenger coaches are functional. The report also noted that 385,5km of rail track needs to be rehabilitated across the network while the signalling and telecommunications network is in urgent need of repair.

Sources privy to the developments told the Daily News on Sunday that about 60 percent of the network was designed to be under the automatic Centralised Train Control, but due to vandalism and aging equipment, it’s no longer factional, throwing all electric locomotives out of business while at the same time putting a strain on diesel-driven coaches.

The NRZ superintends about 3 000km of rail, with about a tenth of that under speed restriction due to the poor state of the infrastructure, while the electrified Gweru-Harare link has been decommissioned after vandalism and cable theft.

Transport minister Obert Mpofu said government is optimistic of receiving a multi-million dollar loan from the Development Bank of South Africa (DBSA) to revive the parastatal’s undercapitalised operations.

Mpofu told Parliament last week that NRZ and DBSA had signed a mandate letter for a $653 million loan to be repaid over a period of up to five years and would engage a technical partner to support the borrowing to avoid government guarantees.

“The partner will jointly carry out the rehabilitation with NRZ and participate in a profit sharing arrangement with the organisation,” Mpofu said.

He said the NRZ and its technical partner would carry out joint marketing strategies targeting regional traffic to generate business that will support repayment of the loan.

NRZ owes its creditors $230 million and $65,8 million to workers who are currently on an industrial action after failing to access their salaries for the past 10 months.

The Transport minister noted that what the company was generating was not enough to pay its bloated workforce and meet other operational obligations.

“The infrastructure and equipment are in a very poor state, there is a very narrow customer base due to negative customer perception of rail service quality and its existence with industry operating at low capacity,” he said.

The ailing parastatal, which like most State enterprises does not regularly release it financial statements, recorded losses amounting to $106 million between 2009 and 2011, according to the government auditor’s report.

Economic implications

At its peak, NRZ established  a rail system that enabled the country to develop its export markets, through lines to the east with the Mozambique ports of Beira and Maputo, to the south, linking with Botswana Railways and South Africa Railways and to the north linking with Zambia Railways and to the Democratic Republic of Congo, Angola and Tanzania.

However, the poor performance at the rail company has resulted in the massive haemorrhage of various Zimbabwe’s economic sectors such as agriculture, manufacturing, mining and energy among others.

These sectors have transferred their bulk business to haulage trucks that have in turn been blamed for the destruction of the country’s road network which has become a national disgrace.

Over 30-tonne haulage trucks take to the roads everyday, destroying what has been left of a formerly vibrant road network which used to be a pride of Zimbabwe.

Latest figures released by the World Bank in the 2014 Trade and Competitive report, indicate that volumes of traffic by rail have plunged dramatically on the back of poor performance and lack of investment in the railway sector.

“Even though it is generally cheaper and environmentally sound to ship by rail than road, some $0,03 per tonne/kilometre compared to $0,07 to $0,12 by road, only 10 percent of traffic in Zimbabwe is shipped by rail,” read part of the report.

Economic analysts say the transportation of bulk goods through roads was also making the country’s business environment more expensive and less competitive.

“Our roads have been dealt a heavy blow by the failure of the National Railways of Zimbabwe to fully play its part in the transport sector. Most of the roads in the country exhausted their 30-year life-span a long time and are now in a poor state due to lack of rehabilitation and increased goods overload,” said engineering expert Joseph Moyo.

Statistics from the Zimbabwe National Road Administration (Zinara) shows that at least $3 billion is now required for the rehabilitation of the same roads, a situation that could have been avoided had the NRZ played its role.

Properties

Transport minister Obert Mpofu recently indicated that government was considering the disposal of NRZ’s foreign assets as a way of recapitalising the struggling parastatal.

“In South Africa we — the NRZ — have mining claims running into millions if not billions of dollars under a company called Pan African Minerals Development Company, which is partly owned by Zambia through the then Federation of Rhodesia and Nyasaland, and also by South Africa since the resources are on her land.

“The mining claims are for minerals ranging from diamonds, gold, manganese. We however, stand guided by government on how we should deal with them. But we can get lots and lots of funding from them,” he said.

The NRZ owns an undisclosed stake in Pan African Minerals Development Company (PAMDC), diamondiferous concessions in South Africa.

PAMDC was created in 2007 to take over the mining concessions previously owned by ZIZA, a group that was jointly owned by the railway companies of Zambia and Zimbabwe.

The creation of PAMDC was essentially to incorporate South Africa into the ownership rungs of the entity after the South African government laid claim to ZIZA’s concessions under the Mineral and Petroleum Resources Development Act (of 2004), which vests all mineral rights with the State.