Business / Companies
Govt in $450m recapitalisation deal for NRZ
08 Dec 2013 at 03:47hrs | Views
Government will conclude a $450 million deal for the recapitalisation of the National Railways of Zimbabwe (NRZ) with two undisclosed foreign investors this month, rescuing the struggling parastatal from plunging into the abyss, it has been reported.
Rail transport is a key enabler to economic growth, considering its role in industry and commerce.
An unreliable rail transport system has meant that over the years businesses have had to rely on road transport, which is pricier than rail.
However, Government is currently locked in discussions with suitors willing to invest in NRZ.
Permanent secretary in the Ministry of Transport and Infrastructure Development Mr Munesu Munodawafa told The Sunday Mail Business last week that the number of investors that the parastatal was in discussion with had been reduced to two.
He, however, indicated that the door had not been closed for new investors that wanted to come on board.
"We have been having talks with potential financiers for our recapitalisation exercise and the number has been downsized to two, though the door is still open for any new investors to come on board.
"By end of the first quarter next year, we should have completed the first phase of the recapitalisation," he said.
Resuscitation of the parastatal, he said, was a priority.
He would not be drawn into naming the investors.
Said Mr Munodawafa: "The last time we rushed to announce our investors, the move backfired. For business and professional reasons, we will not be repeating the same mistake."
Government says the recapitalisation of the parastatal will be in two phases: $450 million for the short-term and $2 billion in the long-term.
It is believed that the tabled investment is what is needed to return the NRZ to profitability.
"A careful analysis has been done and the $450 million that we intend to raise and use for our initial recapitalisation exercise will be sufficient for the refurbishment process of our passenger and cargo trains, as well as rehabilitation of the railway line and communication system in the short-term," explained Mr Munodawafa.
The funds will be channelled towards acquiring new locomotives, modernisation of the passenger trains as well as revamping the entire railway tracks, telecommunication signals and wagons that have outlived their lifespan, or have been seriously vandalised due to theft and lack of proper maintenance.
Part of the capital is expected to be used to build a railway line that will link the country to Kafue in Zambia and the Democratic Republic of Congo, a project that was previously shelved due to a lack of funds.
"Rail can move more goods (compared to any form of road transportation). For instance, where you need about 34 trucks and drivers to move a load, you only need about four people and a single train load. We intend to make rail the preferred form of transport since it is cost effective for both passengers and business people."
NRZ spokesperson Mr Fanuel Masikati noted that plans for the coming year will be made public in the 2014 National Budget.
The NRZ has been struggling to attract new investors since the turn of the millennium.
The decline in business has paralysed operations of the rail utility over the years.
Statistics show that the NRZ is moving an average of three million tonnes of cargo annually compared to 12 million tonnes in 1992 and 19 million tonnes in 1997.
At least 95 percent of its revenue used to come from freight services.
The NRZ's long-term capitalisation plan is expected to stretch up to 10 years. In the process, the parastatal is expected to shift from stabilisation to growth through revenue generated from operations.
There has been no meaningful investment in the NRZ in the last two decades. As part of its initial recapitalisation efforts, the NRZ paid a deposit of about $3 million four years ago to a Chinese company for the purchase of 14 locomotives worth $29 million.
The deal could not be concluded as the Government failed to guarantee it.
Experts contend that the revival of the NRZ will be strategic to the resuscitation of the industries in the country's second largest city, Bulawayo, formerly the industrial hub of the nation.
Currently, the rail transporter employs about 8 000 employees from a high of about 25 000 in the early 1990s and is struggling to pay workers' salaries and retirement packages.
Recently, the parastatal's board approached the parent ministry seeking permission to lay off 6 000 workers. Government blocked the move.
In 2011, the NRZ had 168 locomotives of which only 71 were serviceable, and out of a cumulative total of 8 682 wagons only 3 427 are operational.
Rail transport is a key enabler to economic growth, considering its role in industry and commerce.
An unreliable rail transport system has meant that over the years businesses have had to rely on road transport, which is pricier than rail.
However, Government is currently locked in discussions with suitors willing to invest in NRZ.
Permanent secretary in the Ministry of Transport and Infrastructure Development Mr Munesu Munodawafa told The Sunday Mail Business last week that the number of investors that the parastatal was in discussion with had been reduced to two.
He, however, indicated that the door had not been closed for new investors that wanted to come on board.
"We have been having talks with potential financiers for our recapitalisation exercise and the number has been downsized to two, though the door is still open for any new investors to come on board.
"By end of the first quarter next year, we should have completed the first phase of the recapitalisation," he said.
Resuscitation of the parastatal, he said, was a priority.
He would not be drawn into naming the investors.
Said Mr Munodawafa: "The last time we rushed to announce our investors, the move backfired. For business and professional reasons, we will not be repeating the same mistake."
Government says the recapitalisation of the parastatal will be in two phases: $450 million for the short-term and $2 billion in the long-term.
It is believed that the tabled investment is what is needed to return the NRZ to profitability.
"A careful analysis has been done and the $450 million that we intend to raise and use for our initial recapitalisation exercise will be sufficient for the refurbishment process of our passenger and cargo trains, as well as rehabilitation of the railway line and communication system in the short-term," explained Mr Munodawafa.
Part of the capital is expected to be used to build a railway line that will link the country to Kafue in Zambia and the Democratic Republic of Congo, a project that was previously shelved due to a lack of funds.
"Rail can move more goods (compared to any form of road transportation). For instance, where you need about 34 trucks and drivers to move a load, you only need about four people and a single train load. We intend to make rail the preferred form of transport since it is cost effective for both passengers and business people."
NRZ spokesperson Mr Fanuel Masikati noted that plans for the coming year will be made public in the 2014 National Budget.
The NRZ has been struggling to attract new investors since the turn of the millennium.
The decline in business has paralysed operations of the rail utility over the years.
Statistics show that the NRZ is moving an average of three million tonnes of cargo annually compared to 12 million tonnes in 1992 and 19 million tonnes in 1997.
At least 95 percent of its revenue used to come from freight services.
The NRZ's long-term capitalisation plan is expected to stretch up to 10 years. In the process, the parastatal is expected to shift from stabilisation to growth through revenue generated from operations.
There has been no meaningful investment in the NRZ in the last two decades. As part of its initial recapitalisation efforts, the NRZ paid a deposit of about $3 million four years ago to a Chinese company for the purchase of 14 locomotives worth $29 million.
The deal could not be concluded as the Government failed to guarantee it.
Experts contend that the revival of the NRZ will be strategic to the resuscitation of the industries in the country's second largest city, Bulawayo, formerly the industrial hub of the nation.
Currently, the rail transporter employs about 8 000 employees from a high of about 25 000 in the early 1990s and is struggling to pay workers' salaries and retirement packages.
Recently, the parastatal's board approached the parent ministry seeking permission to lay off 6 000 workers. Government blocked the move.
In 2011, the NRZ had 168 locomotives of which only 71 were serviceable, and out of a cumulative total of 8 682 wagons only 3 427 are operational.
Source - sundaymail
