Ailing NRZ to get US$150milllion for infrastructure revamp but MPs fret over failure to meet targets
AILING National Railways of Zimbabwe (NRZ), whose bank statements are in the red carrying a legacy debt of US$5 million, will receive a loan to rehabilitate dilapidated infrastructure and improve operational efficiency, the Public Accounts Parliamentary Portfolio Committee (PAC) heard recently.
NRZ’s infrastructure has been run down over decades with rusty rooftops, rickety stationary locomotives and wagons, unpainted walls as observed by PAC during a fact-finding mission in Bulawayo to establish the company’s operational challenges.
NRZ falls under the Mutapa Investment Fund (MIF).
MIF Deputy lnvestment Officer, Enerst Denhere, told the parliamentarians that a short-term loan of US$150 million was being sought to cater for NRZ’s operational costs.
“The loan is a short term facility. With Afreximbank, it has probably taken us a year and a half to get to where we are, where it has gone through certain credit committees.
“We have to develop a financial model. We have to develop a comprehensive strategy that they themselves (NRZ) could say, this works.
“And we are now confident that we are almost there. What we can say is that we are working on them to give us a grace period, so that immediately you are displaced or you don’t have to be paid, because part of about 80% of that money is going to upgrade infrastructure,” Denhere said.
He added, “The tenure is short term, but we are looking at a minimum of five years, which we think allows us to at least to fix NRZ in terms of our transport contracts that are key to then make this work.”
Although one committee member expressed displeasure over the loan saying, Afreximbank cited Zimbabwe had too much exposure.
Zaka East MP and former Finance deputy minister Clemence Chiduwa told MIF that Treasury had tried to get a US$115 million from the same bank during his tenure.
“I am not sure if this time around, Afreximbank is now on board,” said Chiduwa
An MIF official explained that NRZ was being weighed down by a legacy debt just like other State-owned enterprises. Specifically at NRZ, it accessed money in the mid-90s, from the World Bank and other lenders for the electrification of the railway line at the Dabuka section in Gweru.
MIF says it is optimistic about NRZ’s profitability ratios which it availed.
“NRZ is an asset-rich company. The fair value that we believe NRZ is sitting on is around $2 billion.”
Meanwhile, MIF revealed plans to unbundle NRZ which is an integrated company.
NRZ owns the infrastructure, the railway tracks, performs the maintenance, the workshops, and does the freight operations.
“When we talk of unbundling, it has happened in other markets, probably South Africa is a near example, where they have split out the infrastructure from the freight operations.
“We think with NRZ, given the three phases in our strategy of stabilisation, followed by growth and expansion, the idea is to fully divisionalise the infrastructure side from the freight operations, and then make sure we’re coming up with frameworks that allow predictable open-access arrangements to third parties.”
By doing this, MIF said it will then gradually, be able to see whether it can fully unbundle NRZ versus the merits of a fully integrated NRZ.
At the moment, NRZ says its working to raise its tonnage up from 2.1 million tonnes closer to the design capacity of 18 million tonnes per year as it seeks to find ways of monetising some low-level real estate to make revenues.
“So return on assets at the moment is really negative because they are making losses. We are not getting any returns. Any of the equity positions is getting worse,” said an NRZ official.
Kuwadzana East legislator Charlton Hwende complained about the slow progress on NRZ’s ability to meet its revival targets.
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