The Diaspora Infrastructure Development Group (DIDG) this week approached the High Court seeking a rescission of the government’s decision to terminate its US$400m contract to recapitalise the National Railways of Zimbabwe (NRZ).
In court papers under case number 7617/20, DIDG said the cancellation of the tender was unlawful.
It is also demanding the defendant, the NRZ, to pay for the suit.
In 2017, the government awarded the deal to recapitalise NRZ to South Africa’s Transnet in partnership with a consortium of non-resident Zimbabweans, the DIDG.
But, in July this year, Cabinet terminated the multi-million-dollar deal saying the consortium lacked the financial wherewithal to implement the project.
Business Times is reliably informed that Transport and Infrastructure Development Minister Biggie Matiza has since been advised of the ramifications associated with unprocedurally terminating the multi-million-dollar transaction.
“We therefore claim, an order declaring the cancellation of the award of tender No. 6599-562 for the recapitalisation of NRZ unlawful and also the costs of suit,” read part of the court papers filed at the High Court on Monday this week.
DIDG further argues that the termination was irregular in that the decision to terminate was not made by NRZ but was rather made by external forces including Matiza.
NRZ chairman Martin Dinha said any legal action would be dismissed by the courts.
“I heard about the summons through the grapevine and NRZ is yet to be served, after which we will instruct our lawyers to defend the legal action.
NRZ and our shareholders (the Government of Zimbabwe) are confident that any legal action by the party in question is a waste of time, baseless, has no legal basis or foundation and will be dismissed by any competent court of law,” Dinha said.
The lawsuit, analysts said, could dent NRZ’s prospects of securing international funders.
The State entity is also battling political risk associated with being a State enterprise in Zimbabwe.
This means it will be difficult for the government to secure a reputable international funder for NRZ considering the multimillion dollar claim already on its neck.
In September this year, DIDG’s lawyers Atherstone and Cook demanded a payment of US$236m damages from NRZ saying the termination of the US$400m contract was irregular.
This comes at a time when international financiers such as the China Exim-bank have already expressed reservations around the impact of the DIDG claim, according to well-placed sources.
It is, however, understood that regional banks, such as Afreximbank, Nedbank, Absa, Standard Bank, CBZ, Ecobank and TDB, together with asset and wealth management firms that include Old Mutual, Imara Asset Managers, National Social Security Authority, Harith Pan African Infrastructure Development Fund, have mobilised over US$1bn to finance the project.
The consortium, which won the tender to recapitalise NRZ in 2017, is claiming damages to the tune of US$236m split in two parts, namely project costs and “reasonable profits” that DIDG projected to reap if the deal had come to fruition.
The government, however, has since moved on by engaging Russia’s Union Wagons in a bid to revive the rail company that requires more than US$1bn to realise a complete turnaround.
Sources have however said that NRZ failed to provide US$1.5m deposit for 100 wagons valued at US$10m, raising questions on how the rail parastatal would deliver a US$1bn deal with the Russians.
The 100 wagons were supposed to have been delivered in January 2020.In contrast, DIDG delivered 14 locomotives and 200 wagons in February 2018 demonstrating the speed and capacity of the diasporans with less complicated financing structures.
As efforts to revive the rail company are on-going, vandalism of equipment, a tanking economy and corruption have destroyed the NRZ, once the bedrock of the nation’s economy.
At its peak, NRZ employed over 17,000 workers in the late 1980s.Today the staff complement has dwindled to 4,600.
Freight declined to 2.6m tonnes in 2016 from 18m tonnes in 1998. DIDG’s intervention boosted the volumes to 3.6m tonnes in 2018.