via NRZ chalks up $17m deficit in five months | The Herald 15 July 2014 by Tendai Sahondo
National Railways of Zimbabwe’s (NRZ) suffered a cumulative deficit of $17 million for the five months to May as revenue income for the period was $44 million against expenditure of $61 million, acting general manager Lewis Mukwada has said.
Speaking before a parliamentary committee on Transport and Infrastructure Development last week, Mr Mukwada said the firm is carrying an average deficit of $4 million every month with 69 percent of the company’s revenues going to wages. The company has a revenue income of $8 million to $9 million a month against a target of $12 million
Mr Mukwada said due to various constrains, NRZ has accumulated a debt of $144 million since dollarisation with $36 million owed to staff in salaries and overtime.
He said NRZ is operating below its break-even point of transporting 400 000 tonnes per month; the firm is currently moving 297 000 tonnes, with volumes being compromised by low demand for commodities among other factors.
NRZ managed to move 3,6 million tonnes of goods in 2013 against a target of 6 million tonnes due to challenges facing various sectors in the economy. In addition NRZ failed to pick up 689 000 tonnes attributed to in-house constrains.
In a bid to lift the company from its quagmire Mr Mukwada said the firm is looking at raising $20 million in the market through the Infrastructural Development Bank of Zimbabwe (IDBZ).
“We want to leverage on the infrastructure bond, we have realized that a lot of pension funds have not yet met their prescribed asset status, we believe there is scope for us to follow what ZESA did and also go onto the market to raise some financing through IDBZ, we hope to raise up to $20 million but it will ultimately depend on what the market is able to offer,” he said.
He further said the firm is still in discussions with DBSA over the $442 million facility.
“We are currently engaged in negotiations with the bank, the challenge is how to go around our balance sheet in terms of offering security for the finances, some of the options we are considering include lift-back arrangements,” he said.
He said NRZ is owed $7,7 million by ZISCO Steel, $10 million by GMB and $2,8 million by the Zimbabwe Power Company, funds which are urgently needed to address key challenges at the company.
NRZ has been receiving $7 million to $10 million from the budget annually; Mr Mukwada however said the firm has not yet received its $10 million allocation for the current budget which he said is all used for the purchasing of spares.
The Acting GM said NRZ is currently negotiating payment terms for 30 000 tonnes of scrap metal from idle infrastructure that was recently tendered, with the highest bidder offering $10 million.
Mukwada said NRZ is realising $120 000 on a monthly basis from Emerged Railway Properties which is co-owned by Zambia Railways and jointly manages the Victoria Falls bridge and the Victoria Falls Hotel.
He however said the parastatal is not realising any benefit from its Investment in RMS which is currently operating at a loss.
The firm is also not benefiting from its 15 percent stake in Beitbridge Bulawayo Railway (BBR) which last gave out a dividend in 2006 and expects to break even at the end of this year.
Mr Mukwada said NRZ also owns a stake in Pan African mining Development Company in which the carrier jointly owns mining rights in South Africa with Zambia Railways and the South African government. He however said the group is still looking for finance to exploit the rights.
The Acting GM said 292km out of 2760 km of track is currently under speed restriction due to deterioration of rail infrastructure. The state owned carrier also requires a million timber slippers to the tune of $15 000 to refurbish railway tracks.
He said the Gweru and Harare electric train corridor has since been decommissioned due vandalism, he however said the firm is looking at re-commissioning the corridor in the medium to short term.
Mr Mukwada highlighted that most of the NRZ wagons are now life expired and more than more than 40 years old.
NRZ has entered into agreements with mobile telecoms companies which have laid fibre along the rail tracks in exchange for capacity on the fibre; a development which Mr Mukwada said has saved the company of significant capex.
He said NRZ is in negotiations with Afrochine to start transporting their commodities, he said the firm is also working on developing a rail loading site at the Afrochine premises.
Looking ahead, the acting GM said NRZ is pinning its hopes on the revival of Zisco Steel which will push up volumes and boost the confidence of lenders.
He said the company will also be looking at tapping more international traffic which currently accounts for 11 percent of the firm’s revenues.
To this end, NRZ is selling potential BOT arrangements for the construction of railway links to Zambia and Mozambique.
Mr Mukwada said NRZ is also in negotiations with a Dubai based firm that is seeking to establish an inland port in Harare.