Unprofessional conduct, corruption derail NRZ

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TINASHE MAKICHI

The National Railways of Zimbabwe (NRZ) had a clear vision of being a “provider of world-class railway infrastructure and transport services in Zimbabwe by 2020”.

At first it looked like with the signing of the $400 million deal between NRZ and DIDG/Transnet, Vision 2020 was achievable but it now looks like there are challenges scuppering the smooth flow of the deal. This has seen previous timelines lapsing thereby casting doubt on the funding capacity of DIDG to pull through on the landmark deal.

The DIDG/Transnet consortium was chosen in 2017 as the NRZ’s technical partner in a $400m deal aimed at recapitalising and rehabilitating the railway infrastructure, but delays in securing funding by the consortium has raised suspicion as to who is behind them.

DIDG executive chairman Don Chimhandamba in his 29 March, 2019 update to shareholders noted that the company has been given tight deadlines to implement certain objectives set out under the new framework agreement which remains tight but achievable.

“In view of the activities that are still outstanding under the Frame Agreement, DIDG -Transnet consortium jointly with the NRZ Board requested to the Government of Zimbabwe an extension for a further period of six months to 14 August 2019, which extension was duly granted through a Cabinet meeting held on March 14, 2019.

“While we are confident that we will achieve the objectives as set out in the extended framework agreement as progress is fairly advanced, the management and deal implementation team remain cautious of the very tight timeliness in the execution of these tasks as any unforeseen delays will quickly impact the short timelines,” said Chimhandamba.

Under the new framework, the parties will focus on closure of outstanding due diligence matters, developing indicative term sheets received from banks to binding funding term sheets working with a Mandated Lead Arranger or bank, initiating the transition plan, Transnet acquiring its final regulatory approvals from its governance and ministerial processes, submission of “core documents” to government of Zimbabwe through the Ministry of Finance and replacing the Framework Agreement with 25 year joint venture and concession agreements.

As efforts to revive the rail company are on-going, vandalism of equipment, a tanking economy and corruption, according to people with deep knowledge of the state owned firm is said to have destroyed the NRZ, once the bedrock of the nation’s economy.

At its peak, the NRZ employed 17,000 workers in the late 1980s. The staff compliment has dwindled to 4,600.

Neglect, lack of spare parts and overdue replacement of equipment have led to a situation where only part of the railroad network is in good condition, and equipment problems have led to a reduced service.

The company is sinking in debt, making it impossible to get out of the quagmire without external help. Freight declined from 18 million tonnes in 1998 to 4 million tonnes in 2015.

Vandalism has paralysed the communications system while the geographical spread of the network made it almost impossible to adequately protect and guard it.

The NRZ operates about 3,000 km of railway, providing passenger and freight services.

Alvord Mabena, the former NRZ general manager and board chairman, says the revival of NRZ will be difficult in the absence of a clear vision and professionalism.

“The issue of NRZ is straightforward, Mabena says. “As a country we still lack the vision as to what we really want to achieve. We don’t have clear targets as to what we want to achieve in the next 40 to 50 years, which is why NRZ is in this situation now.

“In addition we also lack the culture of investing in our parastatals, which is why NRZ has deteriorated to this state despite the parastatal having shown signs of going down a long time ago.”

Mabhena said unprofessionalism and cronyism affected the rail company.

“I think as a country we don’t value our own expertise and professionalism, a situation which makes the powers that be to appoint their cronies and friends at NRZ, thereby leading to massive looting and vandalism,” Mabena says.

Lewis Mukwada, the NRZ general manager, told Business Times that the economic downturn, which saw the closure of some big industries and the contracting of some companies, affected the rail parastatal as the transport business works on derived demand.

He said the deregulation of the transport sector, coupled with the ease of entry into the transport business (facilitated by the importation of cheap second hand horses/trucks) saw a rapid growth of road freight transport, which offered stiff competition to the railways.

“The other factor that led to the deterioration of the rail company was the inability to recapitalise for NRNRZ to re-equip and compete more effectively with road. Railway infrastructure and rolling stock is over 50 years old, with very little replacement or renewal taking place in the last 20 years,” Mukwada said.

The NRZ has an important transit function in the southern part of Africa and is well linked with neighbouring countries. Towards the northwest, in Victoria Falls, the system links with the Zambia Railways, crossing the

Victoria Falls Bridge. Towards the Indian Ocean, the system links with the Beira Railroad Corporation in Mozambique. A second line towards Mozambique reaches Maputo.

Another connecting line links up with Botswana Railways in the west to reach South Africa,. A direct line to South Africa is provided from Bulawayo by the Beitbridge Bulawayo Railway. Elsewhere, the electrified (25kV AC) 313-km Gweru-Harare section has been seriously vandalised and the electric trains have since stopped operating.

Mukwada noted that vandalism was a major factor that has worsened matters for the NRZ. For example, the electrified section between Dabuka and Harare has been severely vandalised, as is the signalling system countrywide.

“The system can most certainly be revived. This is why NRZ floated a tender for the recapitalisation of the organisation, and is currently engaged in negotiations with DIDG/Transnet who won the bid,” Mukwada said.

“The general recovery of the economy, through the realisation of the government’s Vision 2030 programme, will facilitate recovery through increased demand for NRZ services,” he added.

Corruption at the core

An audit of NRZ properties unearthed massive mismanagement amid allegations that some individuals, including high-ranking government officials, had been claiming stakes in those assets.

NRZ has admitted there has been a lack of supervision of its assets. The asset register of the rail company has been in shambles. There are claims that the money collected from the properties cannot be accounted for. Some of the properties are now lying idle. The company is said to own properties worth more than $150m.

Last year, Mukwada noted that NRZ properties had gone for years without proper supervision and the possibility of unscrupulous activities was highly likely. He said after the company realised the anomaly, a team was set up to do an audit of the properties.

The company’s properties include guest houses in the country’s low and high density suburbs, thousands of hectares of forest land, vast tracts of idle land, church and residential stands, as well as plots and farms to rear livestock and grow crops.

The company also owns thousands of hectares of developed commercial stands, undeveloped commercial bays, and land with supermarkets and safari farms. Currently, the company is looking at developing its residential stands in Lochnivar, Harare.

The NRZ also owns a significant stake in Pan African Minerals Development Company (PAMDC), which has diamonds concessions in South Africa.

PAMDC was created in 2007 to take over the mining concessions previously owned by ZIZA, a group that was jointly owned by the railway companies of Zimbabwe and Zambia.

The creation of PAMDC was essentially to incorporate South Africa into the ownership rungs of the entity after the South African government laid claim to ZIZA’s concessions under the Mineral and Petroleum Resources Development Act (of 2004), which vests all mineral rights in the state.

The NRZ also has properties in the United Kingdom.

In his 2019 national budget, Finance Minister Prof Mthuli Ncube said about $2bn was required to rehabilitate and upgrade the railway infrastructure.

“This is obviously beyond the capacity of the budget,” Ncube said. “In this regard, the government will facilitate mobilisation of private sector funding, leveraging on the parastatals’ assets and cash flows.

“Already negotiations are underway with the Diaspora Infrastructure Development Group/Transnet Consortium to inject $216m into NRZ, under a joint venture arrangement,” Ncube added.

Who is DIDG?

Speculation, however, is rife in the market that there might be a political figure being fronted by DIDG, a reason which has seen them failing to raise the capital required for the recapitalisation of the NRZ. There have also been reports that the delays were as a result of intricate legal processes between the NRZ and Transnet of South Africa.

While the transaction is taking time to be concluded, there are fears it could be another Waiting for Godot for the rail parastatal