Latest News Editor's Choice

News / National

US$115m loan for NRZ imminent

by Staff reporter
29 Oct 2023 at 12:25hrs | Views
The National Railways of Zimbabwe is on the verge of finalizing a loan agreement of US$115 million with the African Export-Import Bank (Afreximbank). Out of this amount, $81 million will be allocated to the procurement of rolling stock from RITES Limited in India, while the remaining funds will be directed toward the restoration and expansion of the state-owned rail network.

Under the terms of the RITES deal, the NRZ is set to acquire nine locomotives and 315 wagons. In a recent interview, the newly appointed NRZ board chairperson, Mr. Mike Madiro, emphasized the pivotal role of the Afreximbank loan in rejuvenating the organization's operations. He stressed the need for the railway sector to catch up with the country's economic progress as Zimbabwe strives to achieve upper middle-income status by 2030.

Mr. Madiro pointed out that despite the availability of haulage trucks, railways offer unparalleled economies of scale, making them an essential component of the national economy. Therefore, he emphasized the importance of capacitating the railway operator through rehabilitation, recapitalization, and network expansion to fulfill its mandate efficiently. He also highlighted that the implementation of the RITES of India deal would commence once financial closure is reached and technical details are finalized.

Afreximbank is expected to make the first installment payment to RITES Limited before the delivery of the initial batch of rolling stock. Out of the $115 million loan, $81 million will cover the procurement of locomotives and wagons, along with spare parts and skills transfer to ensure the sustainability of the rolling stock.

A significant portion of the loan, $34 million, will be allocated for infrastructural rehabilitation and network expansion. As part of Zimbabwe's engagement and re-engagement efforts, the NRZ has signed memoranda of understanding with Turkish and Russian partners, aiming to strengthen relations and foster economic development.

Zimbabwe's rail network, spanning 2,760 kilometers, has suffered from infrastructure deterioration over the years, resulting in over 64 cautionary areas (similar to road potholes) along more than 254 kilometers. These cautions have a detrimental impact on train movement, causing delays and accidents. With the financial support from the $115 million Afreximbank loan, NRZ will prioritize the rehabilitation of its signaling system to enhance operational efficiency.

In the 1990s, NRZ hauled 14 million tonnes of freight annually, falling short of its installed capacity of 18 million tonnes. Currently, the freight volume stands at 2.3 million tonnes annually due to existing challenges. The board and management of NRZ are committed to rehabilitating, recapitalizing, and expanding operations to boost efficiency and capacity, with a focus on facilitating trade and investment under the African Continental Free Trade Area (AfCFTA).

The AfCFTA, in which Zimbabwe is a signatory, seeks to eliminate tariffs on 90 percent of goods traded among member states over a decade, promoting trade and investment across the continent. NRZ plays a crucial role as a bulk transporter in facilitating trade and investment.

The efforts of NRZ align with China's Belt and Road Initiative (BRI), which aims to create new trade routes connecting China with Asia, Europe, and Africa. This initiative involves a network of railways, highways, ports, and other infrastructure projects. By developing its rail network, Zimbabwe synchronizes its goals with China's effort to connect continents and facilitate trade and investment.

To implement projects that promote economic development and facilitate trade and investment under the AfCFTA, NRZ requires loans at concessional rates. The engagement and re-engagement strategy pursued by the Second Republic may open avenues for securing such loans, providing the impetus for long-term, bankable projects that contribute to Zimbabwe's economic development and align with the objectives of the AfCFTA.

Source - Sunday Mail